Cabinet Wants to save 8 Billion Euros, Invest 2 Billion
THE HAGUE, 14/08/13 - The cabinet will likely target some 8 billion euros of extra savings next year, 2 billion more than European Commissioner Olli Rehn demanded of the Netherlands in June in order to comply with Brussels budget norms. By cutting by more than necessary, the cabinet hopes to free up funds to invest in the troubled economy, according to sources in The Hague.
The Central Planning Bureau (CPB) is due to release new figures on the economic outlook for 2014 on Wednesday. But the effects of the 6 billion euros in extra savings that Brussels wants has not yet been factored into the figures. The final CPB figures with all calculations included will be made public on Princes Day (budget day) on the third Tuesday in September.
While politicians are still on their summer recess, the cabinet and the leadership of the coalition will be meeting from this week to discuss the exact details of the extra savings and investments for 2014. The working out of these, the government budget for next year, will also be released on the third Tuesday in September.
Much has however already leaked out about what the Netherlands can expect by way of extra measures next year. The basis of the supplementary savings is a package that the cabinet agreed last March, but at the time presented as measures that would only be carried out if economic recovery did not materialise by September.
Under this package, pay in the entire public sector excluding healthcare will be frozen, yielding 1 billion euros in savings. Additionally, the cabinet will not adjust the tax brackets for inflation, putting more people into a higher bracket to yield 1.1 billion euros. In total, the March package adds up to over 3 billion euros in savings.
Additionally, Health Minister Edith Schippers concluded an accord in mid-July with hospitals, medical specialists, health insurers, GPs and patients organisations. Under the agreement, curative healthcare has to restrict its spending growth next year to 1.5 percent instead of 2.5 percent. Between 2015 and 2018, spending will only be allowed to go up by 1 percent annually. This will yield a structural 250 million euros in 2014, rising to 1 billion euros in 2017.
On top of this, the tune doing the rounds in The Hague since July says that the healthcare allowance is to become more income dependent and reimbursements for medicines less lavish. Additionally, on top of the March packages, there may be an extra cutback of 700 million euros on the ministerial budgets.
The cabinet would like to prise out the wealth of private individuals. For example, a one-off scheme in 2014 will make it cheaper to take up dismissal compensation placed in voting rights BVs (private companies). People then pay 80 percent of the normal tax rate. This freed-up money could stimulate consumption and yield more tax revenues for the state. Exit premiums totalling 10 billion euros have been set aside in the voting rights BVs.
There will also be fiscal measures to encourage older people to gift part of their wealth to their children. In this way as well, money stuck in savings accounts should roll into the economy.
Should all of this yield insufficient, then the cabinet will scrap planned investments in 2014. For example, the March package envisaged 500 million euros going to infrastructure projects and 300 million on repairing erosion of purchasing power.