Cabinet sees plans for minimum wage increase and low fuel taxes on shaky ground

The Cabinet makes short work of the Tweede Kamer’s plans to improve purchasing power. After all, the plans to raise the minimum wage, lower energy taxes, and maintain low fuel taxes are raising doubts in the Cabinet. The Ministry of Finance also believes that the MP's plans for improving purchasing power are on shaky ground, NOS reported.

The motions approved after the General Political Consultations, which are supposed to restructure the budget by more than 4.1 billion euros, are insufficient or not sufficiently covered. In addition, the budget deficit would exceed three percent, which is not allowed under European rules, Finance Minister Sigrid Kaag wrote to Parliament.

The letter to Parliament lists the shortcomings of each request. For example, the coverage does not support the VVD's wish not to increase gasoline and diesel taxes in 2024 and to structurally reduce energy taxes for households by 200 million euros. Therefore, it seems like it is not well-founded. This consists partly of ancillary and structural funds and possibly a dip into the National Growth Fund. Moreover, higher incomes in particular benefit from this proposal because they consume more fuel. In addition, households drive fewer diesel cars.

The additional 1.7 percent increase in the minimum wage by 2024 will cost around 1.2 billion euros per year in structural terms. Of this amount, about an additional 0.7 billion euros will go to the AOW state pension to which the minimum wage increase is linked. This "special increase" in the minimum wage requires a change in the law and is also not possible on January 1, Kaag wrote. The July 1 implementation also poses a risk to those receiving allowances. If they earn more, they may have to pay back some of the allowances they received earlier in July.

Furthermore, the CDA's proposal to tax transferring air travelers and use the money to reduce household energy bills has also drawn criticism. The plan would not take effect until Jan. 1, 2025, and would leave a gap in the budget next year. The proposal to absorb price increases in public transportation is also inadequately covered. The proposal provides for a one-time investment, but there is no money for subsequent years. The 250 million euro increase in child benefits "is also not in line with the budget because the revenue shortfall is covered on the expenditure side," Kaag claimed.

The fact that the Cabinet is highly critical of the plans does not mean that nothing will come of it now. It is now up to the MPs to take the criticism into account in proposed changes (amendments) to the budget. They can introduce them during the general financial considerations next week.

In the Budget Memorandum, the Cabinet itself presented a purchasing power package of 2 billion euros in structural terms and with coverage.