Blümel on the 2021 budget: Getting through the crisis together

On 14 October 2020, Finance Minister Gernot Blümel held his budget speech in Parliament, presenting his draft budget for 2021. Despite the coronavirus crisis, it has been possible to enable key additional investments across governmental departments, with reinforcement of the labour market a particular focus.

"I am putting before you our budgetary response to the coronavirus crisis. This response is costly, but we can afford it. Over the past few years, under Federal Chancellor Sebastian Kurz, the Austrian federal government has pursued a solid budget policy, and this now puts us in a position to be able to help where needed. Our sound policies of the past are thus saving the jobs of the future," declared Finance Minister Gernot Blümel in his speech today. The 2020 budget is clearly impacted by the coronavirus crisis. Compared with the same period in the previous year, tax receipts were EUR 7.7 billion (-12.9%) lower as at the end of September. This is due primarily to deferred tax payments and lower gross tax receipts, in particular income tax, corporate income tax and value added tax.

At the same time, as a result of the assistance for healthcare, jobs and business, expenditure has soared, by EUR 9 billion, or 16%, as at the end of September. For 2020, we anticipate an administrative deficit in the federal budget of around EUR 28.5 billion.

For 2021, expenditures of EUR 97.4 billion and receipts of EUR 76.4 billion are budgeted. This yields an administrative deficit of EUR 21 billion, and for 2021 and 2022, a general government deficit of 6.3%/3.5% is expected. As of today, we are forecasting a debt ratio by 2022 of 85% of GDP. From 2023 onwards, debt will be reduced once again, heading back in the direction of fiscal normality.

EUR 29 billion for the labour market and employment

The labour market constitutes a central challenge and will therefore be provided with significant support. As a result, this coming year, significantly more money will flow into the labour market than in previous budget plans. In total, up to 2021 inclusive, over EUR 29 billion will be made available for the labour market and employment.

At present, almost 704,000 people in Austria are unemployed or on short-time work. Because of this, more money than ever will be spent on employment and jobs.

For coronavirus short-time work, aimed at providing all-round security for thousands of jobs, up to 2021 a sum of up to EUR 8.3 billion will be made available. Up to 2022, EUR 700 million will be provided for setting up a work foundation to support employment qualifications for up to 100,000 unemployed people, as well as the education bonus.

The biggest budget increases

Through a step-by-step increase in the education budget, by 2023, the EUR 10-billion mark will have been reached.

For the healthcare sector, the coronavirus pandemic naturally entails substantial costs. These include above all costs of testing and specialists in epidemiology. For this reason, additional funds are available for 2021 to the tune of around EUR 700 million. Provision has also been made for the purchase of a COVID-19 vaccine.

Action on climate change is one of the government's key focuses, and this is also reflected in a clear budget focus. Between 2021 and 2024, over EUR 1 billion will be additionally provided for the relevant medium-term expenditure framework for environmental and climate measures. This will be used to finance the thermal-power restructuring initiative as well as the expansion of renewable energy.

The topic of mobility is hugely significant in connection with action on climate change. For this reason, in the context of the next medium-term expenditure framework, Austria will be additionally investing around EUR 1.4 billion in this area. Linked to this is further expansion of public transport as well as financing of the first expansion phase of the 1-2-3 climate ticket. For the newly-adopted framework plan of the Austrian Federal Railways (ÖBB), for the years 2021 to 2026 a total budget of EUR 17.5 billion has been secured.

The issue of security is also writ large. In total, EUR 215 million will be earmarked in additional funds for the police (+7.3%). The recruitment initiative will be continued, and the possibility of additional permanent jobs and modern equipment will be created.

Where humanitarian disasters occur, Austria will fulfil its obligation to provide assistance where disasters occur. For this reason, funds for the Relief Fund for Disasters Abroad will be doubled by 2024 to EUR 250 million.

There follows an extract of key quotes from the budget speech:

About this budget:

I am putting before you our budgetary response to the coronavirus crisis. This response is costly, but we can afford it. Over the past few years, under Federal Chancellor Sebastian Kurz, the Austrian federal government has pursued a solid budget policy, and this now puts us in a position to be able to help where needed. Our sound policies of the past are thus saving the jobs of the future!

Discipline:

Once again we must take effective measures to reduce infections and enable warnings against travel to Austria to be removed. Now, each individual, through their own behaviour, can make a contribution to protecting the jobs of their friends and relatives and saving jobs in their region. The discipline of the coming weeks will reduce the long-term damage to Austria as a centre of economic activity. The better we get through this crisis together, the quicker we will return to prosperity.

Labour and employment:

As of September 2020, 704,000 people in Austria were unemployed or on short-time work. Even though these figures have significantly declined since the summer, they are too high for us to be able to speak of an easing. Behind each single number is the fate of an individual, and for this reason, every single unemployed person is one too many. We cannot turn the clock back on this crisis; we can only deploy all our efforts to combat its impact.

A budget for work and employment:

In total, for this year and next, including provision for short-time working, we are making over EUR 29 billion available for work and employment. Never before in Austria has more money be made available in this area than in this crisis.

Getting through the crisis together:

75 years ago, in his famous Christmas address, Austrian Chancellor Leopold Figl said: "I beg you, believe in this Austria of ours!". Alluding to his exhortation, I say to you today: I believe in the diligence of Austrian workers and the creativity and ability of Austrian businesses. I believe that, through discipline, cohesion and courage, we will all get through this crisis together, and return to growth and prosperity.

No tolerance of debt:

Our long-term goal must remain to keep the state budget in order and not to finance our own prosperity at the expense of our children. Right now, however, aid and government support are needed, and we are securing that through this budget. We have always said: a budget surplus is not an end in itself; rather it forms a provision for future crises.

Climate-change and debt deniers:

Over the long term, too much intervention and excessive government debt harms society. Anyone who denies this is deceiving themselves and robbing both themselves and subsequent generations of their future. Such debt deniers are very similar to climate-change deniers. Both are living at the expense of the future, and both will leave behind scorched earth for the next generation. Responsible climate policy is important, but responsible budgetary policy is just as important! Through this budget, we are ensuring both.

"Austria bonus":

At present, we are able to raise finance at such favourable terms because the financial markets have confidence in the continuation of our sustainable budgetary course and are pricing this assumption in. Over the past few years, we have worked hard together to earn this "Austria bonus", and now we are all benefiting from it.

Departmental budgets:

This crisis is not the first, and neither will it be the last we have to overcome in Austria. For this reason, it is important to be equipped as well as possible for both this and future crises, and so, with this budget, we are also making targeted investments, independently of coronavirus.

Conclusion:

This budget is our response to the crisis in figures. And above all it is a budget which sets out our course beyond the end of the crisis, inspired by a sense of responsibility for jobs and for Austria as a centre of economic activity.