NEWS ANALYSIS: Debate is underway in Norway’s Parliament over the government’s proposed state budget, and how it will affect the lives of all Norwegians. Tax reform, health care management and funding for local governments, schools and the police top this year’s agenda, just before the national economy reaches a critical turning point.
The country’s economic turning point will occur when the growth of state expenses outpaces growth of state revenues. That’s expected to take place early in the 2030’s, during the next parliamentary session that will run from 2029-2033, according to the finance ministry.
The ministry points to a population that will include more elderly than young Norwegians heading into or already active in the work force. That will also contribute to an increase in state expenses tied to health- and elder care, at a time when revenues from Norway’s offshore oil and gas industry are expected to level out and decline. At the very least the steady growth of oil revenues that has fueled Norway’s economy over the past five decades will cease.
The state also faces expenses from a major increase in defense needs, when there won’t be as much money available to withdraw from Norway’s equivalent of the national piggy bank: Its sovereign wealth fund fueled with oil revenues that has helped balance the budget for the past 30 years.
“On the contrary,” writes the finance ministry, “it looks like budget policy must, to a greater degree, find financing for steadily rising needs for health care, elder care and pensions.” That will make Norway more like other countries, which need to balance their state budgets with taxes and fees, or live with budget deficits.
“This is something that’s been warned for years,” Audun Hovda, leader of the Young Socialists, told news service E24. “We will all have to start thinking differently about how we do things. We’ll have to work more efficiently.”
That’s also why tax reform is one of the biggest issues facing the next parliamentary session. More tax revenues will be necessary when it’s no longer possible to pad the budget with money from the Oil Fund. The fund now covers around 27 percent of Norway’s annual costs, given the government’s proposal to tap if for NOK 579 billion to balance this year’s budget. That’s more than NOK 100 billion over last year’s Oil Fund contribution to the state budget, but such “handling room,” as the Norwegians call it, won’t continue.
More tax and fee revenue will be needed, which is why the government wants to set up a new “tax commission” charged with creating a “more effective tax system” aimed at boosting revenues more evenly over income groups. The goal is also to get more Norwegians into the workforce (more than 600,000 Norwegians aged 20-64 are currently without jobs or studying, in a country of 5.6 million).
The government also wants to set up another commission charged with improving better management of local governments, getting more Norwegians into their local labour forces and offering better local services. Another commission will aim to reform health care management, specifically how Norway’s state hospitals are organized and financed. There’s been lots of noise lately over the growth and expenses of the current system that runs the hospitals on a regional basis, but has also created a huge and expensive bureaucracy at the expense of actual health care. Two more commissions will examine the system for obligatory schooling and how Norway’s national police system is organized.
All of the other parties in Parliament have, of course, their own ideas and proposals about how taxes should be levied and how tax and fee revenue should be spent. After what some commentators called an “incredible revenge” for Prime Minister Jonas Gahr Støre when his Labour Party won re-election by emerging as Norway’s largest, he stumbled at the start over some budget cuts that he said were “mistakes.” Debate over his government’s proposed state budget will continue through the autumn.
Støre still hasn’t presented a government platform, while the three other parties on the left side of Norwegian politics were busy putting forth their demands and priorities. Several of them, not least the Greens, also want to cut back on oil production for climate and environmental reasons, accelerating the expected decline in oil revenues. Støre’s former government partner, the Center Party, continues to demand more support for outlying areas and rural interests, while the others stress how the biggest social problems are found in Norway’s urban areas.
Not only does Støre need to unite the left and center, he also needs to fend off his main opposition on the conservative side of Norwegian politics. He can get help from the resurgent Reds Party, which already has offered to help Støre by trying to unite the left side against the conservative side. It will be tricky, since the Conservatives are no longer the largest on the right, losing that status to the right-wing Progress Party, which emerged as Norway’s second-biggest party after Labour with 23.9 percent of the vote. Recent polls show they’ve risen more since the election, and they promise a vociferous opposition.
There’s no question it will be a turbulent parliamentary session. Tuva Moflag, Labour’s leader of the finance committee in Parliament, is nonetheless optimistic. “I have great faith that we will get through this together,” she told newspaper Dagsavisen. That was before the budget was actually presented, though, and before the sparks really started flying.
NewsinEnglish.no/Nina Berglund
