According to Nora Back and Sylvain Hoffmann, the government’s budgetary situation will be less negative than assumed in the draft budget. The CSL agrees with the European Commission’s forecast of a deficit of -1.7% of GDP compared to the government’s forecast of -2.2% of GDP in 2023. (Photo: CSL)

According to Nora Back and Sylvain Hoffmann, the government’s budgetary situation will be less negative than assumed in the draft budget. The CSL agrees with the European Commission’s forecast of a deficit of -1.7% of GDP compared to the government’s forecast of -2.2% of GDP in 2023. (Photo: CSL)

On 28 November, the Chamber of Employees issued its opinion on the draft state budget. Although the inflationary situation remains uncertain, it argued that public finances will ultimately be better than expected and advocates a countercyclical budgetary approach.

, president of the Chamber of Employees of Luxembourg (Chambre des salariés Luxembourg, CSL), and , director general, on Monday presented the chamber’s opinion following the submission of the draft law on the . The CSL considers that “the deterioration of the budgetary situation remains completely reasonable and must be understood as a price to be paid to guarantee economic and social stability within the grand duchy.”

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On the budget deficit and public debt--for which the chamber uses the threshold of 60% of GDP according to the Maastricht criteria, rather than the 30% that the government has set for itself--it believes that they will be “lower than expected” due to the non-implementation of certain investments and an underestimation of tax revenues. “It seems unlikely that the budget surplus of €1bn in August will turn into a deficit of almost €1.4bn in 2022 as indicated in the draft budget,” it said in its opinion. The real uncertainty remains the duration of inflation and the maintenance of high consumer prices, and the likely rise in key interest rates which, according to the CSL, will continue to weigh on household purchasing power.

Maintain indexation “whatever the cost”

While the employers’ chambers see automatic salary indexation as “catastrophic” for businesses, the CSL rolls its eyes. “This is nothing new,” commented Back, who is also president of Luxembourg’s largest trade union, the OGBL. “We are used to employers in Luxembourg, as well as the OECD, criticising this system,” she said. “We are definitely in favour of indexation. In reality, we are talking about two index brackets, the third being the 2022 bracket postponed to 2023. In our view, it is perfectly feasible for companies to do this, because we are not in a general recession and if that were to happen, the tripartite agreement provides for compensation of the costs of this index by the state, so I don’t see what the problem is.” The CSL maintains its demand for indexation of the tax scale to inflation, as well as a real reflection on tax reform, which the government has already refused in 2023.

Demands for families

While it welcomes the government’s initiative to raise the ceiling for the single-parent tax credit, the CSL is “disappointed” with the overall budget proposal on taxation. It published a table (on page 16 of the above presentation, in French) proposing a new tax scale applicable to class 1, which shows a degressive decrease in the tax burden up to €100,000 of income and an increase in the tax burden from €150,000 of taxable income, up to an additional 15.3% for the highest incomes, compared to the current situation.

Social demands remain at the heart of the CSL’s concerns, which calls on the government to increase tax credits and tax allowances and to reduce or even abolish tax privileges on capital and real estate gains. The CSL also formulated a list of demands for social and family revalorisations and indexations, in particular on family benefits.

This story was first published in French on . It has been translated and edited for Delano.

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