The Dutch Fiscal Framework: History, Current Practice and the Role of the CPB

Abstract

According to the IMF and OECD, the Dutch fiscal framework is rather unique, and its design and implementation are highly recommendable. This paper describes this framework, its role in managing Dutch public expenditure, its history, the most recent national discussions and the role of the CPB. Major features of the Dutch fiscal framework are the trend-based fiscal framework with real net expenditure ceilings for the whole term of government, the role of independent organisations, like the CPB, Statistics Netherlands and the Netherlands Court of Audit, and the intermediary role of the national advisory group on budgetary principles. The framework reflects a long learning process, e.g. how to reconcile sound public finance, political pressures and the detailed requirements for managing public expenditure. There was not only progress, but also regression (e.g. the budgetary process became hectic and short-sighted in the seventies and early eighties) and old ideas becoming relevant again, e.g. taxes should be low and stable, each generation should bear its own burden and the reintroduction of cost-benefit analysis in public decision-making.

Keywords: National fiscal rules & institutions, CPB, Advisory group on budgetary principles, Dutch fiscal framework, history of Dutch public finance, public expenditure, budgetary policy, expenditure ceilings, independent fiscal council, Drees jr, Duisenberg, Lieftinck, Pierson, Tinbergen, Zalm, Zijlstra

JEL Classification: B1, B2, H5, H6, N44