Deep valley, yet some optimism, these are the main points of the Millions Note

If not, the corona crisis could disrupt society even after next year. Nevertheless, there is reason to look to the future with some optimism. That is what Minister Hoekstra said when he presented the Millions Memorandum, next year‘s budget, to the House of Representatives. According to the Million Paper, there will be a recovery next year, but unemployment will rise.

Hoekstra added that we are going through a deep recession, that this is not a normal budget and that many figures are uncertain, but that the economic foundations are strong. Public finances are in good shape; we are climbing out of the valley and providing prospects The Finance Minister went on to say that the government is doing everything it can to minimise the damage to citizens and businesses.

Next year, the government will focus on maintaining jobs, supporting incomes, helping employers and limiting economic damage in the long term.

The Cabinet recognises that the corona crisis is a complex and unpredictable time. Only a year ago it was thought that there would be a surplus in the budget this year, now a deficit of 7.2% is assumed.

Expenditure brought forward

According to Hoekstra, the Netherlands can cushion the blow and the Millions Memorandum is more than just a response to the corona crisis. He underlines that the promised extra investments in defence, police and education will be maintained. Some of those investments already announced earlier, also in the field of rail, water and roads, will be brought forward.

There will be a EUR 1 billion reduction in the burden on citizens. The lowest rate of income tax will be lowered, while the tax rebate on labour will rise. In addition, the reduction for the elderly is being increased, as is the child budget for families with more than two children. The tax deduction for self-employed persons is being phased out more quickly.

Rent

The reduction in profit tax for large companies will not go ahead, but for smaller SMEs with profits of up to EUR 400 000.

Furthermore, the transfer tax for starters on the housing market will disappear. It is one of the measures with which the government wants to restart housing construction. The landlord levy for housing corporations will be permanently reduced by 200 million euros.

The government will meet certain groups of tenants. These are people whose rent is too high in relation to their income; they will be given a statutory right to a rent reduction. 260.000 tenants will benefit from this.

Coronabonus and terms and conditions of employment for health care

In the budget, the Cabinet stresses its continued commitment to controlling the coronavirus. There will be extra money for more testing capacity and for more places in the intensive care units of hospitals. Care staff can count on a second ‘coronavirus bonus‘.

In addition to the one-off payment of โ‚ฌ1,000 promised for this year, healthcare workers can count on a bonus of โ‚ฌ500 next year. The SER has to analyse whether anything needs to change in the employment conditions of care workers.

The Cabinet is taking into account an increase in the healthcare premium against medical expenses to about 123 euro per month, which is about 5 euro more than at present. The final premiums will be set by the insurers in November.

Defence

In the area of justice, extra money is going to prisons, TB clinics and juvenile detention centres, among others. The budget for defence is also increasing and the share of defence in gross domestic product is rising to 1.48%, still well below the NATO standard of 2%.

An investment fund to boost economic growth was announced last week. The government is allocating EUR 20 billion over five years for this purpose.

Purchasing power, national debt

On average, consumers get to spend a little more. According to figures from the Netherlands Bureau for Economic Policy Analysis (CPB), an average household will gain 0.8% in purchasing power next year. Working people stand at a plus of 1.2 percent, benefit recipients at 0.5 percent and pensioners at 0.4 percent.

However, the uncertainties surrounding the corona crisis have left these percentages with even more question marks than normal. Despite the more lenient measures for pension funds, the Cabinet is assuming that a number of funds will also have to be cut next year.

According to the CPB, the economy will grow by 3.5% next year and there will be a 5% contraction this year. The CPB expects unemployment to reach 5.9% next year; that is 545,000 people.

In addition, the Cabinet’s calculators expect a budget deficit of 5.5% next year. That is less than this year, but in the four years before that there were still surpluses. Next year, public debt will rise to more than 60% of gross domestic product.