Belgian federalism: balancing good governance and solidarity

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Belgian federalism balancing good governance
and solidarity

• Dr. Wilfried Swenden
• Politics
• University of Edinburgh

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Overview

• 1. Socio-economic differences between Flanders,
  Brussels Wallonia
• 2. Territorial Transfers
• Social security
• Public employment
• Mechanisms in fiscal federalism
• 3. Political Agency
• 4. Is there a solution to the current deadlock?

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Belgium Flanders/Brussels/Wallonia
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Socio-economic indicators

• Belgium a federation of three Regions and three
  Communities (but economic data usually displayed
  at a Regional or sub-Regional level)
• 2006 (mean average taxable income)
• 14.026 (Flanders)
• 12.357 (Wallonia)
• 11.309 (Brussels)
• Growth rate of economy (in GNP percentages 00-04)
• 2.18 (Flanders), 1.9 (Brussels), 1.75 (Wallonia)
• Unemployment versus share of population
• 32/58 (Flanders), 52/32 (Wallonia), 16/10
  (Brussels)
• Conclusion Affluent Flanders, poor Wallonia and
  in terms of average taxable income, also
  relatively poor Brussels

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Combined with variations in regional identity

• 1999 elections Linz-Moreno 5 point scale
• Exclusive or predominant identification with
  Flanders 31.3 percent
• Exclusive or predominant identification with
  Wallonia 11.9 percent
• Flemish Belgium 42.2 / WalloniaBelgium 41.8
• Exclusive or predominant identification with
  Belgium (in Flanders) 28.4
• Exclusive or predominant identification with
  Belgium (in Wallonia) 44.5

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Gives rise to

• Stronger demands for autonomy or self-rule in
  Flanders
• In a context of relative affluence frequently
  takes the form of we want our money back
• size of transfers from North to South should be
  diminished
• Regional spending autonomy should be matched by
  higher levels of fiscal autonomy

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Transfers North-South

• Figures are contested (examples)
• Welfare expenditures roughly in proportion to
  regional population, but contributions fall
  disproportionally on Flemish shoulders (63gt58.1)
• 92.1 billion BEFr (1999), 0.98 GDP, of which
  roughly 75 benefit Wallonia 25 percent BRU
• Territorial variations in social security
  expenditures count for less than 20 percent
  transfer
• Bulk transfer is the product of higher
  contributory capacity Flemish population
• Van Gompel annual transfers from Flanders amount
  to 6.6 billion (2003), or 4.2 percent of
  primary income 57 percent originate from social
  security, 23.6 percent as a result of federal
  budget operations and only (19.9 percent)
  through funding of Regions Communities

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Funding regional entities (primarily shared
taxes) SML
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However, transfers contribute to alleviating
poverty in Francophone Belgium

• Study by Cantillon, De Maesschalk, Rottiers
  Verbist (WEP, 2006 1034-1056)
• Composition of disposable income
• Per capita difference (1997) only 6 between
  Flanders Wallonia
• However, in Flanders 64 generated through work,
  28 through social security (income replacement
  schemes or cost-covering benefits)
• In Wallonia, comparable figures are respectively
  57 and 34 percent
• Earned income 17 percent higher in Flanders
  compared with national average
• Transfers contribute to narrow income
  inequality between Flanders and Wallonia by 75
  percent
• If taxes and social contributions in Flanders are
  levelled to the Walloon level, and income from
  social security in Wallonia is lowered to the
  Flemish level, average household income in
  Flanders would increase by 7 percent and decrease
  in Wallonia by 4 percent poverty risk would rise
  in Wallonia from 13 to 18 percent (Cantillon
  et.al, 2006 1046)

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Balancing solidarity good governance

• Francophone arguments for retaining the SQ
• Decentralizing social security or increasing
  regional fiscal autonomy will increase poverty
• A poorer Wallonia cannot be in the interest of
  Flanders
• Flemish arguments for more autonomy
• Walloon economy lacks incentives to do better
• Labour cost is too high for current health
  Walloon economy, social regulations are too
  generous
• Universal social protection hinders labour and
  capital mobility
• Flanders is forced to pay the price for more
  cost-incentive policies of Wallonia, for instance
  in child allowances (higher education) or
  unemployment benefit (due to regionalization
  monitoring)
• Echoed by some international institutions
  (example IMF in its most recent report on
  Belgium)

