Can the pieces of the new polder model hold together?

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At first glance the new Dutch government’s coalition agreement looks like a classic polder deal. A pull of the income tax lever here, a tweak on the VAT dial there; a legal supply chain for soft drugs balanced against tighter regulations for sex workers; refugees losing their entitlement to benefits, but the state absorbing more […]

WordsForPress | The website of Gordon Darroch, freelance journalist

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At first glance the new Dutch government’s coalition agreement looks like a classic polder deal. A pull of the income tax lever here, a tweak on the VAT dial there; a legal supply chain for soft drugs balanced against tighter regulations for sex workers; refugees losing their entitlement to benefits, but the state absorbing more of the administrative burden of integrating them. The whole package is a delicate blend of conservative, liberal, progressive and confessional elements: a combination, as one newspaper put it, of the bakfiets (cargo bike) and the church pew.

But cut a little deeper and it becomes clear Rutte III has neoliberalism coursing through its veins. Take, for example, the tax reforms, headed by a streamlined income tax regime with four bands instead of two. At first glance it looked like a tax cut across the board, but closer analysis by the CBS statistics agency has found that the gains are weighted in favour of the top earners, who shed the corrosive middle bands and see their top rate cut from 52% to 49.5%. Anyone earning less than €20,000 a year will pay more in income tax, as the lowest rate is rising to compensate for the loss of the other two. Combined with the rise in the VAT lower rate from 6% to 9%, it also marks a significant rebalancing of the tax base from earnings to consumption.

But the real tell-tale sign is the €3.3 billion the government is planning to spend on reforming the corporation tax regime to open up the Netherlands to foreign investment. Its newfound zeal for condemning letterbox firms – a lucrative sideline for the Belastingdienst until the European Union woke up to the full implications – has forced Rutte III to devise new means to entice foreign capital to its shores. The Brexit feeding frenzy will escalate over the next two years as companies fly out of London, and the Netherlands is staking out a place in the front row. Corporation tax, which was set at 35% in 2000, is coming down further to around 21%, while taxes on dividends are being abolished altogether. Investors are being reassured that their profits are none of society’s business.

In the labour market, the government’s stated aim of reinforcing permanent contracts as the benchmark is belied by the small print. Flexible workers will have the right to compensation when their contracts are terminated from day one, and minimum rates are on the table for low-paid freelancers, such as delivery drivers. Yet companies will be able to retain staff on temporary contracts for three years rather than the current two, protection from dismissal is being further eroded and payouts for contract termination are going down. As the gap between casual and staff workers is narrowed from both sides, many of the advantages of permanent contracts, such as job security, are dwindling into oblivion. And by bringing in individual pension plans to challenge the vast Dutch collective pension funds, Rutte III is conforming to the trend of an increasingly fragmented, flexible, individually oriented workforce.

Even the green energy plan, which has drawn praise for its ambitions to go beyond Paris, should not be mistaken for a Damascene conversion. While the Trump administration has polarised the energy debate as one of the major left/right faultlines, Europe has taken a more pragmatic approach, not least because of the opportunities generated by Trump’s self-ostracising stance. As fossil fuels become compromised by rising costs and liabilities – such as compensating the people of Groningen for earthquake damage – sustainable energy represents the bold, clean and profitable future. Shell has taken tentative steps in recent years to shift its focus to renewables. Investment banks are queuing up to fund projects such as Boyan Slat’s device for draining the plastic soup from the Pacific Ocean. Renewable energy is no longer the sacred domain of the political left. It is potentially big business for a small country with sophisticated infrastructure, access to large areas of sea and a strong tradition of technical innovation.

There are plenty of nods to the left in the coalition agreement: an increase in the international development budget, a pay rise for teachers and accommodation for failed asylum seekers who are unable or unwilling to leave are all measures that the Labour ministers in Rutte’s second cabinet were unable to achieve. New fathers will be able to take up to six weeks off work, albeit on a reduced salary. The arts will receive an extra €80 million a year from 2020. Whether by accident or design, much of the government’s programme will find support among opposition parties, which is a shrewd strategy for a cabinet relying on the slenderest of Parliamentary majorities. But the underlying tone is unmistakable: this is a government that will stake the country’s economic prosperity on the global markets and promote the gospel of self-reliance like none before.

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