The Schoof government has refused to take immediate action to prevent a decline in purchasing power for residents of the Caribbean Netherlands, with losses potentially reaching up to 10% as of January 1. State Secretary for Kingdom Relations, Zsolt Szabo, conveyed this decision in a letter to the Second Chamber, indicating that potential relief measures will not be considered until the spring.

This decision will disproportionately impact individuals earning minimum wage or just above it and benefit recipients reliant on social assistance and AOV (Old Age Pensions). One key factor is the expiration of the $1,300 energy allowance for low-income households. Furthermore, all residents will face increased costs due to terminating subsidies for fixed electricity and water connection fees, adding at least $46 to monthly household expenses starting January 1. Businesses on the islands will also be affected by these changes.

Szabo has firmly rejected amendments from the Second Chamber aimed at mitigating the purchasing power loss. However, he hinted that potential measures to alleviate the burden on low-income households might be included in the spring budget memorandum. He also pointed out that island governments, particularly the Island Council of Bonaire, share responsibility for this situation due to their opposition to the Tax Plan. Szabo noted that while the plan may result in higher incomes for some, it will also increase the tax burden on those earning minimum wages, subtly criticizing local representatives for their role in the outcome.

This decision has sparked concern, as vulnerable groups on the BES islands face significant financial pressure without immediate government intervention.

The letter to the Second Chamber from State Secretary Szabo reads:

On 22 and 23 October, the debate took place with the Second Chamber on the budget statements of Kingdom Relations (IV) and the BES Fund (H) for the year 2025. On November 5. I have informed you about several appreciations of motions, as promised in the second term of this debate. Through this letter, I inform the Second Chamber in response to the request for information from MP Ceder, regarding the impact that the expiry of the subsidies on the cost side will have on the cost of living of the residents of Bonaire, St. Eustatius, and Saba. At the end of this letter, I will briefly discuss the amendments submitted by the Chamber during the budget debate.

Temporary and structural subsidies for the cost of living

For Bonaire, St. Eustatius, and Saba, there are various structural and temporary subsidies to reduce the cost of living on the islands. These subsidies differ in nature and size, for example, they are aimed differently at the end user or at the providers, or they are generic or income-dependent. Ultimately, all subsidies aim to strengthen the livelihood security of the inhabitants of the islands.

For 2024, the government has taken several additional measures with the 2024 Budget Memorandum aimed at increasing disposable income and reducing the cost of living. Some of these measures are structural (such as increasing the minimum wage, benefits and child allowances, public transport resources, and reducing employers’ contributions). The temporary additional subsidy for telecom will also continue in 2025. Several additional subsidies on electricity, drinking water, and the energy allowance for low-income households are temporary. The various subsidies are explained in more detail below following the request for information from member Ceder.

1. Telecom

In order to improve the affordability of fixed internet in the longer term, the previous incidental subsidy from the Ministry of Economic Affairs (EZ) for fixed internet was converted into a structural subsidy in 2023. This concerns $ 25 per connection per subscription on Bonaire and $ 35 per connection per subscription on St. Eustatius and Saba. There is structural coverage for this.

With the purchasing power package of the 2024 Budget Memorandum, the rates for 2024 have been incidentally further reduced by $15 per month for all three islands. The Minister of Economic Affairs will continue the subsidy for 2025. This involves an amount of 2.5 million.

2. Energy allowance

In 2022 and 2023, SZW made funds available for targeted support to households with a minimum income through an energy allowance. This is by analogy with the regulation that applied in the European Netherlands. In the Caribbean Netherlands, however, it has been decided to grant the allowance as a provision in kind, by granting a credit to low-income households with the energy supplier. This is a one-time grant per year for a total amount of $ 1,300 per household. The energy supplier balances this credit on the household’s account and it therefore depends on the consumption of the household in question how long the credit lasts.

With the purchasing power package of the 2024 Budget Memorandum, the energy allowance in 2024 for Bonaire, St. Eustatius, and Saba has been continued. The subsidy expires at the end of this year. The concrete consequences per month are therefore user-dependent, but on average, the end of the allowance means a decline of about $ 108 per month for minimum-income households. As the grant and expenditure cycles of the allowance are not synchronized with the financial years, a decision on the continuation of this measure in 2025 is not an obstacle.

3. Electricity

The costs for electricity consist of fixed monthly costs for grid use and a variable price for how much energy is used. Because the islands do not have economies of scale, maintaining and expanding the electricity grids costs more than in the European Netherlands. That is why the Ministry of Climate and Green Growth (KGG) has been structurally subsidizing the fixed grid costs to the level of the European Netherlands since 2014. The average fixed grid costs in the European Netherlands were $35.15 per month in 2024. This subsidy will be continued. In addition, the Ministry of Climate & Green Growth (KGG) invests ad hoc in energy sustainability projects. These investments lead to cost-reducing effects in the long term.

