News item | 20-05-2022 | 16:57
Defense spending will reach 2% of gross domestic product in 2024 and 2025 to meet the NATO standard. The cabinet wants to increase the statutory minimum wage by 7.5% in three annual steps from 2023. That is a year earlier than agreed in the coalition agreement. The amount of the AOW will increase with the same steps. People who have objected to the tax on savings are entitled to legal redress. These new expenses are structurally covered. This is apparent from the Spring Memorandum approved by the Council of Ministers. Minister Kaag of Finance has sent the Spring Memorandum to the House of Representatives.
Special Spring Note
The government’s first Spring Memorandum not only contains an adjustment of the 2022 budget, as has been customary up to now, but also provides a preview of the budgets for the coming years. In recent years, this was only apparent from the Budget Memorandum that will be presented at the end of September on Budget Day. This preview gives the House of Representatives more time to assess the proposed policy measures. The complete budget will follow as usual with Prinsjesdag.
The Spring Memorandum focuses on the elaboration of the plans from the coalition agreement. At the same time, since taking office at the beginning of this year, the cabinet has been confronted with unforeseen events. The war in Ukraine causes great human suffering and also has repercussions on the Dutch economy and budget. The war necessitates additional investment in defence. High inflation as a result of sharply increased energy and food prices is a major cause of concern for low and middle incomes.
great uncertainty
At the end of last year and this year, the cabinet took several measures to mitigate the increase in energy bills in 2022, totaling 6.4 billion euros. In the run-up to Budget Day, the cabinet will decide on purchasing power for 2023. Due to the great uncertainty about economic development, the cabinet wants to base itself on figures that are as current as possible in order to do justice to next year’s incomes as best as possible.
Nevertheless, in the Spring Memorandum, the government is taking a first step to improve low-income and elderly people by raising the statutory minimum wage as early as next year, and allowing the state pension to rise along with it. Concerns about wealth inequality in the Netherlands are widely shared by the cabinet and the House of Representatives. This topic will therefore form part of the broad purchasing power decision-making process in the summer, which will look at the relationship between costs on capital and labour.
Expenses covered
The new expenses and setbacks in the Spring Memorandum are offset by, among other things, an increase in taxes on capital and companies in boxes 2 and 3 and corporation tax. The expenses are therefore structurally covered.
The budget deficit amounts to 3.4% of gross domestic product (GDP). In the coming years, this so-called EMU balance will be between 2.5 and 3%, ie at or below the maximum balance of 3% that the member states of the European Monetary Union have agreed. Government debt, or EMU debt, is 52.9% and will rise to 54.9% in 2025. This means that it will remain below the 60% allowed in the European Monetary Union for the entire term of office.
The government accepts a limited, temporarily higher debt to solve major social problems, including combating climate change, tackling the nitrogen crisis and investing in future prosperity through education and innovation. These investments are necessary to avoid even higher costs in the future for future generations. The additional expenditure is also expected to lead to greater earning capacity and higher productivity in the future. At the same time, the government believes that the sizeable investment package has reached the limit of what the government considers acceptable to spend.