Netherlands

II - Changes to the Budgetary Process

Budgetary process   
II.1
Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in The Netherlands.

The main characteristics of the budgetary process are as follows. Article 105 (1) Dutch Constitution determines that the budget is to be determined by law (government and parliament combined). The parliamentary budgetary rights have internal effect with the exception that only (budgetary) laws can authorize government spending. That is to say that they are mostly relevant for the relationship between parliament and government. As such a disregard of the budget rules can only have political effects. The yearly budget proposals are submitted on – traditionally called – Prinsjesdag (third Tuesday of September). Government submits its budget plans. Every ministerial department submits one budget plan that is to be approved by parliament. Thereby parliament – as most parliaments – has a so-called budget-right. That is to say the right to reject the proposed budget of the government. Parliament exercises this right through financially limiting the amounts that government can spend within specific policy areas. This is a form of external control on government spending. Thereby parliament exercises the political control of spending. Technical control is based on the justifiability of spending and its effectiveness and exercised by the general auditing chamber (Algemene Rekenkamer). In this way the general auditing chamber assists parliament in controlling the spending of the budget. The budget-right is anchored in the CW that was mentioned before.  As such the parliamentary involvement with the budget is twofold. It has political control through its rights of approval and technical control through the checks on the justifiability of government spending.

An important part of these rights is the parliamentary right on information on the basis of article 68 of the Dutch Constitution. Effective parliamentary control of the budget is only present if parliament is in the possession of sufficient information – the material budget right (see further below) is relevant here.

Approved budgets have the status of law and authorises government to spend money. It is considered to be a rule rather than exception that authorised government budgets are considered insufficient or that authorised policy-objectives change. In these cases the Compabiliteitswet (CW) prescribes that new authorisation has to be provided by parliament through ad hoc supplementary budget measures (suppletoire begrotingsmaatregel), which are passed through parliament.

Next, there exists a separation between the formal and material budget-right of parliament. The formal budget-right prescribes that parliament always has to be informed prior to any spending that is not in accordance with the approved budget. The material budget–right applies for those situations where the exercise of policy is urgent and cannot await the outcome of the formal procedure. In these instances parliament is informed of on-going changes in policy and the accompanying budgetary impact to avoid a situation where parliament is confronted with accomplished facts. This information is shared through separate policy letters or through budgetary notes. Parliament either (silently) accepts or rejects this and thereby exercises its material budget-right.[1]

Since a number of years the government policy proposals are accepted by parliament on the last day before the Christmas recess. Formally the senate also has approval rights of the budget. In practice senate has since 1907 not used its power to reject the budget proposal. Since 1971 there exists a rule that budgets that have not yet been approved in May of the relevant budget year are treated as formalities provided that the government comes to the Senate to discuss its policy plans substantively. This is how the senate has mainly used its budget rights.[2]

General change           
II.2
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?

This question has been answered specifically with respect to the crisis measures in previous answers. As a general observation it is relevant to note that the basic budgetary process has not been changed. Instead all the specific measures have been implemented by aligning the measures within the existing budgetary framework. As noted in previous answers, government has made specific procedural agreements with parliament on how to inform them of measures and as far as possible guarantee the functioning of its existing budget rights in the application of, for example, the ESM Treaty.[3] These arrangements have, so far, been made on an informal basis. The exact legal status of these information arrangements between government and parliament is therefore a bit unclear. Parliament has expressed a preference to make the arrangements official and legally sound information protocols on the basis of article 100 of the Dutch Constitution, but this has been refused by government. Instead there will probably be made a slight amendment to the existing CW in order to implement the informal information arrangements and thereby provide them with a stronger legal grounding.[4]

These agreements guarantee the involvement of parliament every time that aid is provided. In principle this happens before the aid is granted (confidential if necessary) by a policy note and debate with the minister. In cases where the urgency of the situation does not allow for the prior communication with parliament the minister will make a parliamentary reservation, meaning that there is no final commitment for the aid measure until parliament has been informed. Parliament can then decide whether it wants to utilise this reservation or not. In cases of urgent voting procedures (art. 4 ESM Treaty) there is no possibility nor use in making the parliamentary reservation since there are no veto rights. In these cases the minister will as soon as possible defend its position within parliament. With respect to the actual payments the minister periodically informs parliament. 

