Hhe benefits scandal brought political parties of all persuasions together at one point. “We need to get rid of those surcharges as quickly as possible,” was the shared conclusion. More than four years later, that unity has evaporated and parties are increasingly retreating.
It was stated so firmly in the coalition agreement of the outgoing cabinet: ‘We have the ambition to abolish the allowances.’ This shared ambition was based on a parliamentary motion that two of the four coalition partners (D66 and Christian Union) submitted on December 4, 2019 and which the House of Representatives subsequently voted unanimously in favor of. ‘The House requests the government, as part of the journey towards a better tax system, to develop various variants in which the allowance system disappears completely.’
About the author
Yvonne Hofs is a political reporter for de Volkskrant and writes about finance, economic affairs and agriculture, nature and fishing.
More than four years after that motion, the House of Representatives debated this week the recommendations of the parliamentary inquiry committee on Fraud Policy and Services, the major parliamentary self-investigation into the (partly political) causes of the benefits drama. One of those recommendations is the abolition of surcharges. ‘It is clear that a system change is necessary. This has been known for more than fifteen years and written down several times. It is now time for political courage.’
There is no political choice
Since the ‘get rid of the allowances’ motion, piles of civil servant reports have been published that list the advantages and disadvantages of all possible alternatives to the allowance system. In the most recent report in that series, an official working group gives parliament the same message as the committee of inquiry. ‘Several reports have been published in recent years. All alternatives (for the allowance system – ed.) have now been devised and developed. A political choice is needed.’
But that political choice is never made. Abolishing allowances is – as all these reports make clear – easier said than done. Every year, the Benefits Service pays out approximately 20 billion euros in child-related budget, care, rent and childcare allowances to 5.9 million households. The majority of those households are financially dependent on this income support and cannot make ends meet without benefits. “Without compensatory measures, households in the lowest and middle income groups will suffer tens of percent decline,” it said Final report on the future of the allowance system which was published two months ago.
Simplifying the benefits system almost by definition makes income support more coarse-grained and therefore much more expensive. The current government wants to make childcare almost free in order to compensate for the childcare allowance. Households will then pay the same personal contribution, regardless of income. Parents no longer have to provide income information and no longer have to fear refunds if their income increases.
‘Free’ childcare
But this proposal has been bombarded with criticism from, among others, the planning agencies SCP and CPB. They predict that the highest incomes in particular will benefit from this income-independent contribution, because childcare will become cheaper for them. Low incomes already receive 96 percent of childcare costs compensated through allowances. Moreover, ‘free’ childcare will increase the demand for childcare places to such an extent that childcare companies can increase their prices: which could actually make childcare more expensive for poorer parents than is currently the case. And then ‘free’ childcare also costs the treasury more than 3 billion euros extra per year, according to the latest estimates.
It is therefore not surprising that a number of parties have reservations about abolishing childcare allowance. It is still official policy to introduce almost free childcare by 2027, but the VVD had already removed that implementation date from its last election manifesto. The CPB calculation of that program showed that the party had not reserved any money for this in 2027 and 2028.
During a committee debate on the future of childcare, NSC MP Tjebbe van Oostenbruggen recently made it clear that his party is not in favor of an income-independent childcare contribution. NSC wants to make higher incomes pay more. Pieter Grinwis (Christian Union) pointed out to Van Oostenbruggen that this largely undoes the intended simplification, because the Tax Authorities then need current income data from all parents. But NSC would rather opt for this than for untargeted support for high income earners who do not need it.
Withering judgment
The attempt by Housing Minister Hugo de Jonge (CDA) to abolish housing allowance was even shorter last year. After a damning judgment from the Council of State (entire tribes of tenants would suffer so much that they would no longer be able to make ends meet), De Jonge quickly withdrew the proposal. One of the reasons for the major impact on low incomes was that the abolition of housing allowance in the original proposal would be compensated with a significant increase in the minimum wage. However, the government has already used that increase to compensate for the unexpected increase in energy costs for that group.
The House of Representatives is starting to realize that abolishing the allowances can only be done in a responsible manner if the entire tax system is overhauled. But such an extensive undertaking cannot be carried out in one cabinet term. This creates the risk that a new cabinet will want to do things completely differently halfway through the process and start over, because the coalition’s political color changes.
It is difficult enough to find a majority in the fragmented House of Representatives for a particular proposal, let alone a complete overhaul of the tax system. For the time being, none of the four forming parties seems to have a clear vision of how to proceed. In any case, that vision was lacking in their most recent election manifestos.
New report
Opposition spokespeople expressed their frustration about the lack of progress during the parliamentary debate on Tuesday. D66 member Mpanzu Bamenga: ‘The solutions are there, but they require a politician that dares to make difficult choices.’ Party for the Animals MP Ines Kostic also showed impatience. “We’ve talked about it many times and many reports have been written about it.”
A new report is already in the making. On October 26, 2023, the House of Representatives adopted another motion on the benefits system by a narrow majority, this time submitted by NSC leader Pieter Omtzigt and CDA member Inge van Dijk. The two proposed setting up a temporary committee to seek ‘broad political agreement on a robust basis for a fundamental overhaul of our current tax and benefit system’. A preparatory group has now been formed to make a proposal for the establishment of such a committee.
