Presentation of 2018 Budget Memorandum
Presentation of 2018 Budget Memorandum by Jeroen Dijsselbloem, Minister of Finance, Tuesday 19 September 2017.
When I stood here a year ago, you probably thought – as I did – that it would be my last Budget Day as Minister of Finance. In 2017, Budget Day would be handled by my successor. But that person hasn’t been appointed yet. Nevertheless, I decided to bring a successor with me. My successor in 30 years’ time.
Madam President, thank you for allowing him to attend this session of parliament. I’d like to introduce you all to Haci Nuh. This spring, during the annual ‘Money Week’, mayor Ahmed Aboutaleb named this young Rotterdammer ‘mini-minister of finance’. Because he has good ideas about money.
Today Haci is carrying a spare copy of the Budget Memorandum in his rucksack. That’s because I like to spread risks. But more importantly, Haci helps to remind us that the budget is not just about today and next year, but also – and above all – about the longer term. About our children. Anyone considering the country’s revenue and expenditure needs to take account of today’s children and how their future lives will look.
As I’ve done for the past four years, I’m going to tell you today about our economic prospects, about government spending and revenue, and about the state of the public coffers. I’ll do my best to explain things in a way that Haci and his peers can understand. So it looks like I’ve got one final tough challenge as finance minister.
Let me begin with our economy – that is, everything we in the Netherlands earn from products and services in the course of a year. The economy is growing strongly. We’re spending more money in shops, selling more products abroad, and spending more on large new items, like cars and houses, and also office buildings and machinery.
The situation was very different when this government took office in late 2012. At that time, people were extra cautious due to the crisis, and major purchases in particular were being postponed. Shops and other businesses had fewer customers, which meant there was also less work. Unemployment rose and the economy shrank. Fortunately, things are now improving again.
We all pay taxes on the money we earn and the money we spend. Now that we’re earning and spending more, the Ministry of Finance is receiving more tax revenue. Another advantage of economic growth is that it creates jobs. That’s great for people looking for work. And also for the public treasury. Because if more people earn an income, fewer benefits need to be paid out. And that saves the government a lot of money. That’s why we’re currently spending less than we receive. Next year the difference will be over €6 billion.
That’s also good news for the government debt. Let me explain. Like nearly every other country in the world, the Netherlands has a government debt. That’s because over the years we’ve borrowed money to spend on things our country needs – roads, dikes, schools, hospitals, and so on. It doesn’t matter if the government is in debt, as long as the debt doesn’t get too big. But when the economy shrank, the government debt increased rapidly. Now that the economy is picking up again, we can reduce our debt. And that will put the Netherlands in a stronger position to deal with a future economic downturn.
As Minister of Finance, I’m constantly on the lookout to make sure that spending doesn’t get too high and that money is well spent. Because I don’t want our national debt to rise higher than it needs to. Since a new government is being formed, we – the outgoing government – can’t change as much we might like. But we think some things are so important that we want to spend more on them all the same. And we can now do that. For example, we plan to provide an extra €270 million for primary school teachers. And the government is spending an additional €435 million to improve nursing home care for the elderly. People on low incomes will get a bit more from the treasury next year so that they too can feel the benefits of our expanding economy. That will cost €425 million. Finally, we will also spend nearly €100 million extra on improving the protection of people in the Netherlands, against terrorists for example.
As Minister of Finance, I look not only at the effects spending will have today and next year, but also at its effects in the longer term. Because budgets are about the future. After all, most expenditure recurs every year; we call this structural expenditure. And it can go up. For instance, the elderly need more healthcare. And because people are living longer, healthcare costs keep on increasing. So you need to take that into account.
To get a clear picture of this, we calculate how public spending and revenue will develop in the future. We call this the ‘fiscal sustainability balance’. For a long time we had a fiscal sustainability deficit. That meant that we would eventually run short of money and the public debt would rise again. But that has now changed. Since the government took office in 2012, the tide has turned and we now have a fiscal sustainability surplus.
That is because the government has made major changes to the rules on, for example, pensions. People now work longer and receive a state pension later, because on average they live longer. Also, people who have bought a home get a lower tax deduction. Not many people were happy when the government made that proposal. But it was a necessary step to help make public finances healthy again – both now and above all in the future.
What does this mean in practice? It means that everything we pay for from the public purse, such as hospitals, schools, universities, libraries, the police, public transport, roads, bridges and dikes, will remain affordable. It means that Haci, if he one day really does become Minister of Finance, will not have to raise taxes or cut spending, which would mean that his generation would be paying for our choices. In short, it means that the adults of today should not just think about themselves, but also about the children of today, who have their whole lives ahead of them. Because – I’ll say it again – the budget is about looking to the future.
Although there are no certainties in this world, I assume that my time as minister now really is nearing its end. So I’d like to conclude by expressing my gratitude for the broad working relationship I’ve had with the House in recent years. In 2012 only a few people expected this government to last so long and achieve so much. Anyone who studies today’s figures can see that our country is in much better shape.
I’d like to express the hope that the next government will also seek a broad working relationship with you and will never lose sight of our country’s children. Let Haci serve as a compass to ensure my successor stays focused on keeping the public finances in balance, both now and – more importantly – in the future.
It is with great pleasure that I present to you, for the final time, the 2018 Budget Memorandum and the other Budget Day documents.