The total revenue of the Luxembourg state had grown by 9.9% by the end of September compared to the same period the previous year. However, expenditure also increased by 8.9%, leaving a deficit of €339 million for the central government, without social funds and municipalities.
After his presentation to the relevant parliamentary committee this Monday afternoon, Finance Minister Gilles Roth was simultaneously "positive" but also "cautious" despite the complex international situation. In his opinion there is still room for improvement to curb state spending, although he underlined that "we are not pursuing an austerity policy in Luxembourg."
Roth stressed the need to maintain social stability, pointing to heavy government investment in infrastructure and social benefits. Using his favourite Luxembourgish turn of phrase that "ham does not always have to boil in milk", he took a more technical tone, saying spending must be "useful and necessary".
Investment costs should stay "reasonable", civil service hiring must be carefully assessed, and operating costs kept at a "sustainable level". Unlike earlier this year, he gave no target for new public sector jobs.
Payroll was the state's biggest expense, at €5.7 billion (+7.3%). Transfers to the social security system followed at €5.3 billion (+6.5%).
On the revenue side, income tax on salaries and VAT brought in the most, followed by corporate tax, where a small number of companies account for a large share.
After the meeting of the finance and budget oversight committees, only the LSAP and the Greens commented. LSAP MP Franz Fayot and Green MP Sam Tanson welcomed the strong revenue but said much of it stemmed from exceptional factors. The financial sector benefited from higher interest rates, and €400 million came from an unexpected inheritance windfall.
Fayot said he was concerned about the government's plans for a costly tax reform, which he warned could limit the state's ability to meet future challenges.
Tanson criticised the CSV-DP coalition for doing too little on redistribution. Like Fayot, she called for higher taxes on high incomes and capital gains. Asked about her own party's record in government, she said the DP held the finance ministry and compromises were unavoidable. She added that the Greens had scaled back accelerated depreciation, a tax break for investors in rental housing.
Fayot praised Roth's "always very good and constructive" communication with parliament, but said the LSAP's position differs from the government's. He rejected the "more net from gross" approach, arguing it mainly benefits higher earners in the hope that gains trickle down to others. He conceded that weak growth is not unique to Luxembourg or the government's fault, but said it shows such "trickle-down" policies are not delivering.
