Gov't considering temporary cut to public transport fares against high fuel prices

The Dutch Cabinet is considering a temporary fare reduction for public transport as one of the measures to help citizens cope with higher fuel and energy prices due to the Iran war, sources close to the government told the Telegraaf. The Cabinet will present a package of measures intended to protect people’s purchasing power at 11:30 a.m. The National Oil Crisis Plan also takes effect today.

The lower public transport fares are specifically intended to provide relief to commuters affected by the economic consequences of the war. It is part of a broader package of measures that the government hopes will alleviate the financial damage caused by international tensions.

The Cabinet will announce the first concrete steps toward this on Monday. Sources previously leaked to the media that the government is also considering increasing the tax-free mileage allowance and a new subsidy for buying electric cars.

Unlike Germany, the Dutch government is not intending to cut excise duties on fuel, to the disappointment of several opposition parties. ING economist Rico Luman defended that decision to Nieuwsuur, calling an excise duty cut a bit populist. “It goes down well with the public. But it is an unfocused plan: we know from research that the highest income earners drive the most kilometers. And it quickly costs billions.”

Companies are deeply concerned that they will be the ones footing the bill for the government’s measures, a survey conducted by employers’ organization AWVN showed. They worry that a higher tax-free mileage allowance combined with wage increases will lead to a sharp rise in costs. They don’t want to be the only ones bearing the increased fuel costs.

“Companies are also being hit very hard by the higher fuel prices,” Anne Megens of the AWVN told NOS. She said employers are willing to increase the mileage allowance, but that will come at the expense of wage increases. “Economic conditions are not such everywhere that this reimbursement can increase without affecting the margin for wages.”

Since the United States and Israel started attacking Iran on February 28, traffic through the Strait of Hormuz has been severely restricted. The Strait is an important shipping route for oil and gas from the Middle East, and as a result, the prices for these fossil fuels have skyrocketed. Higher energy and fuel prices are slowly trickling down to the rest of the economy.

The Iran war is also resulting in fears of fuel shortages. The Dutch government is therefore implementing Phase 1 of the National Oil Crisis Plan today. This phase has no immediate consequences for citizens. It largely entails the government preparing for a scenario in which the oil problems worsen by speaking with sectors that consume large amounts of fuel and monitoring the size of the fuel stock more closely.

Later phases in the Crisis Plan do contain measures that will impact citizens, including options for car-free Sundays, lowering the speed limits on highways to 80 kilometers per hour, encouraging work-from-home, and a ban on home delivery services.

For the time being, it seems unlikely that the government will have to impose these far-reaching measures, economist Luman told Nieuwsuur. But they are all good options on paper, he said. He thinks lower speed limits and car-free Sundays, as the Netherlands had in the 1970s, will have the biggest impact on fuel usage.