Finance Minister Siv Jensen unveiled her revised budget on Wednesday, which included a NOK 1.9 billion (USD 320 million) increase in spending of Norway’s oil wealth. It prompted reactions from the Conservative (Høyre) and Progress Party (Fremskrittspartiet, FrP) coalition’s political rivals, who said it fails young families, is hostile towards business, and does not do enough in the areas of climate change and education.
Jensen said the Norwegian economy was looking quite healthy, reported Norwegian Broadcasting (NRK). Growth of around two percent was expected throughout 2014 and 2015, on a par with last year but slightly down on the projections from last autumn. Unemployment remained low.
Jensen emphasized that Wednesday’s announcement was not a new budget, but rather a revision of current annual spending, reported Norwegian Broadcasting (NRK). “This government is in favour of multiple yearly budgets, then we’re working with adding to a longer run where we can see things in context, more than large, abrupt changes every six months,” she said. “The budget is a little more expansive that last autumn. That is primarily due to changes in the numbers for 2013, not us having thrown about on fiscal policy.”
The NOK 1.4 billion increase would take the total oil money spending to NOK 140.9 billion. Other key figures included increasing state revenue by NOK 2.1 billion, increasing government spending by NOK 1.1 billion, and tax and excise changes earning the government 165 million less.
Jensen said the revised budget was in line with the fiscal rules governing oil fund spending, which puts the equivalent real return on the fund at four percent of the assets. In 2014 Norway will spend 2.8 percent of the oil money, 0.1 percentage points less than planned last autumn.
Winners: non-smokers, motor boats, climate fund, rental housing, security, privacy, cancer treatment
Jensen announced changes to duty free legislation, which would allow non-smokers to redeem their tobacco quota for up to 1.5 litres of tax-free wine or beer from the start of July. The total quota would then be one litre of spirits, three litres of wine and two litres of beer. “I believe it is a nice gesture for people when they are out on a trip, and I can only surmise that this is a welcome contribution now that the holidays are at our door,” she said. The move surprised health organisations, who questioned why the government would increase spending on substance abuse programs but relax rules around alcohol purchasing. Taxes on motor boat engines were also cut.
The government proposed NOK 22.75 billion for the climate fund until 2017. An extra NOK 4.25 billion was allocated on Wednesday, taking the total increase to NOK 12.75 billion.
NOK 100 million was announced in increased grants for housing rentals in 2014, which equates to up to 450 additional homes. NOK 100 million will also go to additional measures strengthening work on security and preparedness, including NOK 40 million for security in the government quarter, NOK 12 million for procuring emergency helicopters and NOK 7 million for the royal family.
Jensen also said the government would implement its platform of stricter access to tax rolls. Individuals would be notified about who has applied to see their tax records.
NOK five million was announced for the streamlining of cancer treatment. The money will be used to develop a national standard on how long the various elements of a course of treatment should take.
Losers: kindergartens, immigrants, Syria, lay-off policies, Chess Olympics
Despite admitting the government had miscalculated the demand for kindergarten placements, Jensen did not announce any extra money to get more children into day care. Many municipalities had hoped for more money for kindergartens after the government cut grants by NOK 340 million, believing that increased cash benefits would lead to more parents staying home for longer while their children were young.
The government has spent NOK 400 million less on immigration into Norway, and used part of the money for the removal of chemical weapons from Syria. The measure is far from the NOK 1 billion many political parties wanted in increased aid to war-torn Syria.
The government did not reverse new lay-off rules, which require businesses to pay for 10 days extra than they used to. The industry, unions and opposition politicians had all called for the rules to be overturned. The leader of the Centre Party (Senterpartiet, Sp), Trygve Slagsvold Vedum, said the budget was hostile to industry and demanded answers on regional differentiations in employer taxes and the failure to reverse the lay-off rules.
The Chess Olympics to be held in Tromsø in August were thrown into doubt after the government did not allocate the extra NOK 15 million organizers were hoping for. The event has attracted 2,000 participants from 181 countries, and will be one of the biggest sporting events ever held in Norway. “With the economic framework we have right now, we do not look to be in a position to run this,” said chairman Hans Olav Karde. “The event is definitely in danger now.” The government said it had already allocated NOK 75 million, and it was up to the organizers to run the Chess Olympics within their means.
Electric cars costly
The popularity of electric cars and the tax breaks buyers receive meant less revenue for the government. Buyers do not have to pay the one-off fee or sales tax attached to the sale of cars that run on fuel. From January until April this year electric cars accounted for 13 percent of new car sales, meaning there are now some 27,000 of the environmentally-friendly vehicles in Norway. If sales continue at the same rate, it would cost the government between NOK 3 to 4 billion.
The tax incentive scheme was supposed to be in force until 2017 or until 50,000 of the cars were sold, and Jensen confirmed there were no plans to end it early. “The government has committed to continuing these benefits until 2017,” she said. “What happens after that, we’ll then sit down with the Parliament and discuss.”
Criticism flew from the opposition parties as soon as the revised budget measures were announced. The Centre Party said it did little to help regional industries, while the Liberals said the budget was too passive when it came to climate and education policy. Labour (Arbeiderpartiet, Ap) and the Socialist Left (Sosialistisk Venstreparti, SV) parties were disappointed by the lack of funding to create more kindergarten placements, and KrF accused the government of being more concerned with tax-free alcohol quotas than young families.
“I’m trying to comprehend that those who lead the country, in the choice between covering a huge hole in the number of day care places, or cheaper boat motors, choose the latter,” said SV‘s Snorre Valen. “For me it is terribly strange prioritizing.” He slammed the government for focusing on what he called little things like tax-free quotas and boat engines, instead of dealing with more important issues. Lack of changes to lay-off policies were also widely criticized, as was the lack of aid money to Syria and other countries ravaged by war.
The budget must still be approved in Parliament. The Conservatives and Progress Party must win over their support parties, KrF and the Liberals, to pass the revised budget.