Economy

Column: ‘left-wing’ parties take great risk | Financial

If we compare this sector with other EU countries, it is striking that the Netherlands has a large collective sector, the resources of which are mainly spent on health care expenditure and social security. In other countries, these expenditures are considerably lower and the government is spending much more on a stronger economy by stimulating business investment. As a result of the high social expenditure, the Netherlands is also in the European leading group of countries with a high collective tax burden (the sum of taxes and contributions paid by companies and citizens). Partly due to the aging population in our country, this pressure is increasing and will soon become unaffordable.

Business investment

Many European countries are opting to boost business investment in tackling the corona crisis and the recovery of the economy. For example, this week the British government launched a fiscal super discount for corporate investment to get the UK out of the crisis.

We therefore run the risk that our companies and investors will opt for the much lower tax burden in the United Kingdom. Other European countries are already successfully attracting Dutch companies by offering them tax benefits and other facilities. The UK’s tax action plan is likely to intensify this battle for major companies.

New cabinet

The economic recovery policy of other European countries will certainly have consequences for the cabinet policy of the new coalition. Last Monday, the Central Planning Bureau (CPB) published an economic analysis of the election programs, charting the economic effects and budgetary choices. In this so-called calculation, the political attention is mainly focused on the programs of the left-wing parties, PvdA, GroenLinks and SP. These parties would like to participate as a left bloc with at least two parties in a new cabinet, but in a coalition that will pursue a fundamentally different policy than Rutte III. The core of this left-wing policy is greater government, less inequality, additional burdens on businesses and on higher incomes and wealth.

In view of the polls, there is a good chance that the negotiations for a new coalition will be led by the party leader of the VVD, the current Prime Minister Mark Rutte. Partly on the basis of the calculation, we explore in this column the chance of a left cabinet in which a left block participates.

Huge differences

Between the current largest government parties VVD, CDA and D66 and on the other left, there are fundamental differences about future financial, economic and social policy. For example, the left is opting for a strong growth in social government expenditure and also for job growth in the public sector. This must mainly be financed by a gigantic increase in the burden on the business community.

According to the left, public spending must be increased significantly in the period 2022-2025 (compared to 2021). The main expenditures relate to social security, care and education. The SP spends an amount of € 15 billion on social security, GroenLinks € 11 billion and the PvdA € 9.5 billion. In healthcare, the SP is the champion with more than € 22 billion, followed by the PvdA with € 14 billion and GroenLinks with 12 billion. In education, GroenLinks spends almost € 10 billion, the PvdA € 9 billion and the SP more than € 5 billion.

If we compare these left-wing expenditures with that of the election manifestos of the current largest government factions, we see that they spend much less. For example, D66 even proposes a cut in social security of more than € 4 billion and the extra expenditure for health care at the aforementioned groups is around € 8 to 9 billion. Given the enormous differences, a left block in this area will only be able to reach an agreement if they almost completely swallow their own proposals.

By focusing so heavily on a ‘crackly left’ policy (this term is a nickname for the Green Left), the left-wing negotiators run a great risk of being sidelined very quickly in the negotiations on a coalition agreement.

Shocking burden increase

The most striking difference between the left-wing policy and that of Rutte III is the gigantic left-wing tax increase (extra taxes and social security contributions) for businesses. While many companies are in danger of falling as a result of the corona crisis, the PvdA proposes an unprecedented increase of almost € 42 billion, the SP € 24 billion and Groenlinks almost € 13 billion.

The PvdA and the SP in particular are completely out of control here and ignore the disastrous consequences, also for our international trade. This is an essential source of income for our treasury. In addition, our exports generate approximately 2.3 million full-time jobs, mainly in the corporate sector. In the current internet era, these mostly international companies can relocate relatively quickly to other EU countries with much lower costs. Recent figures already show that companies and investors opt less for the Netherlands.

Also extra burdens for citizens

The left-wing tax increase will affect all households; it leads to price increases. In addition to these negative consequences, it is also striking that the left is opting for a larger government and jobs at (semi-) government institutions. In view of the widespread criticism of the performance of these institutions, for example in healthcare, the tax authorities and employment projects, questions must be asked about this left-wing choice.

Moreover, this leads to a displacement of jobs in the business community. Less employment in companies is at the expense of innovations and economic renewal. In other European countries we also see a trend towards a greater role for the government, but there the emphasis is on higher collective expenditure that strengthens the economy. For example, there is a public-private partnership in which a choice is made for profitable investments, for example in the physical and digital infrastructure, in new technologies and innovative climate investments.

A new cabinet should also make this choice. We consider the chance that two left-wing parties will be part of this to be less than small.

Willem Vermeend is an internet entrepreneur and part-time professor of economics at the Open University. He was State Secretary and Minister. Rick van der Ploeg is an economist and former State Secretary, currently professor at the University of Oxford and the VU.

Comment? Mail to [email protected].

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