Citizens’ money will be significantly more expensive than previously expected. Labor Minister Hubertus Heil has announced an additional 3.25 billion euros for this year – while budget politicians are currently struggling intensively to find ways to save and redeploy. How the additional costs come about – and where further points of conflict in state finances arise.
How much does the federal government spend on citizens’ money?
The federal government had previously assumed that citizens’ money would cost them 23.76 billion euros this year; that corresponds to around five percent of the entire federal budget. But it is now clear that this will not be enough. At the end of last week it was announced that Finance State Secretary Florian Toncar (FDP) had informed the Bundestag’s budget committee about an “excessive expenditure” of 2.1 billion euros for citizens’ money. In addition, according to another letter from Toncar, the federal government needs an additional 1.15 billion euros for accommodation and heating for those receiving citizens’ benefit. Overall, there are additional costs of 3.25 billion euros.
Why is citizen’s money becoming more expensive?
The federal government essentially gives three reasons. Firstly, the price increase. Federal Labor Minister Hubertus Heil (SPD) calls the “high inflation in food and energy prices”. His ministry explained that it had become apparent that rents, heating costs and other additional costs had “increased more than we expected a year ago”. Economists expect an inflation rate of 6.1 percent for 2023; last year it was 6.9 percent. Rents will also continue to rise this year, especially in large cities where many recipients of public benefit live. According to a study by the consulting firm Jones Lang LaSalle, the rental apartments offered there increased in price by 6.7 percent in the first half of 2023.
The second reason, according to the federal government, is the higher number of citizens’ benefit recipients. According to forecasts, the German economy will shrink this year, so the number of unemployed people is expected to increase by around 190,000 people. This is how the Nuremberg Institute for Labor Market and Occupational Research estimates it. According to Toncar, the federal government previously assumed that there would be 3.85 million employable people on citizen’s benefit; it is now expecting 3.93 million people. A third factor is that many refugees from Ukraine still receive citizen’s benefit.
What role do refugee Ukrainians play in the increase in spending?
Upon request, the Federal Ministry of Labor was unable to name the expenditure on citizens’ money for Ukrainian refugees. However, the number of recipients makes it clear that billions of euros are at stake. According to the ministry, according to the latest figures from July, 704,000 Ukrainian citizens received citizen’s allowance. These included 482,000 people of working age and 222,000 so-called non-working people entitled to benefits, usually children under 15 years of age. That was around 687,000 more than in February 2022, when the Russian war of aggression against Ukraine began and more than a million people fled the country to Germany. Heil announced that he would now like to place the Ukrainians, but also other refugees who have completed a German course, into work more intensively, including under pressure. If this were to succeed, spending on citizens’ money would also be dampened or reduced.
Are there any other construction sites in the household?
Yes. In addition to citizens’ money, there are gaps in the budget, especially in the federal government’s aid to Ukraine and in support of the states in terms of refugee costs. According to the wishes of the traffic light – especially Federal Defense Minister Boris Pistorius (SPD) – military aid for Ukraine is to be doubled from the previous four billion euros to eight billion. It is not yet clear where the four billion will come from. As far as refugee costs are concerned, the federal and state governments have agreed that the federal government should initially pay a deduction of 1.75 billion euros next year. The budget estimates 1.25 billion euros – so the budget holders still have to “find” half a billion euros in the adjustment meeting.
Why is the traffic light coalition looking to Karlsruhe with concern?
On Wednesday, the Federal Constitutional Court will decide whether the traffic light with the 2021 budget violated the constitution. Specifically, the question is whether the finance minister was allowed to move 60 billion euros of unused Corona loans to the Climate and Transformation Fund (KTF), as Christian Lindner did. The Union faction in the Bundestag has sued. If Karlsruhe rejects the billion-dollar transfer of credit authorizations in whole or in part, the remaining KTF funds could become scarce as early as 2025.