UPDATE DUTCH POLITICS: Budget Day 2024 – what can be done?

Traditionally, the King is first to present the plans in his annual King’s Speech (‘Troonrede’). In his speech, King Willem-Alexander highlighted the new government’s approach of what can be done – focusing on practical solutions and simplifying processes. He emphasized that policies should aim to provide people with more freedom and security, which will require a “different, service-oriented approach” to governance. He also pointed out that several key issues undermining public trust – such as migration, housing, environmental matters, and agriculture – can be traced back to a tangled system of regulations that has evolved over time. Simplification, he suggested, is crucial to addressing these challenges.

Some key points of the plans of the government – led by Prime Minister Dick Schoof:

• The cabinet wants to improve purchasing power by reducing charges for middle-income and vulnerable groups, mainly through income tax. It will also take measures to keep energy bills affordable.​
• Innovation and entrepreneurship are stimulated with tax relief for SMEs and investment in research and development to make the Netherlands competitive again.​
• There will be stricter rules to limit the influx of asylum seekers, with stricter enforcement of European external borders. There will also be substantial investment in defence. ​
• Major housing sites are being identified and €2.5 billion is invested in infrastructure for housing. ​
• Sustainability plans remain largely intact and the energy transition is being accelerated with additional nuclear power plants. The government says it will strive for a sustainable agricultural sector.

After yesterday’s presentation, a cycle of parliamentary debates will follow, including the ‘General Political Debates’ on 18-19 September and the ‘General Financial Debates’ on 1-3 October, which will focus on the main political issues, as well as economic and budgetary policies respectively. Moreover, the budgets of all ministries must be approved by the House of Representatives and the Senate.

Economy & Business Climate

• The government aims to keep the Netherlands among the top five most competitive countries by reducing regulatory burdens and improving the business climate.
• A new program will simplify laws and regulations, while the Business Climate Pact will address issues like taxation, physical space, and network congestion in collaboration with businesses and social partners, with progress tracked annually.
• The Room for the Economy program will tackle spatial economic challenges, including large business sites and future-proof business parks, with a €9.8 million investment in 2025.

Fiscal matters

• Contrary to earlier plans to abolish the expat scheme, starting in 2027, the scheme will be adjusted with a 27% deduction rate for five years. For 2025 and 2026, the rate remains at 30% for all new employees, with higher salary thresholds and transitional rights for those who applied before 2024.
• In 2025, the gift deduction for entrepreneurs will be abolished, and gifts will be taxed as profit distributions, though sponsorship and advertising costs remain deductible.
• The corporate income tax earnings stripping measure will see a partial reversal, raising the generic interest deduction from 20% to 25%.
• A new ‘qualifying entity’ concept in withholding tax will be introduced to prevent tax avoidance, while the dividend tax buyback facility for stock exchange funds remains under certain conditions.
• The generic interest deduction limitation in corporate income tax is widened from 20% to 25%, and the remission exemption for losses above €1 million is relaxed, making it easier for companies to reach agreements with creditors.
• Income Tax: The first income tax bracket for incomes up to €38,441 per year will be reduced to 35.82%. A second bracket of 37.48% will apply to incomes between €38,441 and €76,817 per year. Workers and pensioners will thus have more net income in 2025.

Competition & Internal Market

• The focus is on improving Europe’s competitiveness and internal market, for both citizens and businesses. Thus, through an internal market action agenda, the aim is to removing obstacles experienced by entrepreneurs, improving the application of internal market rules and strengthening the resilience of the internal market.
• The Letta and Draghi reports will influence the direction and policy choices for the single market of the future and competitiveness.​

Innovation

• The Future Fund promotes innovation by boosting funding and collaboration between knowledge institutions and SMEs, focusing on valorisation and increasing risk capital through programs like Early Stage Financing, Seed Capital, and the Dutch Venture Initiative.
• Invest-NL will receive an additional €1 billion to support innovative SMEs in later development stages.
• The National Growth Fund supports 51 projects with €11 billion aimed at sustainable growth, but it is being phased out, with a €6.8 billion reduction, including €5.5 billion by 2029.
• For an innovative economy, the aim is to spend 3% of GDP on R&D.

Foreign affairs

• The cabinet wants to strengthen trade relations with emerging markets in Asia and Africa, while the relationship with the US remains a cornerstone of foreign policy. The cabinet takes a balanced approach towards China, protecting economic security and seeking cooperation on global challenges (MoT BHO, p. 9). The evaluation of the China strategy is expected to start in 2025.​
• From 2028, the government wants to structurally save €1.6 billion on EU remittances .

Trade

• The government emphasises the importance of a level playing field and a reliable government for internationally operating companies, and is committed to international corporate social responsibility (IMVO).
• From 2025, €297 million will be cut from development aid, with the distribution of cuts in 2025 being proportional. Policy for further cuts after 2026 will be worked out in 2025, focusing on issues such as food security, water management and health. ​

Labor

• The number of civil servants and external hires will be significantly reduced. The budget for external hires will be lower from 2025 onwards. In 2025, €11.2 million will be spent on external hiring, down from €208 million in 2024.​
• The Temporary Workers Act aims to provide stronger protection for temporary and agency workers. Enforcement of the admission requirement is planned to begin on January 1, 2027, and in the meantime, extra inspectors will be deployed for current labor law enforcement after their training.

Industry & Energy

• In 2025, further efforts will be made to finalize tailor-made agreements with major industrial polluters.
• Companies will receive compensation for rising electricity costs, provided that at least half of the subsidy is invested in CO₂ reduction initiatives.
• The government aims to abolish the coal tax exemption for dual and non-energy use of coal by 2027.
• The government continues to support hydrogen production, import, and the development of transport and storage infrastructure.
• The government is focusing on the construction of four new nuclear power plants and is exploring the possibility of building several small modular reactors (SMRs).
• For the period 2033-2038, additional space will be allocated for offshore wind energy in a revision of the North Sea Program 2022-2027.
• The Gas and Mining Act will be amended for the further completion of gas production in Groningen.

Infrastructure & Mobility

• To keep the basics in order, this cabinet is embarking on the biggest infrastructure maintenance task ever. The annual maintenance budget for the RWS networks will grow from approximately €2 billion to €3 billion in the period up to 2030.
• A review of the National Climate Adaptation Strategy (NAS) will follow in 2025.
• Two subsidy schemes will accelerate the construction of charging infrastructure in business parks and at public charging points for trucks.
• From 2026 to 2029, the government plans to introduce a 25% discount on motor vehicle taxes for emission-free cars.

Healthcare

• According to the cabinet, healthcare has been under great(er) pressure for some time, and it is more difficult for employees to cope with the growing care. Also, the cabinet identifies unequal access to care.​
• The Cabinet has high hopes for AI and innovation to tackle these issues, investing €162 million in artificial intelligence.
• The Cabinet aims to halve the health deductible citizens pay in 2027 – leading to an expected increased demand for specialized care.

The full King’s speech (in English) can be viewed here.