Many Dutch municipalities not preparing for looming budget cuts in 2026
Dutch municipalities are increasing spending in 2025 despite looming budget cuts that will take effect in 2026, with many failing to set aside financial buffers. According to new data from Statistics Netherlands (CBS), municipalities have budgeted 80 billion euros in expenditures for 2025, a 7.2 percent increase from the previous year. Revenue projections closely track this increase, with municipalities expecting to generate 79.3 billion euros.
While spending is rising across all policy areas, a report from accounting firm BDO warns that three-quarters of municipalities are heading toward financial trouble. A collective shortfall of 5.2 billion euros is projected for the 2024–2028 period. This deficit is largely tied to 2026, when government contributions per resident will drop significantly, slashing municipal funding by more than 2 billion euros.
In recent years, municipal revenues have sometimes exceeded forecasts. In 2023, municipalities spent 75.1 billion euros, while revenues totaled 76.7 billion euros, leaving a 1.6 billion euro surplus. However, this financial cushion is not translating into adequate preparation for the upcoming budget squeeze.
In 2025, the largest portion of municipal spending—20.5 billion euros—will go toward social services, an 11.2 percent increase from 2024. This funding covers programs under the Social Support Act (WMO), youth assistance, social work, domestic violence prevention, and refugee support. Municipalities will also allocate 13.4 billion euros for income support and employment programs, up from 12.5 billion euros, largely due to the increased statutory minimum wage, which raises welfare costs.
Spending on security, economic development, and public health will also rise by approximately 9 percent. Security budgets are growing due to wage hikes, expanded enforcement teams in major cities, and earthquake-related measures in Groningen. Economic development spending is increasing for urban renewal projects, while public health investments are being driven by national grants such as the Integral Care Agreement (IZA) and the Healthy and Active Living Agreement (GALA).
Municipalities will also commit significantly more funds to environmental programs, primarily for climate policy and the energy transition. Some of these initiatives will be supported by national grants like the Decentralized Governments Capacity for Climate and Energy Policy (CDOKE).
Despite these rising expenditures, BDO’s report highlights deep financial uncertainty among municipalities. For 2023, Dutch municipalities collectively posted a surplus of 1.7 billion euros. Yet, by 2026, they are projected to face a deficit exceeding 1.4 billion euros. The report notes that a quarter of municipalities already faced deficits in 2023, and the number is expected to grow.
“Municipalities are dealing with deficits in different ways,” said Marc Steehouwer, chairman of BDO’s Government sector group. “There is a fragmented financial picture, partly because potential cutbacks are not yet concrete. At the same time, municipalities face a common challenge: balancing income and expenditure. As long as government funding remains uncertain and the costs of youth care, in particular, continue to rise, municipal finances will stay under pressure.”
Uncertainty about financial prospects is delaying action. Many municipalities are still hoping for additional government funding but have also built up reserves in recent years. By the end of 2023, Dutch municipalities collectively held 41 billion euros in reserves. However, with municipal elections approaching in 2026, making politically sensitive budget cuts has become more difficult.
“Waiting is no longer an option,” Steehouwer warned. “Take action, be careful when implementing measures, and use available reserves to bridge the gap.”
To cover rising expenditures, municipalities expect to generate 79.3 billion euros in total revenue in 2025. The largest share, 44.7 billion euros, will come from municipal fund allocations. Local taxes and levies will contribute 14.4 billion euros, while an additional 20.2 billion euros will come from other sources, including national grants, rental income, asset sales, interest, dividends, and contributions from other governmental entities.
