Early budget agreement signals a likely Dutch Liberal-Labour coalition

Wed, Oct 3, 2012, 01:00

THE LIBERALS and Labour, the two parties that topped the poll in the Dutch general election last month, have taken a major step towards forming a new coalition government by reaching agreement on a budget for 2013 much more quickly than expected.

The budget, which led to the collapse of the outgoing minority coalition, has been hugely contentious because it aims to make €13 billion in austerity savings – essential if the country is to bring its budget deficit below 3 per cent of gross domestic product, in line with euro zone regulations.

After right-wing leader Geert Wilders withdrew the support of his Freedom Party from the outline budget in April, it was forced through parliament by an ad-hoc group of five parties, including Dutch prime minister Mark Rutte’s Liberals – but not Labour.

At the time, newly appointed Labour leader Diederik Samsom said it was disproportionately weighted against the less-well-off. He argued the EU’s 3 per cent deficit limit “should not be treated as if it were written in stone”.

However, as Mr Rutte and Mr Samsom appeared together at matching lecterns, already looking like coalition government leaders, the main budget differences between their parties had already been resolved, they said – though they warned this did not mean that a coalition deal was guaranteed.

Some of the proposals that would have been most unpalatable for Labour have been abandoned. These include removing the tax-free status of expenses for travelling to work, the so-called “commuter tax”, scrapped at a cost of €1.6 billion.

A controversial plan to charge patients €7.50 a day for hospital stays has also been dropped, as has a proposal to charge higher fees to students who take longer to complete their degrees, known as the “slow student tax”.

Those costs will now be offset, Mr Rutte and Mr Samsom agreed, by increasing the state pension age to 66 by 2018, earlier than expected, and by doubling the tax on insurance premiums. The extra expenditure comes to €2.35 billion, while the savings amount to just over €2 billion, they said.

Asked about the progress of the wider coalition negotiations, Mr Rutte said they were “going well” – while a conclusion was not imminent, neither side wanted them to go on “any longer than necessary.

The Liberals and Labour are expected to try to broaden any two-party deal to include the social democrats, D66. They may also attempt to include outgoing junior coalition partners the Christian Democrats, trounced at the polls, in a bid to restore popular finance minister Jan Kees de Jager to a new cabinet.