Gov't facing €1 billion in financial setbacks due to falling gas prices, rising interest

With Budget Day approaching, the Dutch government is again facing massive gaps in its budget. Caretaker Finance Minister Sigrid Kaag has to find ways to cover about 1 billion euros in financial setbacks caused by rising interest rates and falling gas prices, sources told the Telegraaf.

The rising interest rates mean higher installments on repaying the national debt. That already turned into a billion-euro item for Kaag in the spring, and interest rates have increased further since then. At the same time, the treasury is getting less money from selling Dutch gas due to the low gas prices.

These setbacks come on top of holes left over from the spring, like the 400 million euros it costs to postpone the new savings tax. And proceeds from the European minimum rate for profit tax turned out about 600 million euros lower than the Cabinet expected.

The outgoing Cabinet is negotiating the national budget for 2024 this week and next. Prime Minister Mark Rutte (VVD) and his three deputies, Sigrid Kaag (D66), Wopke Hoekstra (CDA), and Carola Schouten, are meeting at the Ministry of Finance on Thursday evening. “It will be quite a puzzle,” Kaag said about filling the gaps in the budget. “It certainly isn’t easy.”

In addition to filling the budgetary holes, the outgoing Cabinet also wants to take measures to support low-income households at risk of falling into poverty next year. The Central Planning Office warned that nearly 6 percent of Dutch families, including 7 percent of children, will live in poverty if the government doesn’t take measures. Many support measures already in place, like the energy price cap and lower excise duties on fuel, will expire on 1 January 2024. The increase in excise duties on fuel will cause the petrol price to rise by 21 cents per liter.

According to the budgetary rules, the setbacks in interest rates and gas revenues must be covered with budget cuts. The gaps caused by the savings tax and European tax must be compensated through tax increases. The government also hopes that some financial windfalls can help cover these holes. For example, the government couldn’t actually implement all its planned expenditures due to staff and material shortages.

Several other measures to help struggling households are also on the table. A temporary increase in the rent or healthcare allowance is an option. And increasing the child-related budget could target childhood poverty directly.