Coalition deal presented with €35B for climate, more nuclear power, €500M in tax cuts

The four parties involved in drafting a new coalition agreement want to allocate 35 billion euros to address climate issues in the Netherlands over the next ten years, though it will also allow for more nuclear power plants to be built. The deal also calls for three billion euros in tax cuts, especially to help those households with a low- or mid-level income, a 7.5 percent increase in the minimum wage, a massive increase in childcare compensation for families, and the return of the study grant system which was controversially eliminated several years ago.

The coalition agreement between the VVD, D66, CDA, and ChristenUnie was spelled out in a 50-page document presented to Members of Parliament on Wednesday. The agreement was more comprehensive than expected but will still require some details to be ironed out as the likely fourth Cabinet of Prime Minister Mark Rutte advances towards the next scheduled general election in 2025.

The four-year plan gives the Netherlands permission to allow government debt to exceed the European standard of 60 percent of gross domestic product, according to an appendix to the agreement. The EMU debt will gradually increase during the next Cabinet's term to 60.4 percent of GDP in 2025 as the coalition wants to make expensive investments moving forward.

Cabinet formation leader Johan Remkes said that the run-up to the formal negotiations between the four parties took an "excessively long" period of time. He called for a "solid evaluation" to determine why the record-long formation process lasted as long as it did. "Once the dust has settled," he said, an investigation into how this could have happened will be needed. Tweede Kamer chair Vera Bergkamp agreed, and promised the process would be evaluated in full.

"This is an important moment," Remkes said at a press conference introducing the agreement. The country desperately needs a regular government, and not a caretaker Cabinet, in order to affect real policy in several areas.

€35 billion for climate, energy transition

The new Cabinet is pledging to allocate 35 billion euros for climate measures over the next ten years. That money will be made available through a new fund for climate and energy transition issues. The money is intended for the construction of heat, hydrogen, and electricity networks. It also will result in spending more money on making buildings and the transportation sector more sustainable. The extra amount will be on top of the SDE++ subsidy, an existing subsidy scheme for sustainable energy.

The coalition agreement also mentions cutting red tape to increase the speed that projects are completed because major energy infrastructure projects are progressing too slowly. The new Cabinet wants to make progress by using an approach similar to that of the Crisis and Recovery Act in this type of procedure. It is intended to accelerate infrastructure projects.

The coalition partners said they would work with educational institutions, governments, and social partners to train enough people to ensure there are enough professionals to carry out the infrastructure tasks needed to achieve the climate goals. Retraining will also be available when necessary.

Nuclear power investments also planned

The new Cabinet wants to build two new nuclear power plants in the Netherlands. The preparations for the construction should start in the coming years. The existing nuclear power plant in Borssele will initially remain open longer but without losing sight of safety. According to the parties, nuclear energy can complement solar and wind energy and geothermal energy. The power stations can also be used for the production of hydrogen. By installing nuclear power stations, the Netherlands will also become less dependent on gas imports in terms of energy.

The new government will assist parties wishing to bid for the realization of the nuclear power station. Where the rules allow, this will also mean financial support. The signatories of the agreement also promise that a safe solution will be found for the storage of nuclear waste.

Road pricing, also for electric cars, will start by 2030

The new Cabinet wants road pricing to be introduced in due course. The coalition agreement noted that the Cabinet wants to reduce emissions, and road pricing can contribute to this. The introduction of road pricing by 2030 does not automatically mean that only polluters will pay.

Under the agreement, both the users of electric cars and cars with engines running will pay for road use. In the upcoming Cabinet term, the path will be paved for the new system in which the motor vehicle tax rate is dependent on the number of kilometers driven annually.

According to the authors, the levy will not be bound by time and place. Paying according to use will replace toll routes that still exist when the system is implemented, such as the Westerscheldetunnel, the Kiltunnel and the planned A15 extension.

Tax cuts for individuals & minimum wage bump

The four parties also said they want to reduce the burden on households by three billion euros. They want the effective cost of living to be reduced, especially for low and middle income households, workers and families. The Social and Cultural Planning Office said earlier that 28 percent of the population s financially vulnerable, This is one of the proposals meant to bridge that gap.

The new Cabinet will invest 500 million euros annually in reforming the labor market. The coalition deal has adopted a series of recommendations from the Borstlap committee, which warned that the prosperity of the Dutch State is at risk if the country does not implement reforms. The political parties also said they aim to reduce the difference between flexible and permanent contracts. According to the agreement, the government wants to intervene in the tax and benefits system, by reducing benefits and simplifying the tax system.

