Many changes to the draft budget: final decision pending

Many changes to the draft budget: final decision pending

The Bundestag Budget Committee has approved numerous changes to Finance Minister Christian Lindner's draft budget. The adjustment session, which began at midday on Thursday, lasted until around 4.20 a.m. in the early morning.

However, the committee has yet to reach a final decision. As many questions remain unanswered following the ruling by the Federal Constitutional Court, experts are to be heard on Tuesday. Next Thursday, the committee meeting will then be formally concluded.

Only then will information be available on how much new debt the federal government will incur in the coming year and how much money will be spent overall. The Bundestag will then finally adopt the draft budget in the session week from November 27 to December 1.

Constitutional Court ruling brings uncertainty

It is still completely unclear how much of the draft budget will need to be adjusted before then. This is because the ruling of the Constitutional Court could have much more far-reaching consequences than is apparent at first glance. On Wednesday, Germany's highest court declared a reallocation of 60 billion euros in the 2021 budget null and void. These loans had been approved to tackle the coronavirus crisis, but were then moved to a special fund for climate protection and the modernization of the economy. Now the billions are not available.

The German government is currently examining whether the ruling will have even more far-reaching consequences for other debt-financed special funds. As a precautionary measure, the budget holders therefore also want to block the economic stabilization fund, which is used to pay for the energy price brakes, among other things. The opposition CDU/CSU does not consider it serious to adopt a budget at all under these circumstances - and therefore did not table a single substantive amendment in committee.

The chief budgeters of the traffic light coalition sharply criticized this. "Unfortunately, the CDU/CSU refused to cooperate tonight," they declared after the end of the meeting. "First they tried to cancel the meeting and then they didn't put forward a single amendment to the federal budget," criticized Dennis Rohde (SPD), Sven-Christian Kindler (Greens) and Otto Fricke (FDP). They called on the CDU/CSU to "deal responsibly with the ruling and its consequences instead of stopping work in parliament".

Timetable for budget resolution should continue to apply

The traffic light coalition does not believe that the core budget for the coming year, i.e. the budgets of the individual ministries, will be affected by the ruling. The federal budget will therefore continue to be adopted on December 1.

To this end, the budget holders made a number of changes during the night. Among other things, the funds for humanitarian aid abroad were increased. Compared to the government's plans, there will be 700 million euros more. However, according to Victor Perli, a member of the Left Party, there is still significantly less money available than this year.

The funds for integration courses and advisory services for immigrants have also been increased. Instead of the originally planned 880 million euros, 1.06 billion euros have been budgeted. The budget holders also made 80 million euros more available for voluntary services.

Parental allowance reform comes gradually

Lindner had submitted an austerity budget to parliament because he wants to comply with the debt brake - and also feels obliged to do so by the Basic Law. After a long struggle with his fellow ministers, in which Chancellor Olaf Scholz (SPD) also intervened, he brought the draft to the cabinet late. Priorities are defense and climate protection. In many other departments, there will even be cuts compared to the previous year.

The Ministry of Family Affairs, for example, announced a highly controversial parental allowance cap for high-income earners. This is now less radical. The income limit up to which parental allowance is paid is not to fall suddenly, but gradually. Nothing is to change until the end of March. After that, the limit will fall to 200,000 euros taxable annual income. From April 2025, an income limit of 175,000 euros is to apply.

Family Minister Lisa Paus (Greens) had initially proposed that parental allowance should only be paid to parents who have an annual taxable income of no more than 150,000 euros, either alone or together. Currently, the limit is 250,000 euros for single parents and 300,000 euros for couples. Another change is that parents can only receive parental allowance for one month at a time. At least one of the partner months must be taken alone. This must also take place within the first year of the child's life.

Plus for Ukraine aid and reduction in electricity tax

Lindner's ministry had incorporated other changes itself: In the bill for the committee meeting, military aid for Ukraine was doubled to eight billion euros. In addition, around 1.3 billion euros more in subsidies for electricity-intensive companies were planned following the agreement reached by the traffic light system on a relief package.

However, the reduction in electricity tax for the manufacturing industry, which was also agreed as part of the relief package, will be more expensive than expected. For 2024 and 2025, the traffic light coalition is expecting costs of 3.25 billion euros each. This is according to a draft for the budget financing law, which is available to the German Press Agency. When the concept was presented, government circles had been talking about 2.75 billion euros.

1. The traffic light coalition, comprising of the SPD, Greens, and FDP, is responsible for finalizing the federal budget, which includes allocations for various ministries, including household expenses and aid to Ukraine.
2. Christian Lindner, the Finance Minister, is currently working on adjusting the budget in line with the ruling of the Federal Constitutional Court, which deemed a reallocation of 60 billion euros in the 2021 budget invalid.
3. Lisa Paus, the Green Party's Family Minister, is part of the traffic light coalition and has proposed changes to the parental allowance cap for high-income earners, gradually lowering the limit from 300,000 euros for couples to 175,000 euros by 2025.
4. The Bundestag, the German federal parliament, will vote on the revised budget during the session week from November 27 to December 1, requiring the approval of the traffic light coalition and the CDU/CSU, despite their criticisms and concerns.

Source: www.dpa.com