Blümel: 2022 Budget stands for recovery, stability and sustainability Potent economic aid provides the basis for recovery
Finance Minister Gernot Blümel delivered his Budget statement in Parliament on 13 October 2021 and presented the draft budget for 2022. The support provided by the State during the crisis is now proving to be the basis for the country’s economic recovery, and this is reflected in the Budget.
“With the 2022 Budget we are facilitating recovery, stability and sustainability for Austria. We have been through the pandemic together. Now we will advance, with renewed energy, into an exciting and successful period for our country - together. With the biggest aid package since the Marshall Plan, the Federal Government has initiated more than 200 measures supporting the areas of health, jobs and the economy. Thanks to the support for business and the economy, up to 350,000 jobs were saved in 2020. At the height of the crisis, the short-time working subsidies alone helped safeguard 1.2 million jobs. 3.4 billion euros were paid in turnover compensation to businesses forced to close during lockdown. The municipalities have drawn down some 790 million euros for municipal capital projects; and 5.1 billion euros in taxes and levies are currently either being paid in deferred instalments or have been lowered. This package is unique in the history of the Second Republic,” stated Finance Minister Gernot Blümel. “Thanks to these measures, we as a country have weathered the pandemic better than many others; and that is now reflected in the positive growth rates and equally positive expectations for the coming year,” Blümel went on to say.
The economy is growing - debt ratios are sinking
WIFO, the Austrian Institute of Economic Research, is forecasting growth of 4.4 per cent for this year. And economic researchers are expecting solid growth in the years to follow as well. Blümel commented: “Our sustainable budget policies in recent years have not only made it possible to provide the aid packages we needed, but they have been a major reason why Austria is still able to access finance from the money markets at favourable rates. With the crisis now abating, we in Austria will return to sustainable budget policies, as pursuing a consistent path of reducing debt is the best form of provident planning for future crises. Strong growth will help us, and we must do all that we can to sustain this upturn.”
Government revenues declined by a total of 5.4 per cent in 2020. The forecasts are for a strong recovery in 2021 and a plus of 6.9 per cent. Conversely, expenditure grew by 12.1 per cent last year and will increase by a further 2.5 per cent this year. In the Budget for the current year a debt-to-GDP ratio of 89.6 per cent was assumed. But due to the much stronger growth that has been experienced, the debt ratio in 2021 will actually come out at around 83% of GDP. A Maastricht balance of -2.3 per cent and total national debt ratio of 79.1 per cent is expected for 2022.
Finance Minister Blümel commented: “From 2022 to 2025 we are aiming for a step-by-step reduction in our debt ratio to just over 70 per cent of GDP. And I would like to make one thing clear: debt reduction doesn’t mean austerity programme - rather, selecting and setting areas of focus.”
Tax reform: easing the burden, bolstering Austrian business and initiating incentives
A shared area of focus for the Federal Government is the eco-social tax reform programme. Blümel commented: “As a Government, we have jointly signed up to the biggest transformation of the tax system in the whole of the Second Republic - and this despite experiencing the greatest economic crisis since World War II. This is why we will be introducing CO2 pricing for the first time in 2022, whilst at the same time reducing the tax burden. With our eco-social tax reform we are pursuing 4 aims in total: reducing the burden for working people and pensioners; incentivising eco-friendly behaviours; bolstering Austria as a sustainable location to live and do business in; and reducing Austria’s debt ratio after this crisis step-by-step. With this tax reform we are helping our economy to make the switch, ecologically speaking, and we are strengthening Austria’s position in global competitive markets whilst reducing the burden on individuals. This is our road to recovery, our collective reboot.”
As a consequence of the eco-social tax reform, the Federal budgetary framework for climate and environmental protection affairs will rise by EUR 5.9 billion in the years to 2025. The biggest amount of expenditure is budgeted to be for the regional climate bonus (EUR 5.45 billion), which will redistribute income from the CO2 pricing directly to the people.
Thanks to the reduction in corporation tax from 25 to 23 per cent, there will be a lasting alleviation of the tax burden for businesses; and the investment allowance with all the greening components added in will amount to up to EUR 350 million. As part of the CO2 pricing model, the Federal Government is deploying a redistribution mechanism to take account of domestic industries and discourage businesses from moving their production abroad.
An initial analysis by Eco Austria has concluded that once all the tax reform measures are in place, gross domestic product will grow by a lasting 1 per cent or EUR 4 billion per year. Employment will grow by a net 30,000 jobs.
Further areas of focus in the Budget
In 2022, EUR 3.7 billion will be spent on care services, EUR 50 million per annum will be spent on training for the caring professions in the period 2022-2024. In the area of health spending, EUR 3.2 billion will be provided for, amongst other measures, dealing with and containing the pandemic as well as COVID vaccines. The reimbursements from the reductions in health insurance contributions are also budgeted in from 2022 onwards.
The safety budget is being raised by EUR 10 million to help protect women from violence, and in particular to combat domestic violence. The home affairs budget is being increased by EUR 236.4 million in total through the next Federal budgetary framework. This includes raising the sum for combating terrorism by EUR 120 million, with half of this planned in for next year. It will be used to modernise police equipment and facilities so as to be able to deal with the new threats they are facing.
In order to safeguard Jewish communities living in Austria, EUR 16 million will be disbursed by the Federal Government from the budget of the Federal Chancellery. The funds available to the Federal Chancellery in 2022 will be some 18.5 per cent higher than in the last Federal budgetary framework. Of this, EUR 55.4 million alone will be spent on boosting the funding for German-language learning places administered by the Austrian Integration Fund.
An additional EUR 16 million will be provided in the area of agricultural and forestry management for protection against natural disasters. In total, the budget for agricultural, regional and tourism affairs will increase by EUR 554.9 million in the next budgetary framework.
The education and training budget will pass the EUR 10 billion mark in 2022. It will be used, amongst other projects, to push forward with the digitalisation of teaching and learning, and to expand psychological support for schools. By the 2023/24 academic year, every lower secondary school pupil will be equipped with an electronic device.