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Wednesday, May 29, 2024

Revised state budget raids Oil Fund again, and wealthy regions

Norway’s left-center government wants to spend an extra NOK 20 billion this year to further boost defense, send more financial aid to Ukraine and Gaza, and improve hospital care. In order to that, the Labour and Center Parties are tapping more oil revenues and shifting funds from wealthy local governments to poorer ones.

Norway’s finance minister from the small Center Party, Trygve Slagsvold Vedum, presented the government’s revised state budget for the year with priorities on defense and more support for Ukraine and Gaza. PHOTO: Finansdepartementet

Finance Minister Trygve Slagsvold Vedum, leader of the rural-oriented Center Party, insists he’s not dipping too deeply into the country’s piggy bank, its huge sovereign wealth fund fueled by oil and gas revenues. The so-called Oil Fund is meant to ensure pensions for future generations, but it’s tapped every year to balance the state budget. Vedum is now poised to pull NOK 419 billion out of it this year, but stresses that the extra withdrawals amounting to NOK 9 billion remain within agreed-upon spending limits (3 percent of the fund’s value), while the government will also shift more tax revenues raised by wealthy regions over to poorer ones.

State broadcaster NRK reported, for example, that Frøya, an island community off Central Norway that’s generated huge fortunes on salmon farming, will have to give up the most of its locally raised tax revenues. Frøya will now have to turn over around NOK 13,000 per taxpayer to the poorest local governments like Træna, another island community that stands to receive NOK 19,125 for each of its taxpayers from other regions. Bærum, another wealthy community just west of Oslo, will have to turn over the equivalent of NOK 3,711 per taxpayer.

“The goal is that all local governments should be able to offer the same quality of services, like schools and elder care,” Erling Sande, the government minister in charge of local governments, told NRK. He’s also from the Center Party, and added that “we’re redistributing tax revenues so that local governments that are lucky and take in high revenues will have to share more of them.”

Nearly half of the money needed for the government’s increased spending, though, will come from Norway’s Oil Fund (NOK 9 billion). Vedum justifies the withdrawal by claiming that the total amount of oil money now being used amounts to 2.7 percent of the fund’s size, “well within” the 3 percent limit. He claims his revised state budget will give Norwegians “security in uneasy times,” since it puts a priority on defense and preparedness.

The money added to this year’s state budget will further boost defense spending by another NOK 7 billion and financial support for Ukraine by the same amount. Norway will not only meet NATO’s financial contribution goals for its members (defense spending equal to 2 percent of gross national product) but also help keep Ukraine free and democratic under Russian attack. Supporting Ukraine also supports Norway’s own freedom and democracy, Vedum notes.

Vedum also stressed that Norway can afford such support, in addition to the many more millions now earmarked for major budget boosts for police, state-owned hospitals and a long list of other social services. Norway’s economy remains strong, unemployment is low and inflation is easing, giving Vedum the necessary foundation for increased government spending.

The government is also retracting a highly controversial increase it recently introduced in Norway’s payroll tax on employers. They’ve had to pay an extra tax on employees with high salaries, and it set off howls of protest. The government insists it was a temporary tax that will be dropped from January 1.

In addition to the latest boost in spending on defense and Ukraine, Norway also is quadrupling its support for humanitarian aid to Gaza, from NOK 250 million to NOK 1 billion. Norway’s state police, meanwhile, will get an additional NOK 1.6 billion, not only to cover costs of new technology and pensions but also up to NOK 300 million to help fight gang crime that’s set off a new wave of violence around the country and especially in the Oslo area. Another NOK 2 billion is earmarked for Norway’s state hospitals and efforts to shorten often long waiting lists for treatment.

The government will still need support for its budget in Parliament and the Socialist Left party is already demanding more money for child welfare to ease social differences. The government also faces a fight over expensive plans to reinstate local courts that were merged during the former Conservatives-led government. Court officials along with many judges, lawyers and police want to maintain the current system, while the Center Party feels a need to follow through on a campaign promise made to restore courts closer to where people live. Budget negotiations will ensue over the next several weeks. Berglund



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