The 2022 Budget Memorandum and the 2021 report on Budgetary Monitoring

Reporting and advice

This was reported in the 2021 September Report on Budgetary Monitoring and the opinion on the 2022 Budget Memorandum, which the Advisory Division of the Council of State published today, on Budget Day (21 September 2021). In the September Report the Advisory Division assesses, in its role as independent fiscal monitoring institute, whether the budget complies with the agreed European and national fiscal rules. As an independent legislative adviser to the government and parliament, the Advisory Division also presents its opinion on the State Budget for the coming year. This year too, the September Report and the opinion on the Budget Memorandum are published in a single document.

Challenges for the future

The economy is displaying a buoyant recovery and Dutch public finances are still in relatively good shape, but at the same time, the Covid-19 crisis has widened differences between groups, further exposed existing vulnerabilities and made them more urgent. In the 2022 Budget Memorandum the outgoing government outlines a number of challenges for the future, such as a simpler allowances system, space for housing and limiting climate change. A new government will have to introduce structural reforms and provide investment to achieve them. It requires political choices, which will need additional resources, and it will be necessary to ensure public finances remain sustainable. Public finances may be in relatively good shape, in spite of the Covid-19 crisis, but uncertainties must always be taken into account.

Reinforce the implementation of parliamentary rights associated with the budget

Not only the government bears responsibility in this regard, parliament does too, through its rights associated with the budget. This year, in its opinion on the Budget Memorandum the Advisory Division also asks that special attention be devoted to the House of Representatives and the Senate’s rights associated with the budget. It assists parliament in reinforcing its rights associated with the budget, to get a better grip on social security, healthcare and taxation, and to apply the Second State Accounting System Operation in order to modernise the budgetary and reporting system and consider how broad prosperity can be integrated more effectively in the policy and budget cycle. And it proposes submitting the Budget Memorandum in the spring, instead of on Budget Day. As a result it would be aligned with the European fiscal cycle and the House of Representatives and the Senate would be better placed to act in a more timely manner, since the debate takes place in parliament on submission of the Budget Memorandum. On Budget Day the speech from the throne would be delivered and the budgetary laws submitted, after which the House of Representatives and the Senate could proceed with general considerations.

The importance of orderly budgetary policy

Due to the relatively favourable scenario when the new government takes office, at first glance it does not appear that it will face many budgetary constraints. When budgetary constraints are not felt, or observed, there is a lack of democratic anchors for assessing considerations regarding levying taxes and spending collective resources. Therefore, the Advisory Division agrees with the outgoing government on rapidly returning to an orderly budgetary policy and asks the new, incoming government to take a number of important focal points into account. These involve assessing new policy in advance with regard to aspects of broad prosperity, reflecting on implementation and transition issues arising from structural reforms and carrying out integral considerations within budgetary policy for investments, in order to monitor the social and economic returns of these investments.