National Growth Fund subject to change after criticism

As a result of criticism from various parties on the design of the 20 billion National Growth Fund (Nationaal Groeifonds), the government has announced various changes in order to gain support in society and the Dutch parliament. In an article from NRC, Professor of Public Economics at Erasmus School of Economics Bas Jacobs responds to these changes and emphasizes persisting problems.

In the beginning of September, the Dutch government launched the 20 billion National Growth Fund. By means of this fund, the government intends to incentivize public investments in Research and Development (R&D), amongst other things. Proposals from any scientific discipline can be submitted for funding, including fundamental research. Hoekstra and Wiebes, respectively the Ministers of Finance and Economic Affairs and Climate Policy, explained that the predominant objective of the fund is to boost long-term economical welfare, whilst simultaneously transitioning to a low-carbon economy (LCE). Initiatives have to be brought forward by entrepreneurs, knowledge institutes and other societal parties.

The announcement of this fund triggered a response from society: the fund had too many deficiencies. According to consultative bodies of the government (e.g. the Council of State), the fund hasn’t been integrated within the legislative system accordingly, which makes it impossible for the Dutch parliament to exercise its supervisory function. Expenses made within the framework of the fund wouldn’t be democratically accountable. In order to fix this flaw, the administration will have to anchor the fund within the law, a procedure which will take two years.

GDP as a directive

One of the main conditions of the fund is that a project has to be beneficial in terms of GDP. According to Jacobs, this policy decision is a mistake. Rather than making GDP the leading criterium, a broader perspective on welfare has to be taken into account. Certain effects of projects aren’t quantifiable in terms of money, but can make considerable contributions to societal wellbeing. For instance, proposals that concern the reduction of carbon dioxide are not eligible for financing under the current conditions: ‘It is still possible that socially sound, prosperity-increasing environment investments aren’t made because they don’t increase GDP’. However, the new fund proposal is an improvement in comparison with the first plan: in the current plan, projects are only qualified for funding when social benefits are higher than its costs. This excludes previously acceptable proposals that would predominantly benefit private parties, whereas the costs would have to be borne by society.

Ball in the court of the youth

Furthermore, the Dutch cabinet promises to involve the youth in the decision making process. A ‘Council for the Future’ will be established, in which young people will be seated. Its main goal will be to identify subjects that are of importance with regards to increasing the welfare of future generations.

More information

You can read the article from NRC, 1 December 2020, here.

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