Welfare bill grows 50 percent in a decade

Despite the strength of the German economy and dropping unemployment, local governments are facing an ever increasing bill for social services. In the last decade costs have gone up 50 percent nationwide, the study found.

The report also flags up the substantial differences that exist between the different regions.

While Wolfsburg in Lower Saxony, a city made rich through its thriving car industry, allocates 17 percent of its budget to welfare payments, northerly Flensburg in Schleswig Holstein pays 58 percent of its state budget in welfare.

In some regions there is barely any room for budgetary flexibility left, neither for necessary investment in infrastructure nor for the paying-off of debts., the report argues.

The authors suggest that the federal government should do more to support local governments where levels of long-term unemployment are high.

Child support costs increase

The highest proportion of welfare budgets (€36 million) went into child support. Spending on daycare for children doubled between 2006 and 2013.

The second highest spend (€27 million) was on social services, with spending on facilities for disabled people having increased substantially.

The third highest spend (€14 million) was on supporting the living costs of recipient of Hartz IV, the common name for German unemployment benefits. It is here that the authors see a chance for the central government to support government at the local level.

Until now the federal government has paid a third of these costs. But the coalition agreement signed in 2013 has already committed the government to a further €5 billion per year in investment, which would  amount to a doubling of the the support for local governments.

“The money then arrives automatically at the right people,” said Rene Geißler, finance expert at the Bertelsmann Institute, who argues that social security is placing strains on poor regions where the tax receipts are too low to cover the costs.

Whereas in the economically thriving Baden-Württemberg Harz IV only takes up 3 percent of the annual budget, in Saxon-Anhalt, an economically deprived former east German state, this number rises to 11 percent.