Spring Memorandum 2012 and Budget Agreement 2013: Taking one’s responsibility in a time of crisis

The Spring Memorandum 2012 has been realised in financially, economically and politically uncertain times. The current budget of 2012 contains budgetary tightness and considerable setbacks. In addition government finances for 2013 threatened to deteriorate further as a result of a new recession and a smaller economic growth. An acute problem that required an acute solution. The political parties VVD, CDA, D66, GroenLinks and ChristenUnie joined forces and concluded a budget agreement for 2013 that goes towards healthy government finances and a strengthening of the economic position of the country. Therefore the Spring Memorandum 2012 provides apart from information about the 2012 budget an overview of the measures from this Budget Agreement for 2013.

Spring Memorandum 2012

In the second semester of 2011 the Dutch economy fell again into a recession. The Netherlands Bureau for Economic Policy Analysis (CPB) has estimated an economic shrinkage of ¾ percent for 2012. This leads to an adaptation of the growth expectation by 1 ¾ percent for 2012. In addition there are considerable setbacks in the execution of the budget of 2012. The largest setbacks are the unemployment benefits (EUR 1.5 billion as a result of economic shrinkage) and healthcare (EUR 0.7 billion, in particular due to setbacks in the Exceptional Medical Expenses Act and Health Care Insurance Act). The total income was EUR 7.6 billion less than expected as a result of a lower economic growth. The most important setbacks here are corporate tax (EUR 2.3 billion) and income tax (EUR 3.0 billion). In spite of that the government succeeded in completing the expenses framework for 2012. The EMU balance 2012 is expected to amount to a deficit of 4.2 percent and the EMU debt at 69.7 percent of DGP.

Budget Agreement 2013

As a result of new uncertainties and disappointing economic developments, the government finances for 2013 threaten to deteriorate even further. Without any intervention the EMU deficit would increase to 4.4 percent and the debt to 76 percent in 2015 and subsequently continue to increase. Due to the constructive cooperation between Parliament and Cabinet, a budget agreement has been concluded for 2013 that pushes the EMU deficit back to 3 percent. Thus the burden is not passed on to future generations. The Netherlands has kept its good reputation on the financial markets and an increase of the financing burden of government as well as trade and industry has been prevented. Therefore the year 2013 will not be a lost year.

The agreement reinforces economic growth and it improves the functioning of the housing and labour markets. A number of large reforms will be set into motion which will reinforce the economic structure and improve government finances. These are the modernisation of the labour market (reforming the Unemployment Insurance Act and dismissal law), a more quickly increasing of the retirement age (gradually as from 2013), reforming the housing market (redemption of new annuity mortgages within 30 years, structurally lower transfer tax, landlord tax) and a more efficient healthcare (reforming of the costs under the Exceptional Medical Expenses Act and increasing the excess). The total amount of the measures in the package will be EUR 12.4 billion in 2013. These are drastic measures that will affect the whole population of the Netherlands. The effects on purchasing power will be harsh but are evenly distributed amongst the households.