Federal Council takes note of debt brake expert group's report

Bern, 30.08.2017 - During its meeting on 30 August 2017, the Federal Council took note of the report of the group of experts charged with reviewing the debt brake. It gave various supplementary review mandates to the Federal Department of Finance.

As instructed by the Federal Council, the group of experts charged with reviewing the debt brake compiled a report with recommendations. It examined an expansion of the debt brake which would allow budget underruns to be used instead of them being used to reduce debt.

The group of experts is expecting a decline in budget underruns in the next few years. The introduction of the new management model for the Federal Administration (NMM) and the expected normalisation of interest rate and inflation trends, among other things, are likely to curb budget underruns. Inflation and interest rates were overestimated in the budget in the last few years and led to large budget underruns, for example in the case of interest expenditure.

It is not possible to predict reliably how sharp the downturn in budget underruns will be. However, the group of experts considers any further debt reduction resulting from this to be unproblematic.

By contrast, the group of experts can envisage a simplification of the supplementary credit procedure for the current budget. As credits may not be exceeded, the administrative units currently tend to be cautious when budgeting. A simplification of the supplementary credit procedure is likely to reduce the incentive for the Administration to factor-in safety margins in the budget.

Tax cut makes more sense than an expenditure increase

According to the experts, an expansion of the debt brake could be considered if the budget underruns remain "sustainable and considerable" also in the coming years. However, the group of experts is sceptical about increasing expenditure. If anything, the existence of budget underruns is more of a sign that the tax burden is higher than it needs to be. The group of experts would therefore be more in favour of a tax cut than an increase in expenditure.

Analysis of the budget underruns

Today, the Federal Council took note of the recommendations of the group of experts charged with reviewing the debt brake. It wants to continue to monitor the development of budget underruns and, in spring 2019, examine variants on how to proceed based on an FDF report. It has also instructed the FDF to examine in detail the possibility of using structural surpluses to compensate for losses in the case of tax reforms by the end of 2017. Furthermore, the Federal Council has instructed the FDF to examine the simplification of the supplementary credit procedure for certain cases by next spring.

The members of the group of experts are as follows:

  • Chairman: Prof. Jan Egbert Sturm, Director of the KOF Swiss Economic Institute at the Swiss Federal Institute of Technology Zurich and Professor of Applied Macroeconomics at the ETH Zurich
  • Prof. Marius Brülhart, Professor of Economics, HEC, University of Lausanne
  • Prof. Patricia Funk, Associate Professor in Economics, Università della Svizzera Italiana
  • Prof. Christoph A. Schaltegger, Professor of Political Economics, Lucerne University
  • Peter Siegenthaler, Board of Directors SBB and BEKB, former Director of the Federal Finance Administration


Address for enquiries

Further details on the expert group report:
Professor Jan Egbert Sturm, Director of the KOF Swiss Economic Institute at the Swiss Federal Institute of Technology Zurich
Tel. +41 44 632 50 01, sturm@kof.ethz.ch

Further details on the decision of the Federal Council:
Roland Meier, Media Spokesperson FDF
Tel. +41 58 462 60 86, roland.meier@gs-efd.admin.ch



Publisher

The Federal Council
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Federal Department of Finance
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