Response to the collapse of Rutte cabinet

The centre-right Rutte coalition cabinet collapsed on 23 April 2012 after weeks of talks over €12 billion of cuts. The right-wing Party for Freedom (PVV) withdrew its parliamentary support for the coalition in protest at some of the budget proposals, and new elections will now be held on 12 September. Nevertheless, a caretaker government has agreed a cost-cutting budget with the assistance of three opposition parties, a move employers have described as ‘essential’.

Background

The conservative, centre-right Rutte coalition cabinet collapsed on 23 April 2012. This minority cabinet consisted of the conservative-liberal People’s Party for Freedom and Democracy (VVD), with 31 seats, and the centre-right Christian Democratic Appeal (CDA) with 21 seats.

The coalition was able to command a narrow majority because it could count on parliamentary support from the Party for Freedom (PVV), with their 24 seats, even though they did not participate in government (NL1011019I).

The ultimate collapse of the cabinet was in response to proposals for a package of cutbacks totalling €12 billion to be carried out by 2013, aimed at reducing the budget deficit to 3% of gross domestic product. After seven weeks of negotiation, PVV still had serious reservations about the cutbacks and withdrew its support. As a result, the government resigned and national elections will be held on 12 September 2012.

Package of cutbacks

The cabinet’s rejected package covered a range of social and economic areas including pay, taxes, labour market measures and, controversially, the retirement age. One of the primary goals was that no salary increases higher than inflation should be allowed across the working population – the so-called ‘zero line’.

Efficiency measures were also proposed for all public bodies, coupled with cutbacks affecting the police force and ministry of justice, and increased value-added tax (VAT) and bank tax. The retirement age would also be raised sooner than previously agreed. Cutbacks were announced for the housing market, education sector and in the area of development cooperation.

Amended budget agreed

On 26 April, a caretaker government managed to muster enough support for an amended cost-cutting 2013 budget proposal to get the package through a parliamentary vote. Agreement was reached between the VVD, the CDA, and the three opposition parties Democrats 66 (D66), Green Left (GroenLinks) and the Christian Union (ChristenUnie).

• The new package includes the following proposals.

• Wages will be moderated. The ‘zero line’ for civil servants will be maintained in 2012 and 2013 ensuring no wage increase above inflation, while wage moderation will be encouraged in the private sector.

• An employers’ levy will be imposed temporarily on higher income brackets in 2013.

• The employers’ levy on excessive bonuses will be raised from 30% to 75%.

• New labour market measures include making employers responsible for paying unemployment benefits for the first six months after making a worker redundant.

• Steps will also be taken to make the labour market more flexible by limiting dismissal compensation, simplifying dismissal procedures, and offering training and programmes to help those who are made redundant find new work.

• The duration and level of unemployment benefits will remain unchanged.

• The retirement age will be raised gradually, starting in 2013 with a one-month increase. By no later than 2015, a retirement age of 66 would be reached and this will be raised to 67 by 2024. The retirement age would then be linked to life expectancy.

• Changes will also be made to the tax system, housing market and healthcare system.

Social partner response

The union response was divided. Only the Dutch Trade Union Federation (FNV) and the Federation of Managerial and Professional Staff Unions (MHP) responded initially. In a joint statement, they proposed that the spending power of wages must be maintained. They suggested that corporation tax, luxury goods tax and the tax rate for higher income brackets could be raised temporarily.

The Christian Trade Union Federation (CNV) did not sign the union statement, declaring it insubstantial.

The FNV and MHP alleged that as much as 80% of the proposed cutbacks of €14 billion would affect ordinary citizens and households, as had the first €18 billion round of cutbacks introduced in early 2011 by the then new government.

This somewhat brief response reflects the organisational problems within FNV that have recently placed the federation on the sidelines of social dialogue (NL1205029I).

The three unions did unanimously state that the cutbacks in special education and the provisions of the Work and Income According to Labour Capacity Act should be regarded as highly controversial. This means that even the outgoing government could scrap the proposals.

Pensions back on agenda

In an interview, FNV Chair Agnes Jongerius said she was enraged that the debate over the pension agreement had been reopened following such concerted efforts by the social partners to reach it (NL1007019I). The new proposals bring forward the extension of the retirement age to 66 in 2015, 10 years earlier than under the previously negotiated agreement.

She also said it would be antisocial to scrap the intention to spare taxing occupations, because workers entering early retirement now would lose an entire year’s income. What’s more, both measures would only generate limited income. She is therefore pleased that voters will have their say on this important matter.

Employers to face critics

The Chair of the Confederation of Netherlands Industry and Employers (VNO-NCW), Bernard Wientjes, expressed different concerns, focusing on the Netherlands’ reputation as a financially sound country. In the interests of preserving this reputation, he said, employers would be prepared to swallow the bitter pill of cutbacks, with the exception of the more rapid increase in the retirement age.

He said this would mean that VNO-NCW would have to stand up to the retail trade when it came to raising the VAT rate, and that the association would also face criticism in relation to the doubling of the bank tax. Mr Wientjes wants politicians to take responsibility for the cuts and clarify their positions in relation to the package of cutbacks.

He gave his support to the initiative taken by the VVD and CDA caretaker government in joining forces with opposition parties to reach agreement on the 2013 budget.

Marianne Grünell, University of Amsterdam