Social partners divided over government budget

The Confederation of Netherlands Industry and Employers is largely negative about the government’s budget agreement which was published in September 2007. The Dutch Trade Union Federation responded with greater enthusiasm, albeit with some reservations. The employers are highly critical of increasing the financial burden on companies, while the trade unions would like to see greater investment in active labour market policies.

The main points in the Netherlands’ state budget agreement published in September 2007 concern the reduction of the financial burdens of minimum-wage earners and elderly people whose only source of income derives from the General Old-Age Pensions Act (Algemene Ouderdomswet, AOW). Another proposal relates to imposing lower unemployment insurance premiums to reduce labour costs for companies.

However, the financial burden will be increased in other areas, for example through raising the value added tax (VAT) rate from 19% to 20% and raising the level of additional tax on leased cars from 22% to 25%. The tax deductibility of pensions will also be limited to an income of €185,000 and the fixed rate for home-ownership will increase for homes worth more than €1 million. The tax discount for non-working partners will also be abolished sooner than anticipated.

Employer organisation reacts negatively

The response of the Confederation of Netherlands Industry and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW) to the cabinet’s budget agreement has been largely negative. The employer organisation believes that the government is panicking and that the measures will be too onerous on companies and the people who run them. According to VNO-NCW, this strategy is unnecessary, particularly since the economy is improving again.

VNO-NCW has considerable difficulties in accepting the curtailment of pension premium tax deductibility. This proposal targets the upper segment of the labour market and discourages companies from establishing themselves on Dutch soil. The organisation does not accept the prime minister’s salary as a yardstick for the business community. This would make the Netherlands an exception in a global comparison. Such a scenario is undesirable and, apart from affecting the position of companies headquartered in the country, would also have an impact on many other companies and entrepreneurs.

Moreover, special interest groups in the automobile sector are unhappy about the intended excise duty increases and reject the planned raise in additional tax on leased cars.

Trade unions more positive

Conversely, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) is moderately pleased with the budget agreement. FNV concurs with the measure promoting increased labour market participation, arguing however that the proposed policy could be even more dynamic. The trade union federation is calling for the swift implementation of agreements reached at the Participation Summit held at the end of June 2007 (NL0707069I, NL0704059I). As a result, the cabinet must release sufficient funds for wage cost subsidies, subsidised ‘participation-boosting’ jobs and a ‘Part-time Plus Taskforce’. This taskforce should devise strategies to encourage employees to work more hours. In this respect, FNV sees opportunities in upgrading small-scale part-time jobs, tax measures for lower income earners, a personnel policy directed at older employees and the improved integration of people with occupational disabilities.

In order to achieve the targeted level of labour market participation, the cabinet must swiftly implement the unemployment insurance premium cuts it promised. Furthermore, it is necessary to augment childcare facilities, along with extending the period of paid parental leave. FNV also highlights pending staff shortages in the health and education sectors as a result of the ageing population in the Netherlands; the cabinet must attempt to address this problem by improving salaries and investing in education.

As for salaries at the top of the scale, FNV is satisfied with raising the notional income level. However, the organisation criticises the manner in which the government aims to cut into pension rights by imposing tax surcharges on premiums. Pension premiums should remain unaffected; being the cornerstone of the present system, this must not be changed.

FNV also remains highly critical of the proposed changes in dismissal legislation (NL0701039I). The trade union federation continues to believe that the reforms will not help more unemployed people to find work, while employee rights will be significantly curtailed.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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