NEWS ANALYSIS: Prime Minister Erna Solberg of the Conservatives and her challenger Jonas Gahr Støre of Labour faced off in their first major debate of the campaign season Wednesday morning. Tax issues dominated, as Solberg wants to keep trimming them and Støre wants to raise them, both in an effort to preserve the welfare state.
It can be argued that there actually aren’t many huge political differences between the Conservatives and Labour in Norway. Their respective politicians don’t like to hear that, but both parties, the country’s two largest, have much the same views on key issues. Both support the oil industry, for example, and its ongoing quest for more exploration and production, even in the sensitive Arctic. Both refuse to acknowledge complaints that their oil and gas plans are at odds with their other common vows to cut carbon emissions in Norway. Both claim they’re committed to trying to reverse climate change despite their support for oil. Both have put job creation at the top of their political agendas, their views on foreign policy and NATO membership are in sync and they agree that Norway should champion human rights to equality. Norway’s social welfare state has continued to hum along in recent years, regardless of whether the Conservatives or Labour lead the government. An entrenched and independent civil service sector sees to that.
Støre on the offense
Støre, in challenging Solberg to take over her job as prime minister, is left to find fault with how Solberg’s conservative coalition has run things for the past four years. It’s not easy, after her administration generally guided Norway successfully through its greatest economic shock in decades, when oil prices collapsed the year after Solberg took office. Economic growth is already returning and unemployment has fallen for eight months in a row. Solberg’s government also saw Norway through the refugee influx of 2015, when more than 30,000 asylum seekers arrived in the country. Her partnership with the conservative Progress Party survived against predictions it would fall apart, and the two won support from two smaller parties (the Liberals and Christian Democrats) as agreed when the minority coalition took over. Solberg’s ministers have restored diplomatic relations with China, kept Russia at bay and seen the seafood and tourism industries boom. Norwegians remain, according to a UN poll, among the happiest people on the planet.
Solberg launched into Wednesday’s debate by pointing to the country’s economic recovery and how she’s steered Norway through what was called a “crisis” in extremely relative terms. Støre pounced, though, on her program of ongoing tax reform and relief, claiming it sets the wrong priorities and is not sustainable.
That’s where tax issues emerge as perhaps the single biggest difference between Solberg and Støre in the race for control of the government. Solberg and her government partner, the conservative Progress Party, claim tax relief and especially tax cuts for business will create more jobs. They were buoyed this week by a new survey of 200 businesses conducted for employers’ organization NHO, in which fully 80 percent said that more jobs would be created if the value of their equipment and machines (so-called arbeidende kapital, or working capital) were exempted from Norway’s controversial fortune tax (formueskatt), which taxes net worth. Fully 90 percent of business owners want to do away with fortune tax in Norway, claiming that it puts them at a competitive disadvantage against foreign business owners since it’s only levied against Norwegian citizens.
Solberg’s government did away with inheritance tax in Norway within months of taking office. Now she’s advocating removing or at least cutting fortune tax, while Støre wants to maintain it and even raise it. Fortune tax, he claims, contributes towards removing differences among Norwegians by taxing the wealthy more heavily based on their assets. He insists there is no documented evidence that cutting or removing fortune tax on businesses will lead to more job creation. “The fortune tax cuts you cling to, but which your own experts can’t document as having any effect, don’t work,” Støre claimed in a direct attack on Solberg Wednesday morning. “You’re setting the wrong priorities.”
Solberg has admitted, to state broadcaster NRK last week, that she has no evidence that changes in the fortune tax have prompted more hiring. “There are companies that have hired more folks,” she told NRK, “but I don’t think any of us can say whether that’s only because of changes in fortune tax.”
Støre’s Labour Party has also been keen to impose property tax at the local governent level, most recently in Oslo, while the Conservatives and their Progress Party partners strongly oppose property tax. Støre is campaigning on a platform of raising taxes by NOK 15 billion over the next four years to help maintain the welfare state, instead of tapping into Norway’s huge sovereign wealth fund called the Oil Fund.
Newspaper Aftenposten analyzed Labour’s tax plans over the weekend and determined that they amount to NOK 16.3 billion, more than what Støre has mentioned. Solberg’s tax plans amount to an overall reduction of NOK 22.4 billion.
Aftenposten’s account shows personal income tax revenues rising by NOK 2.5 billion and fortune taxes rising by NOK 4.9 billion if Støre is elected, while Solberg would cut personal income taxes by NOK 12.8 billion and fortune taxes by NOK 5.3 billion.
Støre insisted, however, that income taxes would decline or remain the same for Norwegians earning NOK 600,000 (USD 77,000) a year or less and that Labour would not reimpose inheritance tax. “We have composed our tax program such that three or four wage-earners will have the same or even lower taxes, while those of us with the highest fortunes and income must pay more,” Støre told Aftenposten on Saturday. “We guarantee that those who earn less than NOK 600,000 will pay less or the same tax as today.” The average income in Norway at present is NOK 550,000 a year.
Labour, Støre said, simply wants to tax the wealthy harder than Solberg does. Labour wants to collect around NOK 7.4 billion more by increasing Norway’s fortune tax. “We believe that those who have the most in Norway should contribute more to strengthen the schools, elder care and day care for children,” Truls Wickholm, tax spokesman for Labour, told Aftenposten.
Støre’s and Labour’s tax plans may be trimmed, however, if the party teams up with the Center Party to form a new government after the election. The Center Party “proposes lower tax hikes than what Labour proposes,” confirmed the Center Party’s deputy leader Marit Arnstad. Its party program proposes combined tax and fee hikes of NOK 7.9 billion, roughly half those put forth by Labour.
As the campaign rolls on through August, there will be more debates, not least at next week’s major gathering of all party leaders in Arendal. Political commentator Lars Nehru Sand of NRK described both Solberg and Støre as “energetic and on the offensive” after Wednesday’s debate, sponsored by think tank Civita, that highlighted tax policy differences. Støre was quick once again to downplay the decline in the unemployment rate by stressing that there are fewer Norwegians between the ages of 17 and 70 in the workforce today. He accused Solberg of “four lost years” with the “wrong medicine” for strengthening Norway’s economy.
Solberg retorted that Støre is much better at describing problems than at coming up with concrete proposals for solutions. “You can’t pretend that you’ve never sat in a government,” Solberg told Støre, referring to his eight years as foreign minister and health minister in the last left-center government led by Labour’s Jens Stoltenberg, now head of NATO. “You’re good at analyzing, but I’m looking for answers.” So are voters, during the weeks leading up to the election on September 11.