Belgian Stability Programme

2011-2014

Main points of fiscal consolidation

The Belgian government has set itself the priority of ensuring sustainable fiscal consolidation in the coming years. That consolidation is an essential condition for supporting sustainable economic growth because, without consolidation, the increase in the deficit and the debt ratio in the context of population ageing and the return of the snowball effect would lead to a big increase in the risk premium and long-term interest rates, discouraging consumption and investment. In that context, it is essential to have a credible strategy for the consolidation of public finances aimed at reducing the public debt.

The Belgian government also considers that this effort cannot be sustained without the implementation of structural reforms in line with the objectives of the EU2020 Strategy, the Euro Plus Pact, and the recent conclusions of the European Council on 23-24 March.

On the expenditure side, the budgetary effort will focus mainly on:

· increasing the efficiency and quality of public services;

· labour market reforms designed to boost the employment rate and, in particular, the participation of target groups in the labour market, in accordance with the aims defined in the national reform programme;

· reforms aimed at increasing efficiency gains in health care while maintaining quality health care accessible to all;

· controlling certain expenditure, particularly on service vouchers and time credit;

· global reform of the pension system in order to increase the effective retirement age while maintaining an appropriate pension system; in that context, the federal government will continue to perform that task and will define the process for the adoption of decisions on reforming and strengthening the pension system. In October 2011, in order to raise the effective retirement age, Belgium will also evaluate the policy aimed at restricting early retirement (e.g. pre-pensions) and encouraging retention in employment in the context of the measures laid down in the Generation Pact;

· reducing the complexity and increasing the transparency of the tax system;

· stepping up the measures to combat social security fraud, particularly via tighter controls and the cross-checking of databases, made possible by the investments made in recent years in that regard;

· cutting expenditure on interest charges by reducing the deficit.

On the revenue side, the measures to be taken will be analysed in a context of convergence at European level. Therefore:

· The accent will be on green taxation, which is still lagging behind the European level (in % of GDP), notably in order to encourage members of Belgian society to modify their behaviour and thus facilitate the transition to a sustainable economy.

- The government is studying the possibility of introducing a tax on nuclear fuels. To that end, the National Bank of Belgium was asked to conduct a study analysing the appropriateness and details of such a tax.

- The government is also studying the possibility of introducing a tax on “first class” and “business class” air tickets. Consultation with the regions is in progress on this subject.

· The emphasis will be on an appropriate contribution from the financial sector, aimed partly at compensating for the adverse effects of the financial crisis on public finances, and partly at reducing the risks taken by the sector.

· The government is of the opinion that taxes on labour will not be increased in view of their already high level.

· There will be stronger efforts to continue combating tax evasion and to improve revenue recovery.

Table 28 shows the general government financing balance to which the Belgian government is expressly committed and for which it will take the necessary measures. The breakdown from 2012 shown in the table below is purely a guide and does not in any way prejudge the actual implementation of the measures mentioned above, which will be decided by the next government.

TABLE 28 General government budget outlook(1)
% of GDP	2010 Volume(in € billion)	2010	2011	2012	2013	2014
	Net lending by sub-sector
1. General government	-14,4	-4,1	-3,6	-2,8	-1,8	-0,8
2. Central government	-10,9	-3,1	-3,1	-1,9	-1,7
3. Communities and regions and local authorities	-3,2	-0,9	-0,5	-0,4	0,2
4. Social security authorities	-0,3	-0,1	0,0	-0,5	-0,3
	General government
5. Total revenue	172,2	48,9	49,8	49,6	49,9	49,9
6. Total expenditure	186,6	53,1	53,4	52,4	51,7	50,7
7. Net lending/borrowing	-14,4	-4,1	-3,6	-2,8	-1,8	-0,8
8. Interest expenditure (EDP)	12,0	3,4	3,5	3,6	3,7	3,6
9. Primary balance	-2,4	-0,7	-0,1	0,8	1,9	2,8
10. One-off and other temporary measures	-0,3	-0,3	-0,1	0,0	0,0	0,0
	Selected components of revenue
11. Total taxes	103,0	29,3	29,6	29,5	29,5	29,5
(11=11a+11b+11c)
11a. Taxes on production and imports	45,5	12,9	13,0	13,0	12,9	12,9
11b. Current taxes on income, wealth, etc	55,1	15,7	15,9	15,8	15,9	15,9
11c. Capital taxes	2,5	0,7	0,7	0,7	0,7	0,7
12. Social contributions	58,1	16,6	16,7	16,7	16,8	16,8
13. Property income	3,0	0,9	1,1	1,0	1,0	1,0
14. Other	8,1	2,3	2,4	2,5	2,6	2,6
15. Total revenue	172,2	49,1	49,8	49,6	49,9	49,9
p.m. Tax burden	163,1	46,4	46,9	46,9	47,0	47,0
	Selected components of expenditure
16. Final consumption expenditure	58,0	16,6	16,2	15,8	15,5	15,0
17. Social payments	88,9	25,3	25,4	25,4	25,4	25,4
18. Interest expenditure	12,0	3,4	3,5	3,6	3,7	3,6
19. Subsidies	8,7	2,5	2,5	2,1	2,0	2,0
20. Gross fixed capital formation	5,9	1,7	1,9	1,9	1,7	1,7
21. Other	13,1	3,6	3,9	3,5	3,4	3,0
22. Total expenditure	186,6	53,1	53,4	52,4	51,7	50,7

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(1) The breakdown between the federal government on the one hand, and the Communities, Regions and local authorities on the other, over the period 2013-2014 depends in particular on the results of the national reform which is under discussion.

For the period 2011-2014, the stability programme is based on the 2011 budget drawn up by the federal government on 24 March. That budget was presented to Parliament. In preparing the budget the government assumed a deficit of 4.5 % of GDP in 2010. Since then, on 31 March the NAI published its first estimates of the public deficit, indicating that the budget deficit was reduced to 4.1 % of GDP.