Dutch households will experience fewer consequences of the Iran war in their wallets than previously feared. With the exception of one group: people who drive many kilometers by car and live in a poorly insulated house can lose up to 6 percent of their purchasing power.
Parliamentary reporter
An average family will lose about 2 percent of purchasing power next year due to increased energy prices, the Central Planning Bureau (CPB) thinks. However, on the other hand, wages are rising and some prices are actually falling. The government may also come up with measures. Bottom line, the loss of purchasing power can then remain limited. Then most Dutch people would escape unscathed.
But that does not apply to people with lower incomes who are right in the corner where the blows are falling. Those who live far from work and are dependent on their car will feel the increased petrol prices hardest in their pockets. If you also live in a poorly insulated house, your gas bill can rise considerably. This group is the most vulnerable to further price increases and often has insufficient buffers to purchase an electric car or make their home more sustainable.
A catch in the grass
All in all, the CPB calls the effects of fuel and energy price increases ‘usually limited’, with some ‘outliers’. To illustrate: during the energy crisis of 2022 (after Russia invaded Ukraine), Dutch people would have lost up to 15 percent of their purchasing power without government intervention.
There is a catch: if gas and fuel prices remain high for longer this year and in 2027, expenditures will increase by two to three times. This amounts to 500 euros for the lowest incomes and more than 1300 euros for the highest incomes per year.
That is why the cabinet will be examined again in the summer: towards Budget Day, it will be decided whether purchasing power measures will also be taken next year to cushion the loss of income.
Temporary emergency fund
That will not be a necessity for everyone when it comes to energy expenditure. Households with heat pumps, electric cars and long fixed energy contracts are the least vulnerable to increases in gas and fuel prices respectively. At the same time, lower incomes often do not have those kinds of privileges.
The CPB is concerned that it will not be easy for the government to help the groups that will suffer significantly from higher energy and fuel prices. A temporary emergency fund has been set up, but there must be a sufficient budget and structuring it is difficult: getting the money to the right people has often proven complicated.
However, the CPB proposes to continue with the program to make homes more sustainable and to help citizens with this, also through a fund. To get more people into electric cars, a leasing program that has been set up in France could be considered.
Important note about the calculation
The CPB warns that the research does not provide a complete picture of the purchasing power of Dutch people next year, it is really about the effect of gas and fuel prices on citizens’ stock markets.
So-called ‘indirect income effects’ have not been taken into account, for example because the prices of other products and services will also rise. To name just one thing: transport costs also rise when fuel prices rise. The effect of higher wages has also not been examined.
The CPB was already working on the study before the deal was concluded between the US and Iran, but at the same time it says: it is still unclear whether this agreement will survive.
The planning agency also reports that the increase in the tax-free travel allowance from 23 to 25 euro cents per kilometer logically has a positive effect on people’s purses. It is important to note that for people with a lower income there is often no effect on their total purchasing power, because they own a car proportionately less often. So if the government wants to do something about the purchasing power of workers with a lower income, it must come up with additional measures towards Budget Day.
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