Federal Council sets out details of relief measures in earmarked expenditure

Bern, 29.03.2023 - On 25 January and 15 February 2023, the Federal Council decided on measures to ease the burden on the budget. It already adopted adjustment measures of CHF 2 billion for 2024. However, as these measures are not sufficient to eliminate the structural deficits from 2025 onwards, it also wishes to look at strictly earmarked expenditure. During its meeting on 29 March 2023, the Federal Council set out the details of this decision, which provides for temporary reductions in federal contributions to unemployment insurance and the railway infrastructure fund, as well as a reduction in the cantons' share of direct federal tax. The consultation draft is planned for June. Benefit-related old-age and survivors' insurance measures, particularly in the area of pensions for widows, are to be addressed with a separate proposal and should ease the burden on the federal budget from 2026 onwards. This package of measures should save the federal budget around CHF 600 million to 700 million per year from 2025 onwards. This means that a deficit will remain in the financial plan years.

Starting in 2025, the federal budget is set to have high structural deficits. This is due to growing expenditure as well as new, unfunded expenditure. The package of measures to prevent the failure of Credit Suisse, which was necessary to avert severe damage to the Swiss economy, has no impact on the ordinary budget and therefore has not in any way increased the need for adjustments. The Federal Council previously decided on various targeted measures and linear reductions in loosely earmarked expenditure in a bid to save the budget up to CHF 2 billion per year. Despite these measures, shortfalls of over CHF 1 billion per year will remain from 2025 onwards. Since almost two thirds of federal expenditure is subject to statutory earmarking, the Federal Council now wishes to initiate legislative amendments to enable fiscal consolidation to be carried out on a broader basis from 2025. The package includes the following measures:

    • The federal contribution to unemployment insurance is to be lowered by CHF 250 million per year for a period of five years. The extraordinary federal contributions totalling CHF 16 billion during the COVID-19 pandemic helped prevent unemployment insurance from having to accumulate debt during those years despite the massive expansion of short-time work compensation, and the ALV fund's capital is likely to increase continuously in the years ahead. Consequently, unemployment insurance is to make a temporary contribution to relieving the federal budget. A safeguard clause will ensure that this reduction does not cause unemployment insurance to experience financial difficulty in the event of a sharp rise in unemployment.

    • Parliament is currently deliberating a parliamentary initiative on childcare outside the family, which will cost the federal government around CHF 800 million per year from 2025 onwards. Expenditure growth is expected to be strong in the years thereafter. As this is a cantonal task, the Federal Council is opposed to the proposal in principle. Consequently, it requested that the proposal be significantly redimensioned (by halving contributions to parents and dispensing with programme agreements). Furthermore, the cantons should contribute to the financing. To this end, the Federal Council proposed reducing the cantons' share of direct federal tax by 0.7 percentage points to 20.5%, which corresponds to around CHF 200 million. In addition, the option of lowering it by another 0.4 percentage points is to be envisaged if, despite the reduction of the cantons' share, the proposal puts a burden of more than CHF 200 million on the Confederation at some future date as a result of rising costs.

    • The deposit in the railway infrastructure fund is to be lowered by at least CHF 150 million per year for a period of three years. This can be done without a legislative amendment. This should not jeopardise the planned infrastructure expansion. Here, too, a safeguard is envisaged: according to the consultation draft on sustainable SBB financing, all of the federal funds from the performance-related heavy vehicle charge are to be deposited in the RIF in the future until its reserves reach at least CHF 300 million. On that basis, therefore, the reduction in the RIF deposit can be implemented only if the requirement to have sufficient reserves of CHF 300 million is met.

    Following a ruling by the European Court of Human Rights, action is needed in the area of old-age and survivors' insurance. In order to eliminate the unequal treatment of widowers relative to widows, widows' pensions in particular are to be limited in time in line with the current regulations for widowers: in the future, widows and widowers will generally be entitled to a pension only until the youngest child reaches the age of 25. In addition, adjustments to pensions for retired persons' children will be examined. Transitional periods for existing pensions should allow for the most socially acceptable implementation possible. The aim of the reform is to reduce AHV expenditure by at least CHF 500 million and to lower the associated federal expenditure by at least CHF 100 million from 2026. The Federal Department of Home Affairs is working on the specific measures.

    This package of measures will not be sufficient to bring about a complete and lasting removal of the structural deficits. The anticipated robust growth in social welfare expenditure (in particular AHV, supplementary benefits and premium reductions, and now also childcare outside the family) and in Armed Forces expenditure, as well as the high level of uncertainty concerning migration expenditure, are likely to render further adjustment measures necessary from 2025 at the latest. The Federal Council is confident that, taking into consideration the measures already adopted, it is presenting a balanced package. The consultation procedure is due to begin in June 2023.

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    The Federal Council

    Federal Department of Finance