The federal ministries had to submit their budget plans for the coming year. As usual, the wishes will be greater than the possibilities allow. We show which projects have chances and which don’t.
The federal budget for 2024 will only be decided this week, so planning for the coming year is already getting hot in Berlin. The federal ministries had to report their budget plans to Federal Finance Minister Christian Lindner (FDP) by May 2nd. Its task is to create a balanced budget for the coming year.
Exactly how much money he has available for this will only be revealed by the tax revenue estimate in mid-May. However, experts do not expect any major deviations from previous plans. That would mean tax revenue of 394.6 billion euros – 19.3 billion euros more than this year – and allow expenditure of 451.8 billion euros. The federal government would take on new debt amounting to 16 billion euros, which corresponds to the maximum of the debt brake. Expenditures of 445.7 billion euros and 16.6 billion euros of new debt are still planned for 2024. So there’s a little more money to distribute.
Most spending in the federal budget is not flexible. This includes the large item of social benefits. Subsidies to pension insurance will increase by around 6.4 to 123.7 billion euros. That is 5.5 percent more, mainly due to the pension increase in mid-July and another in July 2025. 43.7 billion euros have also been determined for the labor market, which mainly concerns citizens’ benefits and unemployment benefits. The costs increase here only marginally. And the interest payments for the current mountain of debt can already be calculated in a fixed manner. They remain unchanged at 36.9 billion euros.
These items alone already make up 46 percent of the federal budget. There are also smaller blocks of expenditure, for example for the maintenance of the road, rail and waterway network, administration, civil servants’ pensions and subsidies for health insurance. In total, they will cost a further around 76 billion euros, meaning 62 percent of the federal budget has already been budgeted.
The federal government’s scope is therefore limited to the remaining 38 percent, which is around 170 billion euros in spending.
Some changes to the federal budget have also already been determined for next year. This is how basic child protection is introduced. It brings together several previously separate benefits for children such as child benefit, child allowance and the benefits of the participation package and increases them slightly. Because of the increase in benefits and because the Federal Ministry for Family Affairs assumes that more parents will apply for the benefits they are entitled to, Lindner is providing a budget of 2.4 billion euros in the first year.
In return, Federal Family Minister Lisa Paus (Greens) is saving around 200 million euros on parental allowance because in the future parents will only receive it up to a taxable income of 175,000 euros per year. The previous limit was 300,000 euros.
Other things are still plans and wishes. These projects will be fought over in the coming months.
What is it about? Federal Defense Minister Boris Pistorius (SPD) already has a special program worth 100 billion euros, but regular spending from the federal budget is also expected to increase. In order to achieve NATO’s goal of spending two percent of gross domestic product on defense, he is demanding an additional mid-single-digit billion amount from 2025 – around five billion euros. He argues that with the current plans, which do not provide for an increase in the defense budget for 2025, there would be no money left for investments.
How likely is it to be implemented? Pistorius actually has huge special assets for investments. Nevertheless, the coalition leaders, especially Chancellor Olaf Scholz (SPD), also want to achieve the two percent target. However, it is unlikely that the money for this will be financed by hook or by crook, for example through cuts in social benefits. In the end, Pistorius is only likely to get more if the budget leaves room for it.
What is it about? The solidarity surcharge – which amounts to 5.5 percent of the income tax payable – was actually only levied for one year in 1992. Then in 1995 it was passed as a permanent levy to finance German unity. An allowance has been in effect since January 2021, which means that today only companies, the top ten percent of private incomes and savers who are above the saver allowance have to pay the solos.
The FDP would prefer to abolish solos completely anyway. The government could also be forced to do this, because the Federal Constitutional Court will decide this year on a lawsuit that will describe the partial abolition in 2021 as unconstitutional. The Federal Finance Court had already rejected such a lawsuit in 2023. Curious: Six FDP members of the Bundestag had already filed the lawsuit with the Federal Court of Justice in 2020, when the party was still in opposition.
How likely is implementation? Firstly, Lindner argues that by abolishing it he wanted to forestall a ruling by the Federal Court of Justice. Secondly, this is intended to relieve the burden on the economy. The latter is a legitimate wish. The federal government would then have to forego revenue of around 12 billion euros per year. It is unlikely that the budget will provide such relief. Perhaps the traffic light will agree on other variants, such as a lower rate for the soli or a partial abolition for certain company sizes.
What is it about? The social benefit, trivially referred to as “pension at 63”, makes it possible to retire without deductions after 45 years of contributions to the statutory pension insurance. When the law was passed, the minimum age for it was 63 years, now it is 65 years. The costs for this are an estimated 36 billion euros per year, although economic institutes estimate that only around 8 billion euros could be saved if early retirees had to accept deductions again.
How likely is abolition? Very unlikely. “Retirement at 63” is one of the SPD’s heart projects. In addition, social associations strongly support them. Scholz has therefore already called it a “red line” in the budget negotiations. This not only concerns their abolition, but also possible changes.
What is it about? In order to relieve consumers of the rising costs of the Co2 price, which will rise from 45 to 55 euros in 2025, the income from the emission certificates should actually be paid out in full to every citizen in Germany. However, this climate money has not yet been decided. Lindner said that it will at least theoretically be possible from 2025 because then every tax number will be linked to a bank account. The cost of the climate money would be around 13.3 billion euros. Since the revenue from the Co2 tax goes directly to the Climate and Transformation Fund (KTF), it would also have to pay out the climate money. The FDP has already submitted a list of suggestions as to which other climate projects could be deleted.
How likely is implementation? When it comes to climate money, the traffic light has found itself in the delicate position of not using the income from the Co2 price for its actual purpose, climate money, but for other climate purposes. Now she is faced with the dilemma of how to finance this additionally. Almost all economists are calling for climate money as a social compensation for low income groups who are disproportionately burdened by the Co2 price, and as an incentive for consumers to save Co2. It is doubtful whether the Greens in particular are prepared to stop or reduce other projects, such as funding for energy-efficient renovations or the installation of heat pumps. It is possible that the climate money will be postponed further or only paid out to a smaller extent as a test balloon.
What is it about? The Handelsblatt recently reported that the Ministry of Finance had a list of 21 subsidies that could be eliminated in 2025. These include tax exemptions for night, Sunday and public holiday surcharges, the reduced tax rate on cultural goods and tax exemptions for foresters. Other major subsidies such as diesel and company car privileges are not included, but could be made an issue by coalition partners. It is estimated that this could save the federal budget up to 20 billion euros per year.
How likely is implementation? It is very likely that the federal government will review at least some of the subsidies. Many of them are also controversial among economists. You could also easily save money here. However, as the violent farmers’ protests at the beginning of the year showed, subsidies are a highly emotional matter for the affected groups in society. The government must therefore carefully consider what it is cutting or cutting.
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