German government split over integrating “climate money” in social security system

Plans by Germany’s labour minister to assist households struggling with high energy prices and inflation by paying them a “social climate money” have led to disagreement within the country’s government coalition. Hubertus Heil of the Social Democratic Party (SPD) proposed to provide financial assistance to individuals and couples with a monthly gross income of less than 4,000 euros and 8,000 euros, respectively, to ensure that those who need it most get the most. “The state’s resources are limited. That’s why we shouldn’t hand out the climate money indiscriminately to everyone,” Heil told media network Funke Mediengruppe. “It’s important to differentiate along social criteria,” he said. Heil added that Germany’s push for climate neutrality means prices for energy would be rising even if the invasion of Ukraine by Russia had not caused turmoil on global energy market. “Energy in general is going to become more expensive,” the minister said, arguing that support mechanisms that go beyond immediate response packages are necessary. Support payments are meant to become part of the government’s planned “citizen money” scheme, a social support programme that should replace the country’s current “Hartz IV” system by 2023.

While the SPD’s coalition partner Green Party welcomed the idea, the third coalition party, the pro-business Free Democrats (FDP), criticised Heil’s proposal, arguing it would amount to redistributing money. The FDP’s parliamentary group leader, Johannes Vogel, told Bild Zeitung there should be no cap on who receives climate money and called for a simple “per capita premium” to cushion the impact of carbon pricing and other energy price drivers. FDP leader and finance minister Christian Lindner said he is “curious about funding ideas” for Heil’s climate money proposal, ruling out financing of the programme through more debt or higher taxes, news website n-tv reported. He argued the government should focus on tax reforms instead of opening “new money pots.”

In response to the growing energy price burden on households, Germany put over 20 billion euros in various schemes to help struggling energy customers, such as the abolition of the renewables levy on power prices, a reduction in fuel tax, and a discounted public transport ticket. Whilst low-income households are set to benefit from these the most in relation to their net income, the overall burden of rising energy prices will still hit them more than richer households, an analysis by the German Economic Research Institute (DIW) found.