New allowance system: a complicated job that will take a long time

Erasmus School of Economics

In response to the government’s child benefits scandal, outgoing Prime Minister Rutte emphasises that there is still a great deal that needs to be done. In addition to financial compensation for the parents affected, the entire benefits system must be overhauled. Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, explains in an interview with NPO Radio 1 what he thinks the new benefits system should look like.

Not yet heading in the right direction

‘It is clear that the current system needs a lot of work,' Kavelaars begins. ‘When we started with the new system, there was actually already doubt as to whether it would function. What is unfortunate is that it will take a very long time before the new system takes effect, given the major changes that have to be made. And even more important: what does that mean? And how are we going to do that?’ The government will not comment on this yet, however. Some research into a new system has already been carried out, but according to Kavelaars, this is not yet heading in the right direction.

The new system

According to Kavelaars, we should try to do two things in the new system: first, we should try to take away as much of the benefits possible from those currently entitled to benefits and shift them to the organisations that are on the other side. Think, for example, of the organisations that provide childcare. 'If you can lower the costs there, then there is also less reason to provide subsidies to the parents,' says Kavelaars. ‘And the number of childcare institutions is of course a lot lower than the number of parents. As a result, there are fewer people involved in the system.' According to Kavelaars, the same goes for the rent allowance and the healthcare allowance. ‘The second direction is that there should be less consideration for the individual circumstances of the person. At the moment, the allowance is still very much dependent on your income, your assets, whether or not you have children, and that of course makes the system very complicated. This means that if something small changes, there is an immediate reason to adjust the allowance. And that makes the system very complicated.’  

A complicated job 

According to Kavelaars, it will take at least another cabinet term before the new system is in place. This means that we will have to continue with the current system for the time being. ‘This means that the implementation of the current system has to improve, and that the government must take good measures to ensure that the current system is implemented much more carefully. Another aspect in the process is the transitional system, which basically means that another regulation is added. And of course, this also has to be as simple as possible.’ In short, a complicated job which will take a long time.

More information

The full item from NPO Radio 1, 16 January 2020, can be found here (time slot 7:00 - 8:00 from 4:46 minutes; in Dutch). 

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