Montesquieu Institute: from science to society

Odysseus and the Dutch budgetary challenges

Thursday, December 20 2012, 12:57

DEN HAAG (PDC) - 'Budgeting: a method to worry before money is spent, instead of afterwards’. These are the words of the French philosopher Voltaire, quoted during the sixth and last lecture of the lecture series of the Montesquieu Institute. Corina den Broeder, head of the Budgetary Division at the Ministry of Finance, used this quote to define how The Netherlands tries to stick to their budget. The new Dutch government strongly uses financial cuts to keep its head above the miserable economic waters.

Den Broeder mentioned that The Netherlands Bureau for Economic Policy (Centraal Planbureau; CPB) also notices what the Dutch government is going through. The Netherlands are facing the consequences of the euro crisis also, which translates its findings in the financial cuts calculated in the coalition agreement.  With the formation of a new parliament, the CPB forecasts the economic outlook, so an overview of their expenditures and retrenchments can be set up in the coalition agreement. Moreover, she explained that the permanent loss of GDP, government balances and government debt are budgetary challenges for not exceeding the budget, which has been agreed on in the coalition agreement.  

Dick Kabel, head of Fiscal Policy – Directorate General on national Budget of the Ministry of Finance, stressed that the government should not include additional revenues in the expenditures: the so-called Zalm norm. He illustrated this budgetary framework by using Odysseus’ approach to resist the tempting sirens by fastening his self to the mast of a ship. ‘How to stay on track in a world full of temptations’ he said. Income windfalls should not be used in the expenditures in order to establish a fixed expenditure framework during the entire government period. However, this Zalm norm has to take various factors in account, such as the analyses of the CPB, the European standards for budget and sovereign deficits, changes in circumstances, previous budgetary approaches and implementation issues. This will be checked on an annual basis, given the fact that not exceeding the budgetary ceiling in times of economic misery is quite difficult.

All in all, Corina den Broeder and Dick Kabel covered why the Dutch government has to take restrictive measures when it comes to its governmental expenditures and that these measures are registered in the coalition agreement.  Essential questions were inquired from the audience, given the fact that the affairs concerning the matter of forming a coalition agreement and taking budgetary restrictive measures are quite complicated.