CPB: low incomes suffer from purchasing power boom | Inland

The CPB is counting on a decrease in purchasing power of 2.7 percent for this year, according to the new economic estimates. This was eagerly awaited in The Hague, because the cabinet uses them as a handle to start working on the long-awaited purchasing power repair in the coming weeks.

There is still great uncertainty surrounding the purchasing power figures. The planning bureau now assumes more than 5 percent inflation, but also comes up with two alternative scenarios in which the war in Ukraine leaves deeper or lesser traces in the Dutch economy.

3.4 percent

In the variant in which the damage of the war is not too bad, inflation is 3 percent and purchasing power falls by 0.6 percent. In the heavier variant, this involves a price increase of 6 percent and the citizen’s purse shrinks by 3.4 percent.

This is especially noticeable among the lowest incomes, the CPB warns: “Without additional policy, poverty and financial vulnerability among low incomes will increase. Most Dutch households have sufficient buffer to absorb the energy cost shock without getting into financial difficulties or falling into poverty. However, this does not apply to households that already live at or below the poverty line. In addition, there is a group of households whose income falls above the poverty line, but who have a limited buffer and can therefore run into financial problems if they experience a major cost shock.”

Really worry

The planning office has calculated that the rising energy prices of low incomes take a much larger bite out of disposable income. In addition, it is actually impossible to capture the group in a model, CPB director Pieter Hasekamp points out: “Whether it is a knock or a blow depends on the share of energy costs in disposable income. I am really concerned about people with lower incomes, especially if they live in a poorly insulated house. Such effects are not visible in the standard purchasing power charts.”

With the purchasing power assignment that the cabinet faces, the planning office will indicate that it is not wise to try to compensate everyone generically: “It is not necessary for everyone, and for those who need it, it is just insufficient.” Targeted compensation for lower incomes with high heating costs is desirable, but according to the CPB it is also difficult to implement. The planning office recommends increasing the compensation for low incomes via the municipalities (currently 200 euros per household).

Positive note

The CPB also has a small positive note: in all scenarios, the pain will only be suffered this year. For next year it is already registering a purchasing power recovery of 1.5 to 1.9 percent, because the planning office is counting on rising wages and indexation of pensions. And the economy continues to grow in the calculations. This year by 3.5 to 4.2 percent and next year by 1.4 to 2.6 percent. Unemployment rates also remain fairly stable at the current low level.

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