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Federal government evading responsibility and forfeiting oversight powers

Sep 07, 2020

Symbolbild - Unterkunft und Heizung

Giving up delegated management for the housing and heating cost scheme is the wrong way forward

At the expert hearing held by the parliamentary Budget Committee on 7 September 2020, we raised our concerns over two amendments to the German Constitution which are part of the efforts to ease the financial burden on local governments. We particularly cautioned that the federal government thus voluntarily forfeited its power of oversight. The matter of discord is federal funding towards housing and heating costs as provided for by the Second Book of the German Social Security Code.

The hearing covered the following three topics:

  • To strengthen local finance, the federal government stands to permanently shoulder another 25 per cent which means up to 74 per cent of the housing and heating costs under the Second Book of the German Social Security Code. We noted with concern that this initiative is to be implemented through a constitutional amendment (Article 104a para. 3). The amendment serves to avoid the delegated management procedure currently provided for. This would undermine the government’s steering and oversight powers. However, we consider such oversight imperative after finding shortcomings in the use local implementing partners made of federal funding towards housing and heating costs. Only by effectively wielding these powers can the government avoid adverse financial impact on the taxpayers. In our view, it is not acceptable that the federal government deprives itself of these powers.

 

  • In addition to that, the constitutional amendment aims to mitigate the pandemic-related loss of commercial tax revenue by local governments in 2020. We see no need for this amendment. Article 106 of the Constitution already today provides for granting support to local governments in accordance with the Vertical Financial Equalisation Act. The trend of overburdening the Constitution including ever more details and derogations should be stopped.

 

  • Finally, in order to ease the burden on the budgets of the eastern German states, the government plans another 10 percent increase in its statutory pension expenditure reimbursements to reduce unfunded liabilities in the supplementary legacy pension system of the former German Democratic Republic. Against the background of continuously rising federal funding of statutory pensions and other future budget risks we also consider this a matter of serious concern.

 

Our audit findings and conclusions are set out in more detail at: (German version only):

Stellungnahme

Prüfungsmitteilung: Beteiligung des Bundes an den Leistungen für Unterkunft und Heizung

Prüfungsmitteilung: Leistungen für Unterkunft und Heizung - Teil I: Geflüchtete

Prüfungsmitteilung: Leistungen für Unterkunft und Heizung - Teil II: Nicht Geflüchtete

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