Energy support to create €7.5 billion hole in national budget

The government expects that its measures to keep energy bills affordable for citizens and businesses will leave a 7.5 billion euros gap in the budget it will have to close in the spring. Minister Sigrid Kaag (Finance) reported this in the autumn memorandum, the last adjustment to the budget for this year.

The price cap for electricity and gas for households will cost an estimated 11.2 billion euros. Support for SMEs that consume a lot of energy will cost just under 1.7 billion euros. The government expects to cover part of this expenditure by imposing additional taxes on some energy companies. But for the rest, it still has to find a solution.

Estimates of the gap in the budget, for which the Cabinet will seek cover in the spring memorandum, have so far run into the tens of billions of euros. The exact amount is still very uncertain because it strongly depends on how energy prices develop. Lately, after a significant peak last summer, they have fallen somewhat.

An at least as tricky a problem is the rising interest rate on the national debt. In contrast to the once-off energy support, this is a structural cost item. Due to recent years’ extremely low interest rates, the Netherlands could borrow money for free on the capital market for years. But with interest rates rising globally, maturing loans will have to be refinanced at higher interest rates.

The government estimates this could cost an extra 5.8 to 9.2 billion euros annually. Kaag also wants to find solutions for this in the spring memorandum. “In this way, the public finances remain manageable, and no bills are passed on to future generations.”

The war in Ukraine has so far cost the state treasury almost 4.5 billion euros. More than half of that was spent on filling the Bergemeer gas storage more so that the Netherlands will be less dependent on Russian natural gas this winter.