To strengthen the local authorities, the Federal Government is increasing its share of job seeker accommodation costs and offsetting the crisis-related shortfall in trade tax revenue.

The package in detail:

•             Compensation for trade tax deficits: Trade tax revenue is currently down in almost all local authorities due to the crisis. The Federal Government and federal states (Länder) are offsetting these shortfalls with a lump-sum compensation split equally between them. The supplementary budget for 2020 stipulates additional expenditure of EUR 6.1 billion for this purpose.

•             Relieving the strain of accommodation costs: To further reinforce the financial power of the local authorities, the Federal Government will take on a further 25 percent and in total up to 74 percent of the accommodation and heating costs in basic security benefits for job seekers for the long term. EUR 3.4 billion is set aside for this in the supplementary budget for 2020.

•             Support for east German federal states (Länder): Pension claims from GDR times are an increasing burden on east German federal states, as the costs for supplementary benefits systems are rising. By increasing its share of these costs from 40 to 50 percent from 2021, the Federal Government will relieve this strain on the federal states by around EUR 340 million a year.

An amendment to German Basic Law is required to implement the above-mentioned measures. This will allow the Federal Government to increase its share of social costs and participate in a one-off lump-sum compensation payment for local authority trade tax deficits.