The public deficit of the Netherlands for 2014 was 2.3 percent of the gross domestic product (GDP), the same as in 2013. Public debt as a percentage of the GDP also remained fairly stable at 68.8 percent, as Statistics Netherlands reports today. These figures are presented in the first official estimate of the actual public deficit and public debt and will also be sent to the European Commission today.
Public deficit climbs to 15 billion euros
The government deficit climbed to 15.0 billion euros in 2014, an increase by 0.4 billion euros relative to one year previously, but because the GDP also grew, the deficit, expressed as a percentage of the GDP, did not change (2.3 percent). For the second consecutive year, the Dutch government deficit complies with the 3-percent EMU deficit criterion. With 33.7 billion euross (5.5 percent of the GDP), the deficit reached the highest level in 2009, but since then the deficit has been reduced gradually.
Deficit national government 7.1 billion euros
The central government contributed more than 7 billion euros to the deficit, i.e. 2.2 billion more than in the previous year, but government expenses included several large one-off effects, like the proceeds of the auction of telecom frequencies and the bailout to save the SNS Reaal banking and insurance group.
Income transfers contributed to higher government expenses, mainly contributions made by the central government to other levels of government and the European Commission. An additional levy on the basis of recalculation of the gross national income also contributed to higher government expenses. The care allowance, on the other hand, was significantly lower, as a result of changing application criteria.
Tax proceeds substantially higher
Higher government expenses were partially offset by higher revenues. Tax proceeds grew by 8.4 billion euros. The private sector and institutions paid more tax and housing associations faced increased costs, due to the special tax on rental property. Banks had to make a one-off financial contribution to the SNS Reaal bailout. The proceeds of corporate tax and dividend tax were higher than anticipated. Natural gas revenues fell significantly by 4.5 billion euros, due to lower gas prices and less output. The revenues from dividend of the Dutch Central Bank were also lower.
Provincial deficit doubled, municipal deficit reduced by half
The deficit at the local government level was 2.1 billion euros in 2014, just above the level recorded in 2013. The provincial deficit doubled to 0.9 billion euros, partially because the contribution of the national government was cut. The municipal deficit, on the other hand, was reduced by half to 1.1 billion euros. For municipal authorities, land transactions were an important source of income. They bought less land, but sold more land. National government contributions to municipalities also increased. Fewer benefits were paid under the Social Support Act (WMO), but more people claimed social security benefits.
More old age pensions and unemployment benefits paid
Social security funds have been faced with a deficit for years now. Last year, the deficit was reduced to 5.8 billion euros. Spending on old age pensions, unemployment benefits and care benefits increased. Retirement age is raised by one month each year, but due to ageing of the population, the number of people reaching retirement age is increasing so rapidly that this measure is not enough to offset the rising costs. Spending on unemployment benefits increased, because on average over the year 2014 more people received unemployment benefits than in 2013. Spending on health care and welfare rose moderately. After years of rapidly rising costs, the increase remained below 1 percent for the second year in a row. Costs were higher, but revenues also increased. The national government contributed more to social security funds. Statutory social contributions made by employers also rose considerably.
Debt-to-GDP ratio almost unchanged
Public debt rose by 10 billion euros to 451 billion euros in 2014. Public debt expressed as a percentage of the GDP remained fairly stable at 68.8 percent. The higher public debt in euros was almost entirely offset by the value increase of the GDP in 2014. Since 2008, the growth of the debt-to-GDP ratio has levelled off. Between 2008 and 2014, the debt-to-GDP ratio rose from 54.8 to nearly 69 percent.
Public debt rose less rapidly than the deficit of 15.0 billion euros. For a large part, the deficit was funded by creating new debts, predominantly by the issue of government bonds, but the national government also collected revenues from repayments of claims, which are not included in the government deficit. With these revenues, part of the deficit can be financed. These revenues included repayments by the ING bank and the proceeds of the sale of ING’s mortgage portfolio, which the Dutch government acquired in 2009. This transaction put more than 6 billion euros in the government coffers.