The Federal Council’s austerity package is an opportunity for Switzerland

The Federal Council could have made it easy for itself. It could have left the savings proposals of the Gaillard expert group in the drawer. But it is doing the opposite. It is adopting most of the Gaillard Commission’s proposals. It is assembling them into a broad-based savings package. And in doing so it is putting pressure on Parliament, which has so far shown little desire to save.

Cut spending instead of raising taxes

The Federal Council’s austerity package has many good aspects. Firstly, the government wants to largely avoid tax increases. In doing so, it is following a key insight of the expert group: the federal budget can be rehabilitated mainly by cutting spending – without Switzerland going under. Only in isolated cases should the population and economy have to pay a little more to the state, for example by no longer giving tax advantages to capital withdrawals from the second and third pillars upon retirement.

The burden on the population will certainly increase in the coming years. The Federal Council wants to increase VAT by 0.7 percentage points. But this is only intended to finance the 13th AHV pension, which the electorate wanted, and not to balance the federal budget.

Secondly, the Federal Council is designing the austerity package in such a way that recent referendums, for example on climate policy, are not called into question. This is understandable from a democratic point of view, even if the government could have been bolder here – for example by abolishing the unnecessary transitional pension for older unemployed people.

And thirdly, the Federal Council is relying on a broad package of spending cuts. It does not bother with small details and does not choose the path of least resistance. Its proposals include important reforms, such as the restructuring and reduction of the federal subsidy to the AHV. What sounds technical is of great importance for the future stability of federal finances. Of the range of spending cuts, 40 measures require changes to the law. The Federal Council wants to bring these to Parliament as a package.

Foreseeable resistance

The savings proposals will trigger an outcry from many lobby groups. The tourism industry will complain because the special VAT rate for overnight stays will be abolished and the marketing organization Switzerland Tourism will receive less money. Farmers will be unhappy because the Federal Council is proposing to cut some subsidies.

The transport lobby will not be happy that the federal government wants to pay less money into the funds for the expansion of rail and road infrastructure. The higher education sector will not want to accept that tuition fees at federal institutes of technology and universities are to rise and that the National Fund will receive less money. Aid organizations will fight the planned freezing of the development aid budget. And the federal administration itself will not be keen on making savings either.

All of this resistance is the reason why Parliament has so far shown little interest in cutting back on tasks – and has mainly been eyeing higher tax revenues. Many parliamentarians seem to see saving as a nuisance because they don’t want to upset their own clientele. This is why the National Council and Council of States have so far shown themselves incapable of putting together a sensible savings package themselves.

Opportunity for a fitness cure

But now there should be a jolt through parliament. The realization should prevail that the Federal Council’s savings proposals are not an imposition, but an opportunity for Switzerland. This is an opportunity for a fitness cure. The federal government can cut back on unnecessary things, use its resources more effectively – and thus act better in the service of the population. For this to succeed, all sides must contribute something. The Federal Council’s broad-based savings package deserves support.