Tips for the coalition

Where the state can make savings now

The next National Council will have to decide on austerity measures.

(Bild: APA/FLORIAN WIESER)

The escalating deficit is putting the federal government under pressure, saving is the order of the day. Five billion a year is needed to get back on track, say experts. But even more would be possible ...

Experts expect a deficit of around four percent of economic output (GDP) this year, which is a whopping 20 billion euros. Without reforms, it will continue to rise. No matter what the new government looks like: It will have to make savings. There is enough potential, says economist Hanno Lorenz from the liberal economic think tank Agenda Austria.

Government spending is high, this year it amounts to over 50 percent of GDP, or around 250 billion euros. "We clearly have a spending problem," says the expert, who sees no need for new taxes. Instead, the state should make savings, sometimes radical ones, in several areas (see chart):

Klimaticket, Bonus

Umweltförderungen streichen

There is a lot of potential for savings in the climate area. Lorenz sees the greatest potential in the climate ticket: "The way it is subsidized is not efficient." Lorenz also criticizes the lavish subsidies for companies: "Companies are being supported that would invest in measures to reduce CO2 emissions, for example, even without huge subsidies," says Lorenz. The diesel privilege is also to be abolished and would bring in half a billion euros alone. Similarly, the withdrawal of the increased commuter allowance would reduce the burden on the state budget by 200 million euros per year.

The abolition of the climate bonus is much discussed. However, Agenda Austria is not arguing for its abolition, but merely for an end to over-subsidization. Currently, significantly more is paid out in climate bonuses than is collected. Since its introduction in 2022, the state has paid out 1.5 billion euros more to citizens than it has received via the carbon tax. This is not an actual redistribution of tax revenue; at the very least, this overfunding should be a thing of the past.

Pensionen, Bildungskarenz

Im Sozialstaat sparen

Agenda Austria's main focus here is on pensions. The proposal: All special adjustments and above-inflation increases should be compensated for in the coming years, without cuts, but with fewer adjustments. In addition, the low income threshold, up to which no social security contributions are payable, is to be abolished. The fact that incomes of up to a good 500 euros fall into the low income bracket encourages employees to remain below this limit, which can ultimately be disadvantageous. At the same time, the state loses revenue. In many other countries, there is no such limit. It also means that you have to pay significantly more tax from the first euro above it.

Another point is educational leave. It costs 730 million euros per year. In some cases, it enables high earners to complete a yoga course, for example. Both its effectiveness and its value for the labor market have been called into question several times.

Austria clearly has a spending problem. According to our calculations, savings of over 30 billion euros would be possible in 2029.

Hanno Lorenz, Agenda Austria

Bild: Agenda Austria

Unternehmensförderung

Überförderung von Firmen beenden

Lorenz assumes that business subsidies will be reduced to a normal level. The concern that this could further stifle the economy during the recession is correct, but Lorenz notes: "At some point, you have to make savings. If you don't do it during the economic boom, then unfortunately you have to do it now."

Staatsapparat

Bund soll bei sich selbst sparen

Another lever lies in the state apparatus: ministries should reduce their expenditure again after the crisis years. This means that those departments that have increased their expenditure by more than 50 percent (for example the climate department) should reduce their budget back to a normal level. A billion euros could also be added to the financial equalization. Lorenz proposes saving the (non-earmarked) transfers from the federal government to the federal states from the "Future Fund".

Savings would also be possible for civil servants from 2027; the salary increase has already been fixed for 2025 and 2026. In the first year of 2027 alone, this could bring in almost one billion euros. The fact is: if the state refuses to make savings on its own, the private sector will ultimately have to do so, as it is already laying off numerous employees out of necessity.

Pensionen, Gesundheit

Strukturreformen rentieren sich auf Dauer

The potential for savings could even increase year on year, especially if a government tackles structural reforms. Pensions are a major construction site. Raising the retirement age would generate 1.25 billion euros in 2026, 2.5 billion euros in 2027 and even five billion euros in 2029. Expenditure could also be gradually reduced in the healthcare sector. It is not a question of cutting the level of care and making the system worse, emphasizes Lorenz.

But an international comparison shows that our system does not have an ideal "price-performance ratio", so to speak. Other countries show that a similarly good system can be operated with fewer resources. A gradual saving of up to five billion euros in 2029 would be possible, which would bring Austria's healthcare expenditure in line with the EU average, which is currently around one percentage point of GDP higher.

Overall, Agenda Austria calculates that savings of as much as 31.5 billion euros per year could be made from 2029 compared to today. "This would also finally create enough leeway for relief," says Lorenz.