Will there be national strikes and demonstrations? Or does the government still have a solution for the sharp conflict with the unions over cuts to social security?
An ultimatum issued by the unions expired on Monday, and Minister Hans Vijlbrief (Social Affairs and Employment, D66) is expected to issue a letter to the unions in the coming days. According to sources from The Hague, he is thinking of an unorthodox solution: temporarily accepting a gap in the national budget, a de facto postponement. But it is highly questionable whether fellow minister Eelco Heinen (Finance, VVD) will accept this.
The minority cabinet, with 66 seats in the House of Representatives, wants to cut a total of 6.5 billion euros in social security and hopes to ultimately receive support for the austerity plans in the House of Representatives through an agreement with the polder. The idea is that if unions and employers agree, it will become more difficult for opposition parties to vote against.
But agreement with the unions seems far away. FNV, CNV and VCP demand the cancellation of the accelerated increase in the state pension age from 2033, and they want the cuts to the unemployment law (WW) and disability insurance (WIA) off the table. To increase the pressure, the FNV announced last week a national work stoppage in public transport during the early morning rush hour: on Wednesday, June 24, train, bus, tram and metro employees will not start work until 8 a.m.
Fragile plans
The fact that these government plans from the coalition agreement are vulnerable was already evident when a majority of the Senate turned against the proposed increase in the state pension age in April. Now that this cutback has been politically defeated, the government must find 2.7 billion euros elsewhere.
A second attempt by the government to reform the AOW also does not seem feasible: taxation of the AOW. In addition, people would contribute to the state pension to which they are already entitled through taxes. The unions turned against that plan last week, as did the employers. Without support from the polder, the cabinet cannot take any steps, and so far that support does not appear to be there.
Vijlbrief will have to do a lot to reach an agreement with the polder, the House and his own cabinet. He is now considering accepting a temporarily larger hole in the budget in order to buy some time, according to sources from The Hague. While the cabinet initially aimed for a social agreement for Budget Day, this financial gap for the future should be closed at a later date.
But Minister of Finance Eelco Heinen (VVD) will also have to agree to this. Whether he will do so is highly questionable. Heinen would like to convey that he is a minister of financial soundness. Moreover, in the coalition agreement, the government deliberately calculated towards 2035, partly because of warnings from the Budget Space Study Group about the long-term sustainability of public finances, plus increasing NATO expenditure.
Postponement does not solve the problem
What makes a temporary hole in the budget a little easier to swallow is that the cuts to the state pension will only take effect after this cabinet term. The savings of 2.7 billion euros will only be achieved around 2060 and the first revenues will come from 2033. This means that no major financial problems will arise in the short term if the austerity plans are postponed for the time being.
With a postponement, it is assumed, the search for joint solutions with trade unions and employers would become easier. The idea is that reforms, especially around the WIA and to a lesser extent the Unemployment Benefit, can still be discussed with the unions. This is because the unions write in their ultimatum that the plans for WW and WIA must be “off the table”. The government sees this as something other than complete “deletion”, the word they use for the AOW plans.
Employers also seem to argue in favor of letting go of budgetary discipline. In his first interview, chairman of employers’ organization VNO-NCW Coen van Oostrom said last week that he would “place the numbers about the desired cuts outside the brackets.” he said in De Telegraaf. “We have much bigger problems at the moment. There is a crisis going on in the Middle East. So everything we are doing at the moment, all those numbers from the Ministry of Finance to balance the budget, will soon no longer be correct. I don’t want to say that they can be thrown in the trash, but they will be seen in a completely different light.”
Yet delay does not solve the fundamental problem. Reforms of the AOW, WW and WIA have been electoral minefields for years, while the costs of aging, healthcare and defense continue to rise. At the same time, postponing these cuts again would reinforce the impression that this minority cabinet is struggling to actually implement political plans.
As a result, more is at stake than just a social agreement. For the cabinet, this impasse now also revolves around administrative credibility. Without a breakthrough, the paralysis surrounding welfare state reform risks only increasing.
