Ministers look to employers to boost spending power as well

The government is concerned about the impact of soaring fuel prices and inflation on spending power but is looking to employers to help ease the burden by raising salaries, ministers have said.

Officials from the finance, economic affairs and social affairs ministries met for talks on Tuesday morning about the income crisis, with one month to go before the presentation of the 2023 budget.

‘Extraordinary times demand extraordinary measures,’ social affairs minister Karien van Gennip told reporters after the meeting. ‘A large part of the measures to restore spending power must come from wage rises. That is what is needed and there is room to do so. I expect employers to show responsibility.’

Finance minister Sigrid Kaag said that higher salaries would be a ‘structural solution’ to the problem. ‘Not everything can come from government,’ she said. Cutting taxes in the current tax year would be difficult she said, adding that ‘we are looking at 2023’.

Cabinet sources told broadcaster NOS the minister is looking at a permanent solution, rather than a one-off measure.

Pressure

Pressure is mounting on the government to tackle the soaring cost of gas ahead of the winter, while food prices have risen almost 20% and inflation remains at record levels. The coalition will present their 2023 spending plans on the third Tuesday in September.

The government’s macro-economic advice group CPB will publish its latest forecasts on Friday, and these will be used to determine the direction the cabinet should move in.

For example, the minimum wage, which is being put up by 2.5% a year for three years, could be increased by 7.5% in one go. Income tax could also be cut, but that would be expensive, given that shaving just 0.1 percentage point from the lowest rate would cost €400 million.

Lower taxes on fuel, electricity and gas, which are due to expire in January, could also be extended for a longer period, but this too is not only expensive, but would conflict with EU rules on state support. Higher wealth and corporate taxes could also be brought in.