Size of Federal Digital Budget Disclosed for the First Time
Research
12.02.2025
ZEW Calculates Level of Digital Spend in the Federal Budget for Agora Digitale Transformation
In the fiscal years 2019, 2021, 2023 and 2024 the federal government planned total spending of more than 60 billion euros on digitalisation in the four budgets combined. When based on a narrow definition, the digital budget came to 62.2 billion euros; based on a broad definition, it was 67.1 billion euros. The analysis states the budget figures for both a narrow and a broad calculation, as the more than 20,000 budgetary items that were analysed lack transparency and detail. With this analysis, the non-profit think tank Agora Digitale Transformation now reveals for the first time the financial resources earmarked for digitalisation in the federal budget. ZEW Mannheim, which was commissioned with the analysis, put considerable effort into this study to be able to present the first concrete calculations on the federal government's digital expenditure, despite a lack of data and systematic organisation in the budget titles.
The strong increase in spending in the period from 2019 to 2023 is striking, with federal spending on digitalisation more than doubling. The coronavirus pandemic is proving to be a key driver of digitalisation efforts on the federal level. At over 16 billion euros, spending on the digitalisation of administration accounts for the highest share of expenditure in the four fiscal years on which the calculation is based. “It’s true that the coronavirus pandemic is an important driver of spending. Nevertheless, compared to the other EU states, Germany has increasingly fallen behind on digital adoption in administration over the recent years,” says Dr. Stefan Heumann, managing director of Agora Digitale Transformation. “More money doesn’t always mean more impact – digital transformation is not only about money. The key task in administration is to create the right framework for the use of digital solutions.”
Lack of transparency of digital spend
Neither politicians nor the public have full information about the extent of public spending on digitalisation at the federal level. The calculation of a digital budget aims to improve transparency and, in the long term, to help better align the budget with digitalisation.
“There’s no standardised system that would make the digital spend transparent. At present, it’s not always clear from an external perspective which public funds are spent on digitalisation measures. This should be addressed, especially when considering that digitalisation is one of the major transformations this country is experiencing,” says study co-author Dr. Thomas Niebel from ZEW’s Research Unit “Digital Economy”.
Establishing a higher priority for digitalisation in the federal budget
The pandemic has acted as a catalyst for the mobilisation of budgetary resources for digitalisation. Four categories of spending on digitalisation dominate the federal budget: Budget items geared towards the further development of digital administration are well ahead at 16.6 billion euros (broad definition), followed by spending on digital infrastructure of 13.8 billion euros. Not far behind are the categories of research and innovation in digitalisation, accounting for 12.8 billion euros, and defence spending, in the amount of 11.9 billion euros. Compared to these four categories with their double-digit billion amounts, the four categories relating to digitalisation of the economy, education, culture and healthcare play only a minor role.
“Even if it’s not possible to determine an optimal level of digital spending, the increase since 2019 is clearly good news. This increase makes the federal budget more future-oriented. The challenge in the coming years will be to maintain or even expand this new approach in the face of more short-term budgetary interests in the area of transfers,” says Professor Friedrich Heinemann, head of ZEW’s Research Unit “Corporate Taxation and Public Finance” and co-author of the study.
Additional analyses of impact orientation needed
“In addition to the size of the budget, the effective use of public funds is crucial for a successful digitalisation policy,” says Thilak Mahendran, Innovation Lead for Digital Government Action at Agora Digitale Transformation. “Budget funds for digitalisation should therefore not only be quantified but should also be carefully evaluated for their effectiveness.
Improving the data basis
Robust evaluations require a solid data basis. Detailed references to individual budget titles in the notes and to items of spending would help improve the data basis. Further, access to the different departments’ background information on budget titles should be enabled. Given the length and depth of detail of these estimates, they are considerably more informative than the often very brief descriptions in the currently accessible budgetary documents.
About Agora Digitale Transformation
Agora Digitale Transformation refers to itself as the think tank for updates to our democracy. Its goal is to use the opportunities of the digital transformation to strengthen democracy in Germany. As a non-profit organisation, the think tank works in a non-partisan, collaborative and evidence-based way with a focus on actionable and effective solutions for policy. To this end, Agora Digitale Transformation specifically seeks exchange and collaboration with innovators from society, administration, science, business and politics.
