With the budget rapporteur, (DP), due to present her draft report to parliament on 17 December, ahead of the plenary vote which should take place a few days later, several consultative bodies have published their assessments of the government’s proposed budget. Here’s what the professional chambers, Council of State, Court of Auditors and Central Bank of Luxembourg (BCL) had to say.

Local vulnerabilities

If there is one point on which all the opinions agree, it is the recognition of the major uncertainties surrounding the global economic situation. These uncertainties are linked in particular to geopolitical tensions in Ukraine and the Middle East, and to inflation.

But while all the opinions agree on the uncertainty of the economic situation, they differ in their assessment of Luxembourg's current economic situation. For the Council of State, Luxembourg’s quasi-upper legislative chamber, the growth assumptions on which the budget texts are based are too optimistic. The Chamber of Employees (CSL) points to the major differences between sectors, highlighting the difficulties in construction, trade and industry. The Court of Auditors deplores the country's dependence on the financial sector, which accounts for a significant proportion of GDP and a large proportion of tax revenues.

Need for public investment

The second point of convergence is the need to guarantee a high level of public investment. The Chamber of Employees (CSL) and the Chamber of Skilled Trades and Crafts (Chambre des métiers) stressed that public investment is necessary to meet the challenges facing the country, particularly in the areas of housing, health, education and infrastructure. But while the former is calling for an expansionary policy mix to stimulate demand and drive production to its potential, the Chamber of Skilled Trades and Crafts said that public finances will no longer be in balance in the medium term, "even though healthy finances are an imperative for a small country like Luxembourg".

The Chamber of Commerce strongly emphasised the need to regain budgetary room for manoeuvre "in order to put the country in a position to face future crises". And it praised the government for reversing the scissor effect that began in 2022, when expenditure rose faster than revenue. The Chamber of Commerce highlighted the non-perennial nature of certain revenues, such as fuel taxes. It said it was satisfied with the reduction in local authority income tax (IRC), but called for further efforts and again called for the abolition of the investment fund subscription tax.

CSL and the Chamber of Commerce agree on the need to invest in human resources. The CSL recommended the development of initial and continuing vocational training (upskilling/reskilling) to fill the skills gap and meet the needs of the labour market. It stresses the importance of investing in training for young people and adults. The Chamber of Commerce recommends increasing co-financing for vocational training.

For its part, the Chambre des métiers is encouraging the government and local authorities to plan ahead for their investment projects, particularly in construction and renovation, in order to take advantage of competitive prices and stimulate economic activity. It suggested using external service providers to speed up the preparation of tender documents.

Concerns about labour relations

The third point of convergence is the importance of labour relations. Several opinions stress the importance of stakeholder dialogue in guaranteeing social cohesion in Luxembourg. The Chamber of Civil Servants and Public Employees (CHFEP) is particularly insistent on this point, criticising the government's recent moves to undermine social dialogue, particularly in the civil service. In its sights is the integration of the National Health and Safety Service of the Civil Service (SNSFP) into the Inspectorate of Labour and Mines (ITM). CHFEP believes that the state should have specific safety rules for public places and buildings. The Council of State, for its part, was critical of the fact that this provision is a budget jumper, not in line with the technique of budget laws.

The importance that the government intends to give to social dialogue will be measured in its management of pension reform. The CHFEP and the Court of Auditors are concerned. They warned against an ill-considered reform that could jeopardise pensioners' rights and social benefits. They stressed the need for in-depth stakeholder dialogue for any reform of the pension system.

Reliability of forecasts to be reviewed

The main criticisms of the draft 2025 budget concern the reliability of forecasts, the level and nature of investment, tax policy and control of government operating expenditure. These criticisms underline the need for greater transparency, a long-term vision and responsible management of public finances to ensure Luxembourg's prosperity and social cohesion.

With regard to the reliability of budget forecasts, the Chambre des métiers pointed out that public administration deficits have been systematically overestimated in recent years. It questioned the accuracy of the estimates for 2025, given the unpredictable impact of recent crises, particularly in the construction and energy sectors. The CSL, while acknowledging the difficulty of making medium-term forecasts in an uncertain economic climate, deplored the lack of ambition in the expenditure budget compared with the government's announcements. The Court of Auditors pointed out that GDP estimates are often revised as additional data is collected. It encouraged regular and transparent revisions of budget forecasts to reflect the country's economic reality as closely as possible. The CNFP recommends that the government explain in a transparent manner the reasons why the maximum amounts for central government expenditure are exceeded. It suggests that these overruns could be justified by new measures or changes in macroeconomic forecasts.

With regard to investment policies, the CSL criticised the reduction in investment in affordable housing provided for in the draft multi-year budget 2024-2028, deeming it contradictory to the stated objective of making the promotion of affordable housing a political priority. It stresses the urgent need to speed up the construction of affordable public housing in the face of the persistent housing crisis. The Court of Auditors highlights the reduction in public investment between the forecasts in the 2023-2027 draft multiannual budget and those in the 2024-2028 draft, particularly in the housing and health sectors. It questions the budget's ability to respond to the country's major challenges, such as global warming and the lack of housing.

The BCL, while generally positive about the 2025 budget bill, stressed the need for greater transparency and prudent management of public spending.

Fiscal policy and operating expenditure

With regard to fiscal policy, the CSL said that the draft budget does not provide for the adjustment of all family benefits to the cost of living, limiting itself to the indexation of the basic family allowance and age increases. It does, however, welcome the technical adjustment of the tax scale to index brackets, while reiterating its call for an overall adjustment that takes account of inflation and the rising cost of living. It stresses the importance of supporting families, particularly those on low incomes. For its part, the Court of Auditors criticised the lack of an exhaustive quantified assessment of the budgetary impact of the tax relief package and the measures to stimulate the housing market. It called on the government to provide a more detailed analysis of the impact of these measures on economic activity and investment. The CHFEP, for its part, is "impatiently awaiting" the introduction of a single tax class, "which has been announced for years". It recommends simplifying administrative procedures for taxpayers and stresses the importance of guaranteeing easy access to tax services.

With regard to trends in operating expenditure, while the Chambre des métiers is concerned about the significant increase in the budget item "employee remuneration" and calls for structural reforms to reduce the state's operating costs, the CHFEP warns against irrational cost-cutting measures in the operation of the state that could jeopardise the smooth running of public services. It reiterated the importance of a solid, high-performance civil service to meet current and future challenges.

For the BCL, the major budgetary challenge for the government is to control the rise in personnel expenditure in the public sector. It noted that expenditure would only decrease slightly over the period 2025-2028, and that a more marked decrease would have been desirable to face the structural challenges of the Luxembourg economy.

The Chamber of Trades recommended limiting the creation of new benefits and increasing existing coverage in order to curb the increase in maternity and health insurance (AMM) expenditure.

The Chamber of Commerce, for its part, is concerned about the deterioration in the social security accounts and is calling for reforms to ensure the sustainability of the pension, dependency and healthcare systems. As is the Chamber of Trades. Unlike the CSL and the CHFEP.

This article was originally published in .