The sense and nonsense of chargebacks: 5 questions answered

Writer: Koen Donatz

The ‘through accounts’, it is a term that goes around a lot in campaign time. On 1 March, the Netherlands Bureau for Economic Policy Analysis (CPB) published the run-throughs of the election manifestos. [1] After publishing the calculations, politicians can proudly tell that their election programme will provide the biggest increase in purchasing power or the most jobs. This makes the breakdowns both a tool for parties to pat themselves on the back and a stick with which to beat their electoral rivals. But what exactly are the breakdowns? And what do you actually gain from them? In this blog, I will use five questions to explain to you what they are all about.

What are ‘the throughputs’?

Before each House of Representatives election, parties can choose to have their election programmes calculated by CPB. CPB is the economic research institute of the Netherlands. With their studies, they support policymakers and politicians. In the calculations, CPB examines how much the party spends on what for each election programme, which taxes it increases and reduces and what the economic effects of this are on, for example, purchasing power, employment and income inequality. Parties are not obliged to have their programmes calculated. In total, ten parties had their programmes calculated. The PVV, the Party for the Animals and Forum for Democracy chose not to do so.

Are the throughputs relevant?

The beauty of the throughputs is that it forces parties to become concrete. All election manifestos are full of nice, ambitious measures, but in the run-throughs parties are confronted with the fact that plans cost money and that their ideas have economic effects. The calculations give a good overview of how the parties want to spend the available money and where their priorities lie. This makes the accounts a good tool to see differences and similarities between parties. For instance, the calculations clearly show that the SP and GroenLinks want to invest the most in climate and environment, while DENK and 50PLUS want to invest the least.

What are the criticisms of the throughputs?

There is also much criticism of the throughputs. Hereby, some of the main criticisms are listed:

• Not everything can be properly calculated. For instance, the economic effects of investments in education and innovation cannot be calculated properly. This may encourage parties to cut back on this, in order to come out better in the calculations.
• The medium- and long-term economic forecasts in the calculations (e.g. CPB calculates the effects of the election programmes on the level of national debt in 2060) are very uncertain. CPB itself therefore indicates that the calculations should be used mainly to compare parties, not to look down to the decimal point at what the Dutch national debt will be in 2060 if party A takes over after 17 March.
• This election, many parties are coming up with ambitious reform plans, for example for the benefits system. The effects of these reforms are difficult for CPB to calculate.
• The corona crisis gives a distorted picture. The crisis means an unusually large amount of money is being spent in 2021, which makes it harder to see whether parties want to invest extra money in a particular domain compared to a ‘normal’ (pre-corona) year.
• This is one for connoisseurs, but I want to mention it: Some of the assumptions on which CPB bases its models are questionable. For instance, CPB makes the assumption that the measures the parties have in their election manifestos take effect at the first possible moment and then grow linearly towards the end of the government's term. However, in practice, of course, measures will not necessarily take effect at the first possible moment or grow linearly. The timing and pace of the introduction of measures require political choices, which CPB conveniently ignores.

What are the main conclusions of this year's throughputs?

Based on the calculations, CPB drew a number of interesting conclusions, including:

• Many parties are calling for sweeping social security reforms. For instance, GroenLinks, D66, the Labour Party and the Christian Union want to largely abolish the existing benefits system.
• Almost all parties are in favour of increasing the minimum wage.
• All parties opt for more government spending. The SGP is the most frugal in this, while the SP opts for the biggest increase.
• At the same time, all parties are increasing the burden on companies. The VVD and the SGP spare companies the most, while the PvdA wants to increase the burden on companies by far the most.
• The financial burden is passed on to future generations by most parties, and to the strongest extent by D66 and the SP. Only the VVD, the SGP and the Christian Union do not.
• Most parties increase income equality. Not surprisingly, the VVD decreases income equality, the only party that chooses to do so.

What are the results of GroenLinks's election manifesto pass-throughs?

GroenLinks opts to increase public spending by €29.4 billion. This is hefty; in fact, the central government's annual budget is around €300 billion. This extra spending goes mainly to education (€8.4 billion), social security (€7.6 billion), healthcare (€4.6 billion) and climate and environment (€4.3 billion). GroenLinks recovers the burden increase almost entirely from companies, through various tax schemes. Income and labour are actually taxed less by GroenLinks. GroenLinks's ideas mainly increase purchasing power for middle- and low-income families and thus reduce income inequality. The flip side of the story is that, according to the CPB, GroenLinks's plans will also result in less sustainable public finances in the future and structural employment will fall by 1.0%. Simply put, the GroenLinkse plans mean more money goes out of the government than comes in. This means greater financial pressure on future generations. This is something we need to keep our parent party on our toes.

[1] https://www.cpb.nl/sites/default/files/omnidownload/Keuzes-in-Kaart-2022-2025.pdf