The Dutch government has raised the country’s minimum wage by 10 per cent, as lower paid workers grapple with the impact of the soaring cost of food and fuel and housing.
The measure, the centrepiece of an €18bn aid package to help households cope with rising inflation and energy prices, was unveiled in the budget on Tuesday.
King Willem-Alexander, who outlined the government plan in his annual Speech from the Throne, an address to parliament that precedes the budget, said: “It is a painful reality that more and more people in the Netherlands are struggling to pay their rent, grocery bills, health insurance and energy bill.”
Several European countries, including France, Germany, Italy and Spain have announced minimum wage increases, but the Dutch measure — a rise from €1,756 a month — is the highest jump.
Social benefits, including child allowances and pensions, will rise and income taxes will fall slightly to combat the surge in price pressures. Inflation hit 12 per cent in the year to August and is expected to remain high next year despite a cap on energy prices.
The Dutch government is joining many countries in imposing a windfall tax on firms extracting oil and gas, after thrashing out a deal with industry on Monday night.
EU governments in recent weeks have been locked in negotiations on how to structure an EU-wide windfall tax and price cap on energy companies and the Netherlands is likely to set the level in line with that.
Energy prices across Europe have surged following Russia’s invasion of Ukraine at the end of February. The budget also prolonged cuts on transport fuel duty until next July, costing €1.2bn.
The king acknowledged that the measures, aimed primarily at low- and middle-income households, could not prevent some from being worse off. “Even with a package of this magnitude, not everyone can be compensated fully for all the price rises,” he said.
To fund the package, corporation taxes will rise. The oil and gas windfall tax will raise about €2.8bn in 2023 and 2024 combined. Bumper revenues from the Groningen gasfield will also help fund the measures.
Finance minister Sigrid Kaag has also shifted spending from other departments, delaying plans to recruit more teachers.
The budget deficit will be 3 per cent in 2023, just within EU fiscal rules, with debt falling to 49.5 per cent of gross domestic product because of inflation.
Frank van Es, a senior economist with Rabobank in Utrecht, said the support for households could increase price pressures. “It is a quite expansionary budget that will drive up inflation,” he said. “They have overcompensated for the shock from energy prices.”
Rabobank expects 5 per cent inflation and just 0.2 per cent growth next year, against government forecasts of 2.6 per cent inflation and 1.5 per cent growth.
The Netherlands Bureau for Economic Policy Analysis, a government agency, has calculated that up to 1mn people are at risk of falling into poverty as a result of rising prices.
Source: Economy - ft.com
