Flemish government gets 200 million less than expected
Yesterday, a report from the Belgian federal budget authority leaked. It stated that suddenly, the federal government has to save 1.8 billion euro more than was anticipated in the previous report in July, in order to keep the country’s budget on track by 2017. This means that instead of the forecasted 2.4 billion, the Belgian government has to look for 4.2 billion euros now.
The reason why the previous estimations were so poor are the following: because of the Brexit, economic growth will be only 1.2% instead of the forecasted 1.5%, which has of course implications on the tax revenues. Also the fiscal revenues of the changes in fiscal policy like the increase in withholding tax (from 25% to 27 %), advances on taxes, VAT increase on electricity, and excise increase on alcohol and tobacco will be lower than expected. This leads to an overestimation of the fiscal revenues of 900 million euros. Another important reason for the deficit being larger than expected are the index adjustments on the social security payments to the unemployed, the sick and the pensions. Together with the health care budget being a lot larger than expected, and other various expenses, this leads to an underestimation of social security expenses of 700 million euros.
This gap of 4.2 billion euros ensures that the federal government will distribute 200 million less than expected to the Flemish government. This has major implications on its policy, since the Flemish government was planning –after several years of saving- to invest a lot of money in education, health care and R&D. The aim of the Flemish minister-president Geert Bourgeois is to obtain a balanced national budget in 2017, but in order to that, in combination with the planned investments, they have to face a gap of 560 million euros. The question is; where will this money come from? There isn’t a lot of time, since Bourgeois has to come up with a solution before Monday (26/09), because then, the ‘September Statement’ takes place (annual speech from the Flemish minister-president to the members of the Flemish parliament, where the guidelines of the policy for the following years will be discussed). To be continued on Monday…
There were rumours that the Flemish government would intervene drastically, with a change in the policy of service vouchers (reduction of the fiscal deduction, an increase in the cost price, or a restriction on the amount of vouchers), or in the worst case, a tax increase. They solved the matter however rather simply. By spreading the planned investments in hospitals over time, the Flemish government found over 330 million euros. This combined with a couple of smaller savings (e.g. abolishment of the tax benefit for roof insulation), the deficit decreased from 560 to 172 million euros. “We’re on the good track to reach a budget balance in 2017”, Bourgeois testified after the ‘September Statement’. Consequently, the investments in education, health care and R&D can continue without adjustments, with no implications on the budget deficit.
Cédric Bauwens 3056