Finance Minister Sigbjørn Johnsen of Norway’s outgoing left-center government coalition presented his last state budget on Monday, and it wasn’t nearly as tight as some had predicted. Even though it taps into much less oil money than it could, it also boosts spending in many areas that may present dilemmas for the new Conservative coalition that’s about to take over.
Johnsen repeatedly called the budget “responsible” and “cautious,” as he warned that Norway’s economic good times “could turn around at any time.” He stressed, as predicted, that Norway was still in good shape financially, with a solid tax base plus the oil revenues that provide advantages “that few other countries have.” The new government was thus inheriting a lot of fundamental economic strength, he claimed, but cautioned that the confidence both Norwegians and other countries have in Norway’s economy “can disappear overnight,” because oil prices can fall and new crises can arise.
That’s why his outgoing government opted to use far less oil money than it could, just 2.9 percent of the size of the state’s so-called “oil fund” instead of the 4 percent allowed. Nonetheless, the total size of the budget (a dizzying NOK 1,114 billion) is bigger than ever before, with an estimated NOK 135 billion in additional oil revenues made available to fund public projects.
Much more for roads and trains
They will include more than NOK 40 billion worth of new road and rail improvements, and more money for local governments, health care, elder care, day care centers and university students, among other areas marked for budget increases. At the same time, Johnsen proposed no major hikes in taxes on tobacco, alcohol, gasoline or diesel. Johnsen also proposed lower inheritance and fortune tax liability, while introducing a new capital gains tax on sale of real estate.
“We have a well-functioning tax system in Norway,” Johnsen claimed before a packed Parliament Monday morning. He said, though, that the tax changes the government is proposing in the new budget will make it “more fair,” with ordinary folks paying less while corporations face closure of several tax loopholes.
It may be difficult for the incoming government to change much of what Johnsen proposed as it attempts to put its own stamp on the state budget. The new government may agree on several items, or simply find them politically hard to reverse.
He said that lessons from the 1980s and ’90s show that oil revenues “can swing a lot” and must be saved, that there’s a need for solid banks and a need for cooperation both within and outside Norway. The country’s strong economy is not just a product of its oil and other natural resources, Johnsen claimed. “What really matters is the ability to cooperate.”
The outgoing finance minister, known for reciting poetry that aims to lighten up and humanize otherwise serious sessions, said his budget was aimed at ensuring a strong social welfare system in Norway for generations to come, and that it was based on “human values and dignity.” A state budget is much more than “just a bunch of financial posts,” Johnsen said in his address to the Parliament that was carried live on nationwide television. Rather, he said, “it’s all about folks’ lives.”
Now his outgoing government’s proposed budget will be debated in parliament and subject to change by the incoming Conservatives-led government, which can opt to use an estimated NOK 54 billion in additional oil revenues if it wants, while still staying within the generally accepted expenditure rule. Both Johnsen and outgoing Prime Minister Jens Stoltenberg warned against that, fearing that so much money in the system will overheat Norway’s economy.
Johnsen, who received lots of hugs and handshakes from fellow politicians before mounting the podium, will now return to his home county of Hedmark, where he’ll resume his position as county governor. Stoltenberg, as expected, formally announced in Parliament that his government that’s ruled for the past eight years would submit its resignation to King Harald V at an extraordinary Council of State at the Royal Palace Monday afternoon.
It’s then up to King Harald to formally call Prime Minister-elect Erna Solberg, leader of the Conservative Party, and ask her to form a new government, which she’s been working on since the September 9 election. It will be presented later this week.
For more budget information from the government in English, click here (external link).