New government to make social security cutbacks

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In May 2003, a new coalition government of the Christian Democrats and two liberal parties, VVD and D66, took office in the Netherlands. The parties' coalition agreement provides for major cutbacks in public spending, largely targeted on social security expenditure. The trade unions are fiercely opposed to the proposed measures.

Following the general elections held in January 2003, coalition discussions were held between a number of constellations of parties (NL0302101N), with a coalition between the Christian Democratic Appeal (Christen Democratisch Appèl, CDA), the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) and the social liberal Democraten 66 (D66) finally emerging (NL0305101N). The three parties hammered out a coalition agreement in May and a new government, again led by Prime Minister Jan-Peter Balkenende, was sworn in on 27 May.

The coalition agreement outlines a package of cutbacks – mainly in the area of social security – aimed at achieving a balanced state budget by 2007. Of the EUR 13 billion in economies to be made between 2004 and 2007, at least half will be obtained from cuts in social security and civil servants’ wages. For example, the unemployment benefit threshold will be raised, labour market reintegration budgets will be reduced and any rises in benefit payments combated. The linkage of social security benefits to civil servants' wages will be amended, with the result that benefit levels will fall in relative terms. The scope for public sector pay rises will be reduced by 1% a year compared with present plans, and increases in the minimum wage - and thus benefits - will follow the negotiated pay of public sector workers. Healthcare expenditure will be reined in by limiting the scope of the healthcare insurance 'package' and introducing an annual 'own-risk' contribution of EUR 200 (NL0303103F). Furthermore, subsidies will be trimmed and the number of civil servants will be cut.

The only two areas earmarked for increased investment are education and physical infrastructure. Apart from an increased tax credit for working parents with children who have not yet left home, the coalition agreement means that citizens will have to bear a greater burden as a result of the proposed cutbacks in healthcare, including another nominal premium increase, along with the abolition of tax advantages for early retirement schemes, and the limitation of mortgage interest relief on the surplus value of privately owned homes. Share-option schemes and bonuses for managers in the business sector will also be subject to regulation (NL0305102F). However, companies will largely be spared from an increased burden and employers' organisations state they are satisfied with the coalition agreement.

The abovementioned proposals are only part of the full package of proposed measures, set out in a coalition agreement which appears to be more detailed than most. Other cuts will affect rent subsidies and education relief, while the household energy tax will increase. Measures affecting unemployment benefits under the Unemployment Insurance Act (Werkloosheidswet, WW) and especially benefits under the Occupational Disability Insurance Act (Wet op de Arbeidsongeschiktheid, WAO) (NL0207103F) have been fiercely criticised by both the trade unions and opposition parties. The new government intends to broaden the gap between earnings from employment and unemployment benefits, as well as limiting access to unemployment insurance schemes by setting a longer employment record as an entrance requirement. Concerning occupational disability, the proposal outlines that people under the age of 45 already receiving disability benefits should undergo medical reassessment. If such individuals are not found to be 100% unable to work due to disability, they will in future receive a proportionately lower supplementary benefit in line with their assessed level of fitness for work. The CDA’s rank and file membership is critical of the proposed measures affecting disability benefits in particular, being concerned about the message that this sends in terms of the party’s social image.

Finally, the coalition agreement calls on the private sector social partners to ensure that their collective agreements fully reflect the pay restraint to be imposed in the public sector, and states that the policies outlined in the coalition agreement will reduce the upward trend in private sector pay by 0.6%. The document also calls on the social partners to pay specific attention to training and innovation, to 'age-aware' personnel policies, to the need to create jobs (especially for young people) and to the long-term affordability of pensions.

The two largest trade union federations are united in their condemnation of the proposals concerning disability benefits and social security. They see them as being 'antisocial, morally objectionable and unacceptable', and action to oppose them is already being planned. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), which considers the government’s proposals unjustifiable, sees the coalition agreement as disadvantageous to the weakest parties in society and wants to take protest action with patients, civil servants and (potential) benefit recipients. The Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV), believes that the government’s plans will undermine the fabric of social security built up over the years. Despite both federations being highly critical, they are nonetheless seeking to maintain sufficient room for negotiation and consultation with the new government. It is expected that the trade union movement will support the wage moderation envisaged by the government only if the details of the proposals on disability benefits are softened.

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