Norway’s Finance Minister Siv Jensen unveiled what she called a “responsible” state budget for 2017 on Thursday “that will steer us through a demanding time.” It calls for pulling more money than ever before out of the country’s huge Oil Fund, to pump up spending on measures aimed mostly at preserving and creating new jobs.
“We are fortunate, we have lots of money saved up that we can use in times like these,” Jensen said on national radio as she launched into a long day that began before dawn and was to last well into the evening. Reporters were waiting outside her home by 6am and Jensen made the rounds of morning news programs before presenting her budget in Parliament at 10am.
Jensen and her fellow ministers in Norway’s conservative minority coalition government have already faced criticism from those who claim they’re pulling too much out of the largest sovereign wealth fund in the world. Jensen strongly disagreed, stressing that “we’re not ‘using up our oil money’ (as a professor told state broadcaster NRK Wednesday evening). We’re using some of what our oil money has earned. That’s been built up over many years and will continue to do so.”
The roughly NOK 225.6 billion the government will withdraw from the Oil Fund, to add to the tax revenues that otherwise fund government spending, amounts to around 3 percent of the total size of the fund. That’s up from 2.8 percent last year but still well under the 4 percent limit set by Parliament after the fund was established in the 1990s to save Norway’s oil revenues for future generations. The 4 percent figure was seen as the average earnings of the fund over time, but many argue it should be reduced, given the fall in interest rates and the price of oil.
‘Jobs, economic activity and restructuring’
Jensen defended her pending withdrawals as a means of addressing the “shock” to Norway’s economy after oil prices collapsed two years ago. “It’s a situation that’s more demanding than what it usually is,” she said, justifying the need to use more of the oil fund’s resources to stimulate the economy and boost government spending on public projects in a program that seems akin to a “New Deal” for Norway.
“We won’t be going back to that golden age (of high oil prices in an era when Norway’s oil industry has been its most important),” Jensen said. Instead, she stressed the needs now for “jobs, (economic) activity and restructuring” away from oil dependency. “The most important thing is to create new jobs,” Jensen said. “And our restructuring will be green.”
That’s debatable, as the government continues to open up new oil fields, insist that Norway’s gas exports offer a “clean” alternative to coal in Europe and only raise fuel taxes by NOK 0.15 on gasoline and NOK 0.35 on diesel. Jensen repeated that’s not negotiable, and that other changes in vehicle taxes will encourage an ongoing shift to electric and hybrid cars. “It’s not cars themselves that are the problem,” Jensen told NRK Thursday morning, “it’s their emissions,” which she claims will be reduced. Cars, however, “will still be a major means of transport,” Jensen said. “Those who live in Oslo can hop on a bus or a tram, but those living in the districts (outlying areas) can’t do that.” Jensen claimed the government doesn’t want to penalize them too harshly by imposing the much higher fuel taxes demanded by opposition politicians.
‘Tax relief,’ but some increases
Jensen also said her budget offered tax relief “for everyone,” to the tune of NOK 6.5 billion, including on income tax. NRK reported that no further cuts were offered, however, in Norway’s controversial fortune tax, which Norwegians must pay year after year on their taxable net worth. Jensen also announced, in a sign of concessions her own Progress Party clearly made, slight increases in taxes on tobacco and alcohol (around 2 percent), the controversial airline seat tax that caused so much noise earlier this year (by NOK 2) and the tax on electricity. It has risen from NOK 11.61 per kilowatt hour to NOK 16.32 next year, while electricity rates themselves have fallen.
The state government also intends to pass on an additional NOK 4 billion to local governments, which are mostly in charge of delivering public services from schools to day care, nursing homes and other welfare benefits. “We are concentrating on good, secure welfare services and good infrastructure,” Jensen said, noting how much of the money in the budget is earmarked for overdue maintenance of everything from roads and sewer systems to trains and public buildings. “We are fighting an ongoing battle against high taxes in Norway,” said Jensen, who leads the country’s most anti-tax Progress Party, yet she did introduce a new “finance tax” on services offered in the finance industry. Business taxes, Norway’s so-called selskapsskatt, will be lowered to 24 percent.
For more highlights of the budget as they were released on Thursday, click here.
Jensen claimed the massive state budget “holds together well,” and should help bring down unemployment. She was ready to spend the autumn defending it. “The opposition won’t be satisfied regardless,” she said. “That’s their job.”