The Golden Rule adopted in Dutch legislation?
The Netherlands is required to introduce the golden rule – a balanced budget rule – in national law. In a recently tabled bill the Dutch government will comply with this European obligation. However, some critical remarks can be made about this new bill.
On 24 September the Dutch government tabled the bill Sustainable Public Finances Act (Wet Houdbare Overheidsfinanciën). The bill aims to introduce the golden rule: the rule for a balanced budget. This mandatory introduction in national law is laid down in the EU Fiscal Compact. However, some critical remarks can be made about the implementation of the golden rule in this recently tabled bill.
The Fiscal Compact is an intergovernmental treaty signed by 25 EU member states. This fall the Dutch Parliament will probably ratify the treaty during the yearly financial debates. The main goal of the Fiscal Compact is to foster fiscal discipline in the euro area by committing the member states to adopt the golden - balanced budget - rule in national law.
But does the Sustainable Public Finances Act (Wet Houdbare Overheidsfinanciën) comply with the obligation to adopt the golden rule in national law as it is stated in the Fiscal Compact? The answer is twofold.
Yes, in substance the Netherlands complies with the requirements of a golden rule and the conditions set forward in the Fiscal Compact. Above all the balanced budget rule already exist in secondary EU legislation and is already binding for the Netherlands as a member state, with or without codification in national law. The treaty does lay down a slightly stricter term, but this term is currently met by the Dutch government.
However, one of the novelties of the Fiscal Compact is that this treaty obliges the member states to formalize the golden rule in national law.
The bill states in article 2 paragraph 3 that (unofficial translation):
“The budgetary policy will be executed:
- in line with the standards as laid down by the European institutions (…)”
Three critical remarks can be made about this provision. First of all, the main purpose of the mandatory introduction is to increase the visibility on the national level and to create national “ownership” of the European budgetary rules. Obviously the bill doesn’t really meet this purpose. It doesn't mention the balanced budget rule or any concrete standard, but only refers to general standards. Second, the bill refers to (standards of) the “European institutions”, but strictly speaking the rules from the Fiscal Compact are not drafted by these institutions because it is an intergovernmental treaty. Lastly a more general remark. It is not clear why the Dutch government addresses this obligation in a new act. Why did the government not just amend the already existing Accountabilities Act (Comptabiliteitswet)? After all, this act already adequately lays down the rules regarding budgetary matters.
In its advisory opinion the Council of State also questions why the bill refers to the general European framework of budgetary discipline. Why doesn’t the bill mention a concrete standard as it is stated in the Fiscal Compact? But whether or not the golden rule is adopted correctly in our national law is reviewed by the European institutions. Initially by the European Commission and ultimately even the Court of Justice EU can render its judgment on the matter.