'Repairing the roof while the sun shines'

19th September 2007, Comments 0 comments

The Dutch centre-left government presented its 2008 budget on Tuesday and forecast a surplus in the public accounts for the next four years.

Finance Minister
Wouter Bos

"With a booming economy, the Netherlands is one of the most prosperous countries in the European Union. Despite recent unrest in the financial markets the economy will remain strong in 2008 and will provide further growth of employment," the finance ministry said in the budget.

In 2007, the economy is expected to grow by 2.75 percent and in 2008 growth in gross domestic product (GDP) is forecast at 2.5 percent.

In 2008, the Dutch state is counting on a budget surplus of 0.5 percent of GDP that will rise to 0.6 percent in 2009, 0.7 percent in 2010 and reach 1.0 percent in 2011.

Inflation will rise mildly from 1.75 percent this year to 2.0 percent in 2008, the government said.

"It is a fact there is tension on the labour market and that always has an increasing effect" on inflation, Prime Minister Jan Peter Balkenende said.

The national debt will be at 45 percent of GDP in 2008, calculated according to European Union norms, and the government plans to reduce it further to less than 40 percent in 2011.

In the eurozone, the average national debt level is 65 percent of GDP.

*sidebar1*The Dutch budget is traditionally presented on the third Tuesday in September when Queen Beatrix reads the address from the throne to present the government's plans for the next year.

"To foster a cleaner and more efficient economy, the government is raising taxes on consumption and on environmentally harmful activities," the queen said.

The budget includes plans for a new tax on plane tickets – EUR 11.50 for short flights and EUR 45 for longer trips -- that is predicted to earn the government EUR 350 million next year. The government will also raise taxes on tobacco and diesel fuel.

"All these measures in conjunction mean that many people's purchasing power will not rise in 2008," the queen said.

In all, the budget foresees a 6.8 percent rise in taxpayers' regular expenses but the government stressed that most of that will go to financing the national health care system.

The government is also hoping to further lower the already low unemployment from 4.5 percent this year to 4.0 percent in 2008.

The obligatory contribution of employees to the national unemployment insurance will be gradually reduced and eventually dropped.

To compensate, the government plans to raise value added tax (VAT) to 20 percent in 2009, up from 19 percent now.

The opposition rightwing liberal VVD party criticised the budget saying "the Dutch who work the hardest have to pay the most."

Balkenende described this approach as "repairing the roof while the sun shines."

The leftwing opposition was also unhappy with the plans saying there was not enough money reserved for the public sector and combating poverty.

19 September 2007

Further reading

The Netherlands’ financial strength: The speech Finance Minister Wouter Bos gave at the First Annual Conference on the Financial Sector on 6 September 2007 (English).

[Copyright AFP +Expatica 2007]

Subject: Dutch news, Dutch budget

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