4.2 A different look at public finances

This is not the time for fiscal austerity. Instead, the government should support the economy by investing, by creating jobs. This is the time to find new revenue streams. There is no shortage of options. Take the example of the totally failed and unfunded tax shift through which employers’ social security contributions were unilaterally reduced. The tax shift is offset somewhat by alternative financing, which is to the detriment of public finances. In an emergency, this tax shift can be reversed. 7.5 billion euros per year in 2022 alone.

Source : Planning Bureau, Statistical annex on the medium-term outlook, June 2022

The financing of social security is undermined by the proliferation of wage packages on which no (or almost no) contributions are paid. The straitjacket of the 1996 Act has led to a growth of alternative wage benefits that “cost” the social security system dearly.

The table below gives an overview of these wage benefits, their scope and the revenue losses for social security. In 2022, alternative remuneration packages accounted for 2 billion in lost revenue for social security. If we were to replace just stock options and warrants with “real” wages, this would generate half a billion in revenue for social security.

Source : SD Worx Survey 2020, fiscal data, Sigedis, FGTB research department’s own calculations

From a tax point of view, we need to look for a tax on excess profits. Many companies are currently making huge profits simply because they happen to be in the right sector. This is particularly true in the energy sector. Companies such as Shell, Total or the Norwegian company Equinor made billions in extra profits in the first quarters of 2022.

(QUARTERLY

How can these profits be explained in the electricity sector?

The increase in wholesale prices in the energy market has benefited various producers in the sector. Indeed, the pricing mechanism based on the “last kWh produced” (the marginal cost) has led to «windfall» profits (also called excess profits), in particular for nuclear power producers. Based on market prices in August 2022, CREG estimates that the profits of the nuclear power plants covered by the nuclear benefits, namely Doel 3 and 4 and Thiange 2 and 3, would amount to 2 billion euros for 2022 and 1.3 billion euros in 2023 and 2024. This will result in an income from nuclear of 712 million for 2022 and some 400 million for 2023 and 2024.

Given the continuous increase in prices since the beginning of 2022, in September 2022 the CREG recalculated the profits of the nuclear power plants subject to the nuclear annuity (Doel 3 and 4; Thiange 2 and 3) and therefore the new nuclear annuity amounts for 2022, 2023 and 2024.

Source : CREG, Study into the impact of persistently high prices on the wholesale gas and electricity market, 2022

Nuclear levy, in brief

The nuclear benefit is based on the difference between the cost of producing a kilowatt-hour from a nuclear power plant and the selling price of the electricity. Indeed, while the construction of a nuclear power plant is very expensive (between 3 and 6 billion euros), its operation is not. Once that cost has been amortised (which is the case for Belgian nuclear power plants), the plant is very profitable (if the price of electricity is high).

In 2015, the government introduced a levy (nuclear levy) amounting to 38% of the profit margin of the Doel 3 and 4 and Thiange 2 and 3 nuclear plants.

The October 2022 budget conclave decided to involve the entire energy sector by way of:

- taxing the excess profits generated in the energy sector (in addition to the nuclear levy). This tax was to come in to effect on 1st January 2022 and be applied until June 2023.

- a one-off contribution of 300 million euros for the gas transmission network operator, Fluxys

- a contribution of two times 300 million euros for the oil industry.

In total, these measures should bring the State 600 million euros in 2022 and 2.5 billion euros in 2023.

5. Social security: is there sufficient cover?

5.1 The holes in the net are getting bigger

Our social security receipts have been under pressure for years, due to the failure of the tax shift and the erosion of workers’ social contributions.

In times of crisis, we need a social security system that effectively supports the most vulnerable in society. And the social security system has shortcomings in this respect. Most benefits have been below the poverty line for years. The refusal of employers to improve them is appalling. It should be noted, however, that without the link to wellbeing in social benefits, the drop would have been even greater.

What is the link to wellbeing? It is a mechanism for increasing social benefits and linking them to a certain extent to movements in wages.

