Dutch government will need extra €17 billion annually from 2028: advisory board

The next Cabinet will face the task of restructuring public finances by cutting spending or raising taxes. According to a policy report from an advisory board tasked with analyzing the budget and the future of the Netherlands, this is because an additional 17 billion euros will be needed annually from 2028 to prevent the budget deficit from growing further. The advisory group partly attributes the current situation to a lack of decisive actions taken by the fourth Cabinet of Mark Rutte.

The group noted a significant deterioration in public finances, caused by rising interest rates and increased spending, which has made borrowing money more expensive. Without intervention, escalating expenditures in healthcare, aging, and climate initiatives might overshadow other budgetary allocations, they remarked.

According to the study group, the next Cabinet period should aim for a budget deficit of roughly 2 percent of the GDP to respect the 3 percent limit imposed by EU rules. This would necessitate to secure an additional 17 billion euros every year starting from 2028. This can be done through spending cuts or tax hikes.

They criticized Rutte's previous administration for not sufficiently addressing this, often resorting to additional spending to resolve societal problems without proper implementation. This approach, they argue, resulted in unrealistic plans and unfulfilled promises.

The advisory board emphasized that the future Cabinet should not necessarily rely on spending extra money to solve problems. They suggest considering reforms, standardizations, and pricing strategies instead of resorting to subsidies and tax incentives.

This is notably important to tackle future societal problems. “Sound public finances in both the short and long term are important for addressing societal challenges and preventing us from leaving a bill open for future generations.”

Now is the right time to make decisive choices as the outlook for the economy “is generally good,” the advisory board argued. “Now is the time to build up buffers for economically worse times in order to be able to absorb future setbacks as well.”

At the same time, a new administration must be careful when making cuts to avoid unnecessary economic and social damage. “When making policy choices and related investments, it is therefore important to start from the perspective of broad prosperity: in which people and society are central.”

The group advises politicians on budget targets and the budget system prior to the elections for the Tweede Kamer, the lower house of the Dutch parliament. This advice allows political parties to make a proper assessment of the budgetary policy to be pursued in the next Cabinet period.