Budget leak: Dutch public, royals must pay

16 September 2004

AMSTERDAM — Almost everyone from the lowliest Dutch citizen to the royal household will have to tighten their belts a further notch in 2005, according to a leaked version of Tuesday’s budget.

The elderly and minimum wage earners will be shielded from the worst effects of the government’s economising drive and its impact on the public’s purchasing power. The royal household will suffer a EUR 1 million cut in its funding.

Finance Minister Gerrit Zalm is set to tell Parliament that the government has to continue to cut spending to ensure the “heavy flu” the country is suffering does not turn into a “chronic illness”.

Prognosis

RTL News scooped the rest of the Dutch media on Wednesday night by leaking the budget report and below is an outline of the main predictions underlying the government’s budgetary plans.

The economy will grow by 1.25 percent this year and 1.5 percent in 2005; unemployment will rise from 505,000 this year to 550,000 next year and the budget deficit will be cut from 3 percent of Gross Domestic Product (GDP) to 2.7 next year.

But news agency ANP also obtained a leaked version of the budget and reported on Thursday that the deficit will be 2.6 percent next year, instead of the 2.7 percent forecast in the “earlier” dated budget that RTL obtained.

Most of the government’s cuts have already been announced and discussed in the media in advance of the leaked budget speech on 15 September.

Wages

With the Netherlands trailing in the international competitive stakes, the government’s mantra is wage restraint. Therefore, salaries in the public sector and benefit payments will not increase at all next year.

If companies or sectors agree on pay increases in CAO wage and conditions agreements, the government will no longer insure that the agreement is binding on all companies in that sector. In addition, Zalm wants to see the 40-hour week back on the agenda.

To combat the problem of an aging population, the government wants to keep people working longer by getting people off benefits and scrapping the VUT and pre-pensions schemes in 2006.

The out-of-control WAO work disability scheme will become more restrictive and will be available in 2006 only to people who are fully and long-term incapacitated by a work-related illness or injury.

It will become more difficult for people with a short record of work experience to claim WW unemployment benefit and the “firing” payment will be taken off the person’s benefit payments.

To compensate workers for the disappearance of the VUT and pre-pension early retirement schemes, the government will introduce a levensloop savings scheme, under which there will be tax breaks to save for periods of paid leave.

Zalm’s junior minister in charge of tax, Joop Wijn, had already heralded the scrapping of the grijs kenteken (grey registration plate) scheme to help pay for a reduction in corporate tax.

This is to help make the Netherlands more attractive to international businesses by reducing the tax on company profits gradually from 34.5 to 31.5 percent.

Without the grey registrations, company vans and cars will no longer be exempt from paying BPM, the tax for registering a private car.

More cuts

The government has already abolished the pc-prive system. Under the scheme, a maximum of EUR 1,415 is allowed tax-free when employees buy a home computer with a loan from their employer. The computer was to allow the employee to work from home occasionally.

Double income families will be restricted to a single spaarloon saving scheme rather than both partners using the scheme.

Healthcare

A no-claims system will be introduced in the healthcare insurance system, so a person who does not claim for visits to the doctor in a year will get a refund of EUR 250.

People wishing to have cosmetic surgery to have their too-prominent ears pinned back that will no longer be able to claim the costs of the operation from the ziekenfonds public healthcare system.

Other “medically non-essentials” disappearing from the ziekenfonds by 1 January 2005 include eyelid corrections, cosmetic breast enhancement, reverse vasectomies and treatments for snoring. Eliminating these options will save the government EUR 280 million.

When delivering the 2005 Budget on Tuesday 12 September, Finance Minister Zalm will also tell Parliament that striking deals with hospitals to improve efficiency will provide the government with another EUR 280 million in savings,

Most of the additional spending planned by the government will kick in by 2006 or later.

The entire public-private healthcare system will get a facelift of its own in 2006. The current policies will be replaced by a new compulsory basic system for everyone.

It will cost people about EUR 1,000 annually, with the government setting EUR 1.4 billion aside to protect low income earners from the impact of the significantly increased premium.

Justice and education

An extra EUR 70 million will be freed up by 2006 to build more jail cells to hold repeat offenders. The big cities will get EUR 120 million extra over four years to combat recidivists and domestic violence.

By 2006, the state’s spooks at the AIVD will get an extra EUR 10 million to hire more officers to help shadow the estimated 150 Muslim extremists in the country.

The government plans to relieve the troubled VMBO vocational secondary school system by removing “problem children” and placing them in specialist rebound centres in 2007. This will cost EUR 90 million.

College fees will rise by EUR 100 and students aged 30 and older will lose the right to apply for study grants.

Public housing corporations will be allowed to increase rents if they start building new accommodation, with 70,000 new homes coming available next year.

The government plans to spend EUR 3 billion up to 2010 to renew aging road, rail and waterway infrastructure. Additional lanes will be added to notorious roads in a bid to reduce traffic jams by 30 percent.

Subject: Dutch news