The forthcoming Dutch cabinet will need to severely cut spending or increase taxes, as the country’s budget deficit may fail to comply with EU budgetary rules by 2028, a report from an advisory council consisting of high-ranking Dutch officials stated on Monday.
The report – written by Study Group Fiscal Space (SBR), an advisory council that comes together before national elections – aims to sketch a fiscal blueprint for the upcoming Dutch cabinet.
“In the last cabinet period, not enough clear-cut choices were made, and societal challenges were chosen to be solved mostly with extra money,” the report reads.
“In the long run, without additional policies at least, healthcare, ageing, and climate costs crowd out other spending or lead to higher taxes,” it adds.
An “overheated economy, a tight labour market and high inflation” are the leading reasons for the national deficit.
The report points out that the country’s budget deficit is currently set to reach 3.6% of GDP in 2028, which conflicts with the 3% threshold in the European budgetary rules.
The Dutch will carry out early elections in November after the last cabinet fell due to insurmountable differences in the country’s migration policy in July.
Previous Dutch governments have veered off from the country’s traditional fiscally conservative course during the pandemic and the Russian war in Ukraine. This led the Council of State, another governmental advisory body, to reprimand the government for being too fiscally lenient back in May.
However, the report is not entirely pessimistic – provided the upcoming cabinet takes steps to change course.
“The Dutch economic outlook is good given the circumstances, and that is precisely why it is wise to make a course correction now,” the report states.
It recommends an “assignment of around €17 billion structurally starting in 2028” to be raised either by budget cuts or raising taxes, which would aid the country in lowering its actual and structural balance to correspond with European fiscal rules.
(Benedikt Stöckl | EURACTIV.com)
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