Norway’s government is stepping down oil money spending next year

The Norwegian government believes in better times next year and will spend NOK 90.9 oil-billion less than this year. But the uncertainty remains high.

The government will spend NOK 313.4 oil-billion next year, NOK 90.9 billion less than this year, according to the key figures presented by the government at 8 o’clock, two hours before the entire state budget is presented at 10 o’clock.

“The corona pandemic has caused the deepest setback in the Norwegian economy in the post-war period. 

“In recent months, activity has picked up again, but there is still great uncertainty about future developments. 

“Although the recovery has been faster than we envisioned in May, the level of activity will probably be lower than normal for a long time to come,” the Ministry of Finance stated.

Fewer unemployed

The Norwegian economy is expected to recover after a fall of around 3.1% in mainland GDP this year. 

Next year, GDP growth is estimated at 4.4%.

Unemployment is estimated to fall from 4.9% in 2020 to 3.1% next year.

The budget impulse – how economic policy affects the Norwegian economy – is now estimated at the corona-adjusted level 1.0, which is still a so-called expansive effect, but far less than a record high of 4.5 this year.

In May’s crisis budget, the government proposed spending a staggering NOK 420 billion from the Oil Fund. 

That has been adjusted down to NOK 404.3 billion in the estimates in the national budget.

Minister of Finance Jan Tore Sanner (H) has signaled that he will use what is necessary next year as well. 

However, he also emphasized that the use of oil money will be scaled down as growth picks up.

25 billion for corona measures

So far, there have been leaks from the budget of more than NOK 100 billion. 

Among other things, the government will spend NOK 25 billion on various corona measures next year. 

The amount will be adjusted if necessary. 

So far this year, the government has spent NOK 126.3 billion on corona measures.

Among the other largest leaks are NOK 40 billion for research and development, NOK 32.1 billion for railways, and NOK 2 billion for the government’s prestige-project for carbon capture and storage at Norcem in Breivik.

More permanent positions in the police, cheaper after school programs (SFO) for low-income families, increased child benefit, and more for leisure cards (fritidskort) for children are also among the proposed initiatives.

Expect tax cuts

What happens to the wealth tax has been one of the tensions ahead of the budget presentation. 

Norwegian Broadcasting (NRK) believes that the discount on so-called working capital, shares, and fixed assets will increase from the current level of 35% to 45%.

The discount was increased from 25 to 35% in connection with the revised budget in May.

The Conservative Party’s (H) national convention decided earlier this autumn to step in to remove the wealth tax completely. 

However, Prime Minister Erna Solberg (H) acted quickly and said that it would not happen until there are methods that avoid creating new zero taxpayers.

FRP twists the knife

With the Progress Party (FRP) on the outside (of the government), this year, the government will have a far tougher job of getting the budget through the Norwegian parliament (Storting) than before.

Several of the demands that FRP has set to support the budget – such as cuts in the development assistance budget and a reduction of quota refugees coming to Norway – twist the knife where it hurts the most for the Christian Democrats (KrF) and the Liberals (V).

Additionally, FRP has voiced its opposition to the government’s most important climate project, the Norcem project for carbon capture and storage, because they believe taxpayers pay too much of the bill.

The Socialist Left (SV) has called on the government to take the carbon capture project out of the budget negotiations to find an alternative majority in the parliament without FRP.

© NTB Scanpix / #Norway Today