Vivaldi reconvenes on budget and energy bill

03 october 2021
Today at
12:35

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The core cabinet will meet again this afternoon to discuss the budget and measures to tackle the high energy prices. Rising energy costs are pushing the left-wing parties even harder on the budget discussion in the federal government. The 2 billion euros that Prime Minister Alexander De Croo (Open VLD) wants to save collide with a socialist veto.

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Prime Minister De Croo hoped to work out a restart and transition plan for our country during the budget conclave this weekend. But that intention is overshadowed by the political debate on energy prices. The annual bill for a household with an average electricity consumption has risen above 1,000 euros, the natural gas bill even exceeds 1,600 euros. Electricity has not been this expensive in three years, the price of gas is the highest in ten years. The top ministers hope to cut the knot on Sunday afternoon on measures to slow down that increase. They couldn’t figure it out on Friday evening and Saturday afternoon. It is also not certain whether this will work today.

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On the left, the rising energy bill is used to further temper the already limited savings ambitions. ‘After the covid and flood crises, we now have a third energy crisis. It is not the time to cut,” said a socialist cabinet on Friday. The budget deficit for next year is estimated at 21.3 billion euros or 4.14 percent of gross domestic product (GDP). De Croo aims for a budgetary effort of 2 billion euros, or 0.4 percent of GDP, but there is still no consensus on that figure.

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The essence

The federal government wants to take measures to mitigate the rising energy bill.
Prime Minister De Croo wants to save 2 billion euros, but the socialists are using the ‘energy crisis’ to temper their budget ambitions.
There are mainly savings on the table that do not hurt much.

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All parties agree that ‘something’ must be done to reduce energy bills. Over the past week, a whole series of balloons have been released. The Greens and the Socialists are pushing for an extension of the extended social tariff for energy. Since this year, about a million families have been covered by this reduced rate, twice as many as in pre-corona times. The proposal is to keep this arrangement next year, which will cost 200 million euros.

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excise

However, many families cannot claim this and that is why politicians want to go further. Due to the higher prices, the government also sees its VAT revenue increase. There is little enthusiasm for a VAT reduction from 21 to 6 percent due to the high cost, but a political consensus is in the making to allow the additional income to flow back to the population. According to Finance Minister Vincent Van Peteghem (CD&V), revenues will increase by 200 million euros. According to Vooruit, that is even 350 million.

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After the covid and the flood crisis, we now have a third crisis with energy. Now is not the time to cut.

Socialist Government Resource

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The question is how that amount can be returned. Minister of Work and Economy Pierre-Yves Dermagne (PS) argues for an energy check of 100 euros. However, this meets with resistance from the liberals, CD&V and Groen, because it is a one-off measure that benefits everyone, including those who see little or no increase in their energy bill. The cost also rises to half a billion euros.

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A different line of thought therefore seems to have a better chance. Under European pressure, the federal government has decided to replace federal energy taxes with an excise tax. The levies, percentages on the price, would thus become a fixed amount, so that they would not increase the invoice extra in case of price increases. The MR even advocates a cliquet system, in which excise duties fall when prices rise and vice versa.

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Wish List

Extending the broader social tariff for electricity and natural gas and other energy measures fits in with a broader wish list that is on the table during budget discussions. All together, it concerns 43 projects worth more than 3 billion euros. To keep the budget on track, money must be found to fund the new policy. In order to be able to invest more, the socialists prefer to limit the budgetary exercise to one billion euros instead of the 2 billion that De Croo is aiming for.

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What does it mean to us to be able to tell our children and grandchildren that the budget is in balance, but that the world has become unlivable because of climate change?

Paul Magnette

PS chairman

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“What does it mean to us to be able to tell our children and grandchildren that the budget is in balance, but that the world has become unlivable because of climate change?” said PS chairman Paul Magnette on French-language radio. The interpretation of the billion that the PS is aiming for was already determined when the government was formed. These include the transposition of the European directive on e-commerce, an increase in excise duties on tobacco, the expiry of tax regularization and the fight against fraud.

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Budget Classics

A budgetary table is on the table for an additional budgetary effort – whether it is made to further limit the deficit or to finance new policies. In any case, there is the securities tax, which should yield 430 million euros from next year. In addition, the aim is to increase excise duties, such as on professional diesel (50 million), and a few limited VAT increases (20 million) and limiting the favorable regime that top athletes enjoy in social security (30 million).

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The list also includes a range of classics. This involves painless measures that mainly yield money on paper, such as charging extra income from dividends from government participations (100 million) or increasing the employment rate (100 million). All sides seem to be in favor of difficult measures or ambitious reforms. But even then, a quick landing seems difficult. The initial timing – an agreement by Monday morning – will be difficult, according to various sources.

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