Luxembourg budget: Government finally leaves austerity

Luxembourg Finance Minister Pierre Gramegna presented his 2018 budget draft on Wednesday, which confirmed the government has finally left austerity. 

The expenditure for 2018 (central state) amounts to €18.19 billion which will be offset by revenue of €17.3 billion. The deficit in the central state amounts to €890 million. According to Gramegna, the deficit is due to high investment. According to the government's forecasts, the deficit will be reduced to €89 million by 2021.

Here are the main points from the 2018 budget: 

1. Free childcare and language promotion programme to cost the state next year €380 million. That is €36 million more than 2017. 

2. Secondary schoolbooks will be free as the state will assume the costs of €14.5 million. 

3. Around 6,000 students will be equipped with an electronic tablet. €2.2 million expenditure is foreseen in the coming year. 

4. In the field of education and care, 500 new posts will be created, 200 of which are included in the inclusion of children with specific needs. The total expenditure on education amounts to €2.23 billion. By 2021 it should be €2.38 billion. 

5. The new parental leave appeared to work well with families therefore, in the  2018 budget, an additional €98 million will be provided compared to the multi-annual financial planning 2016-2019. 

6. Housing expenditure is expected to total €216 million (+ 3.2%), and the budget for subsidised housing rises by €19 million (+ 19%). The state developer "Fonds du logement" will receive an additional six million euros.

7. Between 2018 and 2021, €70 million will be earmarked for the expansion of retirement homes and nursing homes, while disability expenditure will be €63 million. 

8. The investment for trams for the period 2018-2021 amounts to €228 million. In 2018, the "Fonds du rail" will receive €292 million for the extension of train routes. Overall, investments in public transport will amount to 827 million euros next year. 

9. The reform of the RMG (in the future to be called "Revis") also suggests additional costs. By 2021, the budget is expected to rise to €16 million. 

10. The state plans the construction of three sports centres, 15 sports halls and three football fields. Furthermore, the construction of an Olympic training centre is planned. The expenditure in the five-year plan amounts to €120 million. This is 20% more than in the previous five-year plan. 

11. The cultural budget increases to 141 million euros. €4.5 million will be invested in the modernisation of the Escher "Musée de la Résistance" and a further four million euros in the project "Capital of Culture 2022". 

12. The state will invest €21 million in the rescue services. The construction of the building in the capital is supported by 14.7 million euros. 

13. The police and security forces are reinforced with 100 additional employees. Military spending will rise by €60 million after the government has committed itself to increasing its defence expenditures progressively to 0.6% of GDP by 2020. 

14. Luxembourg continues to invest 1% of its gross domestic product into development aid. In the coming year, the government will invest €21.8 million more in refugee policy (compared to 2017). 

15. The "Enregistrement" will receive 20 additional employees in 2018. The tax administration will be reinforced by 100 employees. A total of 533 new posts will be created in the coming year. In addition, there are the 500 posts in the education and care sector. 

16. Companies that equip their vehicle fleet with electric cars will benefit from a tax credit from 2018 onwards. The private acquisition of hybrid cars (<50 g CO2 / km) is rewarded with a tax deduction of 2,500 euros. 

Positive trend 

Despite tax breaks, high investments and despite tax cuts in electronic commerce, the trend was positive, according to a visibly satisfied finance minister. Gramegna's healthy situation of government finances led to consolidation measures at the beginning of the legislature and to strong economic growth later on.

(Patrick Cameron, wort-en@wort.lu, +352 4993 743)