Background and advisory request
The Rli has decided to issue unsolicited advice on the National Growth Fund (Nationaal Groeifonds). The advice focuses on whether the Growth Fund's current design and planned investments offer the prospect of achieving sustainable earning capacity and what improvements could be made to future rounds of the Growth Fund. The government has set up the National Growth Fund to maintain the long-term earning capacity of the Netherlands. In its advisory report, 'Investing in sustainable growth', the Council makes recommendations that the government can use, in cooperation with the Growth Fund Committee, to improve how the National Growth Fund is used.
The Council concludes that the goal of sustainable earning capacity can only be achieved if the Growth Fund is used exclusively for investments in activities aligned to the transition to a sustainable economy. The Dutch economy will have to be carbon-neutral, low-resource, nature-inclusive and socially just to continue generating income in the future. The current, familiar earning models will no longer provide enough income to bring prosperity and well-being to the desired level in the future economy.
The focus that the Council recommends for the Growth Fund - investing in a sustainable economy that is also internationally competitive in the long term - is in line with the ambitions of the European Green Deal to design a new economic model that will make Europe the world's first climate-neutral continent and create new innovation and investment opportunities and new jobs. This connection is essential because the European measures and legislation arising from the Green Deal will also be decisive for the Netherlands.
To increase the impact of the National Growth Fund on the sustainable earning capacity of the future, the Council briefly makes the following recommendations:
Take 'sustainable earning capacity' as referred to in the government's growth strategy as the starting point for the Growth Fund's mandate, and focus investments on strengthening earning capacity within a carbon-neutral, low-resource, nature-inclusive and socially just economy.
The current mandate of the Growth Fund focuses on structural growth in gross domestic product (GDP). The Council advises the government to ensure that money from the Growth Fund intended to structurally increase GDP goes to projects that, in line with the government's own growth strategy, are unambiguously aimed at achieving truly sustainable earning capacity. That is, earning capacity that fits within the planet's ecological limits and is socially just. It is important to avoid a situation where investments from the fund support parts of the economy that will no longer be viable in the future.
Set the direction for the investments from the Growth Fund by linking up with goals already formulated for relevant social challenges that help achieve a sustainable economy.
Structural growth in GDP is proving to be a goal that does not sufficiently set the direction for public investment from the Growth Fund. There are many ways of pursuing this goal, as evidenced by the plethora of investment proposals submitted from very different angles. The Council believes that in its mandate for the Growth Fund, the government must set the direction of the investments by focusing on a clear mission (or several missions). This can be done in line with the government's current goals for the social challenges associated with the transition to a sustainable economy and following the route set out in the European Green Deal.
Clarify the type of public investment for which the Growth Fund can be used in view of its specific goal. Make explicit the substantive additionality to regular budgets and funds, particularly regarding investments from the Mobility Fund and the Delta Fund, and ensure sufficient resources for existing funds.
The ambition to secure the Netherlands' future sustainable earning capacity will not be achieved solely through investments from the Growth Fund. Parts of standard government policy are already focusing on this ambition. Therefore, it is vital to make clear choices about the investment goals for the Growth Fund. According to the Council, it should focus on investment proposals that add value to the standard policy. After all, the challenge of securing sustainable economic earning capacity for the future and linking it to the sustainability transitions is so big and so fundamental for the Dutch economy that investments from the Growth Fund should truly add something to existing policy efforts. The Council believes that the Growth Fund should not be used to fill the financial voids of existing funds, such as the Mobility Fund.
Direct the coherence between (a) the investments from the Growth Fund and (b) the Growth Fund and other funds/policy instruments. Do this from the perspective of sustainable economic growth: what is needed to achieve the corresponding social goals?
The government states that investments from the Growth Fund must be additional to existing public investments, but it is not clear what exactly is meant by this. The combined investments from the Growth Fund are intended to take the Netherlands closer to a carbon-neutral, low-resource, nature-inclusive and socially just economy to secure our sustainable earning capacity for the future. Making the investments coherent and linking them to other government policies increases the chances of the Growth Fund's missions succeeding. This coherence is not currently being sufficiently promoted or monitored. The government should take more control of this. However, the Growth Fund Committee could also emphasise the coherence between investments in its recommendations. The submitting consortia may also be asked to pay attention to how their investment proposals relate to other investments and policy aimed at the missions of the Growth Fund.
Explicitly include in the assessment framework the need to consider the contribution of proposed projects to the sustainability of the earning capacity.
The GDP effect and the balance of social costs and benefits are prominent aspects of the assessment framework used by the Growth Fund Committee for investment proposals. The Council believes that these indicators are only suitable to a limited extent for assessing the sustainable earning capacity in an economy in transition. The Council therefore recommends that, from now on, proposed projects should be assessed in terms of their contribution to social goals or missions relevant to the growth strategy. A positive criterion should be introduced to favour proposals that make a greater contribution to transition goals. This should include, as a precondition, hard lower limits for the effects on the ecological and social boundaries of the planet, derived from the social goals relevant to the growth strategy.
Communicate more with the outside world about the actual and intended results of the Growth Fund and the work of the Growth Fund Committee. Do not limit this communication to the domain of experts and submitting parties. Use the choices made by the Growth Fund as input into the public debate on the development towards a sustainable economy and the attractive prospects that this sustainable economy will bring.
To make government spending politically and socially accountable, it is vital that both the government and the National Growth Fund Committee clearly communicate the reasons for investments from the Growth Fund and the results achieved. The direction taken will also determine the future economy of the Netherlands and is therefore of great importance to society. Clear communication on how the Growth Fund is being used contributes to the public debate about the development of a sustainable economy in the Netherlands, creates support for it and increases its chances of success.
On 14 October 2021, the advisory report was presented to the Dutch ministers of the Interior and Kingdom Relations (BZK), Economic Affairs and Climate Policy (EZK), Finance, Infrastructure and Water Management (IenW) and Agriculture, Nature and Food Quality (LNV).
For more information about the advisory report, please contact the project leader Bart Swanenvleugel, email@example.com, +31 (0)6 52012691.