Purchasing Power Development: House Supports Cabinet Policy – Senate of States

On Tuesday 12 July, the Senate debated with Ministers Kaag (Finance), Van Gennip (Social Affairs and Employment), Schouten (Poverty Policy, Participation and Pensions) and State Secretary Van Rij (Tax and Benefit Administration) two amended budgets. Ministry of Finance and Ministry of Social Affairs and Employment (SZW). These budgets have been changed in the spring memorandum 2022. The debate focused on the Dutch’s reduced purchasing power and possible measures to increase purchasing power. After the debate, both budgets were adopted by the Chamber.

The concerns of the spokespersons who took part in the debate – GroenLinks, PvdA, SP, PvdD, 50PLUS, SGP and Fractie-Otten – relate to the consequences of high inflation and rising energy prices for more and more households. Ministers replied that measures have already been taken, such as 800 euros energy surcharge and another 500 euros for the most vulnerable households. Other proposals will follow at the end of August, and they therefore asked Parliament to await these proposals.

The seven spokesmen were not convinced, especially not because the timeframe proposed by the government means that the economic relief may come too late. They called on Parliament to take immediate action now to provide immediate relief. For this reason, three political groups – GroenLinks, PvdA and Fractie-Otten – voted against SZW’s amended budget. The Otten Group also voted against the financial budget. The spokespersons also made proposals with proposals for, for example, a one-off increase in child allowance and an energy allowance for students living at home, which is excluded from the current scheme. Two proposals were rejected, the other proposals are put on hold pending the government’s plans at the end of August.

The Van Rooijen et al proposal calls on the Cabinet to consult with pension funds to promote maximum indexation of funds. This proposal was discouraged by Minister Schouten. Fractie-Nanninga, Fractie-Otten, PVV, 50PLUS, Frentrop Frentrop and FVD voted in favor of the proposal.

The proposal from Schalk et al. asks the government to include a reduction in the income tax for low- and middle-income people in Tax Plan 2023 by reducing the first framework and finding coverage for this in the decision-making process in August. This proposal was discouraged by Secretary of State Van Rij. Fractie-Nanninga, SP, PvdD, Fractie-Otten, PVV, SGP, FVD and Fractie-Frentrop voted in favor of the proposal.

Held Movements

Senator Kox (SP) made three proposals. The first proposal calls on the government to improve purchasing power this year by structurally increasing the statutory minimum wage, linked to benefits and the AOW. The second proposal asks the government, in consultation with the housing associations, to set the rents at the price level from June 2022 to 1 July 2023. The third proposal asks the government to also allow students living away from home to be eligible for energy subsidies during this year.

A fourth proposal was made by Senator Van Rooijen, who asked the government to encourage pension funds to compensate for the lack of indexation from January 1, 2023. A fifth proposal that has been made comes from Senator Koffeman. The proposal asks the government to freeze interest rates on student loans at 0% and allow all income from government loans with negative interest to be included in the granting of student loans in favor of the proportional reduction in student debt.

These proposals have all been discouraged by ministers.

Senator Van Gurp (GroenLinks) said that the livelihoods of large groups of people are under severe pressure. The question is whether the SZW supplementary budget provides an answer to this. We should have strengthened the foundation and resilience of our society so that we could have prevented this. For example, by raising the minimum wage. So that we do not have to do do-it-yourself policies and take emergency measures. Van Gurp believes that this is not reflected enough in this changed budget. The budget does not provide a good answer to basic questions from society.

Senator Crone (Labor) said he has never seen so many people in liquidity problems. It will be a real problem in the fall, he predicted. Crone had simple suggestions to implement. These must then be completed by August in order to be able to help these people on time (in October): for example, through a significant increase in the minimum wage, a compensation of 500 euros and a one-off increase in child benefit. Finally, he asked if there will be an emergency safety net until at least January, when the promised help will be available.

Senator Kox (SP) said the Netherlands is facing a purchasing power crisis. He sees many people who are already in trouble or fear that they will soon get in trouble. What the government is doing is too little and therefore not good, Kox believes. He had three proposals: like Crone, a structural increase in the minimum wage, fixing rents and energy allowance for students living away from home. According to Kox, these are all solutions that the argument cannot be that the service systems of the service agencies cannot implement them.

