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News | 15-05-2024 | 08:56
With the world in turmoil, 2023 is a year of economic turmoil. Inflation is high, interest rates are rising, and there is almost no economic growth in the Netherlands. The war in Ukraine has caused energy prices to soar. The Dutch government has taken a series of additional measures to prevent poverty from rising, such as setting energy price caps and raising the minimum wage by 10%. Despite the slowdown in economic growth, unemployment remains low. A sharp rise in wages has helped to ensure that many families have improved purchasing power in the second half of the year. The Netherlands’ eurozone balance was -0.3% of GDP at the end of the year, and the national debt was 46.5%.
These conclusions can be found in the central government’s annual financial report presented to the House of Representatives by Finance Minister Steven van Weyenberg on Accountability Day.
Mr van Weinberg said: “In 2023, the plans set out in the Government’s ambitious investment plan continued to bear fruit. The Government invested in addressing key challenges facing society, in areas such as equal opportunities, education, climate action and defence. Obstacles to achieving these solutions are caused by a range of factors, including staff shortages. We have also reached our limits in terms of our environment and physical space in our country. Despite this, the budget deficit was smaller than expected, the national debt is lower than in 2022, and investments and spending have yielded results.”
Government Finance
In 2023, not all budget funds were spent. This is partly due to shortages on the labour market. The government spent €13 billion less than expected, including €5.8 billion that has been carried forward to future years to ensure that these resources are used for the purposes originally planned. The remaining €7.2 billion is so-called “unspent”: funds that had not been spent by the end of the year. This unspentness mainly relates to the investment budget and complex issues such as welfare, the situation in Groningen and the nitrogen emissions crisis.
In total, the government spent 5.4 billion euros on supporting Ukraine in 2023. The money went towards providing military and humanitarian aid, as well as hosting Ukrainian refugees in the Netherlands.
The budget deficit for 2023 was much lower than expected. The 2023 budget memorandum estimated a deficit of 3% of GDP, but it ended up being 0.3%.
There are several reasons for this. First, actual revenues in 2023 (€19.1 billion) are significantly higher than estimated in the budget memorandum. This is a result both of policy changes, such as the reversal of the decision to reduce energy taxes to cover the costs of the price ceiling, and of positive economic developments, such as rising wages and profits, which translate into higher tax revenues.
The second reason is the lack of spending in 2023. Finally, local governments also have a budget surplus, as well as spending due to another budget year. At the same time, there are additional expenditures such as shelter, interest and energy price caps.
In 2023, eurozone debt is €480.7 billion, or 46.5% of GDP. This is lower than the figure estimated in the 2023 budget memorandum (49.5% of GDP). It is also lower than the levels of the past few years (51% in 2022 and 52.1% in 2021). In 2023, the Dutch national debt remains below the EU’s upper limit of 60% of GDP.
Financial Management
In the past year, the central government’s fiscal management has focused mainly on improving and completing support measures from previous years related to the COVID-19 pandemic and the energy crisis, as well as managing Dutch aid to Ukraine. According to the Netherlands Court of Auditors, the regularity of debt, expenditure and revenue in 2023 was 98.9%, 99.6% and 99.9% respectively. The regularity percentages continue to improve compared to previous years. This improvement is due to the additional efforts of all government departments. In addition, compliance with procedures for timely and correct notification to Parliament has also improved.
In 2023, the number of irregularities dropped from 44 to 36. Ministries worked together within a task force to strengthen financial management to address shortcomings. Although there are still too many procurement management errors in the complex contract award process, central government financial management is generally moving in the right direction. It goes without saying that taxpayers’ money must be managed well. In the year ahead, the government will continue to work to strengthen and enhance financial management across central government.
Incidental Supplementary Budget (ISB)
The number of temporary budget adjustments, called incidental supplementary budgets (ISBs), requested by the Chamber of Deputies has been significantly reduced. In 2023, eight ISBs were submitted, compared to 51 in 2022. This corresponds to spending of €2 billion in 2023, compared to €18.6 billion in the previous year. The main reasons for these ISBs are the war in Ukraine, energy compensation measures and the COVID-19 pandemic.
There are a variety of reasons for creating a contingent supplementary budget (an adjustment to the original budget), such as unexpected expenses or specific measures that require additional funds.
In 2023, the government launched a pilot program to further reduce the number of ISBs. To this end, the government adjusted the budget schedule around the Dutch budget day, thus bridging the gap between the first (spring memorandum) and second (autumn memorandum) supplementary budgets. The government is expected to present a plan aimed at further improving the budget process by the summer.
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