Federal Council wants to curb spending due to rising debt
Published: Wednesday, Feb 14th 2024, 17:30
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For the second time in a row, the federal government failed to comply with the debt brake in 2023. In order to prevent further structural deficits, the Federal Council has decided on further measures for the coming year. In the medium term, all tasks and subsidies will be reviewed.
"In the long term, you must not spend more than you earn," said Finance Minister Karin Keller-Sutter to the media in Bern on Wednesday. This principle had not been followed in recent years. The Confederation's difficult financial situation had become even worse as a result.
All departments have made great efforts, said Keller-Sutter. "But that's not enough." The problems are structural in nature.
"Problem on the expenditure side"
The financing deficit in the ordinary budget amounted to around CHF 670 million in 2023. For the second time in a row, it was higher than would have been permissible in economic terms. The structural deficit amounted to CHF 350 million.
According to provisional figures from the Federal Finance Administration (FFA), net debt rose by CHF 1.4 billion and now stands at CHF 142 billion. Gross debt according to the Maastricht definition rose by CHF 4.4 billion to around CHF 128 billion because long-term debt in the form of bonds was increased.
FFA Director Sabine D'Amelio-Favez spoke of an "ongoing problem on the expenditure side" that must be tackled. Otherwise, the targeted debt reduction could not be achieved. "We are forced to bring the federal finances back into balance."
Limiting growth
To ensure that the 2025 budget complies with the debt brake, the Federal Council had already taken various cutback measures amounting to CHF 2 billion in January. For example, lower payments into the railroad infrastructure fund, a reduction in the federal contribution to the ETH Domain and a waiver of the federal contribution to unemployment insurance are planned.
In addition, the national government has now decided to make a linear cut of CHF 350 million in low-commitment expenditure. This includes areas such as international cooperation, culture, agriculture, regional passenger transport, the environment, location promotion and administration. The army is to be excluded.
According to Keller-Sutter, none of these measures will result in a reduction in services. However, the aim is to slow down the growth in expenditure. Measured against the overall federal budget, the linear cuts are moderate.
"Far-reaching measures" planned
Although the Federal Council intends to continue some of these cost-cutting measures in subsequent years, it expects further deficits running into the billions for the years 2026 to 2028. The reasons for this include higher expenditure on AHV, premium reductions, the army and childcare.
"In the longer term, more effective measures are needed to finance the federal budget," said Keller-Sutter. Extraordinary postings should not be a permanent state of affairs. It is about fulfilling ongoing government tasks.
In the medium term, "far-reaching measures" are therefore needed. By the end of March, the Federal Department of Finance (FDF) should have a concept that fundamentally reviews all federal tasks and subsidies. The review should also include legally committed expenditure and existing funds.
Outraged farmers and development aid workers
Keller-Sutter said that restructuring the federal budget was a difficult but necessary task. Creating more debt was not an option for the Federal Council. Tax increases are also not an issue. "That would be a burden on the population and the economy."
Even the Federal Council's short-term plans have met with resistance from the affected sectors. For the Swiss Farmers' Association (SBV), a reduction in the agricultural budget is "an absolute no-go", as it wrote. It intends to oppose the planned cuts "by all means".
Alliance Sud, the working group of aid organizations, fears that development cooperation will be bled dry as a result of the latest Federal Council decision. The organization is calling on the Federal Council to provide extraordinary funding for the reconstruction of Ukraine.
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