€400 million landed in the state treasury from a single inheritance, understood to have come from a person with no direct heirs to whom the wealth could have been passed on tax-free. "Obligatory fiscal secrecy", as Finance Minister Gilles Roth put it, meaning he cannot go into detail. Sad news for one family, then, but welcome for the public purse.
For the Luxembourg Socialist Workers' Party (LSAP) and déi Gréng (the Greens), however, the state cannot afford to rely on such exceptional revenue and needs to look for structural new income instead. LSAP MP Franz Fayot pointed to weak economic growth as well as spending and investment that cannot simply be compressed. Green MP Sam Tanson made a similar reading of the numbers, calculating that once the one-off revenue is stripped out, the budget deficit would come in some €200 million above the figure voted through for this year.
Finance Minister Gilles Roth insisted on Monday, as he had on RTL's airwaves last week, that the state finances remain robust. Last year's budget deficit is mainly down to an additional €500 million in defence spending and to outlays on the construction of affordable housing and on off-plan property purchases. Even so, he wants to rein in the rise in spending next year.
Spending is currently running 8.8% above the previous year. In a notice to the various administrations, the target was set at no more than 4.5%. On Monday, Roth spoke of 5%. Asked about the discrepancy, he replied that the minister's wishful thinking was one thing, but he had to make sure the government as a whole was on board. If the figure ends up starting with a 5, he said, that would be a compromise he could live with.
At the halfway point of this year, the Ministry of Finance says it is satisfied with the state's revenues, with it being up by a little more than 10% compared to the first half of last year. Price increases have also pushed VAT revenue considerably higher, with takings up by a good 11% to €3.1 billion.
Spending, however, continues to climb. The bulk of it goes on public investment, social benefits, local administrations and, of course, the salaries of those working for the state.
The Ministry of Finance also describes the country's public debt as moderate by international standards. As a reminder, the International Monetary Fund, among others, has warned Luxembourg of an unhealthy trajectory for its public finances, and the public deficit in particular, over the coming years.
