Spending power is the big political hot potato at the moment

The four coalition parties have begun finalising their autumn budget and boosting spending power is top of the list of problems to solve, political commentators say.

Pressure on the government is mounting 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 four parliamentary party leaders met on Thursday to discuss possible measures, in their first meeting since the summer recess began.

And although sources told the Financieele Dagblad the meeting was ‘nothing out of the ordinary’, spending power is proving more of an issue this year, the paper said. ‘In a normal year, spending power discussions are about fractions of a percent, this year we are talking far more than that.’

The paper has put together a list of moves which the coalition could make to lighten the burden on households.

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, the paper said. 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.

Fuel taxes

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, the paper said. Higher wealth and corporate taxes could also be brought in.

In the meantime, the FD points out, the government has set aside €3 billion to reduce taxes, as was agreed in the coalition deal at the start of the year.

Whatever the government decides will only have a marginal impact, given that inflation is currently over 10%, the paper said.

But more will become clear next week, when the government’s macro-economic forecasting agency CPB publishes its latest figures, which form the foundation of the 2023 budget.