Report of the Committee of Experts on Procurement and Competitiveness is not a procurement list

Koen Schoors

Professor of Economics UGent

Do not be dazzled by fuel cards and speed limits. The Committee of Experts’ report on purchasing power and competitiveness is not a procurement list, but a balanced, comprehensive and optimizing proposal that is best implemented in its entirety.

A few weeks ago, the ‘Agreement’ devoted a full debate to the proposals of the Committee of Experts on Purchasing Power and Competitiveness. A hypothetical debate when the committee met at about the same time to discuss its analysis and possible actions. There was therefore no report with proposals at all. One would begin to wonder what that media debate was about. As a result, most media outlets are still mainly croaking around a speed limit now that there is a report.

Decrease in energy demand

We start our report with measures to promote a fall in energy demand. We recommend that a structure be put in place to respond appropriately if extreme price shocks occur again or if an energy crisis should occur this winter. There are many elements, but the overall coordination structure is lacking. A rapid fall in energy consumption also increases the chance that winter’s energy supply will suffice.



There are many elements to respond appropriately to new price shocks or an energy crisis this winter, but the coordination structure is lacking.

We therefore propose a number of rapid measures, such as limiting car use and speed limits, moderating office temperatures, encouraging public transport and encouraging teleworking. But structural measures are also needed. In this context, it is recommended to limit the personal use of the company’s fuel card and to accelerate investment to higher energy efficiency in public housing and lower middle class housing.

Purchasing power

We are in favor of the extended social tariffs. In addition, we also propose to protect the lower middle class, which is just not justified, by means of energy vouchers that do not depend on consumption, but on income and family composition. In this way, we mitigate the extra large negative impact on purchasing power for groups that spend a large part of their income on energy, while maintaining strong price incentives for consumption reduction and energy efficiency.

To prevent the middle class from seeing part of the indexation of its income flow to the government because it ends up in a higher tax level, we propose to bring the indexation of the tax levels forward.

Employment

Higher employment would help. It would limit the wage pressure and thus the wage spiral in our economy. In addition, employment is one of the best guarantees against loss of purchasing power. We therefore propose a series of measures to tackle the trap of unemployment and poverty, increase the participation of vulnerable groups, reconsider the problem of disability and incapacity for work, tackle labor market disparities and improve regional labor market mobility.

As effective measures to increase employment are complex and broad, there is also a need for a good relationship with the various regions and local actors. This will probably require a separate group of experts.

Electricity prices

We keep the reduced VAT on electricity because this is a quick and efficient way to mitigate the temporary loss of competitiveness in the Belgian economy. In order to be budget neutral and at the same time provide the right incentives, taxes on electricity must rise again when oil and gas prices fall. We do this through a smart increase in excise duties, whereby we impose a lower excise duty on a basic package of electricity.

We convert federal rates on electricity and gas bills to excise duties as much as possible. We set the excise duties so that the final kWh price ratio for electricity and gas fluctuates between 2 and 2.5. Heating with heat pumps becomes so profitable. In addition, we require energy suppliers to offer at least a variable and a fixed contract. In order to ensure that these fixed contracts are sound, suppliers on fixed contracts are again allowed to charge a regulated severance fee.

Companies

We are in the process of establishing a system that will flow from any unexpected gain caused by the rise in gas prices, but will grant exemptions to players who invest these gains sufficiently in green technologies such as solar, wind, energy efficiency, demand management and grid batteries. Businesses in trouble due to higher energy costs can count on easing banking conditions, government guarantees and strengthened incentives to reduce their energy consumption and increase efficiency, such as accelerated depreciation for green investments.

Automatic wage indexation

Finally, we propose that the social partners consider optimizing the system of automatic wage indexation linked to the monitoring of competitiveness. The current system in this crisis has led to a – hopefully temporary – deterioration in competitiveness and threatens not only the budgets of companies but also those of local authorities.

We suggest following the situation closely to assess when a correction is needed, including electricity and gas prices more precisely in the index, leveling out the reference indices further and adjusting the health index to the declining importance of fuel oil. To do!

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