As the economic perspectives deteriorated last months the Flemish public budget rapidly moves towards an imbalance if no interventions are made. Nevertheless Flemish social partners in SERV are pleading to increase public investments thus stimulating economic growth. Unfavorable economic conditions and a high need for investment will probably cause a deficit in Flanders budget 2015. Social partners think that under very strict conditions a deficit is acceptable.
Caroline Copers, actual president of SERV states that: “ In the actual context raising public expenditure especially classic public investment can be effective. Public investment has a double impact. First of all public investment creates economic activity and direct as well as indirect employment. Furthermore investments result in effective infrastructure and hardware such as roads, bridges, quay walls, schools, welfare centers….and hence stimulates the broader economy.
Investing in growth
The Flemish social partners admit that running a public deficit combined with public investment is only feasible when specific and strict conditions are respected:
- The deficit should be entirely due to factors that were not known when drafting the budget in September 2014. More concrete: only deficits as a result of revised business cycle previsions for 2015 are admitted. Other deficits should be cleared and put in order.
- The admitted deficit (see point 1) should be in balance with public investment that in the short run has a positive impact on the economy.
- The admitted deficit (see point 1) may not have a negative impact on the Belgian commitments towards the European Union.
- Efforts should be made to avoid that expenses other than investment increase the deficit.
More transparency needed
SERV claims that it is extremely difficult to get a detailed report concerning public investments in Flanders. Social patterns plea for a yearly report on all ongoing and future public investments in Flanders inclusive the related financial commitments, thus improving the comparability of the different modes of financing (in and out of the budget).
In the government program the Flemish government commits itself to start with performance budgeting (output based budgeting), a positive step towards reporting on core performances and actions by government. Nonetheless SERV misses concrete commitment on when and how the new way of budgeting will be implemented.
The government program also foresees better and more information concerning the implementation of the budget. This leads to more openness on the effective spending of public finances and is necessary to get both policy intentions and policy output connected, an essential characteristic of performance budgeting.