Dutch government too focused on short term, planning offices warn

The Schoof I Cabinet is too focused on the short term, paying for measures to improve things now by making cuts that could harm future prosperity. The government also has not made many of its measures and ambitions concrete enough to calculate how they will play out. The Bureau for Economic Policy Analysis (CPB), Netherlands Institute for Social Research (SCP), and the Netherlands Environmental Assessment Agency (PBL) said this in a very critical joint reflection on the Cabinet’s Budget Day plans. “The Cabinet is prioritizing broad prosperity here and now at the expense of broad prosperity later and elsewhere,” the planning offices wrote, NRC reports.

The government wants to keep the budget deficit below the European-agreed limit of 3 percent in the coming years. To achieve this, it is making structural cuts of 1 billion euros in higher education, research, and innovation.

That is very risky for the economy in the longer term, said CPB director Pieter Hasekamp. “The cuts are now creating financial space for government finances but may be at the expense of prosperity in the future. Research worldwide shows a clear link between spending on education and growth in prosperity.” The cuts are also “at odds with the government’s goal of improving the competitive position and business climate,” the planning offices added.

The government plans state that it wants to improve the quality of education and basic skills among school students, but it does not explain how it plans to achieve this or what level of improvement it aims for. Plans to make books more expensive by hiking the VAT rate also seem inconsistent with this goal.

The CPB, SCP, and PBL also have reservations about plans to reduce the number of international students. In the long term, international students “bring more benefits than costs because some students will continue to live, work, and pay taxes in the Netherlands.”

The planning offices are also critical of the government’s one-sided focus on presenting migration as a problem. The government assumes “that migration puts pressure on social cohesion.” But it is more complicated than that and reducing migration is “not the solution to all problems in this area.”

There is a “complex relationship between diversity and social cohesion,” SCP director Karen van Oudenhoven said. “The cohesion in neighborhoods does not only depend on where people come from but also on their socio-economic position and circumstances in the neighborhood.”

Diversity in the Netherlands is a given, Van Oudenhoven said. She is, therefore, concerned by the government’s plans to scrap measures that prompt social cohesion. “The social service period, where young people from all kinds of groups temporarily went to work somewhere, is disappearing. And the government is abolishing the subsidy for broad bridge classes, where children from all kinds of educational levels sit together.”

When it comes to security of existence and healthcare, the government is also making short-term choices that have uncertain long-term effects. It is increasing purchasing power by increasing allowances while at the same time saying it wants to reform the allowance and tax system, but without giving a concrete explanation of what this means. "Increasing financial security of existence by increasing allowances in the short term can make the long-term goal of simplifying the system more difficult,” the planning offices said.

For healthcare, the government says it wants to reduce health inequalities, but without naming specific measures or which differences it is targeting. Cutting the healthcare deductible in half in 2027 will lower the threshold for getting care. That is positive, but also has risks, said CPB boss Hasekamp. “It increases accessibility, but in the long term, healthcare expenditure will increase significantly and lead to more demand in an already tight labor market. Where will we get the required people from?”

The planning officers are positive about the government’s goal to reduce the housing shortage by building 100,000 homes a year, but “more choices are needed than just the number and types of homes to be built.” According to the CPB, SCP, and PBL, the Cabinet pays too “limited attention” to the connection of new residential areas to good infrastructure. “They must also become places where you live safely and pleasantly, where you have no risk of flooding and good facilities nearby. The Cabinet does mention that, but it is much less elaborated,” said PBL director Marko Hekkert.

The CPB, SCP, and PBL had nothing good to say about the government’s policy on climate change and nature restoration. The government says it wants to achieve the European targets for CO2 and nitrogen reduction and water quality, among other things. Instead, the plans made so far “amount to reversing the policy of the previous government” and are “probably inadequate” for achieving the climate targets.

The government’s plans include scrapping the increase in the CO2 levy and the energy tax and reversing the mandatory purchase of a heat pump when the boiler gets replaced. The alternative measures proposed by the Cabinet are “less concrete.” The same goes for nature restoration. The government scrapped the current programs and funds around nitrogen and water quality without having replacements ready. “An uncertain route that could cause delays,” the planning offices said.