By Reiner Holznagel, President of the German Taxpayers Association

Germany’s tax‑financed social benefits system has become increasingly complex and is long outdated in its structures. The multitude of benefits and responsibilities is barely manageable and overwhelms both citizens and public administrations alike. The negative consequences? Inefficiency and unnecessarily high costs. This system urgently needs order and clarity! That was precisely the task of the Commission on Welfare State Reform. It has delivered and outlined a framework for reform that can make the welfare state noticeably more efficient.
 
The Commission’s proposals deserve support because they address the right issues. Their aim is to consolidate tax‑financed social benefits and authorities, dismantle contradictory transfer effects, and put an end to chaotic responsibilities. These ideas have the potential to make the welfare state simpler, more transparent and more digital – in other words, more effective and more in line with the times.
 
First, I would like to stress three uncontested points: Those in need must be able to rely on the solidarity of taxpayers. Equally uncontested, however, is that this social safety net cannot become a permanent solution. There must be incentives to leave this net under one’s own steam and take up employment. Yet these incentives are often lacking, which is why new initiatives must take effect quickly! A third point is crucial: Anyone who returns to work must feel this positively in their wallet – compared to receiving state benefits. To achieve this, we need not only a reorganisation of benefits but also a more active labour market policy and an effective employment administration.
 
The Commission’s recommendations reflect long‑standing demands of our association: less complexity, clearer rules, more targeted incentives for employment, greater use of standardised payments, and consistent digitalisation of benefits and administration. It is essential not to expand the circle of recipients, but to manage benefits more effectively and above all to streamline authorities. A more efficient welfare state must also handle taxpayers’ money more efficiently. A reform of the welfare state must therefore also generate efficiency gains for the public purse!
 
What must absolutely be included? Quite clearly: benefit fraud must be rigorously curbed. Especially in view of the weaknesses exposed by the EU’s freedom of movement for workers, data sharing between social, financial and security authorities must finally be established. Abuse of unemployment benefits and child benefits must come to an end! Although the Commission only touches briefly on this point, the fight against benefit fraud must become a central tool in the upcoming legislative procedures. Why? Again, quite clearly: in order to protect our taxpayers’ money!
 
The ball is now in the court of policymakers – the governing coalition has a clear mandate. It must not postpone the reform of the welfare state; on the contrary, the reform must be swiftly implemented in law and then thoroughly reviewed. It is crucial that policymakers stay committed, regularly evaluate the impact of the reforms and make adjustments wherever practical experience demands it.