Budget Memorandum: budget surplus in 2008

Newsrelease | 18-09-2007

The economic and financial situation in the Netherlands
Why measures now?
Ten measures in 2008

The Budget Memorandum 2008 shows a surplus being reached again in 2008. It spells out the objectives of the coalition agreement. It also incorporates the additional measures agreed to ensure sound government finances from 2011. Moreover, arrangements have been made to ensure that the purchasing power of the lowest-income groups will not be affected in 2008. This Budget Memorandum also defines the financial latitude and budget rules for the government’s term of office thereby ensuring that the government’s ambitions of growth, sustainability, and solidarity fit within the objective of realising a structural budget surplus of 1% of GDP by 2011.

The economic and financial situation in the Netherlands

With a booming economy, the Netherlands is one of the most prosperous countries in the European Union. In 2007, the economy is expected to grow by 2¾ per cent. Despite the recent unrest in the financial markets, the economy will remain strong in 2008, with an anticipated growth of 2½% of GDP.

Public finances have also improved. Following a temporary dip in the 2007 EMU-balance, 2008 is expected to once again yield a budget surplus of 0.5% of GDP. This reflects an improvement of the GDP of almost 1% in the space of one year. The budget will continue to show a surplus over the next 4 years.

Table EMU-balance 2007-2011 (in % GDP)

	2007	2008	2009	2010	2011

Actual EMU-balance	-0.4	0.5	0.6	0.7	1.0
Structural balance	-0.3	0.4	0.8	0.9	1.1

Debt will amount to 45% of GDP in 2008. The EMU-debt is expected to be reduced to less than 40% of GDP in 2011 (39.2%), the lowest in more than thirty years. The outlook for the Dutch public finances is better than average for the Eurozone. This applies to both the budget balance (Eurozone -0.8% of GDP) and the debt (Eurozone 65% of GDP).

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Why measures now?

The government is taking firm measures in order to be able to realise its ambitions and objectives defined in the coalition agreement. With the economy booming, now is the time to implement these measures. Moreover, the cabinet has taken a number of measures in addition to the coalition agreement, which from 2011 will help cover the costs of the ageing population, and therefore contribute to the welfare of future generations. Where possible, the plans also ensure that lower-income groups will not be affected in 2008. In addition to a substantial package of measures combining extra investments and easing of the tax and premium burdens, this also involves cutbacks and increases in the tax and premium burden.

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Ten measures in 2008

Growth, sustainability, solidarity and respect are central in the government plans.

Commencement neighbourhood approach
Extra funds for peace operations and crisis control operations
Extra funds for research and social innovation programmes
Introduction environment-specific measures: taxes on packaging and airline tickets
Energy-saving measures
Introduction compulsory work/education programme up to age 27
Efficiency measures in healthcare
Extra funds to tackle juvenile crime
Phased introduction free school books
Increase of earned income tax credit