It will be busy in the back rooms of The Hague this summer. In the run-up to Prince’s Day, negotiations are underway there every year from mid-August between the coalition parties in the cabinet and the House of Representatives. Sometimes that is exciting, sometimes not, but a cabinet always wants to tell a good story on Prinsjesdag. Often that is something along the lines of ‘Burgers, good news, you are improving!’
This year it will be even more exciting. Billions of dollars of decisions are waiting. Purchasing power was boosted by the high energy prices. The cabinet has earmarked 6.5 billion euros to soften the blow this year. Not a small amount, but almost the entire House of Representatives is frustrated about it. The people who really get into trouble are not helped enough.
The House made a laundry list of proposals to help more people this year. The government’s answer came last week: not possible – the government’s systems are not set up for aid this year. And if the systems can do it, there are risks that implementation services will run into problems. The opposition found it difficult to digest.
On the other hand, everything is possible again to improve purchasing power next year, the cabinet writes to the House: increase allowances, lower taxes, increase the minimum wage. And so Prinsjesdag comes into the picture, because then the cabinet presents next year’s budget. Prime Minister Rutte (VVD) and Finance Minister Sigrid Kaag (D66) seemed to suggest this week that there is a lot in the barrel.
In the coalition agreement, the coalition already agreed to reduce the burden by 3 billion euros next year. But that will not improve purchasing power significantly: in the calculation of the coalition agreement – before the invasion of Ukraine – purchasing power remained more or less the same in the coming years. So more is needed.
The government seems to be embracing the advice of the Central Planning Bureau to provide better structural support for lower incomes. I say ‘seems’, because Kaag also writes that ‘structural recovery of purchasing power’ must primarily come from ‘raising wages and pensions’. It is therefore not the cabinet, but companies that have to come to the fore, in the opinion of the cabinet.
But the pressure on the cabinet to support household incomes itself is great. Rutte IV already painted himself in a corner during the formation when it comes to purchasing power. VVD, D66, CDA and ChristenUnie allocated an enormous amount of money (75 billion euros), but the purchasing power of citizens hardly improved. The money mainly goes to the government itself and to large projects such as climate and nitrogen. Public wealth, private poverty, so typified Laura van Geest, former top civil servant and director of the CPB, ‘the atmosphere’ of the coalition agreement.
This combination leads to attacks by opposition parties: the cabinet apparently has no money left for ordinary people, but it does invest 60 billion in climate and nitrogen funds. Rutte IV is therefore stuck in his own money trap: spending so much money and letting people suffer a lot? Hard to sell. That clamp will put tension on the coalition again this summer. Because supporting people with low incomes costs billions of euros, and Kaag had just said that the cabinet has now spent enough. That means cutting expenses elsewhere or increasing taxes. And nobody likes that.
Marike Stellinga is an economist and political reporter. She writes about politics and economics here every week.
A version of this article also appeared in the newspaper of 9 July 2022