Tangible relief for citizens

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Consultation of the Federal and Länder Governments Tangible relief for citizens

The Federal and Länder Governments have agreed on a number of essential relief measures to the benefit of citizens: a gas and electricity price cap, a housing benefit reform and a Germany ticket for public transport. “We are solving our country's problems together,” said Federal Chancellor Scholz. Furthermore, the Federal Government is going to provide support to the federal states for their expenses in relation to refugees from Ukraine.

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Federal Chancellor Scholz with state premiers Weil (l.) and Wüst

Federal Chancellor Scholz with state premiers Weil (l.) and Wüst: “We won’t leave anyone to cope with the high energy prices on their own.”

Photo: Federal Government/HCPlambeck

The relief measures are being implemented at the necessary speed in view of the high energy prices, said Federal Chancellor Olaf Scholz following a meeting of the Federal and Länder Governments on Wednesday. He added that this was important “so citizens won’t need to worry about their bills, this is our common goal”.

The fact that it was so important to join forces had “a lot to do with the Russian war of aggression against Ukraine," Scholz noted. He pointed out that the war was claiming lives every day, and that towns, villages and infrastructure were being destroyed in Ukraine on a daily basis. The war was also prompting many Ukrainians to seek refuge in our country, Scholz explained.

“It is impressive to see how, thanks to the great support from all parts of our society, we have been able to organise all of this together, and how this solidarity and support still persists in Germany after all this time,” Scholz said. He went on to say that this was also giving rise to major tasks that the Federal and Länder Governments and the municipalities needed to cope with. This is why the Federal Government is planning, among other measures, to provide the federal states with 1.5 billion euros in the coming year to cover their costs in connection to refugees from Ukraine.

Following their discussion, the Federal and Länder Governments adopted this resolution.

These were the individual points discussed by the Federal and Länder Governments:

Limiting energy prices

At the conference, the Federal and Länder Governments agreed to introduce an electricity and gas price brake next year that will remain in place until the end of April 2024, following the suggestions made by the expert committee for gas and heat. “The development of prices is a burden on citizens. Many prices have meanwhile multiplied. This is why we felt it was important to see how citizens, families, crafts businesses and companies could be relieved,” said Federal Chancellor Scholz after the meeting. 

The gas price brake provides relief and encouragement to save energy

The Federal Chancellor explained that relief would be provided in three areas: gas, district heating and electricity prices. “The price brakes for citizens have now been initiated, and I am pleased that we have established the framework for this,” he said. 

Consumers, small and medium-sized companies will benefit from the price brake from March 2023 at the latest – and possibly with retroactive effect from the start of February. Gas customers will be able to obtain 80 percent of the amount of gas used in the previous year at a reduced rate of 12 cents per kilowatt hour, while heat will cost 9.5 cents. These rates are significantly lower than the current market rates. 

Socially fair compensation will be ensured by means of taxation of the gas price brake for all those whose income is so high that they must also pay solidarity tax. An emergency aid measure will be realised this year, as the gas price brake will not become effective until next year and relief for citizens is required sooner: the Federal Government is going to cover the advance payments in December.

For industrial enterprises, the gas price brake is to apply for 70 percent of their consumption in the past, and it will become effective from January 2023. The price is to be capped at a net rate of 7 cents per kilowatt hour. The arrangements will be developed in line with the regulations for state aid. 

Keeping electricity affordable via kilowatt hour prices and stable network charges

The electricity price brake is to provide relief for customers from 1 January 2023. “The price per kilowatt hour will be capped at 40 cents for consumers, as well as small and medium-sized companies,” the Federal Chancellor said. The reduced rate applies for 80 percent of last year’s consumption here, too. For industrial enterprises, electricity prices will be capped at 13 cents per kilowatt hour for 70 percent of the amount used in the previous year. In addition, network charges are to remain stable in 2023.

The Federal Chancellor announced that the specific regulations are to be set out at the Federal Cabinet meeting on 18 November. Lower Saxony’s state premier Stephan Weil expressed his respect for the Federal Government, saying that the issue of energy was a major, complex challenge that was unparalleled in the history of the Federal Republic. 

Integration of profiteers – using windfall profits

Windfall profits from electricity generation as well as those of gas, oil and coal businesses and refineries will be skimmed off to fund the electricity price brake. In addition, there are to be hardship provisions for areas that are particularly affected, in particular medical facilities, university hospitals and care facilities. Further aid measures are planned for sports and cultural facilities and municipal utilities. 

Germany ticket that is valid nationwide

“The 49-euro ticket is coming, ideally from 1 January 2023,” said state premier Weil: “This is a practical way to improve the lives of many people.” The Germany ticket is not only intended to provide financial relief for citizens, but also to make public transport more attractive and to help reach the climate targets. This is why the Federal Chancellor and the state premiers are pleased about the general agreement reached at the Transport Ministers’ Conference to introduce a digital “Germany ticket” that is valid for public transport nationwide. The goal is to introduce the ticket as soon as possible, at a launch price of 49 euros per month.

For this purpose, the Federal Government will be providing loss compensation to the amount of 1.5 billion euros per year from 2023. The Länder Governments agreed to contribute the same amount. Furthermore, the Federal Government is going to provide one billion euros worth of regionalisation funds a year, starting in 2022. Planning provides for an annual increase of three percent for these regionalisation funds. In late 2024, the Federal and Länder Governments will discuss the further development of regionalisation funds from 2025 onwards. 

Housing benefit reform: increased housing benefit for more people

The Federal and Länder Governments will each bear half of the cost of the housing benefit reform. In addition, the Federal Government is going to pay another heating cost subsidy in order to provide relief for those hit particularly hard by higher heating costs. All those who receive housing benefit are eligible to receive this subsidy. Housing benefit is a rent subsidy that is designed to relieve people whose income is too low to cover the high ancillary costs. 600,000 households are currently receiving housing benefit. Owing to the housing benefit reform, the number of people entitled to housing benefit will increase considerably from 1 January: around two million households will be eligible to receive housing benefit in future. The reform will also improve the scope of the housing benefit, as a permanent heating cost and climate component will be added.

Compensation for bracket creep

In a phase of particularly high inflation, the Federal and Länder Governments are protecting citizens and German businesses against additional strain. The goal is to provide compensation for the consequences of the so-called bracket creep in income tax. In concrete terms this means that the Inflation Compensation Act is going to raise the basic personal tax allowance, tariff benchmarks, the maximum maintenance amount, child benefits and the child tax allowance. Around 48 million citizens will benefit from the implementation of the Inflation Compensation Act that is currently going through the parliamentary legislative process: employees, pensioners, self-employed people and personally liable entrepreneurs.

Refugees from Ukraine – support for the federal states and municipalities

In order to provide financial relief for the federal states and municipalities in fulfilling their tasks in the areas of displacement and migration, the Federal Government is going to transfer 1.5 billion euros to the federal states in 2023, for covering their expenses for refugees from Ukraine. Back in April, the Federal Government already promised the federal states 1.5 billion euros for 2022. 

Starting in 2023, the Federal Government is also going to provide an annual refugee allowance of 1.25 billion euros to the federal states to enable the states and municipalities to also cover the costs related to refugees from other states. This solution for refugee expenses was important with regard to social cohesion, the state premier of North Rhine-Westphalia, Hendrik Wüst, said and he added: “It is a good thing to have this clear commitment of the Federal Government to play a reliable part in refugee funding, also structurally.” The Federal and Länder Governments plan to discuss further development at Easter 2023.