Defund and defend: the health and healthcare costs of rearmament

Fiscal transfers from welfare to defence spending are well-documented in the literature, however, their mechanisms and distributive incidence deserve further scrutiny. This paper traces the funding mechanisms behind the welfare-to-warfare trade-off mandated by the 2025 NATO Agreement in the Netherlands and analyses its distributive incidence, using policy documents from the 2026 coalition agreement and the latest Dutch budget laws. We identify two channels of extraction, a direct one and an indirect one. First, a 'freedom contribution' withholding up to 95% of the inflation correction for income tax from 2028 onward, generating €5·1 billion and whose previous implementation has negatively affected the lower-income earners. Second, €10·3 billion, generated through cost-sharing mechanisms in healthcare, managed care, cost-shifting in long-term care, and the abolition of financial protection mechanisms for chronically ill and disabled patients. By 2030, this combination is expected to finance above the total additional defence expenditure. The Dutch case provides a transparent example. As European governments change their budget priorities to meet new NATO commitments, the question of who bears the fiscal cost of rearmament, and through which mechanisms, demands attention.