The cost of life is rising rapidly and the call for the Cabinet and the coalition to intervene is increasing. But it will only become clear on Friday how massive the loss of purchasing power is and how much financial space there is for the Cabinet.
The coalition parties VVD, D66, CDA and ChristenUnie promised this week after consulting with the Cabinet that a “comprehensive package” was being worked on to alleviate somewhat the pain of declining purchasing power.
Cabinet also hopes to get help outside of politics. On Tuesday, after mutual consultation, some ministers called on employers to raise wages. “We can only solve this with each other, and also with the employers. There is scope for salary increases,” said Minister Karen van Genneep (Social Affairs).
Exactly what the Treasury stores depends on how the economy performs this year and next. The Central Planning Bureau (CPB) will publish these numbers Friday morning in its Macroeconomic Outlook (MEV), also known as the August Rest Estimate.
This estimate is central to budget negotiations between the coalition and the Council of Ministers for the coming year. It is still a draft version, and a detailed and final estimate will be published in Prinsjesdag (September 20).
Eyes on purchasing power and inflation
So it will be announced on Friday how high the national debt will be this year and next, how fast the economy will grow and how many unemployed we can expect. But eyes will mainly be on purchasing power and inflation estimates.
When the coalition agreement was drafted, the government assumed inflation of 1.8 percent for the year. In July that was more than 11 percent. “Purchasing power is a concern,” Prime Minister Mark Rutte said on Thursday.
For purchasing power, the CPB defines for each income group, source of income (workers, benefit recipients and retirees), family type (dual-income earners, singles and singles) and family composition (with or without children) what developments for this and the following year. The government must then act on this.
The Cabinet wants the measures to be as targeted as possible
Every year an attempt is made not to allow the purchasing power numbers to diverge too much, which in previous years was usually possible by managing some of the handles modestly. This is now different due to the massive loss in purchasing power due to higher grocery prices and higher energy prices. An additional 6.5 billion euros was already spent last year to dampen price hikes.
Low-income earners have so far received an energy allowance of 1,300 euros and everyone has benefited from tax breaks on gasoline and energy bills. Everyone in the coalition agrees that additional funds should be allocated for the coming year.
The government only wants to help groups that need it most in the most targeted way possible. Tax cuts aren’t for everyone. “For 2023, targeting will certainly be a big option,” Finance Minister Sigrid Kaag said in a discussion on purchasing power ahead of the summer.
On Thursday, it said Cage was considering “purchasing power structural reform” for next year. She cited higher wages and a higher minimum wage as an example. “This makes families more resilient to economic shocks.”
Middle income is also in trouble
The coalition looks not only at low-income people, but also at the middle classes, according to the parties. “I think it’s very important that we do something for them to cushion the blow,” VVD leader Sophie Hermanns said of the groups.
More and more families need money. The European Central Bank calculated in June that low-income groups and recipients in particular face financial risks as prices rise, but if prices remain high, this group will become larger and larger. In the worst case scenario, that’s 1.2 million households.
Where should all these billions come from and at the expense of who or what, is the big political question nowadays. The coalition parties will continue to negotiate next week. “Evil is in the detailsChristenUnie Gert leader Jan Segers said about this week.