Council of State critical: ‘Be honest, billions in spending will hurt someday’

The Cabinet is insufficiently transparent about the costs of the corona crisis, according to the Council of State. This is particularly important at a time of crisis, according to the independent advisor of the government. “Nobody talks about what it all costs,” says Vice-President Thom de Graaf.

In the annual report, the Council of State judges that there is insufficient insight into the budgetary consequences of this crisis and the support packages. “It seems as if nothing is hurting now,” says the Vice-President. That is why, according to him, the Cabinet should be more transparent about what today‘s billions in expenditure mean for the next generation, or for the burden increases in the future.

De Graaf understands that special measures are needed in times of crisis, but says that this is also the time to identify the consequences of current political choices.

Accumulated debt

According to the Council, the fact that public debt is now rising above the limits of the European budgetary agreements is understandable. Moreover, it is in line with European rules, which may now be applied more flexibly on a temporary basis.

However, this is something that needs to be discussed now. “At the moment, no one is talking about the fact that we will ever have to pay this back,” says Frank de Grave, member of the Council of State. “The democratic debate can only be properly conducted if certain agreements are made on how to deal with this public debt

Incidentally, the Council itself would find it unwise to allow public debt to rise to a level such as it is in France and Italy over the next few years. According to the Council, the political decision should be to return to a budget deficit of 60% of gross domestic product within a few years. “Then you will have buffers for the next crisis,” says Vice-President De Graaf.

Doomsday scenario

Furthermore, the Council of State lacks an elaboration of the scenario of a second wave in the memorandum of millions. This may be a worst-case scenario, but it is not inconceivable. Figures from the Netherlands Bureau for Economic Policy Analysis show that if there really is a second wave, the impact on the economy will be even greater. More companies will then go bankrupt and hundreds of thousands more people will lose their jobs, according to the CPB.

The Council of State believes that the memorandum of millions does not clearly describe what a second wave would do to public finances. De Grave therefore pleads for a ‘stress test‘ for the Dutch budget. “Start that now”, says De Grave, then you can make preparations now.

No coherence in investments

The Council of State supports the fact that the Cabinet is now choosing to invest too. However, the many proposals that are now on the table lack coherence. There have already been a number of initiatives, such as InvestNL and Invest International. On top of that, the National Growth Fund (an investment fund for which the government is going to release 20 billion over the next five years).

With regard to all these investments, the Council still has questions such as: what is the overall picture, where is the cohesion, why has variation been chosen and what about the implementation?

“The vision on what should happen with the money is lacking”, says fellow councillor Van Zwol. Despite the fact that the Council has been advising the cabinet to invest for some time now, in his opinion it is not ‘the more the better‘. “It’s about quality