In turbulent times, with high price increases, the Norwegian economy is doing well compared to other European countries. Unemployment remains low and activity is high, although growth is slowing somewhat. At the same time, the high increase in costs and the effects of the war cause a significant increase in spending in the state budget. These are expenses that must be covered.

“The goal is to make everyday life a little better for people. We take responsibility to ensure that municipalities and those providing basic social services such as care for the elderly, schools, police and hospitals are compensated for high prices. In addition, some personal benefits of individuals are adjusted. The government also contributes to stability and security in Europe by increasing support for Ukraine and welcoming Ukrainian refugees. This is a responsible budget that will contribute to security in turbulent times, says Finance Minister Trygve Slagsvold Vedum (Sp).

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Last year, around 110 new people entered professional life. There is high activity, profitability and willingness to invest in Norwegian companies. Economic growth is expected to be slightly lower in 000, after a strong post-pandemic recovery, before accelerating in 2023. There is a prospect of a gradual decrease in price dynamics over the year, without a large increase in unemployment.

“The government will continue to strengthen the working line. As part of this budget, we are taking a number of actions to make life easier for many working people. We will help ensure people have a safe job and get more people into work. This is one of the most important things we can do for people. At the same time, we must take care of those who need it most and make sure that no one is left behind, says Finance Minister Trygve Slagsvold Vedum (Sp).

Budget priorities

  • The government is proposing compensation to public companies and others that receive money from the state budget for high increases in prices and wages.
  • To contribute to security and stability in Europe, support for Ukraine under the Nansen program has been increased.
  • The government proposes to increase allocations to municipalities so that Ukrainian refugees are well received.
  • It is proposed to strengthen hospitals, police and municipalities, in addition to the announced compensation for high wage and price increases.
  • Thanks to the government's proposal, pensioners on low incomes will receive a tax credit of NOK 1,4 billion. The tax credit will give up to around NOK 4500 less tax for those on a low pension.
  • The government is proposing tax breaks for working people by increasing deduction rates and tax-free meal coverage for barracks commuters and long-distance drivers.
  • The government will continue with the temporary extension of the benefit housing in 2023, will allocate more funds to the labor market and extend support for ENØK activities in public housing.

The use of oil money in the state budget is increasing

The use of oil money in the state budget increases by about NOK 56 billion. This corresponds to a withdrawal of 3,0 percent. from the Oil Fund. The increased use of oil money is mainly due to the following factors:

  • Compensation for increased prices. High prices meant that the budget presented last autumn by the government would be much tighter than expected. This is being fixed now. This results in an increase in expenditure of around NOK 27 billion, including almost NOK 11 billion for increased social security and pensions.
  • Currently, it is estimated that lower electricity prices overall will weaken the budget by approximately NOK 22 billion. This is because state revenues are more undermined than savings in electricity subsidy schemes.
  • Support for Ukraine through the Nansen programme. The government presented the Nansen program for Ukraine and increased aid to countries severely affected by the war by a total amount of over NOK 16 billion. Support under the Nansen program was supported by a large majority in the Storting.
  • Costs for refugees arriving in Norway. Norway will accept many more refugees in 2023 than it was assumed in the autumn. Refugees from Ukraine must be well received and it is important that as many of those who are already here as possible find work. This means that over-budget spending will increase by around NOK 6 billion.

The war in Ukraine is estimated to cost over NOK 40 billion this year and costs are expected to be roughly the same next year. To find room for action in this regard, it is necessary to push and postpone other political initiatives from the Hurdal platform.

– Norwegian support for Ukraine is important for stability in Europe and help for the war-affected Ukrainian population. It is also crucial for our security that Russia does not win wars of aggression and brutal use of force. Broad political Norway stands behind the support for Ukraine and the Nansen programme. We will stand up for the Ukrainians as long as it is necessary - says the finance minister.

Pensions will increase significantly this year, both because wage and price increases are high and because the regulation takes into account that last year's wage and price increases were higher than expected. As a result, pensions will increase significantly more than the projected increase in wages this year. Other social security benefits will also increase more than wage increases.

- Retirees and pensioners will probably achieve a record increase in income thanks to this year's indexation of pensions. We also provide a better everyday life for low-income retirees. They receive a tax credit of almost NOK 1,4 billion. This will result in up to around NOK 4500 less tax for people with low pensions, says Vedum.

The government believes it is irresponsible to plan large cuts to the revised budget to cover these expenses as it will unacceptably affect the social offer or lead to strong and unforeseen increases in taxes and fees.

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Source: regjeringen

Photo: Celine Lyse Augdal / Finansdepartementet

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