Strong warning from the Council of State: ‘Structural improvement of government finances necessary’

The new government will have to structurally improve public finances to prevent the budget deficit from rising high in the longer term. The Council of State says this in a report on the spring memorandum that the outgoing cabinet recently submitted.

According to the Council of State, the fact that the deficit and the national debt have remained within limits is partly due to under-exhaustion. Due to, among other things, tightness on the labor market, many ministries have not yet managed to actually make expenditure that had already been budgeted.

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The starting position of the new cabinet is less rosy, the Council of State warns. It is likely to experience a period of moderate economic growth, with lower inflation and higher interest rates. In the longer term, the deficit will increase, partly because ‘ageing-sensitive expenditure’ such as healthcare and AOW continue to rise.

Budget deficit

If policy remains unchanged, the budget deficit is expected to increase to an average of 4.6 percent of the size of the economy between 2029 and 2032. That is well above the maximum of 3 percent that the euro countries have mutually agreed on. That makes it inevitable to cut spending or raise taxes, or both.