Dutch deficit billions less than calculated

21 November 2005

AMSTERDAM — There was surprise in The Hague on Monday when it was revealed that the budget deficit this year would be considerably lower than expected.

Finance Minister Gerrit Zalm had estimated a deficit of 1.8 percent. But thanks to higher-than-expected tax receipts, the EMU balance puts the deficit at 1.2 percent. That is about EUR 3 billion less than anticipated.

The EMU balance is the difference between the income and expenditure of the public sector (i.e. central government, provincial and local authorities and the social security funds). The windfall is largely due to the profit tax paid by companies.

The budget deficit is now near the level outlined in the coalition accord agreed between the three government parties in 2003.

The main opposition party, Labour (PvdA), has called on Zalm to explain how the deficit has fallen so quickly. “In June Zalm was talking about a deficit of more than 2 percent. In the space of a few months this has dropped by up to EUR 3 billion,” PvdA MP Ferd Crone said.

Crone suggested that some of the money, EUR 1-1.5 billion, should be used to lighten the burden on the public. This idea ran into immediate opposition from the government side.

MP Bert Bakker, of the small governing party D66, said Crone’s proposal was “premature”.

“We must not sell the skin before we have shot the bear. We have to examine whether this is a one-off or an ongoing windfall,” he said.

“Should it transpire to be structural money then it would be understandable for the cabinet to travel along the road of tax cuts,” Bakker added.

Subject: Dutch news