NL residents' purchasing power to drop 4% despite energy price cap: CPB

The Central Planning Office (CPB) expects that the average Dutch household’s purchasing power will fall by a total of about 4 percent this year and next year, despite the price cap on energy that will take effect in January. The government’s advisory body based its calculations on the current energy prices. The CPB added that the price cap would somewhat mitigate the loss of purchasing power.

The CPB mapped out four scenarios for the impact on purchasing power, looking at lower, higher, and current energy prices. It also examined the influence of higher energy prices if Dutch households had to endure a severe winter this year.

The decline in purchasing power is mainly due to high inflation and less-high wage increases, the CPB said. According to the base scenario, based on the current energy prices, inflation will be 3.5 percent next year. Without the energy price cap, that would be 6 percent higher.

People with lower incomes are most at risk. They indeed seem to benefit most from the energy price cap, but this group spends a larger share of their income on energy. The CPB believes that some 430,000 households will eventually face financial problems and be unable to afford their food, housing, or energy costs. If this winter is harsh, that could be up to 500,000 households.

Whichever scenario becomes a reality, the price cap will ensure that fluctuations in energy prices affect the average household less. If, for example, the price of energy rises, the average household will only lose another 0.2 percent of purchasing power compared to the base scenario, even with a severe winter.