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Dutch government reveals its 2014 budget19 September 2013, by Alexandra Gowling
As is traditional, the third Tuesday of September saw the Budget for the following year handed down in The Hague. The day began with King Willem-Alexander’s first King’s Speech, in which he signalled the end of the welfare state in the Netherlands.
At the presentation, Finance Minister Jeroen Dijsselbloem commented that years of high economic growth in the Netherlands had been accompanied by the accumulation of debt by businesses and households. "This is part of the reason why individuals, businesses and banks are now confronted with the need to strengthen their balance sheets," he explained.
The national debt has risen since the beginning of the crisis, increasing by 150 billion euros as a direct consequence of successive budget deficits. Dijsselbloem presented an extensive package of reforms in healthcare, social security and the public sector in order to achieve the government’s ambitious six billion euros of spending cuts.
The Dutch government is cutting some healthcare expenditure in an effort to halt its rising trend. More efficient healthcare practices will involve people making more appointments with GPs rather than hospitals, while there will also be cuts to spending on medicine.
Several benefits are being merged, namely the care allowance (zorgtoeslag), child allowance (kindgebonden), rental allowance (huurtoeslag) and elderly benefit (ouderencomponent), into a single household benefit. In the public sector, expenditure of salaries will be limited.
These cuts will result in the expected budget deficit being reduced to -3,3 per cent of GDP in 2014 (613 billion euros). Without these cuts, the government says the deficit would rise to -3,9 per cent.
Everyone is going to pay 100 euros less tax. The tax rates are not, however, adjusted for price increases, so everyone will in fact have to pay more tax.
If you have a well-paying job, you will have to pay up to 36 more euros per month as a benefit of tax simplification, as well as having a higher maximum tax credit. This income-related tax credit will go up by 375 euros in 2014.
This will benefit lower- or middle-income earners, but isn’t great news for those who earn more than 40.000 euros. Nor will you get much help if you are your family’s sole income earner: the transfer of tax reduction onto your partner is still limited.
Low-income earners will receive lumps sums from the government, while they will also benefit from certain healthcare measures. Even they, however, will still lose 10 euros a month through the tax simplification.
Higher-income earners will receive smaller, and in some cases no, children or healthcare allowances. There are also a general reduction in the childcare benefit (kinderopvangtoeslag) and freezes on the child benefit (kinderbonden) and the children’s allowance (kinderbijslag). They are also reducing the general tax credit (algemene heffingskorting) for higher earners.
The government says it will be taking a number of measures to support lending to businesses, especially innovative businesses.
There will, for example, be a revolving fund to grant loans for the purpose of energy conservation, while they plan to encourage long-term investments via the Netherlands Investment Institute.
The government has said that "putting balance sheets in order" will take time, noting that the process will also not be smooth. A press release said there "are no easy or quick solutions" and "everyone will need to make a substantial effort as we work towards recovery."
It echoes what King Willem-Alexander said in his speech yesterday, that the Netherlands is slowly but surely turning into a "participative society."
For more information, read the full press release.