The right-wing coalition helps low-income people a little more than the rest

The new government coalition wants more social security, but for whom? For the lowest income earners or mainly for the middle and high income earners?

The agreement between PVV, VVD, NSC and BBB is very clear on this matter. Ambitions to halve poverty are being cancelled. They wrote that both sides “do not want to reach further settlement.” There will be no additional increase in the minimum wage and social assistance. The Office of Social and Cultural Planning noted last week that the agreement focuses largely on the “working population.” For others, such as the unemployed and disabled, the agreement is likely to be “less positive.” This is partly due to cuts in unemployment benefits (WW).

But the Central Planning Office showed a completely different picture on the same day, in the initial calculations of the agreement. Everyone is making some progress, and the lowest earners are slightly ahead of the rest. This is due to increased allocations for them. This would also reduce the rise in poverty rates in the coming years.

In short: This right-wing coalition is beginning to stabilize. Not only by taking money from the highest incomes and largest assets: they also get tax benefits. Well, by helping low-income people a little more than the rest.

Children in poverty

This does not change the fact that poverty continues to increase, according to the Central Bank of China. The proportion of children living in poverty, which currently stands at 4.8 percent, will rise to 5.3 percent within four years. Without these measures, this percentage would have risen more sharply to 5.9 percent, according to the calculations.

At the same time, the coalition takes many measures that help rich and poor, such as reducing health care deductibles and lowering energy taxes.

Overall, Esther Barendregt, chief economist at Rabobank, sees “a focus on low and middle income”, but also “limited ambition”. Barendregt was also a member of the Independent Social Minimum Commission. The fourth Rutte government introduced this at the insistence of the then non-partisan Member of Parliament Peter Umtsigt.

The subsistence minimum is too low to live on, this committee concluded last year. People living on social assistance benefits, for example, often earn less than 100 to 500 euros per month. Only a few of its recommendations can be read into the coalition agreement. For example, re-examining it every four years to determine if the benefits are high enough to live on. And to radically simplify income arrangements.

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The latter represents the biggest setback for Barendrejt: she sees little rush to simplify income plans. “The system is collapsing in light of its complexity,” the economist says. “People who are financially vulnerable don't know if they'll get better if they go to work. Surcharges, taxes and local regulations are too complex for that. And then your benefits can also be taken back. This has a paralyzing effect.”

The Alliance has no plans to modify complex arrangements for people with disabilities. It wants to “prepare” for “reform” of taxes and benefits, the agreement states. But according to Barendregt, politicians need to make up their minds quickly. Piles of official reports and preparations have already been published. “There is no shortage of ideas. Now a direction must be taken.”

Meanwhile, the coalition is not downplaying the importance of the allowances, but rather magnifying them. The increase in the number of allowances gives vulnerable citizens a higher but uncertain income. The alternative was to increase welfare and the minimum wage. The VVD and BBB in particular are known to oppose this. Barendrejt: “The drawback is that the bill ends up going to business people. But it adds simplicity.”

Childcare is almost free Increased inequality of opportunities

Childcare will be almost free for all working parents. The Social and Cultural Planning Office and the Central Planning Office warned last year that this would have poor outcomes for the most vulnerable children. They expect increased inequality of opportunity.

So it is remarkable that this Rutte IV plan is continuing.

Financially, it mainly helps wealthy parents. Everyone will soon be reimbursed 96 percent of shelter costs. For the lowest incomes, this is the same as now. The highest earners now receive 33 percent, thus making significant progress.

Good for low-income people: it becomes safer. The current allowance is an advance, where you can risk getting the money back if your income turns out to be higher. Not any more soon.

But planning agencies expect low-income people to experience longer waiting lists at childcare centres, where there are significant staff shortages.

According to estimates, demand could rise by 30 percent, especially from wealthy families. Their children will go less to grandparents and more to day care, competing for the same scarce places as children from poor families.

The government could prevent such a rush by making wealthy parents pay a higher amount.

Officials were already working to develop such an income-based alternative, in case the new coalition wanted to respond to criticism from planning agencies. This is not the case yet.

Energy bill and refueling are cheaper “Ineffective fossil subsidies”

After Budget Day, there was criticism of the VVD's proposal to extend the reduction in fuel tax duties for an additional year. This mainly benefits those with higher incomes, economists calculate, because they have bigger and bigger cars.

Research institute TNO described it as an expensive “passive fossil subsidy” if you want to help people with small wallets and high car dependency.

National Security Council leader Peter Umtzigt, then a non-partisan member of parliament, was also critical. In one of the debates, he said that people who live hand-to-mouth cannot even afford a car.

The coalition now also wants to maintain the reduced fuel tariffs in 2025. In addition, the energy tax on household gas must be reduced in the coming years.

Both measures directly help low-income people. They spend the bulk of their income on energy and fuel. However, higher incomes benefit more. They generally burn much more than low-income people.

ABN Amro's economic office had previously described the reduction in energy taxes as “ineffective”, because it removes the incentive for the rich to become more sustainable.

Low discount The poor are the least benefited

The most surprising measure taken by the coalition is the significant reduction in the healthcare deductible: from 385 to 165 euros per year. An important point for the PVV, which states that low-income people therefore avoid care or do not collect their medicines.

But for the lowest incomes, living at most just above the subsistence minimum, there are now municipal subsidies for health care costs. There are affordable “municipal policies” that include paying the deductible. They also receive health care allowance. Lower discount reduces additional fees. But higher health care premiums – the government wants to largely pay for the deductible through a higher premium – actually mean a higher surcharge.

In short: All Dutch people benefit from a lower discount when they are sick, but the poorest people, who already have a privileged programme, benefit less than others. The minimum discount is therefore mainly related to solidarity. “Healthy people should show more solidarity with sick people,” says Xander Coleman, a health economist at Vrije Universiteit.

In order to allow citizens to benefit, the coalition reduces income taxes. It is uncertain who will benefit most from this. It depends on the exact design. But this clearly does not help low-income earners much: they now have to pay little or no income tax.

Jeffrey Clark

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