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Allocation of the effort between the entities
In an institutional structure like Belgium, where
many powers and financial resources are decentralised, it is important
to determine the optimum allocation of the fiscal consolidation effort.
Furthermore, that is a requirement stipulated by the European
Commission.
However, in the current political context with a
caretaker government and institutional negotiations aimed, in
particular, at reforming the financial flows between the federal State
and the federated entities(1), the
federal government cannot decide on the allocation of the effort between
the levels of power. By way of indication, it has to be content with
referring to the recommendations of the High Council of Finance on the
subject. The allocation formula proposed by the latter corresponds to
the respective share of each entity in the total primary expenditure of
general government, namely 65 % and 35 % respectively for Entity I and
Entity II.
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TABLE 16
Target financing
balance per entity proposed by the High Council of Finance |
|
In % of GDP |
2010 |
2011 |
2012 |
2013 |
2014 |
|
General government |
-4,6 |
-3,7 |
-2,8 |
-1,8 |
-0,8 |
|
Entity I |
-3,4 |
-3,2 |
-2,5 |
-2,0 |
-1,6 |
|
Entity II |
-1,1 |
-0,5 |
-0,4 |
0,2 |
0,8 |
|
Source : High Council of Finance
(2011) |
For the period 2011-2012, the allocation of the
effort proposed by the High Council of Finance corresponds to the
targets which the federated entities set themselves in their respective
multi-annual budgets.
For 2013, the HCF advocates an additional effort
of 0.1 % compared to the path planned by the federated entities, which
should be made possible by the extra financial resources which that
level of power will receive from the federal government under the
Special Finance Law, following the improvement in the economic
parameters, resources which the federated entities have not yet taken
fully into account.
From 2014 onwards, the allocation of the effort
relating to the consolidation of public finances recommended by the HCF
gives rise to an increasingly asymmetric path, in that Entity I could be
satisfied with a deficit of 1.6 % of GDP while Entity II would have to
accumulate budget surpluses amounting to 0.8 % of GDP in 2014. The HCF
states that this asymmetry does not in any way reflect a divergence in
the fiscal policy stance of the different levels of power; it is due
simply to the fact that 90 % of the ageing costs and 100 % of the
interest charges on the historical public debt are charged to Entity I.
According to the HCF, this apparent asymmetry in
the actual expected budget paths is far from ideal. It considers that
the sustainable consolidation of public finances requires a reform of
the current funding flows and the institutional framework. That is one
of the major issues in the current institutional negotiations. In the
view of the HCF, that revision must lead to increased accountability for
the different levels of power, increased fiscal sustainability for the
Federal State – which bears the bulk of the charges on the public debt –
and sustainable convergence of budget balances.
Regarding local authorities, the September 2009
cooperation agreement between the Federal State and the Regions
(supervisory power) ultimately provided for strict adherence to the ESA
95 accounting standards. That agreement was first implemented in the
NAI’s revision of the local authority accounts (see Focus pp. 14-15).
These new harmonised statistics should enable the Regions to improve the
exercise of their supervision over local authorities. Thus, in line with
the 2009 cooperation agreement, the Flemish government recently approved
the “golden rule” providing for structural equilibrium of the local
authority accounts over the whole of the local government’s term (so as
to take account of the entire local authority investment cycle).
Regarding the Walloon Region, Article L1314-1 of
the Code of Local Democracy and Decentralisation mentions that the local
authority expenditure and revenue budget must never record an ordinary
or extraordinary balance in deficit, nor a fictitious equilibrium or
surplus. Considering the investment cycle, that rule should result in
ESA equilibrium on a multi-annual basis.
Regarding the Brussels Capital Region, Article
252 of the New Municipal Law stipulates that the budgets and accounts
must be in equilibrium for both ordinary and extraordinary transactions.
That equilibrium is strictly observed by the local authorities with the
aid of the Brussels Capital Region which, in agreement with the Federal
State, injects € 30 million each year to cover the local authority
deficits in order to neutralise that operation. This fiscal principle
and the Region’s aid should enable the local authorities to move towards
equilibrium over the local government legislative term".
(1) In
these negotiations, the Brussels Capital Region is the subject of
particular attention because it has found that
there is structural
under-funding. |
