Norway’s Budget 2019

Norway's state budget for 2019 focuses on employment, welfare and security.

Many welcome the diverse focus of the budget, but critics say it's simply designed to strengthen the coalition by trying to woo the Christian Democrats into joining the government.

Economy doing well

Siv Jensen, Norway's Minister of Finance and leader of the Progress Party, presented the proposed budget to Parliament on Monday.

“The Norwegian economy is doing well. Businesses are investing more and employment is rising throughout the country. We are using the good times to secure a sustainable welfare state and a safer Norway”, she said.

“To support the economy's growth potential, we maintain fiscal responsibility. The fiscal budget is well adapted to the economic situation and will make Norway stronger and more secure”.

An attempt to strengthen the coalition?

While the budget has been positively received by many in the media, some are critical of what they see as an obvious outreach to the Christian Democrats (KrF), giving the small party a big influence on policy.

The proposed budget includes measures such as a big increase in foreign aid, an increase in the number of UN-certified refugees coming to the country, more aid to families with young children, and more cash to farming and rural communities, traditional areas of support for KrF.

The chief economist for one of Norway's biggest banks said that never before has a party with such low voter support had so much influence on a state budget.

The Christian Democrats were a key part of the previous government led by Erna Solberg. Despite not being a formal member of the coalition, they – along with the Liberal party – supported the government on a confidence-and-supply basis.

Following the 2017 government in which the Conservative-Progress government fell short of a majority, the Liberal Party formally joined the government but the Christian Democrats declined to do so, despite supporting Solberg on most issues.

What's in the budget?

According to the press release given alongside the speech, favourable economic conditions and a tighter fiscal stance allows the majority of new jobs to be created within the private sector.

Spending of oil revenue amounts to 2.7 per cent of the Government Pension Fund Global. Although a small increase, this is still well within the bounds of the “safe spending” rules.

The government maintains its growth-supporting policies by cutting taxes and duties also in the 2019 budget. Prioritized areas continue to be knowledge, transport and communication, health, and an efficient provision of services at the local level.

Some of the other highlights from the 2019 state budget include:

• An increase in foreign aid to NOK 37.8bn, around 1% of Norway's GNP
• An increase in Norway's refugee quota to 3,000
• Free kindergarten places for 2-year-olds in low-income families
• Free kindergarten core time for 6,500 more children
• Corporation Tax to be cut from 23% to 22%
• A new reporting requirement for income earned through tips
• A big increase of more than NOK 160m to NOK 670m for R&D work on carbon capture and storage (CCS) technology
• Changes to curb profit shifting and base erosion to level the playing field for national and multinational businesses. The interest limitation rule restrains multinational groups’ ability to reduce corporate income tax in Norway by excessive debt financing of Norwegian subsidiaries.

“By cutting taxes and duties, we provide businesses and families with more economic leeway. In addition, lower taxes encourage job creation and make work more attractive”, said Jensen.

“We are constructing roads and railways at a rapid pace, and we continue to promote research, innovation and build competence. We make the everyday life easier, and, at the same time, improve competiveness and promote a shift towards greener, smarter and more innovative business activities”.

What's next?

Given the mathematics of the current make-up of Parliament, the passing of the proposed budget will rely on support from the Christian Democrats. The party will now study the proposals before deciding whether to throw its support behind the plans.

The party – which traditionally aligns with the non-socialists – is expected to support the budget but their leader remained tight-lipped. They are expected to decide by early November.

For more information on the proposed budget, see the Government's press releases.