PRESS RELEASE

Prioritisation of future-oriented public spending

• Future-oriented public spending in areas such as transport infrastructure, defence and education has been low in Germany for years. It needs to be increased and stabilised through suitable institutional rules.
• A suitable instrument to ensure investment in transport infrastructure is to establish a transport infrastructure fund. Such a fund should be permanently endowed with revenues from the federal budget, for example with toll revenues.
• A suitable instrument for ensuring sufficient expenditures on defence and education is to establish area-specific minimum quotas.

Future-oriented public spending must be increased and stabilised. It is crucial to ensure that sufficient funds are committed to these types of expenditures, regardless of the budgetary situation, rather than to create additional scope for debt financing. The institutional design of rules that commit expenditures in these areas should be tailored to the respective areas. A suitable instrument for the maintenance, modernisation and new construction of the road and rail network is a transport infrastructure fund, endowed with revenue from the core budget. Minimum spending quotas could provide for binding spending rules in defence and education, particularly in the early childhood and primary school sector.

“The debt brake aims to prevent burdening future generations with excessive public debt. However, future generations can also be burdened by insufficient future-oriented spending and inadequate infrastructure maintenance,” explains council member Achim Truger. “The debt brake does not ensure the necessary prioritisation of future-oriented expenditure. Politicians must be bound by institutional rules to use sufficient funds for future-oriented expenditure.”

To date, future-oriented public spending on transport infrastructure, education and defence has been too low in Germany. There is a substantial spending backlog in all three areas. Instead, politicians tend to favour measures and expenditures that benefit the current electorate. Future-oriented public spending tends to be neglected as its benefits only materialise in the long term. Binding institutional provisions should secure sufficient funds for these areas, regardless of the economic situation. New legislation should ensure that such provisions are binding. The design of the provisions should be tailored to the financial needs, administrative responsibilities and requirements in the different areas.

Transport infrastructure fund

The GCEE proposes a transport infrastructure fund for investment in transport infrastructure, which should be permanently endowed with revenues from the core budget. A continuous revenue stream is appropriate for stabilising investment in the road and rail network and ensuring sufficient investment in the long term. Sources of revenue could be, for example, the truck toll or a new car toll replacing the revenue from the energy tax on transport fuels in the future. Earmarking expenditure for maintenance, replacement and new construction is useful to ensure that new construction is not prioritised at the expense of maintaining existing infrastructure, as this has happened in the past.

Minimum quotas for defence and education spending

Additional expenditure will be necessary to expand and modernise the Bundeswehr's equipment after the expiry of the Bundeswehr Special Fund. Future defence spending should be based on NATO's two per cent target. A statutory minimum quota would increase its binding effect. The financing of the Bundeswehr expenditures should come from the core budget. A stability-oriented reform of the debt brake – as unanimously proposed by the GCEE in a policy brief from January 2024 – could create additional scope for borrowing to cover the spending backlog.

For education, minimum expenditure should be put in law as well. A meaningful indicator here could be based, for example, on minimum expenditures per pupil. As education expenditures are largely borne by the federal states, quotas would have to be set at the state level. State-specific quotas should account for regional differences, but nationwide coordination would be helpful.