Budgeting is a profession and, like any serious profession, it is contained in rules. The national budget, for example, concerns the strict separation of income and expenditure, or the failure to cover structural expenditure with incidental windfalls. The European Stability and Growth Pact also applies, which stipulates that a deficit may not exceed 3 percent and the national debt may not exceed 60 percent.
Clear principles that have proven their usefulness, but apparently no longer for the House of Representatives. Two weeks ago, at the General Political Considerations, he adopted an unprecedentedly large package of motions that went straight through all these rules. New expenditure was covered by tax increases, the budget deficit continued to rise and the implementation of the new plans seemed to have not been thought through at all.
The outgoing cabinet therefore advised against all proposals, but with the elections approaching (November 22), the House continued vigorously, in numerous occasional coalitions. A total of 4 billion euros worth of new plans were submitted and adopted, to the dissatisfaction of the cabinet and the business community, which was presented with the bill.
A week later, that dissatisfaction was formally recorded in a scathing letter from the Ministry of Finance. The core message: not everything you want, House, is possible. Between dream and deed there are laws and practical objections, whether the House wanted to take them into account.
The good news this week – after another two days of debate (this time the General Financial Considerations, with the financial specialists of the factions) – is that the House showed itself to be largely sensitive to the criticism of the Ministry of Finance and the wishes of two weeks ago. adjusted. This means, among other things, that the minimum wage will be increased less and later, that the bank tax will not be increased by 350 million but by 150 million and that a planned increase in the child-related budget will be canceled again.
Not all wishes were adapted. For example, the VVD stuck to the proposal not to increase the excise duty at the pump as of January 1 and to pay for it from the Growth Fund, intended for innovations. Money that was booked for later years is brought forward, causing the budget deficit to increase.
The cabinet therefore broadly stuck to its negative advice as given two weeks ago. The adverse effects of many motions on the business climate, for example, weigh heavily, and the violation of budget rules has not all been resolved, said outgoing Minister of Finance Kaag (D66) and her State Secretary Van Rij (Taxes, CDA). A resigned Kaag said that the House is still adhering to the plans despite the negative advice: “As a caretaker cabinet, we have to relate to the adopted motions.”
The government also has itself to thank for the fact that the House has ignored the accusation about the budget rules in particular. In recent years, various cabinets have received fierce criticism from advisors such as the Council of State, the Budget Space Study Group and the Court of Audit for not respecting the budget rules themselves. In the latest Budget Memorandum, the government itself allows the deficit to rise to no less than 3.6 percent – although that will not be until 2026, and the proliferation of funds pumped up with borrowed and virtually free money (for nitrogen, innovation and much more) also clashed with the budget law of the House.
The entire course of events in recent weeks suggests that it has not yet fully realized that the Netherlands, and the rest of the world, are now living in a completely different economic era. The years of negative interest rates and ‘free’ money for the treasury are over and are unlikely to return any time soon.
This means that budget discipline must be on the agenda now. The Netherlands is in good shape, with a low national debt that will only really be affected by increased interest rates in the long term. But the future awaits: aging will cost a lot of money and, according to the International Monetary Fund (IMF), climate change and measures against it will require close to 50 percent of gross domestic product – an amount that is as high as today’s national debt.
High budget deficits translate into government debt. That’s not a good plan. Now is the time to cherish the buffer that has been built up with the low national debt, instead of undermining it.
A version of this article also appeared in the October 7, 2023 newspaper.