Netherlands new budget aims for ‘people to have more money to spend’

The new government’s budget plans were laid out by the king,** during a ceremony shaped by tradition. In the Netherlands there is an entire budget day called Prinsjesdag, the third Tuesday in September, which is also the traditional state opening of parliament.

King Willem-Alexander delivered a speech today, written by the government, which outlined the policy plans for the coming period.

In his speech, the king highlighted that the Dutch government will work to get migration under control, will take action to tackle the tight housing market, and introduce measures to improve household incomes.

According to the speech, other key policy issues to be addressed include measures aimed at improving the quality and accessibility of healthcare and education, tackling climate change, energy supply and the tight labour market.

What the Dutch economy needs

The latest figures suggest that the country’s economy is recovering, with projected GDP growth of 0.6% in 2024 and 1.6% in 2025, according to the Netherlands Bureau for Economic Policy Analysis (CPB).

Spending is viewed as one of the key elements in boosting the Dutch economy. Details of the budget leaked in recent weeks, show that the government plans tax cuts to improve purchasing power.

The latest forecast shows that purchasing power will increase by 0.7% in 2025, which is less than previously expected.

Further leaked information showed that the government is planning to implement an extra bracket in income tax so that everyone pays less tax on the first part of their income, according to the Netherlands Times.

Expatriate workers’ tax breaks are going to be re-introduced, according to previous reports by Dutch newspaper De Telegraaf, they will have 27% of their salary free of tax for five years.

“The clear agreement for the long-term is that the government’s budget will remain in order through strict budgetary policy,” said the king.

“In the short-term, it is important that everyone gets a little more to spend as soon as possible. All groups can expect a plus in purchasing power next year, including workers with middle income, but also people with lower incomes and pensioners.”

On the other hand, a proposed VAT increase has sparked protests across the country, as it will hit a number of industries including hotels, publishers of books, sporting events, festivals and sports schools. The measure is expected to bring in €2.2bn euros to the budget from 2026.

The government has plans to tackle the tight labour market, as “from technology to public transport, from education to healthcare and from hospitality to horticulture, severe staff shortages can be felt everywhere,” said the king in his speech.

Another point made in the speech detailed how the government plans to create a more business-friendly climate in the country by imposing fewer rules, lowering the tax burden and providing extra funding for innovation.

To tackle housing problems, the government has a goal of building 100,000 new homes per year, “making an extra €5bn available over the next few years for that purpose, as well as a further €2.5bn aimed at enhancing access to new residential areas,” said the king.

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Budget cuts are also on their way

In order to keep a strict fiscal policy, the budget deficit is planned to be kept below 3% of GDP in the coming years, just as it is required from all EU countries, including the ones who want to adopt the euro. (The recent economic hardship across the bloc left some room for countries to go beyond this level temporarily.)

The Dutch government pledges to achieve the 3% and in order to do so, it is making structural cuts of €1bn in higher education, research, and innovation.

This has sparked a national debate, and three key advisory boards, including the CPB have said that this is short-term policy which will cost the country dearly in the future.

“The cuts are now creating financial space for government finances but may be at the expense of prosperity in the future,” CPB director Pieter Hasekamp told the Netherlands Times. “Research worldwide shows a clear link between spending on education and growth in prosperity.”

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In the following days, the budget will be debated in the lower and upper houses of the Dutch parliament.