Belgium taxes an average worker more heavily than any other OECD country. Then it spends billions subsidising wages because employing people is so expensive.
We created a problem, then created another government programme to compensate for the problem.
This is not a metaphor. Belgium spent about €25 billion on subsidies and investment grants to businesses in 2024. Almost two-thirds were wage subsidies. The National Bank itself notes that these partly compensate for Belgium’s high tax burden on labour.
Once you notice this pattern, you start seeing it everywhere.
We make labour expensive, so we subsidise labour. Those subsidies cost money, so taxes stay high. High taxes create strange incentives, so we add exceptions. Those exceptions create disequilibrium, so another group gets compensated.
Almost every individual rule has a reasonable explanation, but the system as a whole becomes completely insane.
In product management, I’d call that a resource allocation problem.
Belgium ended 2025 with a budget deficit of 5.2% of GDP and public debt of 107.9%. The National Bank expects both to worsen further. So we already collect enormous amounts of money, still borrow enormous amounts of money, and then spend part of that money compensating for problems created somewhere else in the system.
We are remarkably good at solving the side effects of our own policies instead of revisiting the policies that caused them.
That is the real reform problem.
Take labour taxes. If we want to lower them, we could remove wage subsidies, exemptions and other distortions and use that money to lower the normal rate for everyone. That would make the system simpler and cheaper, but it would still be a tax shift. It would not fix the deficit.
We constantly mix those two problems together. Belgium can move €15 or €16 billion away from labour taxes and still have exactly the same budget deficit the day after. The deficit needs its own answer: slower spending growth, more people working, and most of all a state that becomes much more disciplined about what it funds.
Why doesn’t every meaningful subsidy, tax exemption and government programme have a clear objective, an owner, a way to measure whether it worked, and an expiry date? After five years running any of these, we should by default ask one question: did the thing we said would happen actually happen?
If yes, renew it. If partly, redesign it. If not, stop.
I think we can go one step further. Before asking whether a programme works, ask why it exists in the first place. What problem was it originally compensating for? Can we remove that underlying problem instead of permanently funding its side effects?
That is where the labour example comes in again. We tax work heavily, then subsidise employers for hiring. We make housing difficult to build where infrastructure already exists, then spend enormous amounts dealing with the consequences of scarcity, long commutes and scattered development elsewhere. We tax car ownership whether someone drives into Brussels at 8:15 or down an empty motorway at 22:00, then build a collection of exemptions and special regimes around those blunt instruments.
None of those individual policies are necessarily stupid. In fact, that is precisely the problem. They are often perfectly rational responses to another part of the system.
I call that locally rational, globally absurd.
Reform should therefore work by replacing whole deals, not by removing one piece and leaving everything around it untouched. Remove wage subsidies and lower the labour taxes they were compensating for. Charge for congestion where and when driving actually imposes costs and remove taxes simply attached to owning a car. Protect open space and make housing substantially easier to build in places that already have trains, schools, shops and sewers.
The unit of reform should be the exchange.
That changes the political question from What are you taking away from me? to What bad deal are we replacing with a better one?
The same problem exists inside government itself. Belgium can keep federalism, regional autonomy and different political choices without accepting that responsibility for outcomes should become almost impossible to trace. Different governments can share machinery underneath while still making different decisions on top of it. For every major outcome, citizens should be able to answer a fairly basic question: who owns this?
We seem to be world class at making that difficult.
None of this means Belgium simply needs a smaller state. A smaller version of the same system would still contain the same distortions, exceptions and compensations. Before Belgium asks what to cut, it should ask: which parts of the state exist only because another part of the system does not work?
We already live in an extraordinarily wealthy country. Maybe the great economic reform project isn’t figuring out how to become rich. Maybe it’s figuring out how to stop being so expensive at being rich.