Speech on the presentation of the 2015 Budget Memorandum
Speech by Minister Dijsselbloem at the presentation of the 2015 Budget Memorandum in the House of Representatives on Tuesday 16 September 2014.
I will shortly present the budget for 2015. A budget that can best be described as 'prudent'. Prudent in its additional expenditure. Prudent in the burden it places on individuals and businesses. And prudent in its specific forecasts about the future. Prudence is essential given the current international uncertainties, especially in view of their potential impact on our fragile economic recovery. The government is therefore seeking a balance between restoring purchasing power, reducing financial risks and increasing expenditure, as it must in the light of international tensions.
It can be concluded from the figures for 2015 that the outlook for the Netherlands is brighter. Exports, corporate investments and consumption are all projected to rise. Yet the figures are no cause for complacency. The aftermath of the crisis will still be felt in 2015. Many people will see little sign of the economic recovery in their pockets. For the majority of households, the result will be modest at best. Next year, average purchasing power will rise by 0.5%.
Unemployment is particularly worrying. It's encouraging that it has started to fall, but far too many people - 605,000 - are still looking for work.
The government has given priority to relieving the burden on people and businesses, especially the tax burden on labour. Subject to the prudent constraints of the budget and the economy, we will do so by:
- helping jobseekers find work;
- increasing the employed person's tax credit;
- and extending support for the housing market.
These measures will help rebuild confidence. Confidence that is necessary to give our fragile economic recovery a sound footing. The government will therefore continue the line taken in 2012:
- putting public finances in order;
- ensuring a fair distribution of the burdens and benefits;
- and implementing reforms to nurture economic growth.
A lot has been achieved since the government took office at the end of 2012. Financial stability has been restored. Not only in the public sector but also in the household, financial and business sectors. Risks are declining and resilience is growing. The 3% limit is no longer an issue; with a deficit of 2.2 %, we will remain below it. Yet next year we will still be spending €40 million more every day than we receive in revenue. The government aims to cut the budget deficit further and so create a buffer for difficult times.
Total mortgage debt has also declined. Many people have taken advantage of low interest rates on their savings accounts to pay off their mortgages. The housing market is slowly picking up in most regions. But more than a million households are still in negative equity. And most of them are young homeowners. For them, good news such as an addition to the family or a change of job can have serious financial consequences. The government is helping by making residual debts more bearable.
The business community is generally faring well but some small and medium-sized enterprises are still having difficulty getting credit, owing to their weak financial position. We are providing an additional €155 million to increase scope for lending to SMEs. Some of the money will come from the Future Fund the government is setting up to invest in innovation and provide capital for the future. The initial capital is €200 million. The revenue generated will be used to fund innovative SMEs and scientific research.
The financial sector has made good progress on creating buffers, and we have taken great steps forward with the EU banking union. The European Central Bank will be keeping a close eye on the financial sector as from the autumn. Banks that are in danger of collapsing will not be able to trigger a major crisis. The risks have been put back where they belong: not with taxpayers but with the banks and their investors. But, here too, we still have work to do. Because confidence - between banks and investors and, especially, public confidence in the banking world - is still wafer thin.
On the whole, the Netherlands is emerging from the crisis stronger. But internationally there are serious threats. Growing tensions in Iraq and Ukraine are causing indescribable human suffering and distress. There and here. International turmoil is causing great uncertainty. It is affecting our economy directly and indirectly. World trade and lacklustre growth in other European countries are uncertain factors for the year ahead. We cannot rest on our laurels. Fluctuations in world trade will always have a direct impact on our open economy. We can do little to influence these external factors but we can identify opportunities at home to stimulate growth and remove obstacles. In the coming years, the government's agenda will in any event give high priority to the reform of the tax system, the dialogue about the future of our pensions and further cost control in the care sector. In a letter to parliament entitled Working on Growth, the government has set out the additional measures it will take to create opportunities for growth, for talent and for cities as the engines of the economy. There are opportunities in the labour market. We still waste a lot of talent. In the short term, we must increase the number of jobs. In the long term, more employment will also generate growth. The burden on labour must be reduced so that employers benefit and employees are better off. This is a major operation that will take time. The government will take the first steps in 2015 by releasing €1 billion - in a period of austerity - to lighten the tax burden. This measure sets the tone for a phased reform of the tax system in the years ahead.
The speed with which we can move forward will depend on developments in the financial and economic spheres. It is the government's ambition to facilitate 100,000 jobs by reducing the tax burden on labour by €15 billion. That figure includes a €3 to 5 billion net tax cut to absorb any unwanted impact on incomes.
Besides fostering employment, this major reform should also simplify the tax system and make it easier to administrate.
The Budget Memorandum considers ways to raise growth to a higher level. Reducing the burden on labour is one example. A second is the global trend of cities as sources of economic growth and innovation. Cities are where supply meets demand, where personal contact and cooperation create new ideas, and where the most money is earned and spent. This concentration of economic activity is accelerating throughout the world and it is a mechanism we can put to better use in our own country. For example by giving cities the space they need to grow. The government, together with the cities and other stakeholders, will introduce proposals to this end in 2015.
2015 will be a year of great change, particularly in the field of care. Introducing these reforms with due care will require - and receive - a great deal of our attention. But the government will also be looking ahead. Opportunities for growth, opportunities for talent and opportunities for cities cannot be fulfilled in the space of a single year. But it is the course this government will embark on in 2015. In this regard, the history of our Kingdom will be a source of inspiration.
Two hundred years ago, after the summer of 1814, a major international congress was held in Vienna. The great powers mapped out the future of Europe and redrew national borders. Napoleon was safely in prison on Elba. And the delegates took their time. Outside the conference rooms, they attended so many balls and took so few decisions that the people famously quipped: 'The Congress dances, but does not progress.' This has never been the case in the low countries. We dance less and do more. By the time the Congress made up its mind, William I had become our Sovereign Prince. He established the Dutch central bank and the Court of Audit and began modernising the Netherlands. We still have the same attitude 200 years later.
The world around us is changing. Sitting back to see what happens is not in our genes. In keeping with tradition, the government will act prudently but resolutely in the years ahead. We might not be able to change the world but we can prepare the Netherlands for a world that is changing.
It gives me great pleasure to hand to you the only paper copy of the 2015 Budget Memorandum and related documents.