Finance

Coalition throws billions: how are we going to pay for those plans?

The planned expenditure of the new cabinet is sky-high. We have lost 68.3 billion euros on ‘temporary’ extra expenditure alone. All these expenses cannot be financed by tax money alone.

The government can finance additional expenditure in various ways. For example, you can raise taxes, you can cut back on other things, or you can borrow money.

There are cuts here and there, but that is in no way proportional to the extra spending. And the extra expenses are not financed by higher taxes either. By far the largest part of the extra money that is spent is therefore borrowed.

‘Acceptable’

“That is acceptable, because the higher debt is also something for future generations,” thinks Marieke Blom, chief economist ING Netherlands. For the interest costs associated with a government debt, they will receive a solution for the climate and nitrogen problem.

Furthermore, the extra expenditure on education is intended to support the economy in the longer term, so that the interest costs of the higher debt can be paid again, according to Blom.

Distinction between structural and temporary

For the financing of the plans, the new cabinet makes a distinction between structural extra expenditure and temporary extra expenditure. For example, the extra expenses for free childcare for almost all parents will continue forever, unless it is ever decided to do it differently, of course.

However, the extra expenditure on tackling the climate and nitrogen problem will be spent over several years, but it is nevertheless temporary. For example, the 25 billion euros intended to reduce nitrogen emissions from agriculture will be spent until 2035.

68.3 billion euros

Under the heading ‘higher temporary expenditure’, the 35 billion euros that the new cabinet will spend in the coming years to achieve the climate goals also stand out. In addition, 6.7 billion euros more will go to knowledge development, research and innovation.

It is also the intention that a total of 600 million euros will go to public housing, for the restructuring of the existing housing stock in vulnerable areas. And a total of 1 billion euros extra will go to an impulse to build more homes. All in all, this amounts to 68.3 billion euros in additional expenditure.

‘Juggling with definitions’

“But the distinction between structural and temporary extra expenditure is a matter of putting signs in the government budget, it is a juggling with definitions,” said Bas Jacobs, professor of public finance at Erasmus University in Rotterdam.

Real money is eventually spent and the national debt rises as a result. It makes no difference to the amount of the national debt under which denominator you classify the expenditure. But of course it matters for long-term sustainability whether expenditure is one-time or permanent, he says.

Higher deficit

The Rutte IV cabinet wants the budget deficit to rise to 1.75 percent of gross domestic product (GDP), which is the total economy, or what all Dutch people earn together.

As a result, the government debt expressed in GDP will rise to about 60 percent. The government debt may not rise any higher, euro countries have agreed with each other in the Maastricht Treaty.

Some countries do have a debt that increases, but the Netherlands has always waved the finger in Europe that other countries do not have enough budgetary discipline, so we cannot make it above that 60 percent now, Jacobs thinks.

‘Mutual differences bought off’

The fact that so much more is now being spent is mainly due to political choices, he says. “Many differences between them have been bought off with more money.”

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button