Unemployment cap could cost Flemish municipalities over 200m euros in 2026
Flemish municipalities could face up to 203 million euros in extra costs in 2026 due to the federal government’s decision to limit unemployment benefits to a maximum of two years. This was revealed in Belfius' annual study on the financial health of municipalities in Flanders.
According to the study, if 30 per cent of those who lose access to benefits turn to the public centre for social welfare (OCMW), local authorities would need to support around 16,000 new living wage recipients. If 46 per cent do so, that number rises to 24,000 people, with corresponding costs jumping to over 200 million euros.
Walloon municipalities could also see their budgets strained, with potential added costs of up to 190 million euros per year. While the federal government has earmarked a contribution of 234 million euros for all OCMWs in 2026, no regional breakdown is available as of yet.
Rising pension costs for permanent municipal staff are also putting pressure on budgets, the study says. In 2026, Flemish local governments are expected to spend more on pensions than on wages for active employees for the first time.
This trend will continue in the years ahead, doubling the annual contribution for municipalities to address the imbalance.
Municipal budgets are likely to take another hit from the planned federal tax reform, particularly the increase in the tax-free allowance. Though the effects won’t be immediate, Belfius expects municipalities to compensate for future losses by raising local surtax rates on personal income.
Strong financials
Still, Flemish municipalities enter the new administrative period on a relatively strong financial footing. The 2025 operating budget is set to rise by 2.2 per cent to 15.08 billion euros, with staff costs making up half of total spending. The biggest cost increase is in individual social assistance, up 4.8 per cent compared to 2024.
On the revenue side, municipalities anticipate 3.8 per cent growth in 2025, reaching 16.25 billion euros, driven by a 4.8 per cent rise in tax receipts due to full income indexation. Investment remains robust as well, with 4.2 billion euros set aside for projects next year, particularly in the energy transition.
#FlandersNewsService | The city hall in Ghent © BELGA PHOTO JAMES ARTHUR GEKIERE
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