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Federal German Budget 2020

Social cohesion and record investment

Record investment in making the country innovative and fit for the future – the largest tax cuts for more than ten years – and extensive measures to foster social cohesion. That is the German government’s plan for the next year. Again there is to be no new borrowing.

A pie chart showing spending by ministry: 41.3% for labour and social affairs, 12.5% for defence, 8.3% for transport and digital infrastructure, 5.1% for education and research, 4.3 % for interior, building, community 4.3% for health, 3.3%,...

Spending on labour and social affairs accounts for the lion's share of the national budget

Photo: Bundesregierung

Federal Finance Minister Olaf Scholz has presented the draft 2020 budget to the German Bundestag and explained the financial plan for the period up to 2023. The budget is sound, involves no new borrowing, but makes full use of existing leeway, explained Olaf Scholz in his speech.

Setting clear priorities

The German government would like to help ensure that the economic success of the country benefits everyone, said the Federal Finance Minister. More steps are to be taken to tangibly increase the disposable income of low and normal earners in particular, and of families. In 2021 there will be another increase in child benefit and the tax-free allowance for children. Federal states and local authorities are to receive support from national budget funds, to enable them to reduce nursery fees and improve the range of childcare services available. This will benefit families with low and average income in particular.

In 2021 the solidarity surcharge will be discontinued for 90 per cent of tax-payers said Olaf Scholz. This alone will raise the disposable income of normal and low earners overall by more than 10 billion euros a year. That, stressed the Federal Finance Minister, is the largest tax cut for more than ten years.

Important impetus

The German government is setting important impetus to make the country more innovative and fit for the future and to forge ahead with the modernisation of the country, with record investment. Almost 40 billion euros will be available for investment every year up to 2023. That translates as a total of over 159 billion euros over the period 2020 – 2023, which is about 30 per cent more than in the previous legislative period. The German government is investing above all in effective infrastructure, affordable housing, better education and innovative research.

Strengthening cohesion

The German government is using targeted incentives for investment and support to help the federal states build more social housing to meet the urgent demand for accommodation, continued the Federal Finance Minister. With a social labour market the German government is also creating new opportunities to get the long-term unemployed back into work. This and the support for structural change in the regions affected by the end of lignite mining will help strengthen social cohesion, declared Olaf Scholz.

Now the two chambers of parliament, the Bundestag and the Bundesrat, will debate the government’s draft budget in detail. The German Bundestag is expected to adopt the budget in November. The approval of the Bundesrat is not required but it can comment on the draft. Find out here, how the budget is produced.

Taking into account climate change mitigation efforts

The German government will also continue to step up its climate change mitigation efforts to cut emissions of greenhouse gases in line with the country’s international commitments, declared Olaf Scholz. A programme of measures for the period up to 2030 is currently being elaborated by the Climate Cabinet in order to implement the Climate Action Plan 2050. This programme is to be taken into account in the final planning of the Energy and Climate Fund.