Decisions made by higher levels of government are severely impacting the finances of local authorities in Wallonia. In 2022, additional costs relating to decisions taken at the regional or federal level cost municipalities an estimated €327.1 million, Le Soir reports.
These costs are only increasing and are expected to rise to €355.2 million by 2024, the Union of Cities and Municipalities (UCVW) estimates, up from €293.5 million in 2018.
Local financing was significantly hampered last year by funds for relief zones now provided to provinces, depriving local councils of €87.4 million.
Relief funds are now being allocated to provinces, depriving local councils of direct funding. Credit: Orlando Whitehead
Combined with the growing economic burden of pensions and reduced federal tax revenues, these changes are set to continue a “catastrophic trend” in municipal funding. The mayor of Braine-le-Comte, Maxime Daye, is calling for “political courage” to protect the finances of municipalities.
“Each year, the impact of the federal tax shift, which has reduced the tax base for the Personal Income Tax Declaration (IPP), is stronger and stronger. Since 2021, it has passed the threshold of €100 million per year,” he said.
According to the UVCW’s calculations, this causes municipalities to lose at least 5% of the additional payments to which they are entitled, equating to a loss of €53.2 million in 2022. Most significant, according to Daye, is the payment of pensions to local civil servants, which is now borne by municipalities. "This cost is set to triple in five years,” he said.
Indeed, the pensions for these civil servants alone will cost municipalities €292.4 million by 2027 – three times more than this year. For the lowest level of administration in Belgium, these costs are unmanageable.
Financing Flanders?
“Today, the penalties paid by the municipalities in the south of the country (Wallonia) are used to finance pensions in Flanders,” Daye complained, who is calling for the way pensions are paid to civil servants to be overhauled.
Alongside the UVCW, Daye wants to convince the authorities to “reduce the cost of pensions for the entire local public service” while also increasing the attractiveness of work in municipal administrations. The mayor complains that party leaders and ministers are too scared to approach such reforms.
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The UVCW has identified other federal and regional decisions that have weighed heavily on the finances of municipalities. For example, in 2022, municipalities lost €34 million in tax revenue linked to property taxes on equipment and tools due to a freeze on tax indexation agreed on in 2004.
Similarly, a Federal Government decision to return to stricter rules for reduced-price “social” energy tariffs will be felt at the CPAS of municipalities. Despite this, the cost of municipal allocations to these social centres continues to rise, increasing by €22 million in 2021 and €43 million last year.
