The issues of inflation and purchasing power rarely appear in party manifestos, despite being flagged as a major concern ahead of the election. Parties often in-explicitly address these concerns by positioning themselves on indexation.
As summed up by the Luxembourg Socialist Workers’ Party (LSAP), the index mechanism “guarantees a regular adjustment of salaries to the rise in consumer prices, and maintains purchasing power.” As it stands, all political parties in Luxembourg are in agreement to defend and maintain the current, index system.
The index remains a strong marker for voters, many of whom have not forgotten its postponement between July 2022 and April 2023, at a time when inflation was high enough to theoretically trigger three wage indexations in one year. These voters have also not forgotten that, despite the planned boost to the tax scale in 2024, the non-indexation between 2017 and 2023 caused losses for many.
The issue of adjusting the tax scale to inflation is also included in the programme of several major parties, including the Democratic Party (DP), the LSAP, the Christian Social People’s Party (CSV) and the Greens. Smaller parties like Fokus, the Left, and the Alternative Democratic Reform Party (ADR) have also included a tax scale to inflation adjustment in their programme.
A majority of these parties propose to change the tax scale, more or less quickly, in order to reduce taxation on the lowest incomes.
The DP has meanwhile set itself apart by announcing that it will reach an agreement with social partners to modify the list of goods used to calculate inflation, and hence the triggering of the index, in order to “neutralise products that are harmful to health and the climate.”
The Pirate Party is in favour of keeping the system in place and are for guaranteeing indexation of the tax scale, but remain critical of the way the index works for high earners. According to the Pirates, the latter can receive hundreds of extra euros with each index while a person on the qualified social minimum wage will receive €75 - attesting that, “above a certain amount, wage increases are no longer linked to inflation.”
The relatively new Fokus party stands out from the crowd by proposing a 3% index (instead of 2.5%) for workers and pensioners who receive an equivalent of the unskilled social minimum wage. The index should then degress, says Fokus, “according to income.” Fokus adds that, with their proposal, “around 93% of households would receive more per indexation than they do today.”
The matter of purchasing power, however, goes far beyond the index mechanism. Tax measures, such as income tax and social benefits, are also the focus of various party positions, which RTL will cover throughout the course of this week.