Additionally, they plan to raise the minimum wage gradually by 7.5 percent. The minimum hourly wage will be based on a 36-hour work week with reforms meant to reduce trapping people in poverty.

An additional 300 million euros will be set aside annually to allow small and midsized businesses to continue to pay wages in the event of illness. The self-employed tax deduction will still be reduced by 650 euros annually through 2030. To compensate for this, self-employed people will be able to benefit from the increase in the general worker’s tax credit.

Childcare costs almost fully compensated

The new coalition also wants to increase the reimbursement for childcare step-by-step up to 95 percent of the costs. “Parents will only pay a small personal contribution,” the agreement stated.

This concerns childcare for working parents, which will no longer be paid in the form of benefits, but will be paid directly to childcare institutions. That way, parents are no longer faced with repaying large amounts to the tax office when corrections are made.

There was much to be done about the childcare benefits system, which involves large amounts. After the tax benefits scandal, almost all politicians wanted to get rid of the system.

Study grants returning

The basic study grant will return for all students, the coalition parties wrote in their agreement. There will also be an "income-dependent supplementary grant." How high these grants will be is not yet clear. Students who had to borrow under the loan system will receive compensation. They'll get a discount on their student debt or a "study voucher." The coalition is allocating a total of 1 billion euros extra for this.

The new coalition will not amend Article 23 of the constitution to adjust the freedom of education. This was a sensitive issue in the formation. Christian parties CDA and ChristenUnie did not want to change Article 23. The D66 thought about tightening it up. The article of law contains guarantees for special education, which also includes Christian schools. The discussion about the article flared up after reformed schools refused students because of their sexual orientation. The parties wrote that schools may not refuse students based on ethnicity, sexuality, sexual orientation, or marital status.

The coalition parties will close the pay gap between primary and secondary education. Primary school teachers will therefore earn a lot more. The parties also strive for a collective labor agreement for teachers and administrators in foundation education. The parties want to reduce the workload in schools. They make money available for smaller classes or more teachers and supervisors in a class.

New housing target increased by 25%

The coalition parties want to abolish the landlord levy, which the housing corporations vehemently despise. Instead of this tax which corporations pay annually, binding agreements must be made with the corporations about constructing flexible housing, affordable rental housing, renovation, and sustainability.

The coalition also wants to build more homes, about 100,000 per year. In recent years, the target was 75,000

Health insurance deductible remains, but more flexible

The new Cabinet wants to keep the healthcare deductible frozen at 385 euros. It does want to adjust the deductible system so that people no longer have to pay the entire cost after a singular expensive treatment. Instead, there will be a system with a "payment per treatment up to a maximum of 385 euros."

Healthcare salaries

The new coalition hopes to make working in healthcare more attractive by providing "more say, an approach to regulatory pressure, good (additional) training and better cooperation with formal and informal care providers." Higher salaries for healthcare staff, something that part of the Tweede Kamer has wanted for some time, was not mentioned.

Wages have already been increased, it was noted. The institutions and companies where care providers work are expected to be good employers, with training opportunities and an irregularity allowance. Furthermore, according to the coalition, "working more hours in healthcare should pay off."

Defense billions more, but not what it wanted

The coalition wants to allocate an extra 3 billion euros per year for Defense. According to the Ministry, at least 4 billion euros extra was needed to get the armed forces in order during the coming Cabinet term. An additional earmark of 10.7 billion euros will allowed for budget maintenance and increases during the upcoming Cabinet term.

"We are putting the foundations in order," the parties said in their coalition agreement. The new Cabinet will make investments in personnel and equipment. In particular, the IT capacity and intelligence work will be strengthened.

The Defense organization will also divest "superfluous real estate." The armed forces have a considerable backlog when it comes to property maintenance. The ministry is currently investigating the consequences of divesting 35 to 40 percent of the real estate.

Next year, Defense will receive an additional 500 million euros, which will eventually grow to 4.2 billion euros more in 2025. It averages out to 3 billion extra per year. This means that the agreed NATO standard of 2 percent of gross domestic product will not be met, which would have required 7 billion euros.

Over the past year, Defense has lobbied vigorously for more money. The aim was an increase of at least 4 billion in the budget. This is necessary because the world has become more unstable, and Defense is still recovering from years of budget cuts.

The new Chief of Defense, Onno Eichelsheim, warned when he took office in April that the "continuity of the armed forces is in danger" due to a lack of money. Eichelsheim is an Air Force general who has been in the military since 1986.