Financial situation of many households will be better than last year, but uncertainty remains

The financial situation of many households will look better this year than in 2022, with the National Institute for Household Information (Nibud) reporting that the purchasing power of some households has increased by more than 8 percent. However, there is still uncertainty in the market this year due to inflation and energy costs, among other factors.

In its calculations, Nibud assumes an inflation rate of 3.5 percent, which was previously calculated by the Dutch Bureau for Economic Policy Analysis (CPB). With this inflation, households improve between 0.5 and 8.1 percent, depending on family composition and income. In some cases, households will lose 0.2 percent in purchasing power based on this inflation rate.

Overall, the improvement in purchasing power is due in part to employed people having more money left over because of a higher earned income tax credit. As a result, they pay less tax. In addition, many people are receiving a wage increase due to a new collective bargaining agreement, according to Nibud.

The financial situation of the non-employed is also improving, as benefits, social assistance and long-term care allowances have been increased. "All these measures provide a financial breathing space that most people desperately need, because in 2022 everyone had to save heavily and prices in supermarkets remain high," the budget adviser said.

And so more things that played a role last year will also have an influence on the financial situation of households this year, such as the increased energy prices. As a result, Nibud argues that personal circumstances and spending "should play a bigger role in policymaking" because "few households will be able to absorb further price increases."

"If we've learned anything from the energy crisis, it's that people in energy-inefficient homes or large families inevitably have higher energy costs than others. As a result, they may have more difficulty making ends meet than others with the same income," summarized Nibud director Arjan Vliegenthart. If it was up to him, people should therefore be given more security. "Important basic and utility services must remain accessible and affordable for all, now and in the future,” Vliegenthart said.