Social partners sceptical about new government's programme

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On 15 September 1998, the new government coalition in the Netherlands presented its policy programme for the next four years. The coalition proposes an increase in the burden of taxes and social security contributions for companies and citizens, despite having agreed on a reduction in summer 1998. The tone is low-key: economic growth has passed its peak and crises in the world economy call for a more cautious approach. The social partners' first comments were even more critical than their initial reaction to the coalition agreement.

In her traditional speech on the third Tuesday in September, the Queen of the Netherlands read out the new governing coalition's statement of intent for the period 1998-2001. The government also presented its new Budget. The new "Purple II" coalition - once again comprising the Labour Party (PvdA), the Liberal Party (VVD) and the Liberal Democrats (D66) - indicated its intention to continue along the policy lines of the last four years. An emphasis will be placed on the creation of jobs, a further reduction of the budget deficit and a reduction in taxes and social security contributions in 2001. The social partners' initial response was no less critical than their reaction to the presentation of the coalition agreement in summer 1998 (NL9807190N). Their comments focused on: the estimates for economic growth and the subsequent opportunities for the development of new policy; the expected low increases in pay and; the partial privatisation of the Disability Act (Wet op de arbeidsongeschikheidsverzekering, WAO) and the Unemployment Benefits Act (Werkloosheidswet, WW) (NL9806184N).

The president of the largest trade union confederation, Federation of Dutch Trade Unions (Federatie Nederlandse Vakbeweging, FNV), was one of the most vocal critics of the new coalition's plans. President Lodewijk de Waal castigated the coalition agreement as lacking in substance, vision and ambition. The FNV called for increased government investment in social security, the environment, education and healthcare, and for additional financial resources to alleviate poverty. Mr De Waal threatened that the FNV will be seeking closer alliances with the opposition. With the current left-wing majority in the Chamber - the largest left-wing party, the Labour Party, is part of the ruling majority - this is certainly no easy option, but it cannot be ruled out nevertheless. Employers are also expecting a possible confrontation. The largest employers' association, the Confederation of Netherlands Industry and Employers (VNO-NCW), believes that the coalition has not sufficiently adapted its policy to meet current economic challenges, given the proposed increases in government spending, the rising burden of taxation and social security contributions and an unchanged budget deficit.

Privatisation of social security

Employers and employees have repeatedly expressed their common view that the Disability Act and the Unemployment Benefits Act should be entirely privatised (NL9807188F). In the summer of 1998, the Social and Economic Council (Sociaal Economische Raad, SER), an important advisory body composed of employers' and employees' representatives, put forward a unanimous recommendation on the subject. The Council is of the opinion that the privatisation that has been implemented in the administration of the Disability Act and the Unemployment Benefits Act should be followed by further privatisation regarding the adjudication of claims. The Council envisages the social partners in a supervisory role.

In the final weeks of the previous cabinet, the Minister of Social Affairs proposed that adjudication should remain in public hands. The new government has accepted the proposal. Ironically, it is the former president of the SER, Klaas de Vries, who has had to defend this policy in his capacity as the new Minister of Social Affairs, not only in the Second Chamber, but also in the context of broader discussion with the social partners. Mr De Vries now claims that the social partners' call for further privatisation is a purely organisational matter, aimed at regaining their erstwhile influence over social security. The Minister says he will do everything within his power to ensure that they regain this influence over the area of claims adjudication.

Margin for wage increases

In setting its Budget, the government has taken into account a 1.5% wage increase margin over the coming years. This raised quite a few eyebrows, and not only amongst employers and employees: 1997 saw competitive - government endorsed - collective agreements in the public sector that amounted to an average 3% annual increase in wages, and held the promise of another 3% increase in the coming year. Wage demands for new collective agreements have also breached the 3% mark in other sectors. Social security benefit payments will also rise as they are linked to wage increases. In other words, state benefits, and wages in the healthcare, education and public administration sectors will exceed the estimated government Budget. To deal with the potential financial setbacks that could result, the coalition took these matters into consideration when drawing up the Budget. At present, the government is calling for wage moderation and has made substantial cuts in Disability Act and Unemployment Benefits Act expenditures. The government's policy statement designates financial windfalls for dealing with these expected setbacks, despite the coalition agreement's pledge to give priority to extra investment in education and healthcare.

Economic growth

Projected economic growth and expenditure of the revenue that this is expected to generate is a further point of contention for the social partners, and the employees' representatives in particular. Once again, the "Purple II" coalition follows in the footsteps of the previous coalition, taking a growth rate of more than 2% as the starting point for its policy. This would have been a realistic assumption four years' ago, but given 1997's 4% growth rate and a projected growth rate of 3% in 1998, this figure is now open to question. The recent economic turbulence on world markets has made growth projections for 1999 and beyond increasingly uncertain. Potential international calamities notwithstanding, a cautious growth scenario forms the broadly endorsed basis for policy in the Netherlands, as the SER recommendations on socio-economic policy for the medium term illustrate (NL9806183F).

However, there is a need for policy agreements on the issue of such additional revenue. The trade unions have expressed their disappointment over the allocation of such revenues towards financing possible budget deficits and the easing of the burden of taxation and social security contributions from 2001 onwards. The VNO-NCW employers' organisation is particularly incensed about this delay; not only has the promised reduction of the burden of taxation and social security contributions been postponed, but it will also be preceded by an increase in the burden for companies and citizens over the coming two years. In VNO-NCW's opinion, the coalition has failed effectively to adapt its policy to the current economic challenges.

Commentary

The coming years will be a test of the "Purple II" coalition's ability to sustain effective dialogue and the relationship of mutual trust its predecessor built up with the social partners. After years of pay moderation, the continuing strength of the economy has prompted higher pay claims from trade unions. The repercussions of these demands will be felt well into 1999. With economic growth on the decline, the question is whether or not the unions are still inclined to play the role of a "responsible partner". This will require confidence in government policy: if the coalition invests in the Netherlands' "social infrastructure", it will be easier for the unions to accept their former role. The same goes for the employers' organisations, although the nature of their demands differs substantially. They are also seeking to continue in their role as "responsible partners" to the cabinet, but demand that the government fulfils its promise to reduce the burden of taxation and social security contributions. It remains to be seen whether the government's policy over the next two years can instil a sufficient level of confidence amongst the employers' organisations for them to provide the demanded "credit".

As FNV president Lodewijk De Waal pointed out, the "Polder Model" - the Netherlands' successful consultation-based economy (NL9710137F) - is mainly a matter of faith: it works as long as people believe in it, and people believe in it only as long as it works. It is now up to "Purple II" to lay a groundwork of trust in the consensus economy. Concerted efforts in achieving mutual goals and strict accountability for one's promises are the raw materials for such a foundation. One such mutual goal is an increase in the number of jobs, an issue to which the new coalition is highly committed. One might ask whether this will be sufficient to repair the breach in faith caused by the government programme. (Marianne Grünell, HSI)