Switzerland plans federal budget cuts in bid to balance the books
After hinting that budget cuts would soon be necessary at a press conference last year, the Swiss government has now announced how it plans to balance the country’s books going forward. Changes to Swiss taxes and cuts to federal spending in programmes like transportation and social security are part of the new plan.
What budget cuts are being planned in Switzerland?
On March 29, Finance Minister Karin Keller-Sutter announced the Federal Council’s new austerity plan for the next few years. She explained to 20 Minuten that by 2025, the federal government of Switzerland would run a deficit of 1 billion Swiss francs a year if no cost-saving measures are made, because of what the council described as “growing expenditure as well as new, unfunded expenditure” passed by parliament.
In a statement, the Federal Council explained that despite having already cut 2 billion Swiss francs from the federal budget for 2024, the measures “are not sufficient to eliminate the structural deficits from 2025 onwards.” To solve the crisis, therefore, the council argued that additional money needed to be saved in order to balance the books.
250 million francs a year cut from unemployment insurance in Switzerland
The first measure proposed relates to unemployment insurance in Switzerland. The Federal Council has decided to lower federal contributions towards the scheme by 250 million francs a year for five years. The measures will be implemented in 2025.
In justifying the move, the Federal Council noted that the government had pumped 16 billion francs into the scheme during the COVID pandemic - as workers were furloughed or lost their jobs, and businesses were forced to cut back or close operations - to keep the social insurance programmes debt-free. With the economy back open, the council predicted that the insurance scheme will receive more money through salary and business contributions than the council is planning to take out.
As a result, the Federal Council expected that the insurance funds will not experience financial difficulties because of the cuts. However, to make sure the funds stay afloat, a safeguard clause has been put in place to ensure that funds do not default if there is a “sharp rise in unemployment”.
Less funding for Swiss Federal Railways (SBB)
Secondly, federal spending on Swiss public transport will also be reduced by 150 million francs a year for three years, starting in 2025. The council assured that the cut will not impact any of the new infrastructure plans proposed by Swiss Federal Railways (SBB).
Furthermore, another safeguard will be implemented which would see funding for part of SBB operations put in a special fund. Authorities confirmed that the cuts would only begin once said fund reaches a value of 300 million francs.
Cuts to cantonal funding if childcare reform passes parliament
Finally, the Federal Council has proposed reducing the amount of federal tax income given to Swiss cantons by 0,7 percent to 20,5 percent, and by a further 0,4 percent if the financial burden on federal authorities increases. However, this part of the scheme will only be enacted if current plans to subsidise childcare facilities are passed by parliament, as the policy would cost the federal government an extra 800 million francs a year from 2025.
Deficits will remain despite budget cuts, says Federal Council
In concluding their statement, the Federal Council said that the cuts will be necessary to keep Switzerland’s finances in order. However, they noted the “package of measures should save the federal budget around 600 million to 700 million Swiss francs per year from 2025 onwards," meaning “a deficit will remain in the financial plan.”
Both houses of the Swiss Parliament are expected to respond to the plan in the coming days. For more information about the austerity measures, please consult the official press release (in German).
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