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Fuel taxes spark new budget battle

Norway’s minority government coalition is poised for yet another battle over the state budget in Parliament, also with its two support parties. This time the battle will be over fuel taxes and the costs of driving, with the conservative government parties proposing a non-negotiable overall decrease that’s not likely to satisfy either the Liberals or the Christian Democrats much less other parties.

The biggest confusion is over what will happen with plans to expand the E18 highway west of Oslo. PHOTO: Arbeiderpartiet
While the city government in Oslo is making it more expensive and difficult to drive, the state government revealed part of its budget proposal on Friday that will relieve the overall tax burden on motorists. The proposal is non-negotiable with the government’s two support parties, and likely to set off a budget battle in Parliament. PHOTO: Arbeiderpartiet

The two support parties, along with several others in Parliament, have been keen to significantly raise fuel taxes and many other taxes associated with driving. They want to keep trying to get Norwegians out of their cars to lower carbon emissions. Oslo’s city government presented a budget this week that includes many measures aimed at discouraging driving and boosting use of public transportation, even though the latter will cost more, too. The state government’s support parties also want such a major “green shift” in the state budget. The Liberals have been particularly demanding, threatening to withdraw support for the minority coalition if they don’t get the fuel tax hikes they want.

The entire issue could topple the government, if Prime Minister Erna Solberg and Finance Minister Siv Jensen don’t get their budget through parliament. Solberg and Jensen insisted at a press conference Friday that the overall state budget does indeed represent a major “green shift” while relieving motorists from carrying too much of its costs. Solberg rattled off a long list of measures aimed at cutting emissions. Jensen stressed that many Norwegians living in outlying areas lack public transport options and must rely on their vehicles. She and Solberg thus presented a package that they claimed addresses both climate and cost issues.

Only a minimal fuel tax increase proposed
Instead of making any major cuts in Norway’s large oil and gas industry, which is by far the country’s largest source of emissions, even the coalition’s Conservative and Progress parties were willing to go along with a slight rise in gasoline and diesel taxes. Only small increases are on the table, though. As Norwegian Broadcasting (NRK) reported earlier on Friday, the government is proposing to boost gasoline taxes by 15 øre (NOK 0.15), while diesel taxes would rise by just 35 øre.

The Conservative and Progress parties also plan to ease taxes on other aspects of driving, such as cutting the annual vehicle registration fee, raising the amount of transport costs that commuters can write off of their income tax, and even lowering some road tolls in outlying areas. None of that seems to have the support of the Liberals or the Christian Democrats.

Solberg of the Conservatives and Jensen of the Progress Party thus went to the unusual step of holding their press conference on Friday to reveal the driving-related portion of their proposed budget before the entire budget’s scheduled release next week. Politial commentators claimed it was an attempt to take the thunder out of the thorny fuel tax issue so that it won’t overshadow the rest of the budget that apparently has won a nod from the support parties. One commentator on NRK claimed the government and the country was nonetheless facing a “budget crisis.”

Battle looms
The commentators may have been over-dramatizing the matter on national radio Friday morning, but it’s clear a budget battle looms after Parliament formally reopens next week. Solberg was presenting both the slight fuel tax increase, which nonetheless is a major concession from the anti-tax Progress Party, and the overall package as a “take it or leave it” proposal. Neither Solberg nor Jensen want their support parties to be able to increase fuel taxes further, prompting NRK to claim that Solberg was posing an ultimatum.

That’s always a risky thing to do for a minority coalition. Newspaper Dagens Næringsliv (DN) estimated that the coalition’s proposals for motorists would yield nearly NOK 1 billion in tax relief, instead of making it more expensive to drive. At the press conference on Friday, Solberg admitted that the budget “doesn’t go as far as the Liberals wanted” in terms of fuel tax hikes but stressed repeatedly that the state budget as a whole was full of measures aimed at a “green shift” without unduly raising costs for a vast majority of Norwegians.

Jensen, who continued to describe her party as “the car-owners’ party,” said it was important that the budget proposal relieves the overall tax burden on motorists. “Norway is a long country,” she said, where public transport alternatives aren’t available for many residents in outlying areas. She also insisted, however, that the overall budget will reduce emissions in many other areas, while relieving the cost of such reductions on those who have no choice but to drive. Berglund



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