The social partners have criticised the plans put forward by the Dutch government to ease the impact of the economic crisis. Trade unions are against the plans to keep older employees working for longer and to raise the retirement age. Employers, meanwhile, have argued against the scrapping of the mortgage interest rate deduction. All of the social partners are calling on the government to react more decisively to the economic crisis, as it did in the autumn of 2008.
Two controversial cabinet proposals
Against a backdrop of economic recession, the government has put forward two highly controversial proposals: to scrap the mortgage interest rate deduction and to raise the retirement age. The proposals have come in the run-up to the government’s spring financial report and budget, as well as its consultation with the social partners, on the basis of which the government aimed to reach agreement on new crisis measures before 1 March 2009.
Raising of retirement age
In terms of raising the official retirement age, the government has taken a significant step in its crisis measures by proposing to gradually increase the retirement age up to 67 years of age. In time, it estimates that this move will generate savings of between €6 and €8 billion. The savings will, in turn, enable the government to justify the extra spending needed to stimulate the economy without damaging the tenability of government financing in the long run. Raising the official retirement age will also help to solve major problems related to pension fund coverage ratios. If the retirement age is raised, pension premiums would not need to be increased to the same extent as would be necessary otherwise and any decrease in pension payments could be smaller. In addition, a higher retirement age would increase the number of older people in employment and this category of workers could be particularly affected by the economic crisis.
The retirement age remains at 65 years in the alternative plan. However, this will lead to greater cutbacks in public expenditure, which will have a negative impact on the economy. Increasing the financial burden through raising pension and healthcare premiums will only serve to prolong the process of economic recovery. In the long term, such measures will also have a detrimental effect on government financing, essentially passing on the burden of the current financial problems to future generations.
Government parties divided
Key ministers of the largest government party, the Christian Democratic Appeal (Christen Democratisch Appèl, CDA) are in favour of raising the retirement age, while the other two government parties are still divided internally. The liberal opposition Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) has already expressed its approval of the measure.
Views of social partners
On both sides, the social partners believe that the government’s response to the economic crisis is too slow. Instead, they would like to see the same level of decisiveness now as the government displayed at the time of the financial crisis in the autumn of 2008. The Chair of the tripartite Social and Economic Council (Sociaal Economische Raad, SER), Alexander Rinnooy Kan, is particularly dissatisfied with the speed of the government’s response. Mr Rinnooy Kan believes that the crisis-combating measures must be timely and targeted, even at the further expense of the budget deficit – as long as the measures are only temporary. However, he declined to comment on the issues of raising the retirement age and scrapping the mortgage interest rate deduction.
On the employer side, the Confederation of Netherlands Industry and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW) is calling for measures directed at boosting the economy in the short term, without transferring a heavy burden to the next generation. VNO-NCW believes that the mortgage interest rate deduction should be kept intact to help maintain people’s confidence in the government, and argues that generating mistrust could be potentially disastrous for the economy. In particular, the employers are hoping for wage moderation and a new package of incentives for the transport and construction industries. Along with the trade unions, VNO-NCW is urging for an extension of the working time reduction scheme and tax measures for home insulation in a bid to stimulate business in the construction sector.
The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) considers the raising of the retirement age to be a highly contentious move; in particular, reforming the General Old-Age Pension Act (Algemene Ouderdomswet, AOW) is considered an unassailable hurdle. Fears of social unrest are meanwhile mounting. Employees are particularly critical of the government’s latest proposals, especially in light of the fact that they have just witnessed the financial services sector being saved using their hard-earned tax payments. It is considered unfair to now expect employees to work for longer too. Contrary to the proposal put forward by the central council of ministers, employee and employer representatives are calling for measures that will instead enable older employees to stop working sooner in order to make way for young people who are unemployed.
Marianne Grünell, Hugo Sinzheimer Institute (HSI)