Huge budget package will boost purchasing power by 3.9% in 2023; Not a full recovery
The Cabinet’s planned package of measures for the upcoming year’s budget leaked out on Friday afternoon, in keeping with a recent tradition of the leak taking place days ahead of Prinsjesdag, when the budget is officially presented. The budget for next year contains a purchasing power package that is "historic in size."
Sources close to the Cabinet said the measures now add up to more than 17 billion euros. As a result, household spending ability will increase next year, with purchasing power due to rise by 3.9 percent, the Central Planning Bureau has calculated according to various sources. Before the package of measures was on the table, the CPB previously estimated that purchasing power would stagnate next year with just a 0.6 percent increase.
This will somewhat ease the financial pain experienced by residents this year. Purchasing power in 2022 will have declined by almost 7 percent by the end of the year, the CPB projected. This means that the blow from prices pushed higher by inflation will not be fully cushioned, but the intervention will partially restore the sharp decline households faced this year.
Prime Minister Mark Rutte did not rule out further measures, if they become necessary over the course of next year.
A decline of 6.8 percent is still expected for this year. It is possible that measures will be released on Budget Day that could also ease the pain in the autumn, but this is still being discussed feverishly. "What is still possible in 2022 will be limited," Rutte said on Friday during his regular weekly press conference after the Council of Ministers meeting.
There is also rumor of a possible price ceiling for electricity and gas. This could contribute to an increase in purchasing power, but it is not expected to be possible before next year at the earliest. Ministers will continue to meet with energy companies on Monday.
The multi-billion dollar package for next year contains measures to structurally improve purchasing power. The government wants households to be able to absorb setbacks more easily. One of the most important measures is the substantial increase to the minimum wage, which also means that benefits will rise sharply. Income tax will also go down for many households, and some subsidies will go up.
Without intervention, the CPB estimated that 7.6 percent of the population would fall below the poverty level in 2023. That will be reduced to 4.9 percent if the Cabinet formally unveils the measures which leaked out on Friday. The child poverty rate will be 6.7 percent with the rumored plans, NOS reported.
Sources told the broadcaster that the result of the measures should lead to economic growth of 1.5 percent, up from the previous estimate of 1.1 percent. The CPB anticipates growth of 4.6 percent this year. Inflation, which should finish at 9.9 percent this year, will go up by a further 2.6 percent next year. The previous CPB calculation was 4.3 percent inflation increase in 2023.
Reporting by ANP and NL Times