Dutch government deficit 2.5 percent in 2013

31/03/2014 15:00

Deficit under 3 percent limit for the first time in five years
Strong rise in government revenues
Debt rises to 73.5 percent of GDP

Figures released by Statistics Netherlands today show that Dutch government deficit amounted to 2.5 percent of GDP in 2013. This puts it below the European norm of 3 percent for the first time in five years. In 2012, the deficit still amounted to 4.1 percent. The government debt of the Netherlands rose by 2.2 percentage points in 2013, to 73.5 percent of GDP, well over the European limit of 60 percent.

Government deficit was over 9 billion euros lower in 2013 than in 2012. The substantial fall in the deficit amount was largely caused by a rise in income: government revenues rose by 7 billion euros to 285 billion euros

The deficit amount may still be adjusted, as no definite decision has been made concerning how the nationalisation of SNS REAAL Bank is to be booked. Statistics Netherlands always consults Eurostat, the statistical office of the European Union, in the case of extensive and complex transactions, to ensure that its applies the regulations correctly. This consultation is still in progress. The final outcome will be a slight upward effect of at most a few tenths of a percentage point on the deficit as a percentage of GDP.

Higher taxes and premiums, mostly as a result of government measures, accounted for 5.6 billion euros of the increase in revenues. More than half of this amount came from wage and income tax, including social security premiums. In addition, as a result of a rate increase revenues from insurance tax doubled to 2.3 billion euros. Energy tax also rose considerably in 2013. The tax and social premium burden was the highest since 1999, at 39.3 percent of GDP.

Government revenues were also pushed up by higher dividend payments by the Dutch Central Bank and ABN AMRO Bank in 2013, putting 1.4 billion euros more in government coffers. Revenues from natural gas rose by 0.5 billion euros to 15 billion euros, nearly the same amount as in record year 2008.

Government spending fell by 2 billion euros. Spending has amounted to around 300 billion euros since 2010. The auctioning off of 4G telecom frequencies accounted for a one-off fall of 3.8 billion euros in government spending in 2013; in accordance with an international agreement, this is booked as negative spending. In addition the recent trend of lower spending on remuneration of government employees and lower investment continued. In spite of the higher debt, interest charges decreased further as a result of favourable refinancing.

Spending on social benefits continued to increase, rising by 3.4 billion euros in 2013. Unemployment benefits and state old-age pensions accounted for most of this increase. Government health care spending under the Exceptional Medical Expenses Act (AWBZ) and the Health Care Insurance Act, which had risen substantially in previous years, remained at around the same level as in 2012. One important reason for this was the higher policy excess introduced in 2013.

The government debt rose by 16 billion euros in 2013, to 443 billion euros. This increase is almost equal to the financing of the deficit. The nationalisation of SNS REAAL Bank resulted in an extra debt increase of more than 8 billion euros. On the one hand, this comprises a capital injection for SNS REAAL Bank that had to be financed; on the other hand, the government took over the bank’s real estate portfolio, including inherent debts.

Revenues from the sale of financial assets, such as part of the American mortgage portfolio taken over from ING Bank, reduced the debt. These revenues do not affect the deficit, but do bring in money which can be used to reduce the government debt. The introduction of obligatory treasury banking for local government at the end of 2013 also curbed the debt increase. Central government was able to use the money from local government for its own spending or repayment of debts.