UPDATE DUTCH POLITICS: Government in crisis mode on Budget Day

On Budget Day (known as ‘Prinsjesdag’), the third Tuesday of September, the Dutch government announces its plans and ambitions for the coming year. Traditionally, the King is first to present the plans in his annual King’s Speech (‘Troonrede’).

This year’s budget discussions in the run-up to Budget Day were unconventional. As the budget plan is usually finalized well before its presentation, the cabinet now continued negotiations until Budget Day – mostly focusing on measures to mitigate the sky-high energy prices. Due to the complexity of the relations between the 4 different parties in the governing coalition these negotations took longer than wanted.

After yesterday’s presentation of the government budget for 2023 by the Minister of Finance (Ms. Sigrid Kaag), a cycle of parliamentary debates, lasting until the beginning of December will follow. The budgets of all ministries must be approved by the House of Representatives and the Senate by 1 January 2023.

A key element of this year’s King’s Speech was the current distrust (towards politics) and feelings of uncertainty in Dutch society. Referring to how the Netherlands tackled historic crises, such as the reconstruction of the Netherlands after World War II, the King advocated for gradually regaining trust and hope – through collaboration. In this light, the King emphasized the important role of governmental organisations, such as the tax authority.

Highlights of the King’s Speech & Government budget 2023:

• The economic outlook for 2023 is uncertain, mostly due to rising energy and commodity prices. However, the economy is expected to grow by 4.6% in 2022, and by 1.5% in 2023.
• The government is counting on €366.4 billion in revenues and €395 billion in expenditures, yielding a budget deficit of €28.6 billion.
• National debt will decrease from 49.8% of GDP to 49.5% percent of GDP, amounting to €500 billion.
• Inflation is at a historic high (13.6% – August 2022 compared to August 2021).
• Unemployment is at a historic low (3.8%) – which is related to the relatively low average number of working hours (32.1 hours/week) – which is the lowest in the EU.
• To protect purchasing power, an exceptionally large package of €17.2 billion (of which €5 billion is structural) is presented. Part of this package are measures that specifically support vulnerable groups and middle-income earners.
• To shield consumers from surging energy prices, a temporary price cap on gas and electricity – from 1 January 2023 onwards – will be introduced. In addition, for the extension of the reduction of the excise duty on fuel an amount of €1.2 billion is reserved.
• The revenue of gas companies in the Netherlands – which is related to the high energy prices – will be heavily taxed, raising €2.8 billion in 2023 and 2024.
• The CO2-tax for industry will be changed – by amending the reduction factor.
• The lower corporate income tax rates will be increased and the threshold will be narrowed.
• The 30%-ruling (wage tax) for expats will be limited. The cabinet proposes to impose a maximum to the ruling as of 2024 (the so-called Balkenende-norm or the Wet normering topinkomens (WNT)-norm, which is EUR 216.000 in 2022, but is expected to increase in 2024).
• The cabinet has reserved additional budgets for education and equal opportunities (€2.8 billion), housing and infrastructure (€7.5 billion), the future of rural areas (€24 billion) and climate change (€35 billion) in the coming years.
• Following the coalition agreement €3 billion is invested in defense (of which €1.9 billion in 2023). In addition, the government added €2 billion in the context of the war in Ukraine – which means that the Netherlands will meet the NATO standard of 2% in 2024 – 2025.

The full King’s speech (in English) can be viewed through this link.