For the fifth year in a row, a balanced budget was achieved without new borrowing. This was accomplished without having to draw on existing reserves, despite increasing expenditure.
The provisional data shows that the Federation achieved a structural surplus of roughly 0.15% of gross domestic product (GDP) in 2018, thus meeting the requirements of Germany’s constitutional debt brake.
Investments reached record levels and disposable incomes were boosted
At the same time, the German government implemented pro-growth, forward-looking budget and fiscal policies in 2018 to ensure that Germany remains internationally competitive.
Investment expenditure as defined under budget law reached a record level of €38.1 billion – €4.1 billion more than in 2017. Despite the interim budget management in the first half of 2018, investments thus increased by over 10% on the year.
In addition, the German government is boosting disposable incomes. Increases in child benefit and child allowances, as well as measures to compensate for bracket creep, help families and lower or middle income earners in particular. Furthermore, 90% of those who pay the solidarity surcharge today will no longer have to do so from 2021.
Revenue totalled €348.3 billion in 2018, thus exceeding expenditure by €11.2 billion. Under section 6 (9) of the 2018 Budget Act ( Haushaltsgesetz 2018), this amount must be allocated to the reserves. There was no need for the €1.6 billion withdrawal from the reserve that was originally planned.
All reserve funds have been allocated for the financial planning period until 2022 and will serve to balance the budget. The funds that have been allocated now are assigned to finance projects such as a planned all-day school programme (€2 billion), as well as additional expenditure as approved in the parliamentary consultations for the 2018 budget. Foreseeable changes in economic conditions must also be taken into account. This is why it remains essential to maintain a responsible budget policy.
Preliminary closure of the 2018 federal budget*:
Here is a breakdown of revenue and expenditure (provisional closure of the 2018 federal budget):
Tax receipts/transfers of EU own resources totalled €322.4 billion, thus exceeding the projected amount by €1.1 billion. This was mainly due to lower payments of own resources due to lower calls for funds by the EU, especially in the area of structural funds.
In addition, the take from a range of taxes increased, including wages tax (up by €0.8 billion), non-assessed taxes on earnings (up by €0.6 billion) and corporation tax (up by €0.5 billion). This was offset by a drop in other areas, in particular in VAT revenue (down by €2 billion). Administrative revenue/seigniorage totalled €25.9 billion.
In 2018, the Federation once again provided substantial relief to the Länder and local authorities. The Federation stands by its national responsibility within the federal system and provided additional funds to develop digital technology, promote subsidised housing, and support public transport and the continued expansion of pre-school child care. Grants for investments by the Länder and the local authorities also increased.
These were the trends for special federal funds in 2018:
In the summer of 2013, €8 billion in funding was allocated to a special relief fund set up to help repair damage from the May/June 2013 floods. Spending from this special fund reached an approximate total of €5.8 billion on 31 December 2018, with €0.6 billion spent in 2018; however, the approved funding indicates that the amount required in the future is likely to be substantially higher.
The Energy and Climate Fund posted revenue of €7.0 billion in 2018, of which around €2.6 billion came from auctions of CO2 emission certificates; €2.8 billion came from the federal budget, and another €1.6 billion, approximately, were withdrawals from reserves. In turn, the fund disbursed approximately €2.5 billion in programme expenditure. A total of approximately €4.5 billion has been carried forward into 2019.
On 31 December 2018, recapitalisation operations worth €14.6 billion for the Financial Market Stabilisation Fund (FMS) were still outstanding. Taking into account all current and completed transactions, an estimated €24.4 billion of the FMS’s borrowing authorisation had been utilised by the end of December 2018. The final outstanding guarantees under section 6 of the Financial Market Stabilisation Fund Act ( Finanzmarktstabilisierungsfondsgesetz ) were returned in 2013; the guarantees were never used.
In the summer of 2015, the special fund for promoting local authority investment was established with a volume of €3.5 billion. The aim of this fund is to promote investment, in the 2015–2020 period, by local authorities with inadequate financial resources and thereby to help balance out disparate economic structures in Germany. The Federation is providing up to 90% of the funding for investments carried out under the auspices of the fund, which is targeted towards financially strapped local authorities in the Länder and city-states. In turn, the Länder ensure that the local authorities benefiting from the fund are able to cover at least 10% of the financing. Since the fund became operational on 20 August 2015, the Länder have drawn down €1.3 billion (approx. 37%). By 30 June 2018, €3.3 billion – roughly 94% of the financial assistance under section 3 of the Local Authority Investment Promotion Act ( Kommunalinvestitionsförderungsgesetz ) – had been allocated.
In addition, the Federation’s supplementary budget for 2016 (which is based on a new article in Germany’s constitution, Article 104c) allocates another €3.5 billion to the Local Authority Investment Promotion Act until the end of 2022; these additional funds are intended to be used as grants to financially strapped local authorities for investments in improved school infrastructure. An administrative agreement between the Federation and the Länder on the school renovation programme, as set out in the Local Authority Investment Promotion Act, entered into force on 20 October 2017. The Länder have now implemented the programme under Land law. On 31 March 2018, when the Länder last reported to the Federation, a total of €0.4 billion (12.2%) of federal funds had been committed. However, the data published separately by various Länder shows that a substantial amount of additional funds are now being committed in this area. The fact that few funds have been drawn down so far – around €19 million in five Länder – has little bearing on the status of implementation. Funds cannot be drawn down until accounting has been completed (at the earliest), meaning that, as an indicator, the transfer of funds lags behind the actual status of investments.
A special digital infrastructure fund that was set up on 1 December 2018 aims to promote investment in the expansion of broadband, especially in rural regions, and to make grants available for investments by the Länder and local authorities (associations of local authorities) in education-related infrastructure for schools (see the “Digital Pact For Schools”) that are important for Germany as a whole. In fiscal year 2018, the Federation allocated €2.4 billion in fast-start financing to this special fund.
With the establishment of a special fund for investments in the expansion of child care, the Federation had also made available approximately €3.8 billion by the end of 2018. The purpose of this fund is to provide additional support for child care for children under the age of three. From a total of €0.8 billion available in 2018, around €0.33 billion were disbursed. The remaining funds (around €0.5 million) will be carried forward into 2019. Including the additional €0.3 billion newly earmarked for this fund, this brings the total amount available in 2019 to €0.8 billion. In 2018, the Federation made a sum of €0.9 billion available as part of additional annual support to help child care facilities cover their operating costs.