Local government finances in Belgium
The budget situation of the cities and municipalities is sound, but owing to the rising costs of pensions, integration allowances and social services, local authorities face many financial challenges. That is the conclusion drawn by the National Bank of Belgium in a study just published in the Economic Review.
In the light of the local elections in October 2018, the study aims to describe the budget situation of Belgian local authorities. That comprises the municipalities, CPAS, provinces, police and emergency service districts and other entities (such as the autonomous municipal undertakings which are classified in the general government sector). The study also examines the main financial challenges that local authorities must address.
From a macroeconomic point of view, the budget position of local authorities is currently sound. Their budgets have been practically in balance in the recent period, or have even recorded small surpluses. This applies to almost all components of local government. Moreover, the debts of this subsector of general government are relatively small.
The budgetary supervision exercised over local authorities has contributed to this favourable financial position. In the 1980s, the equilibrium principle was introduced for municipal finances, and that eliminated the deficits. Since then, the Regions have taken over responsibility for budgetary supervision and have approved a number of additions and implemented revisions which have strengthened the budgetary framework a little more. That may account for the relatively low level of local authority investment expenditure, in comparison with previous electoral cycles.
However, local authorities face a number of financial challenges. Those challenges include the increased cost of financing their statutory officials’ pensions and the growing use of integration allowances and social services. Numerous other factors will also exert upward pressure on expenditure or downward pressure on revenues.
In order to address these challenges, the central concern must be to increase local government efficiency. Steps were taken recently in that direction, but in the years ahead it is vital to maintain the efforts to improve the quality of community services and to maintain strict control over expenditure.
You can read the full study by clicking on this link.