Blümels “announcement towards the future”

After an “answer to the crisis”, as he had called his budget last year, this year it was an “announcement towards the future,” said Blümel, who also made an urgent appeal for vaccinations at the beginning of his budget speech: A stab could not only save your own life, but also jobs in Austria – “the sooner we leave the pandemic behind, the faster we will regain social, economic and budgetary stability”.

Blümel admitted that everything was not done right during the crisis because there was no blueprint for the pandemic. “Did we only make the right decisions in difficult times? Probably not. You have to admit that openly, ”said Blümel. There were “hard decisions” with “tough decisions” that you had to make as a government, but: you took responsibility in a “crisis of the century”.

Graphics: APA / ORF.at; Source: BMF

Debt “legitimate” in difficult economic times

But more than 200 government aid measures have been taken and these are the basis for the economic upswing that is currently being experienced. Going into debt in difficult economic times to help is legitimate, said the finance minister. On the other hand, incurring permanent debt in growth phases is a convenience at the expense of taxpayers. The consistently falling debt ratio under ex-Chancellor Sebastian Kurz (ÖVP) was not an end in itself, but necessary to create room for maneuver.

The draft budget that has now been presented would deliberately set priorities, such as the eco-social tax reform. In addition, measures to stimulate the economy would be introduced in order to set Austria apart in European competition. In contrast to other countries, they do not discuss ecology against economy, but combine both. The departments are also given the freedom to set their own priorities. This ranges from a continuation of the terror and disaster package to money for regional climate tickets and broadband expansion.

Graphic of historical budget development

Graphics: APA / ORF.at; Source: BMF

Distribution of funds after the crisis

There should now be more money for the Ministry of Defense, the Ministry of Justice and the Federal Chancellery, among others. The budget of the health department will be increased by six billion euros in the financial framework – not only the pandemic control measures, but also the reimbursement of the reduction in health insurance contributions is already included, according to Blümel.

A total of 5.9 billion euros should be available for climate and environmental protection by 2025. This also includes funds for “protection against natural hazards”. 16 million have been earmarked for this in the financial framework. There should be significantly more money for adaptation measures. 350 million euros should be due by 2024 for compensation payments for damage caused by the bark beetle.

Budget speech by Finance Minister Gernot Blümel (ÖVP)

Finance Minister Gernot Blümel (ÖVP) held his second budget speech in the National Council. The federal government will again spend more than it earns next year.

Deficit probably smaller than expected

Blümel expects a general government deficit of 2.3 percent of economic output and falling debt for the coming year. In April, Blümel had expected a minus of 4.3 percent and record debt of 89.6 percent.

The finance minister assumes that the debt ratio will fall from 83.2 percent this year to 82.8 percent in the coming year and then to 72.5 percent in 2025, despite the tax reform planned in several stages. “It wasn’t predictable like that,” said Blümel. As reasons for the more positive development, he cited the significantly higher economic growth with correspondingly rising tax revenues, the low interest rates on national debt and the staggered tax reform, which does not allow all relief to take effect immediately.

Tax revenues are growing by almost 20 percent this year to 98.3 billion euros and are expected to rise to just over 100 billion euros for the first time in 2023. The largest item of income next year will be value added tax (33.2 billion euros, plus 18.6 percent) – also because the value-added tax reductions decided on for a limited time in the CoV crisis will expire at the end of 2021. Wage tax revenues climb by 11.7 percent to 31.4 billion euros. Corporate income tax on corporate profits is also expected to grow strongly to ten billion euros (plus 66.7 percent), and capital gains tax by almost 50 percent to 3.8 billion euros. The Ministry of Finance expects less money, among other things, from the mineral oil tax and energy levies.

After the federal states and municipalities receive a third of the tax revenue, they too can again count on higher transfers from the federal government. The municipalities’ “share of the income” in the joint taxes will increase by seven percent to 12.7 billion euros, the federal states will receive 26 percent more (18.3 billion euros).

“Structural zero deficit” targeted for 2025

After a large increase to 8.3 percent of gross domestic product (GDP), the general government deficit of the federal, state, local and social security funds is expected to fall to 6.0 percent in 2020 and to 2.3 percent in 2022. In 2025, the minus is expected to be 0.4 percent of GDP. This year, a “structural zero deficit” (adjusted for cyclical fluctuations and one-off effects) should also be achieved.

The federal government alone will earn 86.4 billion euros in the coming year (an increase of 14 billion euros) and spend 99.1 billion euros. This leaves a deficit of EUR 12.6 billion. For comparison: Blümel had originally planned a deficit of 30.7 billion euros in the federal budget for this year. In fact, this year’s balance is likely to be better than originally feared. According to the Ministry of Finance, the federal deficit should be around the value of 2020 (22.5 billion euros) this year.

Budget item graph

Graphics: APA / ORF.at; Source: BMF

Sharp criticism of the opposition

Immediately after Blümel’s budget speech, the members of the opposition parties reacted with sharp criticism. The SPÖ MP Kai Jan Krainer called the figures presented “bad news for all employees and pensioners” because they would pay the tax cut themselves. Krainer referred to the cold progression. In addition, it is a “gift” to higher earners. It is also “bad news for the climate”, since the measures would hardly have any effect on climate protection, and he criticized the accounts as not being transparent.

The FPÖ MP Hubert Fuchs criticized that the government’s coronavirus policy had torn “a big hole” in the state budget. As a result, the economy was “massively damaged”. And: The economy is not “because of”, but “despite” this government is doing better again.

Tax revenue graph

Graphics: APA / ORF.at; Source: BMF

The tax relief does not deserve its name, as it has no effect on the economy. It is the “biggest sham in the Second Republic” because the citizens would pay for it themselves through the cold progression. It would therefore be an “eco-asocial” tax reform. He also expresses criticism of the planned climate protection measures.

Women’s organizations are demanding more money

Immediately before Blümel’s budget speech, domestic women’s organizations went tough in a broadcast with the government’s plans. The funds for equality, feminist work and protection against violence are “far too little”. In addition, the eco-social tax reform does not deserve its name, as it is unsocial and unecological.

Plenary hall of the alternative quarters of the Austrian parliament

ORF.at/Roland Winkler

Almost the entire federal government and Federal President Alexander Van der Bellen had attended the budget speech

The women’s organizations charge 228 million a year for gender equality policy and violence prevention. In addition, 3,000 full-time jobs across Austria are required for the victim protection area. Instead of gifts to high earners and corporations, investments should be made in education, childcare and care. Women’s Minister Susanne Raab (ÖVP) pointed out in a broadcast in the morning that the budget increase in the women’s department to 18.4 million euros was the third increase in a row.

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