Traffic light on the budget: relief and few burdens

Budget 2024 - Traffic light on the budget: relief and few burdens

Following the agreement in the weeks-long budget dispute, the leaders of the traffic light coalition have emphasized the social compatibility of their compromise. With regard to the effects of the agreed higher CO2 price, Chancellor Olaf Scholz (SPD) said that there would be "very little additional burden" on the price of petrol.

He, Finance Minister Christian Lindner (FDP) and Vice-Chancellor Robert Habeck (Greens) emphasized that the planned tax cuts would remain in the 2024 federal budget. Economic experts and associations, on the other hand, criticized the fact that the promised climate money as social compensation for increasing climate protection burdens is still not coming.

Relief and very low burdens

Scholz emphasized that the agreed wage and income tax relief of 15 billion euros would remain in place. "That's where it stays. And that affects small and medium-sized incomes," he said on Wednesday evening in the ARD program "Farbe bekennen".

Lindner emphasized in the "ZDF Special" that there will be "clearly noticeable relief for the broad middle of the population from 1 January next year". Economics Minister Habeck said on ZDF's "Heute Journal": "It's not just all tax relief, we are also defending tax relief." He pointed out that the state would continue to take the costs of the levy for green electricity promotion (EEG levy) from electricity customers.

In an interview with the German Press Agency, FDP parliamentary group leader Christian Dürr therefore also spoke of a "relief budget" for the working population and the economy.

CO2 taxation: increase in energy costs

The very small additional burden on the price of petrol that Scholz is talking about is the result of the price for the emission of climate-damaging carbon dioxide (CO2) being raised more than originally planned: from 30 euros per tonne of CO2 to 45 instead of just 40 euros. This will increase the price of fuel, natural gas and heating oil, among other things, by how much has already been calculated.

The ADAC estimates the additional burden for petrol and diesel at 1.4 to 1.6 cents per liter (including the increase already decided from 2023 to 2024: around 4.3 and 4.7 cents respectively). According to calculations by the comparison portal Check24, for a household with an annual consumption of 20,000 kilowatt hours, this means an additional burden of EUR 20 for gas purchases (total increase compared to 2023: EUR 60).

In addition, the federal subsidy for electricity grid costs has been removed, meaning that the grid fees to be paid by consumers will increase - by 60 euros for an average household with an annual consumption of 3,500 kilowatt hours, according to transmission system operator 50Hertz.

Criticism from outside

Veronika Grimm, an economist, is therefore calling on the traffic light government to introduce the payment of a climate fee to citizens as compensation, as already agreed in the coalition agreement. "That would be a very important measure to create acceptance for climate protection," she told Welt TV. People with low incomes would particularly benefit from this: They would generally have a small carbon footprint, but would get as much back per capita as everyone else.

Oliver Holtemöller, Vice President of the Leibniz Institute for Economic Research Halle (IWH), has a similar view. "Increasing the price of CO2 is something that economists have long recommended in order to achieve climate protection targets efficiently," he told MDR. However, the lack of social compensation is "a shortcoming".

The VdK social association is also calling for this to be changed. "An increase in the CO2 price is anti-social," VdK head Verena Bentele told Redaktionsnetzwerk Deutschland. "That's why the climate money must be introduced so that people on a budget are not overburdened."

Karlsruhe ruling: new budget necessary

The coalition leaders reached an agreement early on Wednesday morning after weeks of dispute. The new budget planning had become necessary because the old planning with special funds was no longer considered constitutional following a Constitutional Court ruling on the 2021 budget. This meant that the coalition lacked around 30 billion euros for 2024.

Key points of the solution

- Debt brake: It is not to be suspended in 2024 for the time being, but an exception for the consequences of the flood disaster in the Ahr valley is to be examined. The traffic light also reserves the right to suspend it at a later date and take out additional loans in the event of a change in the situation in Ukraine.

- Billions in subsidies for industrial projects in eastern Germany, such as the Intel chip factory near Magdeburg: the traffic light wants to stick to this - as well as the expansion of a hydrogen economy.

- CO2 price for refueling and heating with fossil fuels: This is not to rise to 40 euros per tonne on January 1, 2024 as previously planned - but to 45 euros and then to 55 euros in 2025.

- Charges for the electricity grids: The 5.5 billion euro federal subsidy will be canceled. Electricity will therefore become more expensive.

- E-car subsidy: It is to end earlier - when is unclear.

- Energy tax: tax concessions for agricultural diesel are to be abolished.