Focus shifts from purchasing power to supply

Now that the procurement and competitiveness expert team has completed its recommendations, it does not look like the government will come up with major initiatives before the summer. Voting in the coalition should be largely clear if Putin shuts down the gas tap.

Pierre Wunsch, governor of the National Bank, joined the core cabinet on Monday night. He presented the 55-page report, which he co-authored with a group of academics at the urging of Prime Minister Alexander De Croo (Open VLD). With that report, the Prime Minister would objectify the political debate on the purchasing power of households and the competitiveness of companies in times of sky-high inflation and ditto energy prices.

The experts reach a double conclusion. In general, automatic wage indexation has protected purchasing power, however, with significant differences between undercompensated and overcompensated households. But the system – which is only found in Belgium, Cyprus, Malta and Luxembourg – is beginning to threaten the competitiveness of our companies.

In the expert report, Voka reads the confirmation that the companies’ competitiveness is threatened by a wage-price spiral.

In an attached text, the National Bank notes that if neighboring countries succeed in achieving wage restraint, the competitiveness of the Belgian economy will face a “clear and current danger”. An obvious danger. In addition, there are fears that the Russians will shut off gas and that the price crisis for companies will get even worse.

The experts come up with nine recommendations to support purchasing power and competitiveness. There is no such thing as a big bang. There is no money for that. According to experts, it is especially important to reduce energy consumption. As a result, there would be a need for fewer wage adjustments and purchasing power adjustments, and the wage-price spiral would not be screwed up.

The measures to reduce energy consumption are met with some ridicule from politics. The idea, which has already been launched to lower the speed limit on motorways, only gets applause from the Greens. The call for a curtailment of the private use of fuel cards is being met with opposition from the Liberals, led by MR chairman Georges-Louis Bouchez. ‘It makes the company car more expensive for the user or for the employer.’

The essence

  • The team of experts in purchasing power and competitiveness makes nine recommendations to the government.
  • The experts want to reduce energy consumption to ease the pressure on the index and not to explode the bills for companies.
  • There is little chance that further purchasing power measures will be taken before 21 July.
  • Even then, the Liberals will primarily focus on competitiveness.

Depending on purchasing power, experts suggest a number of measures that the government can still take. There will be a revision of the taxation of energy – with more control via excise duties. The Ministers of Finance and Energy have been working on this for several months. There is probably no money left for extra energy checks for low incomes that just miss the social rate. PS would like to let the reduced VAT rate on gas and electricity expire and use that money to pursue a more targeted policy, but Vooruit sticks to it.

There seems to be little enthusiasm for praying to index tax scales and quickly increase purchasing power. The experts are proposing an adjustment on 1 July, but it will take too much, it is said in the corridors. The call to make fixed energy contracts mandatory in the supply of energy producers is likely to be translated into policy. Minister Tinne Van der Straeten (Green) is working on this.

budget format

Few parties expect further purchasing power measures by 21 July. Also at Vooruit, it is said that the pressure has been eased due to the extension of the lower VAT and the social rate. ‘The report confirms what we are saying: that we are already doing a lot for purchasing power, but that we can do a little more.’ According to the Social Democrats and the Greens, the issue will be discussed again in September, when the budget is to be drawn up. But the Liberals want to shift focus.

“We must now work quickly on a supply plan for Vladimir Putin” (The Russian President, ed.) the gas tap opens and the energy can become more sparse and even more expensive. It will be a harsh winter, the war is not over. We must make it clear to people that we do not solve the problems with bad checks, ‘it reads in the blue corner.

The experts call for an ‘energy crisis preparedness structure’ that can respond quickly to change, and a support mechanism based on German and French examples for companies. Deferred payments, government guarantees and specific government loans are provided to finance investments in energy savings and to write off faster. In addition, they no longer propose to look at new gas and electricity contracts to determine the index, but at the settlements. This way, there will be fewer major shocks.

Voka reads in the report confirmation that the companies’ competitiveness is threatened. The employers’ organization reiterates its call for a social index jump.

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