Specially Allocated Funds Ensure More Investment in the Future
ResearchInnovative indicator assesses future orientation of the federal budget
A new study by ZEW Mannheim shows that 20 per cent of the 2023 federal budget was spent on future-related expenditures. This share had previously fallen to 18.2 per cent during the COVID-19 pandemic. This figure comes from an indicator developed by ZEW called the future ratio (Zukunftsquote), which measures the proportion of expenditure that is highly relevant for future endeavours. The share of funds allocated for the future proved to be above average. The Digital Infrastructure Special Fund and the Climate and Transformation Fund were particularly future-oriented.
“The special funds of recent years have supported the federal budget’s capability to plan for the future. The Federal Constitutional Court’s decision that ended the possibility of financing secondary budgets using debt has posed a major challenge. Therefore, the core budget should place a larger focus on future expenditures in order to prevent a long-term decline in the future ratio,” explained Professor Friedrich Heinemann, head of ZEW’s “Corporate Taxation and Public Finance” Research Unit. “The future ratio as a measure of the federal budget’s preparedness for the future overcomes the vagueness of the classic investment ratio, as it classifies all expenditure items according to their focus on the future. It includes not only capital in kind, but also human and natural capital and even technical knowledge,” added Dr. Albrecht Bohne, researcher in ZEW’s “Corporate Taxation and Public Finance” Research Unit.
Increase in future ratio thanks to special funds
The special funds can also be analysed individually on the basis of the future ratio. This figure shows the five relevant special funds, four of which have a higher future-oriented ratio than the core budget. The Digital Infrastructure Fund and the Climate and Transformation Fund in particular demonstrate a high level of future-orientated allocation. The Economic Stabilisation Fund, on the other hand, has a future quota of zero per cent, as it was geared towards immediate crisis management.
About the future ratio
The future ratio is an innovative indicator that assess the federal budget’s level of focus on future endeavours. In contrast to the traditional investment ratio, the future ratio does not just look at investments. It also classifies and weights all expenditure according to its relevance to the future. To this end, expenditure is assessed on the basis of the following criteria: growth-relevant infrastructure, technical knowledge, human capital and natural capital. Calculating the future ratio helps to improve transparency regarding the budgets’ readiness for the future. The future ratio aims to make a decisive contribution to the debate on debt cap reform.