Social benefits should not only guarantee a decent income in case of illness, unemployment, old age, etc., but should also protect citizens against poverty. It is therefore essential to raise these minimum social benefits above the poverty line. We cannot continue to consciously create poverty. The fight against poverty must be an absolute priority. This includes abolishing the status of cohabitant.

What is the status of cohabitant, in brief? A person who pays social security, if they decide to live (legally) with someone else, will lose a (big) part of their already low benefit. Our aim is to abolish this status and to individualise rights. Everyone must be able to build up their own rights. It’s a question of power of living, but also of emancipation.

SOCIAL MINIMUMS EXPRESSED AS A PERCENTAGE OF THE POVERTY LINE (AUGUST 2022 - 3 REGIONS)

Minimum pension guarantee – Person living alone – Survivor’s pension Minimum

Pension guarantee – Person living alone – Survivor’s pension

Minimum disability benefit – Person living alone

Income guarantee allowance for the elderly – Person living alone

Minimum pension guarantee – Couple

Minimum unemployment benefit – Person living alone

Minimum unemployment benefit – Single-parent family with two children

Living wage – Single-parent family with two children

Minimum disability benefit – Couple

Income guarantee allowance for the elderly – Couple

Minimum wage – Couple with two children

Minimum disability benefit – Couple with two children

Income replacement benefit – Person living alone

Living wage – Person living alone

Minimum unemployment benefit – Couple

Income replacement benefit – Couple

Living wage – Couple

Income replacement benefit – Couple with two children

Minimum unemployment benefit – Couple with two children

Source : FPS Social Security

5.2 Pensions

We believe it is imperative that pension reform be consistent with the reality of the working world. It is time to stop considering pensions as a budgetary adjustment variable, but rather as an essential and priority social right.

By 2030, the statutory retirement age will gradually rise to 67, while the average healthy life expectancy is only 63.8 years in 2020 (Eurostat).

Working longer is impossible for many people. The explosion in the number of people with long-term illnesses is proof of this. That’s why the FGTB recommends access to retirement after 40 years of working.

The FGTB has been asking for years that hardship at work be taken into account in future reforms. Night work, repetitive tasks, increased flexibility, significant psychosocial burden, etc., are, among others, criteria of hardship that should allow for earlier retirement, without any financial loss.

We managed to achieve the minimum pension at 1500 euros net, which is very good. But this could be called into question if the rules of access are changed. Another priority for he FGTB: the reassessment of women’s pensions. This means taking into account differences in careers and working conditions in the way pension benefits are calculated.

In Belgium, the net pension replacement rate is 62%. This rate is lower than in neighbouring countries, with the exception of Germany. The replacement rate is an indicator used to measure a pension system. It expresses the percentage of income that the pension represents, compared with the income received as an active worker in employment.

It should be noted that the Netherlands has a very high net replacement rate, which is due to the presence of a private pension scheme. This guarantees almost universal coverage and is therefore described as “virtually mandatory”.

Rolling out the second pension pillar (sector-based and company pension systems) is not a priority for the FGTB. Although these pension systems are increasingly common, they are not equal, as the Audit Office has pointed out. This is why the FGTB is fighting for the first pension pillar (the statutory pension) to be strengthened.

Net Pension Replacement Rate

According to the report from the Financial Services and Markets Authority (FSMA):

- On 1 January 2020, the average worker had only 3,344 euros in reserves via the private pension system. This corresponds to EUR 14 per month as a supplement to the statutory pension. For workers close to retirement, the median pension reserve is EUR 9,119, or about EUR 38 gross per month in addition to the statutory pension.

- Only 53 joint representation committees have a sector-specific pension scheme (approximately 50% of joint representation committees).

- The majority of the members of these schemes are men, but there has been a slight and steady increase in the proportion of women over the years. In 2011, women still accounted for only 17% of active members of a sectoral pension scheme. The share of women has since increased year by year, reaching 41% in 2019.

It is therefore the statutory pension (first pillar) that remains the system that is the most secure and provides the most support.