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Thursday, May 23, 2024

Finance minister steps on the brakes

Sigbjørn Johnsen, Norway’s new finance minister, claims the level of Norway’s social welfare services may have hit their peak. Even though his government has proposed an expansive budget for next year, Johnsen suggests significant belt-tightening lies ahead.

He intends to put the brakes on public spending of Norway’s oil revenues. “The next four years are going to be a lot more demanding,” he told newspaper Aftenposten over the weekend. The party, in other words, is over.

Norway has enjoyed unprecedented affluence in the past few years as high oil prices and steady supplies of oil and gas from the North Sea pumped up the national economy. Opposition politicians actually complained two years ago that the left-center coalition government led by the Labour Party wasn’t spending enough of the oil revenues on needed public improvements from better roads to schools.

Now the government is spending much more than traditional limits on use of oil money allow, mostly through stimulus programs aimed at countering the global finance crisis. Johnsen, a Labour Party veteran himself who spent six years as finance minister in Gro Harlem Brundtland’s government, now says that spending must be reeled in.

“When your room for negotiation shrinks, you can do two things,” he said. “You can try to find more income or you can set tougher priorities.” Less oil revenue is flowing into Norway now, while the number of persons aged 67 and higher will jump by 70,000 in the next four years alone. That means higher costs at a time of potentially lower revenues.

The government, meanwhile, has promised to keep a lid on taxes. That means either the mainland (non-oil) economy must grow or public spending must decline.

“The numbers coming in up to 2013 will show how difficult that may be,” Johnsen said.



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