News item | 5/17/2023 | 10:15
In 2022, the war in Ukraine, high inflation and rapidly rising energy prices followed each other in rapid succession. The cabinet protected Dutch households with a historic package of purchasing power measures, including raising the minimum wage, increasing various allowances and reducing VAT and excise duties. Despite these measures, public finances were in better shape at the end of 2022 than in 2021. The economic recovery was strong and the Dutch economy grew by 4.5%, well above the European average of 3.5%.
This is evident from the Central Government Annual Financial Report and the National Annual Report, which Sigrid Kaag, Minister of Finance, sends to the House of Representatives on Accountability Day on behalf of the government.
Minister Kaag: “Whether we look to the future, to the present or to the past: everywhere we see the need for sound financial policy. Only with a solid foundation will we be able to make the transition to a green economy and take measures that protect our nature and our climate – now and in the future.”
Public finances
Despite all the additional measures as a result of the war in Ukraine, public finances were in better shape at the end of 2022 than the year before: the government’s EMU balance amounted to a small surplus of €88 million, rounded off at 0.0% of the gross domestic product (GDP).
This balances government expenditures and revenues. This is the result of the relatively high amount of unspent money and lower expenditure on corona measures. The government has not yet been able to realize all the plans from the coalition agreement due to the government’s limits on implementation and because of the historically tight labor market. For 2022, the total underspend will amount to €6.2 billion, €1.4 billion higher than in 2021. Government debt was lower than in recent years. In 2022, public debt was €480.1 billion, or 51.0% of GDP. In 2021 this was 52.1%.
Financial Management Empire
In the past year, as in 2021, central government’s financial management was largely dominated by dossiers with financially extensive problems, such as the war in Ukraine, the influx of refugees and compensation for increased energy costs. This always had to be done quickly. In addition, the settlement of compensation measures from previous years had an impact on financial management.
Nevertheless, the year 2022 has ended better in terms of financial management than the two previous years. For example, the Court of Audit finds that the regularity picture is more positive in 2022 than in 2021. The financial size of the files where the government has not followed all the rules or where this cannot be determined with certainty has decreased significantly: the percentage of expenditure of the Central government where not all rules were followed, or where this cannot be determined with certainty, was 0.58%. That was 1.01% in 2021. Progress in the field of legality is the result of the efforts of the ministries. The procedures for timely and correct informing parliament are also much better known and are being followed more closely.
In addition, the Court of Audit has assessed whether ministries make mistakes in the provision of services or in the performance of activities. In 2022, the Court of Audit found 44 shortcomings in the operational management at seven ministries. This is a slight decrease compared to 2021. However, resolving imperfections in financial management requires time and attention. Financial management can only be structurally improved with a solid foundation.
Broad Prosperity
In addition to these financial and economic results, the Central Government’s Annual Financial Report 2022 contains an overview of developments in the field of broad prosperity. The government considers it important to develop broad prosperity, which concerns the quality of life here and now, and the extent to which this affects the quality of life for future generations and people elsewhere in the world. The government is pursuing policy to strengthen broad prosperity and is taking steps to integrate broad prosperity into the budget system. The planning offices CPB, SCP and PBL also pay attention to broad prosperity.
The Monitor ‘Broad Welfare & the Sustainable Development Goals 2015-2022′ of Statistics Netherlands shows a mixed picture: in general, the broad level of prosperity in the Netherlands is high, although there is room for improvement on some themes. In particular, indicators relating to the ‘later’ dimension, such as the development of natural capital, are in the red. It is therefore very important that we achieve the ambitious goals that we set ourselves in 2021 with the coalition agreement in the field of climate and nature.
Moreover, broad wealth is not evenly distributed among groups of people. A recent study by SCP ‘Contemporary inequality’ shows that inequality not only depends on economic capital (education, income), but is also related to social capital (‘who you know’), cultural capital (‘who fits you’) and personal capital (‘who you are’).
Task Force Improvement Financial Management
In order to tackle the shortcomings in financial management within the national government, Minister Kaag set up the Financial Management Improvement Task Force in mid-2022. Where possible, the Taskforce offered support to the ministries and asked for administrative and political attention. It has been established that it is important to increase substantive knowledge of financial management, the procedures to be followed and the exchange of information. Attention will also have to be paid to this in the coming year. Minister Kaag has therefore decided to continue the Taskforce.