The purchasing power of low-income households will be hardest hit by the new government plans, the Netherlands Bureau for Economic Policy Analysis (CPB) reports. On BNR Nieuwsradio's economists’ panel, Casper de Vries, Professor Emeritus of Monetary Economics at Erasmus School of Economics, discusses this with Piet Rietman (economist and former director of the FNV trade union) on the Dutch radio broadcaster BNR Nieuwsradio.
Calculation of Cabinet plans
According to the CPB, purchasing power will decline in all income groups compared to a scenario without policy changes. This is mainly due to the increase in the mandatory deductible and a reduction in the healthcare allowance. These costs weigh more heavily on low incomes, as they consume a larger proportion of income. De Vries questions if this is best for society. He is also not in favour of a substantial reduction in the mandatory deductible as envisaged by the previous government. He believes that the financial incentive is important in order to prevent unnecessary healthcare expenditure.
De Vries also argues that the labour sector is relatively heavily taxed, while capital is spared. He sees a flat tax in box 3 as a better way to stimulate innovation. ‘You are taxing people who earn higher returns because they take a lot of risks. That is the stupidest thing you can do,’ says De Vries.
The state pension age is also rising due to increasing life expectancy. De Vries says this is inevitable in order to keep pensions affordable, but wonders whether the agreements in the pension agreement should already be abandoned. He also advocates timely retraining for people in heavy occupations.
Donald Trump's import tariffs
Finally, Trump's announced import tariffs are discussed. De Vries believes that Europe should stay on the course and not retaliate immediately. He emphasises that the greatest costs of import tariffs usually end up with the country that imposes them. If Trump violates agreements, he believes that Europe can still intervene later. As far as he is concerned, Europe's priority lies in strengthening internal competition and stimulating innovation.
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You can listen to the full episode of the BNR Nieuwradio economists' panel, 23 February, here (in Dutch). For more information, please contact Ronald de Groot, Media & Public Relations Officer at Erasmus School of Economics: rdegroot@ese.eur.nl, mobile: +31 653 641 846.
