OECD Economic Surveys: Luxembourg 2019

Annex. Progress in main structural reforms

Abstract

This annex reviews action taken on recommendations from the previous Survey released in June 2017.

 

Recommendations from the previous Survey	Actions taken
Making growth more resilient and greener
Develop further the capacity to undertake regularly system-wide stress tests of fund-bank linkages and consider publishing their results.	The CSSF now runs fund-bank interlinkage stress tests twice a year. High-level results are shared with interested external public organisations
Introduce additional macro prudential measures, such as limits to loan-to-value or loan-to-income ratios.	A draft law for the implementation of LTV, DTI and DSTI caps was presented to Parliament in December 2017,but not yet passed.
Improve access to credit for SMEs by introducing a central credit registry.	Anacredit, a central credit register for Luxembourg, is currently under construction by the BCL in cooperation with the European System of Central Banks.
Reform land planning and introduce time-limited building permits.	Draft law no. 7139 of May 2017 proposes a development contract (Baulandvertrag) according to which land classified as residential area must be developed within 3 years.
Increase taxation of non-used constructible land.	No action taken.
Limit further mortgage interest deductibility to reduce housing demand.	No action taken.
Align the legal age of pension entitlement with increases in life expectancy.	No action taken.
Link more closely the level of pensions to the level of contributions.	No action taken.
Increase taxes and excise duties on transport fuel.	In 2019, the authorities increased excise duties on petrol and diesel by 1 and 2 cents per litre respectively.
Explore the introduction of a system of congestion charges.	No action taken.
Improve cross-border railway connections and transport infrastructure.	A 10-year investment plan has been signed between Luxemburg and France in 2018 for cross-border public transport infrastructures. Significant investments in railways are already underway.
Better skills for more inclusive growth
Reduce grade repetition by providing earlier individualised support to students falling behind.	In 2018, Luxembourg introduced seven specialized centres for improving the support for pupils with special educational needs and a mediation service for inclusion and integration addressing individual complaints from pupils, with a view to lower drop-out rates.
Improve the mobility between secondary tracks via curriculum alignment and differentiated teaching.	The law of 13 March 2018 created a national syllabus council and two national syllabus commissions, one for elementary and one for secondary education, aimed at improving the syllabus consistency in national education.
Create individual learning accounts and expand the individual study leave to enhance access to lifelong learning.	No action taken.
Make systematic use of the tools for assessing and anticipating skills needs in policy making, especially in education policy and immigration policy.	A new “National Observatory for School Quality” was created in 2018 to evaluate the school system and to issue policy recommendations with a special focus on equity.
Strengthen career guidance and counselling to improve responsiveness of tertiary education to labour market needs.	The law of 22 June 2017 introduces the “Maison de l’orientation”, whose responsibility is to ensure consistent professional and educational guidance to young and adult students. There is a strong collaboration between the new structure, the national employment agency ADEM and the department of vocational training.
Tailor lifelong learning programmes to the needs of the low skilled and older workers.	The State’s financial participation increased by 20% for the wages cost of low-skilled and participants over 45 years.
Provide incentives for fathers to share parental leave. Consider introducing bonus parental leave if fathers take up a minimum amount and remove the cap on parental leave allowance.	Implementation of a 2016 reform has made the share of fathers in total parental leaves increase from 25% (2016) to 50% (December 2018).
Adjust the tax and benefit system to increase incentives to work for low-skilled youth, older workers and second earners. For example, limit the access to unemployment benefits for young people with no employment record.	The newly implemented “Revis” (revenu d’inclusion sociale) replaces the minimum guaranteed revenue as of 2019 and reduces some of the work disincentives by excluding 25% of professional income from the computation of the benefit amount, and by permitting more than 40 hours of work per week and per household. A new minimum social wage tax credit of 70 euro per month on monthly gross salaries between the minimum social wage and 2.500 euro was introduced in January 2019.
Improve the evaluation of existing active labour market policies and set and partly publish output measures for local PES offices.	The EvaLab4Lux project will improve evaluation of ALMP by providing systematic studies and conducting impact evaluation studies.
Move to a system of fully individual taxation to make the tax system more gender neutral.	No action taken.
Close off various routes into early retirement and support more flexible workplace practices to strengthen labour market attachment of older workers.	Conditions to enter partial retirement, which keeps older workers attached to the labour market, have been eased in 2017.
Improving the integration of immigrants
Ease immigrants’ access to public sector jobs.	Since 2017, measures have been taken within the civil service to facilitate the learning of the Luxembourgish language.
Continue to increase public supply of language courses. Diversify language training to take better account of workplace needs.	The Government introduced several classes for learners of different ages to enhance language skills.
Speed up decisions on asylum applications. While waiting for a decision, ease provisional labour market access for applicants with high prospects of being allowed to stay.	The average duration from the submission of the application for international protection to the first decision has decreased from 21 months in 2015 to 6.5 months in 2018. No action has been taken to ease provisional labour market access.
To attract talent and better respond to skill shortages, reduce the time needed for non-EU citizens to obtain a work and residence permit.	In July 2018, the Grand-Ducal Regulation laying down the conditions and procedures for the issue of a residence permit as a salaried worker has been modified to reduce the administrative burden on the applicant and to simplify the procedure for obtaining a work and residence permit.
As planned, increase the provision and affordability of early childhood education and care, and familiarise children aged 1-4 with both Luxembourgish and French. Ensure that all providers comply with quality standards.	The initiative “Staark Kanner” (Strong Childen; Law of 29 August, 2017) provides multilingual education and 20 hours of free child care in nursery facilities for children ages 1 to 3 (until they turn 4, when compulsory school starts). Public funding is conditional on compliance with high quality standards. Data from December 2017 states that 58% of the children aged 1 to 3 have been benefitting from this measure.
Make resource allocation across schools more equitable, and introduce incentives to attract more qualified and experienced teachers to disadvantaged schools.	No action taken.