Tuesday 22 September 2020

Budget Day without the pomp and ceremony, and with a mixed economic message

Royalty fans at the palace. Photo: Dem van der Wal ANP

The Dutch government will present its 2021 spending plans on Tuesday afternoon, but without the traditional pomp and ceremony which normally accompanies the event.

The king and queen will not drive to the parliamentary complex in a coach, and there will be no waving to the crowds from the palace balcony. But despite calls to stay away because of coronvirus, some royalty fans still gathered in front of the Noordeinde palace on Tuesday morning, hoping to get a glimpse of the king.

The main highlight – the king’s speech – has been moved from the Ridderzaal ceremonial hall to the Grote Kerk, to allow for better social distancing and there will be far fewer guests than on a normal Prinsjesdag.

As happens every year, many of the provisions of the budget have already been leaked. Here is what we know so far:

  • The economy will contract by 5% this year but will grow in 2021 by 3.5%, if there is no second lockdown.
  • Unemployment will reach 5.9% next year
  • Spending power will rise by an average of 0.8%, with people in work benefiting from a 1.2% increase
  • Healthcare staff will get a further bonus of €500 next year, on top of the tax-free payout of €1,000 in 2020 but no structural pay increase
  • The basic tax rate currently 37.35% may be cut by up to percentage point
  • The planned reduction in corporation taxes for large companies will not now go ahead, but small firms will have to pay less and all companies with net profit of less than €400,000 a year will fall under the lower tax rate.
  • The tax break for the self employed will be reduced in stages of €110 to €3,240
  • First time buyers will no longer have to pay a tax of 2% over the purchase price of their property – saving them some €4,000 on a home costing €200,000.

The spending plans will be presented to MPs later in the afternoon by finance minister Wopke Hoekstra, who will outline the financial constraints facing the government because of coronavirus, while announcing an increase in basic ministry budgets.

Unlike the financial crisis of 2008, when cuts were essential, this year the government wants to keep money moving, to speed up the recovery and strengthen the economy in the long term.

Hoekstra and economic affairs minister Erik Wiebes last week outlined plans for a €20bn investment fund which, the NRC said in its analysis, will help boost central government spending by some 11% this year.

Election

The 2021 budget must also be seen against the backdrop of the March 2021 general election. On Wednesday and Thursday MPs will debate the spending plans and, the Volkskrant says in its analysis, all will be looking to score points and set out their positions ahead of the vote.

This will be difficult in particular for the Christian Democrats (CDA) and Liberal Democrats (D66), whose leaders are both part of the current coalition and will have to defend government policy.

The king’s speech will be broadcast live on radio and television.

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