According to Senator Otten (Fractie-Otten), the Netherlands very quickly ended up in a worrying situation in 2022, exacerbated by the war in Ukraine. Energy bills have exploded and grocery prices are skyrocketing. Everything becomes more expensive very quickly. One thing does not increase with it, and that is the disposable income of many Dutch people. Otten sees a widening gap between them haveand do not worry† According to him, the government has for far too long assumed that the poverty policy should be directed at the real poor and has therefore not realized that people with a higher income also run into problems. As far as Otten is concerned, work must pay more, and work more must also pay more. In addition, the tax system must be simplified and the allowances phased out.

Senator Van Rooijen (50PLUS) proposed that there should be a legal basis for the quality of legislation. As a result, new releases cannot take place without a legal basis, but must first be fully discussed in both chambers. Van Rooijen asked the Secretary of State if he could promise that retirees who do not (or no longer) work will also benefit from the tax cut. Because severe inflation also affects the elderly, he proposed extending the one-time relief of DKK 2 billion. He also asked if it is possible to award a tax-free check to the largest possible group per. October 1st. The Senate had adopted a proposal by Senator Van Rooijen on the IOAW, a benefit for people who become unemployed in old age after receiving unemployment benefits. He asked if the government would also implement the proposal.

Senator Schalk (SGP) was pleased that the government has followed up on his proposal earlier this year to increase the child allowance for several years. According to Schalk, more should be done for low and middle incomes, for example through tax rates in 2023. Is the government willing to do something for the group that falls just outside all schemes because they are just above the social minimum, Schalk asked. He also drew attention to single wage earners who pay up to 7 times as much tax as double-earners. Will they be punished with a higher tax burden if they choose their family? Eventually, he wanted to know how the gap between single and double incomes could be narrowed.

Also, according to Senator Koffeman (PvdD), more and more people are having trouble paying their bills. The dichotomy is becoming more and more disturbing. According to him, the one-time energy supplement of 800 euros is a nice gesture, but it does not provide structural solutions. AOW retirees are already having a hard time. That is why the PvdD today supported the Van Rooijen proposal. Excluding students as a group from the energy subsidy is not allowed, as some municipalities seem to do. What does the Minister think about this, Koffeman asked? In 2022, it became clear that it was not a good thing to abolish the basic subsidy. Starters who arrive at the bank with student loans are not welcomed with open arms. The 1 billion that the government allocated to students with a loan is nothing more than a blanket for the bleeding and does not help, he concluded.

Minister of Finance Kaag agreed with the House that a significant task awaits. The Cabinet is looking at how it can respond to the CPB’s advice to make households more resilient. She warned that they will not be able to remove all the pain. Employers also have a role to play. There is room for wage increases. It is especially important in times of crisis to stay the course, she concluded.

Minister Van Gennip for Social Affairs and Employment also shared Parliament’s concern. The government welcomes the fact that the municipalities see opportunities to do something about the energy supplement and allocate 500 euros on top of the 800 euros to the most vulnerable incomes. The government is calling on the social partners to raise wages. Some employers have taken that step. But there are still places where more needs to be done, Van Gennip says.

The spring memorandum contains the intention to bring forward the increase in the minimum wage. It will no longer be possible to increase this year, but it will be 2.5% per. 1st of January. If we want to do something different there, we have to decide to do it in August, Van Gennip says. She called the proposal by a number of spokespersons to increase the child allowance once ‘rather untargeted’. According to her, it is an expensive measure that particularly affects high incomes.

Minister Schouten for poverty policy, participation and pensions explained that the extra energy supplement of 500 euros took so long for most of the vulnerable because there are many tasks for the municipalities. The municipalities have said they would rather have a state scheme to make it easier. When the government found that there was no room for regulation at the national level, the municipalities said they would do it anyway. The government will pay a total of 1.4 billion euros to the municipalities for this.

According to Schouten, the group of students is very diverse, and it is not possible to distinguish between students living at home and students living away from home. She also told that there is a threshold for applying for energy supplements, for example for the elderly. She has asked municipalities to make information about the grant available through places where the elderly come, such as town halls. She called Van Rooijen’s IOAW proposal a rather specific question for the Cabinet. In August, the cabinet will look at the purchasing power of the elderly and will then discuss how they handle it.

Secretary of State Van Rij for Fiscality and the Tax and Customs Service said after Van Rooijen that there should actually be a law where one has a good legal basis and has made it legal in such a way that one presses the button when necessary. He said this is not yet possible this year because a proper implementation of the tax authorities can not be guaranteed at the moment.

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