2019 Budget Memorandum: Investing in and preparing for the Netherlands' future

In 2019 the Dutch economy will grow by 2.6% and the budget surplus will increase to 1% of gross domestic product (GDP). Next year the government debt will fall by €6 billion, to 49.6% of GDP. Unemployment will drop to 3.5% in 2019 – the lowest level since 2001. These forecasts are set out in the 2019 Budget Memorandum, which Minister of Finance Wopke Hoekstra presented to the House of Representatives today.

The Netherlands is doing well and it's time the Dutch people felt this more in their pockets. That's why the government is taking measures to strengthen purchasing power, especially for those on low or middle incomes. Purchasing power will grow in 2019, due to both rising wages and lower taxes on labour. Despite higher inflation, purchasing power is expected to increase by 1.5% next year, leaving almost all population groups better off.

Natural gas extraction in Groningen

The government is seeking to make the province of Groningen safer. For instance, it intends to invest at least €1 billion in the Groningen Future Fund. The cost of cutting back gas extraction will be €300 million in 2019, rising to €1.5 billion on a structural basis in 2023.

In late 2017, Nederlandse Aardolie Maatschappij (NAM) and Energie Beheer Nederland (EBN), an independent enterprise wholly owned by the Dutch state, reserved a minimum of €1.4 billion to cover claims for damages and the building reinforcement programme. These costs will result in lower natural gas revenues for central government.

Brexit

To ensure that the Netherlands is properly prepared for Brexit, over €90 million will be earmarked for, among other things, additional capacity at the customs authorities and the Food and Consumer Product Safety Authority (NVWA). The creation of the new Ministry of Agriculture, Nature and Food Quality and the Ministry of Economic Affairs and Climate Policy will entail one-off expenditure of over €60 million in 2019 for extra staff, ICT and other material resources. The structural costs are estimated at €37 million. This was already set out in the Spring Memorandum.

Lower-than-expected healthcare and social security expenditure, lower interest charges and other windfalls will help cover these extra costs.

Incomes

According to the most recent forecast, the planned tax measures would give businesses a higher tax cut than envisaged in the coalition agreement, partly because the abolition of dividend tax will cost more than expected. The government has therefore taken additional measures to bring the tax cuts into line with the coalition agreement.

In the years ahead, the high corporation tax rate will be reduced by slightly less than was agreed: from 25% to 22.25% instead of 21%. SMEs will be spared, because the low corporation tax rate will be reduced by the amount set out in the coalition agreement. For SMEs, the government is also cutting taxes on labour by €100 million on a structural basis. The tax rate on income from a substantial interest (box 2) will be increased by less than was announced in the coalition agreement. And for housing associations the government is reducing the levy on landlords by €100 million on a structural basis.

Long-term developments

The government also sees risks to economic growth. Brexit, the threat of trade conflicts, and geopolitical tensions in other parts of the world could trigger a sudden economic downturn and a deterioration of public finances. That's why it's necessary in good times to build up reserves for worse times.

Controlling healthcare spending is another ongoing challenge for the future. The government has taken various measures, such as the outline agreements that the Ministry of Health, Welfare and Sport has concluded with the healthcare sector. The increase in healthcare costs will be around €2 billion lower than envisaged. Nevertheless, healthcare will continue to be the biggest and fastest-growing item of government expenditure in 2019.

More information about the Budget Day documents is available on the rijksoverheid.nl website (in Dutch).

Ministry responsible