Although the Social Democrat / Green government has been in power for a year, this is the first time they will be governing with their own budget. Last year, the two parties saw their proposal rejected in parliament, as the anti-immigration Sweden Democrats used their kingmaker role and the opposition conservative proposal was approved.
“If we look at the conditions and priorities for the budget, the government has prioritized jobs, education and climate. In order to invest in this, we need stable public finances and that’s why all the reforms are fully financed,” Finance Minister Magdalena Andersson says.
Some of the measures Social Democrat Stefan Löfven’s government presented for job creation include support for innovative and growing companies, an exports promotion campaign and investments in rural areas.
The government’s goal is to make Sweden’s unemployment rate the lowest in the EU by 2020, but today it is still at 7.6 percent this year. Last year, Germany and Austria had 5.0 and 5.6 percent respectively.
In education, the red-greens suggest higher teacher salaries, more staff in school libraries and for recreation activities and financial support for municipalities to educate refugee children.
“If we look at our schools, we see that they are facing many challenges. We’re below the OECD average in all the domains of the PISA assessment, our results are falling faster than in any other OECD country, inequality is growing and the parents’ background is playing a bigger role in academic performace,” Andersson says.
As for climate issues, the main measures include investments in solar panels, energy storage, wind power and intelligent power grids, increased railway maintenance, more public transportation in rural areas and higher incentives to buy hybrid and electric cars.
The new budget’s increased spending will be financed through tax hikes worth a total of SEK 19 billion, including reduced ROT and RUT subsidies (tax breaks for home improvement work and help with housework, respectively), higher gas and diesel taxes, higher taxation on savings, and a reduction of the earned income tax credit, which will now not apply to people making over SEK 50,000 a month.
Andersson admitted during the press conference that the tax increases will affect most of Sweden’s households, as they will end up with less money in their pockets.
“When you implement tax hikes, it will obviously affect people’s availabe income,” she said.
According to Swedbank analyst Arturo Arques, Sweden’s unemployed are one of the groups that will benefit from the new budget.
“The unemployment benefit ceiling has been increased from 18,700 to 25,000 kronor. After taxes, depending on which municipality you live in, that could mean between 3,000 and 3,500 kronor more per month for the unemployed,” Arques said.
Measures for pensioners
Pensioners will also benefit from the new budget, as there will be a general pensions increase and tax cuts for retired people, according to Nordea analyst Ingela Gabrielsson said.
The government expects Sweden’s economy to grow by 2.8 percent this year and in 2016.
Professor Jonas Hinnfors, a political scientist at Gothenburg University, told Radio Sweden (link to listen is below) that there are some small reforms in the budget, but that it doesn’t contain grand plans. “They’re trying to deliver a budget which is more in line with their rhetoric and ideological foundations,” he said, adding that it is more of a “status quo budget” than one filled with big reforms.
This story is posted on BarentsObserver as part ofEye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.