The CPB writes this in the latest estimate of the state of the economy in the Central Economic Plan. “What we see in our outlook is that government finances will deteriorate quite rapidly in the coming years,” says Pieter Hasekamp, director of the CPB. “So something will have to change.”
“At some point, choices will have to be made. You cannot continue to spend extra money in this way,” he says.
Important information in formation
The Central Economic Plan is of great importance to the cabinet and this year also to the forming parties. Based on these figures, the government can adjust the budget that will be presented on Budget Day in the spring, if necessary. Because the cabinet is outgoing, major decisions will be left to a future team of ministers. The document is therefore very important for the forming parties, because it provides insight into how much money can be spent.
The now outgoing cabinet has loosened the budget reins considerably. The treasury is not yet affected by this as much, because part of the money could not be spent (for example because there were no people to carry out the work), a number of windfalls and the strong economy.
But in the long term the deficit will ‘deteriorate sharply’, the CPB warns. The climate and nitrogen funds, among other things, will put a heavy burden on government finances in the coming years, as will more expensive healthcare, social security, asylum and defense. Due to the increased interest rates, the Netherlands also has to pay billions more per year on the national debt. We cannot now count on a strongly growing economy to keep public finances healthy.
Increase taxes
According to the CPB, ‘tight choices’ must be made in order to tackle education quality, housing construction, increasing demand for care and the energy transition without ending up deeply in the red. That means: taking money elsewhere, ‘redirecting’ in The Hague jargon, and also increasing taxes.
Without intervention, the deficit is expected to rise to 3.3 percent of what the whole of the Netherlands earns together (gross domestic product) in 2028. In 2032, the deficit would even reach 4.6 percent. The European limit is 3 percent.
Purchasing power increases
There is considerably better news for households. Purchasing power is increasing for all groups this year, and so people have more to spend. Inflation is expected to drop to 2.9 percent, so things will become more expensive less quickly than in recent years.
At the same time, wages will continue to rise rapidly, by an average of 6 percent this year, the CPB expects. Overall, purchasing power will increase by 2.7 percent this year. “Wages are currently rising faster than inflation,” Hasekamp summarizes.
2024-02-22 10:59:00
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