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Transfers Political Agency

• Flemish Parliament Five Resolutions 1999
• The role of political agency
• Antagonism between Flemish and Francophone
  parties starts to rise sharply in 2004
• Regional elections won in Flanders by Vlaams
  Belang, and Flemish Christian-Democrats
• Flemish Christian-Democrats in Flemish government
  but in federal opposition
• Prior to 2007 federal elections, electoral
  alliance with hard line left-over of Volksunie
• Nationalist outbidding works due to absence of a
  statewide party system or with the exception of
  Brussels (and periphery) impossibility to
  sanction parties from other language group ?
  moderate stance is too costly
• Roland Noury show how linguistic divide has
  become more pronounced after 2003 in federal
  parliament and forms a second cleavage alongside
  government-opposition divide
• Francophone parties see themselves increasingly
  as legitimate voice for Belgian interest, and
  portray doom scenario, in part fuelled by RTBF
  fake news report on Bye, Bye, Belgium
  December 2006

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Flanders autonomy is a matter of Good
Governance (degelijk bestuur)

• homogeneous policy packages example science
  policy
• Tailor policies to regionally divergent
  priorities (transport)
• Adjust policies to very different circumstances
  on the ground (youth versus old age unemployment)
• Responsive/accountable government (fiscal
  autonomy) Flanders raises only 15 percent of
  what it spends

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Examples from Flemish party manifestoes

• Vlaams Belang
• Federalism is a strategy to of the Francophone
  parties to gain concessions from the Flemish
• The priority of the Francophone parties is to
  prune away Flemish welfare and to frenchify
  Flemish Brabant
• NVA
• Belgium is governed by the Parti Socialiste
• Belgium should become a weak confederation of two
  Communities
• Flanders sustains welfare dependent culture of
  Wallonia
• CDV
• Genuine solidarity implies more equitable
  distribution of public investments and a more
  objective allocation of social security revenues
• Regions should be authorised to levy personal
  income and corporate income tax
• Regions or Communities should control health care
  and family allowances, employment, public
  transport, telecommunications, science, justice
  policing
• Similar demands are raised by some interest
  groups (especially VOKA, Flemish chamber of
  commerce industry), VEV, Flemish economic union

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Francophone Belgium

• Parti Socialiste the unity and identity of our
  country are clearly undermined when one seeks to
  regionalize competencies such as labour, health
  care of family allowances. We touch here upon the
  core of our social solidarity (PS 2007)
• Point at reverse direction of transfers in the
  past
• Point at solidarity in different matters
  (reduction of gas emissions, Flanders relies on
  Wallonia for at least a quarter of its water
  supply)
• MR policy fragmentation may be solved by
  returning powers to the centre or co-operation
  between regions should be enhanced (for instance
  employment agencies in order to increase labour
  mobility) yet social security in all its
  dimensions health insurance, pensions, family
  allowances, unemployment insurance, health and
  safety at the workplace) should remain an
  essential mission of the federal state

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But, also support from

• Unions
• We oppose a system of allowances to which
  supplementary schemes could be added which vary
  from one region to another As a matter of
  principle, we can only succeed in safeguarding
  inter-personal solidarity and equal rights by
  keeping labour agreements, labour legislation and
  our social security federal. At a time when we
  are seeking to build a social Europe, we will not
  tolerate the unravelling of our Belgian model
  (Labour Day Speech, Rudy De Leeuw, 1 May 2007)
• Public Opinion (survey Feb 2007)
• 92 percent believe that Belgian social security
  sets example for other countries 87 W 80 FL
• But 54 Fl respondents agree with statement
  that our social security system is the source
  of unacceptable transfers between North and
  South (dismissed by 64 FR)

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Flemish parties of the left

• And Flemish political parties (of the left)
• SP.A transfers grounded in differences in
  economic development and unemployment are fair
• Decentralization of supplementary (i.e.
  non-income replacement) social schemes can raise
  problems for Brussels
• However, support regionalization of labour market
  policy regional employment agencies are in a
  better position to assess who is fit to enter the
  labour market, what social assistance the
  regionally unemployed require and who should
  require vocational support.
• Coordination mechanisms at federal level should
  ensure that Regions are held responsible for
  regional labour market policies (i.e. monitor the
  implications of their policies on social security
  expenditures)

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Outcome

• Clash of opinions prior to elections
• Centre-right government, but with inclusion PS
• Absence of agreement on conclusive state reform
  resulted in interim federal government (Christmas
  2007 Easter 2008)
• Due to mutual veto position both language
  communities, no prospect yet of a substantial
  state reform the jury is out (July 2008)
• Interim agreement (25 February) envisages
• Regionalization of labour market policy, without
  touching upon inter-personal solidarity, and
  especially social security
• A discussion on some aspect of health care policy
  or family policy
• A reform that seeks to strengthen the
  participation and co-decision of regions at the
  federal level (Senate, IMC, Deliberation
  Committee), as well as a federal electoral
  district
• Reconsider funding of Brussels fiscal autonomy
  regions.
• In parallel commission set up to strengthen
  institutional ties between French Community and
  Walloon Region

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Furthermore, Brussels periphery