From 2020 to 2023, the fixed grid costs were temporarily reduced to $0 as crisis measures in the context of corona and then the energy cap. With the purchasing power package of the 2024 Budget Memorandum, this reduction has been temporarily continued until 2025 to combat poverty, therefore only for small connections (households). In addition, the grid tariff is likely to increase in the coming year, just like in the European Netherlands.

In summary, the network tariffs for electricity in 2025 are likely to increase by a total of $40 per month as a result of these government measures.

4. Drinkwater

Due to the small scale and expensive processes to make drinking water from seawater, the costs for drinking water on Bonaire, St. Eustatius and Saba are high. To meet the costs of drinking water for residents, the Ministry of Infrastructure and Water Management has granted a subsidy in recent years to structurally reduce the monthly fixed drinking water rates (Bonaire and St. Eustatius) and the price of bottled or ash-transported drinking water (Saba). This has led to the fixed rate for drinking water on Bonaire and St. Eustatius being reduced to approximately $7.50 per month (instead of the actual rate of $47 and $95 respectively). For Saba, the price of 3 and 5 gallon bottles has been reduced from about $16 and $19 to $2.50 and $3.25, respectively. The Ministry of Infrastructure and Water Management also incidentally subsidizes investments in the drinking water supply of Bonaire, St. Eustatius, and Saba. This also affects the drinking water tariffs.

With the purchasing power package of the 2024 Budget Memorandum, the subsidy has been supplemented once for 2024 to reduce the fixed costs for drinking water by 40-50% compared to the already subsidized rates. In addition to the non-continuation of this subsidy, the subsidy will be reduced by 4.3% in 2025 (rising to 25.9% in 2029) as a result of the general agreement in the coalition agreement on reductions in structural subsidies.

Drinking water tariffs will increase by a total of at least $6 per month in 2025 as a result of these government measures, in addition to the expected autonomous increase in fixed tariffs.

By mapping out the impact of the loss of subsidy money on drinking water tariffs, the commitment in the WHO Water of 18 November 2018 is being fulfilled. by member Soepboer of NSC (TZ 202411-062).

In summary, it can be concluded that utility costs will increase by at least $40 per month for electricity and $6 per month for drinking water in 2025. Since the telecom measure will be continued in 2025 and the moment of decision-making has no effect on the energy allowance, the government believes that the consequences of the expiry of the temporary subsidy measures will be limited as much as possible.

Because the government intends to provide targeted support for the minimum income, the government is considering whether and how the remaining purchasing power resources in the additional item for next year can be used most efficiently.

Negative impact of the amendments

Member Ceder has submitted two amendments, both of which aim to transfer an amount of 7 million and 9 million respectively to the BES fund. As indicated in the debate, I advise against both amendments. As indicated above, the government has already reserved additional resources for targeted measures to improve social security in Bonaire, St. Eustatius, and Saba. Further decision-making on this will take place in the spring. For now, I can indicate that we are looking at the extent to which we can use the purchasing power resources for next year to extend the temporary measures on the cost side.

The resources in the BES fund can be spent freely. The temporary subsidies to utilities expiring in 2025 will not be funded from the BES fund (except for the energy allowance), but from the various departmental budgets. Transferring the money to the BES fund therefore does not offer a solution. I would also like to note that the energy allowance requires an amount of EUR 5 million (and not EUR 7 million) and that decision-making on this in the spring will not affect the inhabitants of the Caribbean Netherlands.

Concerning the amendment aimed at moving 7 million from Article 4 Promoting Socio-economic Structure, I would like to make the following observations.

The resources in this article are all policy resources concerning Bonaire, St. Eustatius, and Saba. These resources are available for good governance and legal certainty, integrity, supervision and enforcement, future-proof public finances, data formation and monitoring, and the stimulation of economic self-reliance in the Caribbean part of the Kingdom. Removing this budget makes it impossible to implement the ambitions from the policy agenda.

Finally, I would like to point out the consequences of the adoption by the House of Representatives of the Grinwis amendment to the BES Islands Tax Plan 2025 (36 604, no. 11 Grinwis et al.). As a result, the link between the statutory minimum wage and the tax-free allowance has been postponed until at least 2026. This will lead to higher incomes on the BES improving, while the minimum income will have to pay more tax. With the currently known amounts, it concerns USD 95 per year extra tax on Bonaire, USD 133 per year on St. Eustatius, and USD 65 per year on Saba. This amendment also has the consequence that the motion adopted last year by Grinwis et al. (36 418, no. 86) is not implemented, which encouraged linking the tax-free allowance to the statutory minimum wage.

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