Wet HOF

Overview of Wet van 11 december 2013 inzake houdbare financiën van de collectieve sector (Wet houdbare overheidsfinanciën, Staatsblad 2013, 531)

Summary: The Law on Sustainable Government Finances of the collective sector (hereafter “HoF”) implements legal instruments to reach and maintain sustainable Government spending for current and future governments in the Netherlands. It is the main legislative instrument introduced in the Netherlands to implement the requirements that follow from the Fiscal Compact Treaty.

Key instruments and aims of HoF: The main aim of HoF is to implement instruments to establish a so-called trend-based budgetary policy on the central and local levels of government. The essence of the Dutch trend-based budget policy is that the budget balance is allowed to fluctuate within certain limits. Those limits are determined by what deficit is allowed for the medium-term (trend-based). It is characterised by the use of realistic economic premises, a strict separation of revenues and expenditures, a fixed multi-annual expenditure framework and one principle moment of decision-making on next years’ budget.

Article 2 sections 1-3 is a key part of HoF and determines that the Minister of Finances has to run a trend-based budgetary policy taking into account the norms that have been established by the institutions of the European Union for: i. The MTO for the structural EMU-balance; ii. The yearly EMU-balance; and iii. The yearly EMU-debt.   Section 4-11 provide the operational procedural means through which recommendations from the EU institutions are implemented on a national level.

Articles 3-8 decentralise the obligations by imposing on local governments and specified legal entities with public spending capacities an equivalent effort obligation to reach the norms that have been established by the institutions of the European Union. These articles also determine the sanction mechanism that can be applied in case the equivalent effort obligation is breached. 

Comments: A legal commentator highlights that the norms that article 2 Hof refers to are unclear.[5] This un-clarity is caused by the phrase ‘the norms that have been established by the institutions of the European Union’. If Article 2 is intended to implement the obligations arising from the Fiscal Compact Treaty then the article erroneously refers to the institutions of the European Union since the norms in that Treaty have not been made by the institutions of the European Union but, jointly, by all the Member States together.  As such it can be debated whether, due to this un-clarity, the Netherlands has actually sufficiently implemented the Fiscal-Compact Treaty. Another main issue that has come up in the comments on the Wet HoF is that the requirements of a trend-based budgetary policy conflicts with the conventional budgetary processes of local governments that tend to spread out budget spending over multiple years. This is no longer possible under the Wet HoF.

Institutional change        
II.3
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?

The relevant changes have been described in questions II.1 and II.2.

Change of time-line 
II.4
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?

So far no changes have been made to the time-line of the budgetary cycle. On the basis of the CW national budget has to be approved before the 1st of January – as such it is in alignment with the EU framework. In practice the budget is always approved later and this could therefore affect the time-line of the budgetary cycle and necessitate some changes in the established practices of parliament in the approval of the budget.[6]

Miscellaneous
II.5
What other information is relevant with regard to The Netherlands and changes to the budgetary process?

Not applicable.

[1] 05 ESM Treaty – Diamant/Van Emmerink ‘Het Nederlandse budgetrecht in Europees perspectief’

[2] Ibid.

[3] 01 EFSM&EFSF – 180112 first policy letter on parliamentary involvement efsf measures and 01 EFSM&EFSF – 130912 second policy letter on parliamentary involvement efsf measures replacing the first.

[4] 05 ESM Treaty – 100812 discussion on budget right parliament.

[5] 06 Fiscal Compact – Reestman 2013 De ondoorgrondelijke systematiek van het wetsvoorstel HOF NJB 2013, p. 299-302

[6] Government intends to adopt these changes in the CW. 05 ESM Treaty – Diamant/Van Emmerink ‘Het Nederlandse budgetrecht in Europees perspectief’