Analysis

Dutch Parties See Low Support Despite Higher Growth

The economy is growing again, but the ruling parties are still down in the polls.

Mark Rutte
Dutch prime minister Mark Rutte leaves his residence in The Hague, January 18, 2012 (Rijksoverheid)

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

According to the spending plan read out by King Willem-Alexander during the state opening of parliament, the Dutch economy will grow 2.4 percent next year. It would be the first time in a decade that the economy grows faster than 2 percent.

The windfall would allow €5 billion in tax relief, the monarch said, as well as higher spending on defense and health care.

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

Purchasing power

With the exception of pensioners and the unemployed, nearly all the Dutch would see their purchasing power increase in the next 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 it is far below the European average of 9.5 percent.

Tax reform

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 they couldn’t convince the others.

Next coalition

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

Elections must be held before March 2017. Given the Labor Party’s collapse in the polls and the absence of a left-wing majority, analysts expects the liberals will go into coalition with the Democrats and 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 wealth tax.