Looking at the spring memorandum, macroeconomist Arnoud Boot fears the government will cut back on the wrong things. It’s important to keep an eye on the “medium term,” he says. “Don’t make stupid cuts.”
Boot invites the Netherlands to look closely, he thinks it goes beyond austerity. He mentions the amount of extra money that was spent and funded outside the budget. “If you look at how badly the tax system is managed, where people lose income, then it’s mostly about getting the public finances in order.”
Order things
And austerity, that word can be interpreted in different ways. “It suggests that something is breaking, but we will finally put things in order.” This requires short-term and long-term measures. “It makes sense that this cabinet is primarily looking at the short term,” says Boot. “A long-term story is difficult, and it’s not even clear who’s going to make it.”
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According to Boot, significant cuts need to be made in the near term. ‘Because of the rules, annual savings of 2.5 to 3 billion have to be made in the short term. Structurally we are talking about six billion a year.’ Two things have to happen for this, he thinks.
“We’ll finally put things right”
FREE money
‘In this day and age, when politicians without a sense of accountability are suggesting that money is free, austerity in practice mostly means looking at where money is wasted. Furthermore, we have a tax system that is too complex, which in the short term means a loss of income.’ According to Boot, there is a solution for this, again in the short term: a capital gains tax. “The moment you use it, the leak is closed.”
In addition to making cuts by capping losses, Boot also recognizes the need to cut spending. Healthcare is a major government expenditure item, but cutting costs here is a difficult task. ‘It’s like a cuckoo cuckoo that gets bigger and bigger. This is where it’s important that you look at this the right way, from a system control standpoint. We are talking about one hundred billion euros, it is the fastest growing item of government expenditure. How can you use it effectively and how can you ensure that those costs increase further?’
Childcare
According to Boot, it would make sense if ministries were forced to come up with plans that would allow each department to cut costs by 1%. “This will make us stronger.” It is important to look at the effects of government policy, for example on childcare.
“If the government now concludes it can’t deliver free childcare, then it’s a good thing it’s deferring it for two years.” However, Boot emphasizes the importance of childcare accessibility. ‘For children, especially those from lower backgrounds, but also for parents. And the number of employees you need in childcare is much less than the number of parents who can work a little more if childcare is properly organised.’ That’s why macroeconomist Boot has clear advice for the Cabinet: “Keep an eye on the medium term and don’t make stupid cuts.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
