Dutch Parties See Low Support Despite Higher Growth

Optimistic economic growth forecasts may not restore Dutch confidence in the two ruling parties.

King Willem-Alexander of the Netherlands on his way to the state opening of parliament in The Hague, September 16, 2014
King Willem-Alexander of the Netherlands on his way to the state opening of parliament in The Hague, September 16, 2014 (Ministerie van Defensie)

The Netherlands’ ruling parties promised voters relief from austerity on Tuesday. But the return of economic growth after years of belt tightening may be coming too late to restore confidence in Mark Rutte’s coalition government.

According to the spending plans read out by King Willem-Alexander during the yearly state opening of parliament, the Dutch economy will expand 2.4 percent next year. It would be the first time in more than a decade that the economy grows faster than 2 percent. The windfall would allow €5 billion in tax relief, the king said, as well as higher spending on defense and health care on a total budget of €260 billion.

The government’s deficit would fall from 2.2 percent of economic output this year to 1.5 percent in 2016.

With the exception of pensioners and the unemployed, nearly all of the Dutch would see their purchasing power increase in the upcoming fiscal year. For the lowest paid, the measures would amount to 5.3 percent more spending power.

Unemployment, at 6.7 percent, remains relatively high by Dutch standards but is far below the European average of 9.5 percent.

Absent from the king’s speech was an announcement of tax reform. Although he said taxes on savings up to €125,000 would be lowered while those on higher savings will be raised, there was no promise of a more comprehensive overhaul, despite the ruling parties’ efforts to find parliamentary support for it.

Without a majority in the upper chamber of parliament, Labor and Rutte’s liberals would have needed the support of centrist opposition parties to enact tax reforms. The two had proposed reducing labor costs to encourage hiring and raise capital and sales taxes to make up the difference but couldn’t convince the others.

In the lower house, the government’s majority of 76 would be reduced to 43, according to the latest Ipsos poll. The centrist Democrats and the nationalist Freedom Party would both see their numbers go up in the 150-seat legislature.

The next election can be called no later than March 2017. Given the Labor Party’s collapse in the polls and the absence of a left-wing majority, analysts expects the liberals will next go into coalition with the Democrats and the Christian Democrats. The three most recently governed together from 2003 to 2006 and would be able to reform the tax code without taking into account Labor’s hesitations about lowering costs for employers and its insistence on raising the tax on capital.