New state budget cuts lots of taxes

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After weeks of intense negotiations, Norway’s conservative parties have finally agreed on a state budget for next year that includes large cuts in some unpopular taxes, more money for transport, pensions, police and the courts, and lower health care bills. The budget deal gives the government a majority in Parliament, averting a stand-off that could have ushered the left-center parties into power.

The government’s initial state budget proposal for next year has now been revised to help please the conservative Progress Party, and thus secure a majority for it in Parliament. PHOTO: Stortinget

Siv Jensen, leader of the conservative Progress Party that played a decisive role in the negotiations, clearly decided herself that quarreling over even bigger cuts in alcohol or tobacco taxes, or whether even fewer asylum seekers should be allowed into Norway, wasn’t worth letting the Labour Party take over for the Conservatives. She mostly blamed the ongoing Corona crisis for her party’s decision to concede on some issues (like its demand to dramatically cut Norway’s foreign aid), but she also didn’t want to give any of the left-center parties an incumbent advantage heading into next September’s election.

“In a normal (non-Corona) situation, it’s not certain we would have accepted this budget agreement,” Jensen claimed at a press conference Tuesday evening. Several members of her party’s board voted against the compromise, she said, but two-thirds approved it in the end.

It’s a relief and another victory for the Conservatives’ Prime Minister Erna Solberg that she can stay in power at least until next year’s national election. She had also been keen to come to terms yet again with Progress, even after it withdrew from her government coalition in January. Progress is still ailing in public opinion polls, though, and hasn’t won back the voters it thought it would when it rejoined the opposition in Parliament. It needed to score some victories for its policy in the lengthy drama around the state budget this autumn.

Border trade targeted
Now Progress can claim that it was able to slash NOK 7.4 billion worth of taxes and fees, and even eliminate a controversial tax increase on chocolate and other products containing sugar, not least soft drinks. Progress claims the sugar tax alone prompted even more Norwegians to drive over the border to shop in Sweden, where taxes are much lower, and food and drink much cheaper.

When the Corona crisis hit and restrictions cut off the border trade, business boomed at both Norway’s liquor monopoly Vinmonopolet and at Norwegian grocery stores. Progress has pointed to how their revenues since the crisis began have jumped by an estimated NOK 5 billion, with Jensen now claiming that “trade leakage” will be cut by NOK 3.7 billion.

That’s far from assured, since Swedish taxes and prices will still be lower and selection greater. Current Corona containment measures that keep Norwegians from crossing the border will eventually ease. Norwegian consumers nonetheless stand to benefit, given the sugar tax cut, a 50 percent reduction in taxes on non-alcoholic beverages, a 25 percent cut in tax on chewing tobacco (called snus) and NOK 775 million worth of tax cuts on beer and wine.

Transport, pensions and patients win, too
The budget deal is also aimed at creating more jobs in Norway, for retailers, food producers (one candy-maker in Sandfjord told Norwegian Broadcasting he was “thrilled”) and construction workers, for example. The new revised budget contains several enhancements including an extra NOK 1.6 billion for transport projects, road maintenance and rock-slide prevention, and restored funding to move forward with construction of a controversial ship’s tunnel at Stad on the West Coast.

Progress also pushed through more pension funding aimed at providing raises for single retirees with the lowest pensions. Many Norwegians with chronic health care problems will also benefit, after reversal of a planned increase in the so-called egenandel portion of health care fees patients must pay themselves under Norway’s national health plan. Patients currently pay around NOK 250 (USD 30) for a visit to the doctor, for example, but when they’ve paid a total of NOK 2,460 in the course of a year, their portion is eliminated.

The government had planned to boost that amount (equivalent to a state health insurance deductible) to NOK 3,183 but now it will remain at NOK 2,460 and also encompass patient payments for other health care services like physiotherapy and even treatment abroad. That means Norwegians who need to visit doctors or obtain treatment often will save lots of money since the state will fully cover the costs of all care over NOK 2,460 (USD 275 a year).

Foreign aid and refugee concessions
Progress had to give up, however, its demand to cut foreign aid and further reduce the number of UN-certified asylum seekers Norway has agreed to take in. That will remain at 3,000 so-called “quota refugees” a year, already down dramatically from earlier years.

All four parties involved in the budget negotiations could claim some victories. Even though the Christian Democrats firmly opposed the tax cuts on alcohol, sugar and chewing tobacco, it hung on to Norway’s generous foreign aid budget and prevented a reduction in refugee arrivals. The Liberal Party also was keen to accept at least as many refugees as Norway does now, even though hardly any can currently travel because of Corona restrictions.

“We have had constructive negotiations,” claimed Liberal Party leader Guri Melby, who also serves as Norway’s education minister. “The results show that we are able to work together and secure what’s needed to prepare Norway for the future, and get the country out of the crisis we’re in now.”

Objections from the opposition
Opposition politicians in Parliament were predictably quick to criticize the new budget and its priorities. Members of Parliament from the Labour and Socialist Left parties claimed, for example,  that it doesn’t provide enough assistance to companies and job seekers hit hard by the Corona crisis. Calls continue to rise for more emergency Corona aid packages, and are expected in early 2021.

Prime Minister Solberg admitted the negotiations were “tough,” but said she was “happy and proud that we stand here with the eighth budget agreed upon by four parties that have shaped Norwegian policy over the last eight years.” She noted that “there’s a lot in the budget on which individual parties and the (now-three-party) government don’t agree, but everyone has contributed and can see that their policies are included.”

The budget will demand even more use of money in Norway’s huge sovereign wealth fund known as the Oil Fund, which has also been tapped more than ever before to cover costs of the Corona crisis. The government will now tap it for another NOK 13 billion, more than the amount normally allowed (3 percent of the size of the fund), but the fund itself has continued to grow this year, to the tune of around NOK 100 billion so far. Most parties have gone along, however, with the need to dip into what Jensen herself calls Norway’s ultimate “piggy bank,” to get through the Corona crisis.

NewsInEnglish.no/Nina Berglund