2022 Budget Memorandum: Resilience and further steps forward
With expected economic growth of 3.5% in 2022, the Dutch economy is recovering remarkably quickly from the COVID-19 pandemic. The number of people in work is high, the number of bankruptcies is at a historic low, and the national debt remains under control. Because of the government’s caretaker status, it is only making targeted investments in areas where delay is not an option. For example, we will spend money on further action to combat climate change. We will invest in tackling crime, improving security and protecting threatened persons. And given the tight housing market, we will be investing to step up the construction of homes in the years ahead.
The economy is recovering quickly from the COVID-19 crisis and GDP will already reach its pre-pandemic level this year. Substantial economic growth is also forecast for next year. Public finances have come out of the crisis in good shape, despite sizeable support packages. Although the public debt rose during the pandemic, it remains under control thanks to the buffers that had already been put in place. This favourable picture is attributable to the enormous resilience of businesses, employees and society in general. The government’s substantial support packages have fulfilled their purpose: retaining jobs and minimising unnecessary bankruptcies. Nevertheless, the pandemic has had a huge impact on people’s lives in the Netherlands, especially on those who were ill, lost close friends or family members, or lost their livelihoods.
Key figures
Expected GDP growth is 3.9% in 2021 and 3.5% in 2022. According to estimates, the average rate of unemployment will be 3.4% this year, rising very slightly to 3.5% in 2022. Low unemployment is good news but also presents a challenge: businesses are finding it more difficult to recruit good staff. The national debt is estimated to be 57.7% in 2022, therefore remaining below the European Union limit of 60% of GDP. The budget deficit will also fall. While the government balance will be -6% this year, it is projected to stand at -2.4% in 2022.
Policy measures for 2022
Climate
If we are to curb climate change, more rapid action is needed. The longer we wait, the more costly the solutions will be. In this year’s Budget Memorandum, the government therefore sets out additional steps to reduce greenhouse gas emissions. In total, the government will invest an additional sum of over €6.8 billion in climate measures on top of existing spending on climate policy. Part of this investment is necessary to carry out the National Climate Agreement. The remainder of this package is directed at the further implementation of the Urgenda judgment. The government is aware that further climate policy measures are needed in the coming years to achieve the climate objectives. The action the government is now taking, in the light of its caretaker status, will contribute to this end.
Security and safety
Nor can we afford to delay in investing in security and safety, in view of the dislocating effect of crime that undermines society. From next year, €400 million will be provided annually to combat crime of this kind. In addition, extra funding will be allocated from 2022 onwards to enhance protection and security. The government will also increase the payments received by legal-aid lawyers in order to safeguard access to and the availability of legal representation. Also, the government will invest in the training of military personnel and the availability of sufficient munitions.
Extra money for building homes
From 2022, the government will make available €100 million a year over 10 years in order to increase the supply of homes in this period.
Tax cuts
The government will cut taxes and social insurance contributions by €226 million on a structural basis to boost the purchasing power of people on low incomes, sole earners and families. In addition, the government will reduce the landlord levy by €30 million a year from 2022.
The caretaker government is therefore addressing the most pressing issues for 2022. However, looking further ahead, structural problems remain in the fields of education, healthcare, benefits and the labour market. It is up to an incoming government to determine how to tackle them.