It will be an exciting spring for the new cabinet. Because the four parties of Rutte IV have to negotiate again. The Supreme Court canceled the wealth tax in box 3. Now there is a billion-dollar setback, a gap in the budget and a new tax has to be devised. A sensitive issue – taxing wealth – about which coalition parties VVD, CDA, D66 and ChristenUnie think differently.
At the same time, the opposition is demanding additional expenditure from the cabinet. In the Senate it appeared this week that left-wing and right-wing opposition parties want the state pension AOW to rise along with the increase in the minimum wage that the cabinet wants to implement. This wish has special weight because the cabinet does not have a majority in the Senate. And then the high inflation and the explosively rising energy bill also put pressure on the cabinet: do something to repair people’s purchasing power, is heard from all sides.
In short, it will be the most exciting Spring Memorandum in ages. The what? Sorry, Hague slang. On Budget Day, a cabinet makes plans for the following year; The Spring Memorandum shows what was good and what was disappointing in the current year. The coalition has an interest in postponing the spring negotiations, or their outcome, until after the municipal elections on March 16. Because there is a good chance that the honeymoon of this cabinet, with the good news for everyone, is over.
Fascinatingly, at the same time as this political struggle, an economic struggle is taking place in society. About who gets the bill for inflation, which is mainly caused by more expensive energy from abroad. Economist Raoul Leering of ING wrote in The Telegraph an interesting column about. Employers and employees are fighting: are wages rising sharply and profit margins falling? Or do wages lag behind and employees pay a large part of the bill?
There is a similar battle between suppliers and buyers, between producers and consumers. It’s all a question of power: whoever has the most market power wins. For example, supermarket chains have been clashing with food manufacturers in recent weeks about the prices they want to charge.
The British are having an interesting debate about this battle. The boss of the British central bank called on employees not to make too high wage demands in response to inflation. That’s painful, he said, but necessary to get out of trouble. His appeal fits with the classic concern about a wage-price spiral: higher prices lead to higher wage demands. And those higher wage costs in turn lead to higher prices.
The central bank boss got criticism from all sides† Why did he ask for self-control from workers and not from companies? asked economic commentator Martin Sandbu of the Financial Times wonder† He could also have asked companies to moderate their prices and profit margins.
sandbu call it a blind spot in the ‘mental model of the economy’ among many policy makers. It makes inflation the problem of one economic class (workers). While that fight is by no means decided yet. Labor is scarce, vacancies are up for grabs, wages lagged for a long time. I can imagine that working people think: goodbye.
Marike Stellinga is an economist and political reporter. She writes about politics and economics here every week.
A version of this article also appeared in NRC Handelsblad on 19 February 2022
A version of this article also appeared in NRC on the morning of February 19, 2022
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