State of Nation Address Emphasises Housing, Social Welfare, Economic Growth

On the afternoon of Tuesday 11 June 2024, Luxembourg's Prime Minister, Luc Frieden, held his first State of the Nation address at the Chamber of Deputies (Luxembourg's parliament), providing a government statement on the economic, social and financial situation of the country.

Among the mentioned government priorities was notably more housing through faster construction: a ten-point action plan, a substantial simplification of the procedures including the harmonisation of standards and the digitalisation of all authorisation, as well as a more “pragmatic” nature conservation seen in a more global sense. Prime Minister Frieden emphasised the need to create more affordable housing through a reform of the law on municipal planning as well as three pilot projects, including the private sector.

A second priority noted was social policy taking care of those who “need it most”, to include administrative simplification, the introduction of the "once-only" principle at the level of the Luxembourg state, better access to information and better coordination with the actors on the ground. A broad debate on the pension system is scheduled for autumn 2024 as well as a package of measures for a better work-family balance (for the end of 2024).

Another priority mentioned was the strengthening of purchasing power, a competitive economy and the creation of jobs. Prime Minister Frieden added that this strengthening of purchasing power could be achieved through an inflationary reduction of the tax scale and through the reduction of the corporate tax rate from 17% to 16%. Administrative simplifications are planned for SMEs, farmers and seasonal workers as well as “coherent” strategies to strengthen the ecosystems of the financial centre and data.

Regarding its environmental policy, the government aims for a phaseout of the energy price cap with strong “socially targeted aid” and a new, socially fair climate bonus model from 1 October 2024 as well as the expansion of renewable energies through administrative simplification for wind and solar energy. In addition, innovative ideas for renewable energies are planned (e.g. along highways, in and around industrial zones, agrophotovoltaics), according to the Prime Minister.

Furthermore, the government statement notably emphasises a policy that protects Europe as its partner in peace and freedom, supporting European solutions for the economy, the climate and defence. Notably, Luxembourg is aiming to achieve the international commitment of 2% of the Gross National Income (GNI) for defence already in 2030.

The Prime Minister noted several initiatives are being implemented to streamline processes and improve service delivery. The introduction of the "once-only" principle means that citizens will no longer need to submit documents repeatedly; instead, the state will handle document sharing internally. This change aims to reduce administrative hurdles, allowing aid to reach people more effectively and enabling the state to provide proactive assistance. In the housing sector, procedures for the general development plan (PAG), special development plan (PAP) and environmental impact evaluation (EIE) are being shortened, and building permits will benefit from a "silence means consent" approach, which means they will be automatically approved if not explicitly denied within a certain timeframe. Additionally, a national building regulation will be established to unify building codes, and there will be fewer required environmental studies and compensation measures, all while aiming to maintain nature conservation.

In the economic sector, procedures for SMEs, farmers and seasonal workers will reportedly be simplified and aid for investments in green technologies will be easier to access. Social welfare initiatives include an action plan against poverty that simplifies and harmonises social assistance programmes, according to the State of the Nation address. A unique social counter will serve as a single contact point for all social assistance needs and a digital platform will provide an overview of all available social assistance. For renewable energy, the state will offer pre-financing for photovoltaic systems and will engage in broad consultations with the sector and municipalities to simplify procedures for wind and solar energy projects, according to the government's statement.

In the context of the recent  European elections, the Prime Minister commended the success of pro-European parties as he cautioned against rising Euro-scepticism in neighbouring countries. Prime Minister Frieden affirmed Luxembourg's firm stance within the European Union, asserting that the Grand Duchy's security and economic future are intertwined with the EU, emphasising the importance of a competitive European single market in maintaining prosperity compared to global counterparts such as the US and China.