Economist Daniël van Vuuren on the Miljoenennota: ‘I haven’t seen many concrete plans yet’

Daniël van Vuuren is Professor of Economics at Tilburg University’s Faculty of Economics. He looked at  the coalition agreement and the new government’s Miljoenennota for Univers and listed what struck him most.

One of the first things that is often mentioned in the reports around Prinsjesdag and the Budget Memorandum, the so-called Miljoenennota is purchasing power. This turns out to be less high than in an earlier estimate by the Centraal Plan Bureau: ‘But there is not much exciting to report about that,’ says Daniël van Vuuren: ‘It is a construction that is made very important in politics, but for most people it does not have much influence on their daily reality.

‘Purchasing power models assume that nothing will change at all in a household. But in practice, of course, much more changes for people if, for example, someone loses his or her job, gets promoted or gets married or divorced. These changes often have a much greater impact on a household’s purchasing power.

Addressing uncertainty

‘What I did find remarkable about this Miljoenennota is the government’s intention to tackle uncertainty about incomes. In particular, in the aftermath of the childcare benefits scandal, we saw that people sometimes do not even dare to apply for an allowance because they are afraid of chargebacks. That uncertainty causes stress, and if you live in poverty, you often suffer from it anyway, so that worsens the situation for these households.

‘But what will the government’s plans mean in concrete terms for the reform of allowances and taxes?’ wonders Van Vuuren. ‘We still see very little concrete implementation of the plans. In fact, the government is going to increase a number of allowances, such as the child-related budget and the rent allowance, for example.

Short-term politics

‘That is a short-term reduction in the burden, but it fills the proverbial ‘Christmas tree’ even further. It will soon be even more difficult to phase out and reform the system of allowances and taxes. I hope they will do something about it soon.

‘There are many intentions in the coalition statement. And in the budget, it is becoming a bit more concrete here and there. But these are mainly short-term measures. I still wonder what long-term policy is going to be pursued. A lot is still unclear and I hope that the government will also achieve results.

Migration

Van Vuuren was a member of the State Commission on Demographic Development in 2050, led by ex-informateur Richard van Zwol. Migration is a spearhead of this cabinet, but the government remains vague about labour migration for the time being, he believes. As an economist, Van Vuuren does not want to comment on asylum migration: ‘But I do think it is wise that we also give people we let in access to the labour market, so that they can participate. And you can see that the government now wants to limit labour participation.’

Of course, the cutbacks in higher education and research are also close to his heart: ‘I’m not very happy that cuts are being made and we may lose innovative power. Our long-term earning capacity is linked to the productivity that comes from research and education, and we desperately need that. Hopefully, wise choices will still be made, by placing accents. But I don’t think it’s wise to cut back on that like that.’

Market thinking

With the traditional briefcase in hand, the new Minister of Finance Eelco Heinen shows that he is a proponent of market thinking, a view that seemed to be on the decline lately. What does Van Vuuren think about the ‘comeback’ of the market: ‘I’m not a black-and-white thinker in this respect. For or against the market, I think it’s too simplistic.’

‘If you leave everything to the market, you will see inequality or pollution increase, for example. Then there is the reflex that the government should solve it. But government intervention also has its limitations, and we have to be aware of that. The benefits scandal is, of course, the most striking example of a dysfunctional government.’

Interplay

According to Van Vuuren, it’s about the interplay between government and the market: ‘The housing market is one such example: that market doesn’t work at all, to put it bluntly. Because you can see that there is a huge mismatch. We found in the report of the state commission that there are 2.6 million families in the Netherlands and there are five million family homes.

‘So there is a huge surplus of family homes. And what will be built?’ asks Van Vuuren rhetorically: ‘Family homes. On the contrary, we should build more homes for single-person households, because there is a huge shortage of them, so that the flow gets going. So the government has to take the lead, but of course it shouldn’t build houses itself. Market parties can do this much better. That’s the interplay.

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