Photographer: Krtisian Helgesen/Bloomberg

Richest Scandinavians Face a More Meager Future After Election

  • Labor tax plan targets Facebook, Google, wealthy Norwegians
  • Finance Minister candidate says oil spending must be reduced

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The woman who may well be Norway’s next finance minister after September elections says her countrymen need to brace themselves for more modest times as she calls an end to the era of oil-fueled spending.

After successive governments spent the past eight years pumping about 1.3 trillion kroner ($164 billion) of oil cash into the economy, with expenditure hitting almost 8 percent of GDP this year, reality is finally setting in.

With only four weeks to go until the Sept. 11 general election, the Labor Party looks poised to return to power after four years in opposition. The group has railed against the Conservative government’s decision to raid Norway’s sovereign wealth fund. Instead, it wants to raise taxes by about 15 billion kroner ($1.9 billion) to pay for budget measures including more welfare and job programs.

Marianne Marthinsen

Marianne Marthinsen

Source: Stortinget

Marianne Marthinsen, a key Labor lawmaker and the party’s spokeswoman on fiscal and economic policy, says given Norway’s extreme wealth, such measures can’t be viewed as a form of austerity.

“We might not be in an upward-going buzz anymore, but it’s still a pretty good party,” the 36-year-old said in an interview at her office in parliament last week.

Norway recently changed the framework within which governments must set budgets. Instead of being free to spend the equivalent of 4 percent of the country’s $970 billion wealth fund, governments must limit themselves to 3 percent. That means some tough choices need to be made, Marthinsen said.

Krone Swings

She signaled the next government may need to operate with a buffer within the spending limit since the fund’s size is now to a large extent decided by movements in the krone. (Norway’s wealth fund, the world’s biggest, invests abroad to avoid stoking domestic inflation, so currency fluctuations can change its krone value considerably.)

“We can’t put ourselves in a position where such things as swings in the exchange rate all of a sudden impact how many hospital beds we can have next year,” Marthinsen said.

She also said she’s “100 percent sure” that Labor’s planned tax increase won’t be enough. “We will need to be tougher in prioritizing and that means all areas will need to realize they can’t have as high a growth as they are used to.”

Labor proposes raising the wealth tax back to where it was before the Conservative-led coalition came into power in 2013. Norway is one of the few countries left in Europe to impose an explicit wealth tax. “We think it’s better to invest in the population, and make them more productive,” Marthinsen said.

Read more on the wealth tax debate here

The party, which even while in opposition has been parliament’s biggest, wants to stop multinational corporations such as Google and Facebook from avoiding Norwegian taxes. Marthinsen may also scale back some tax breaks that currently are available for luxury electric cars. “Giving billions in subsidies to buyers of luxury cars undermines the legitimacy of our tax system,” she said.
 
Labor will move away from the “ideologically driven” sales of state enterprises, while keeping a “pragmatic” view of state ownership, Marthinsen said. The party is still pondering whether to act on a recommendation to separate the wealth fund from the central bank, though Marthinsen said she may not move too far from the current model.

Read more on the recommendation to move the fund

“It has been right that the fund has been mainly index-managed,” she said. “I think a more independent environment could increase the focus on expansion and raise pressure on expanding investments and developing a large environment around this. It’s not a given that that is the right thing to do.”

Brexit Options

Marthinsen is following the Brexit debate in the U.K. and says that she is doubtful that Britain will seek a long-term solution within the European Free Trade Area, of which Norway is the biggest member. But if the U.K. would decide to go in that direction for a period it would clearly give a “whole different weight” to the EEA accord and “open some interesting opportunities,” said.

Read a QuickTake on the U.K.’s Brexit options

She dismissed the calls of the Center Party, which could be a key coalition partner, to seek an exit from the EEA accord, through which Norway trades freely with the EU.

“But we are completely clear that the EEA agreement is firmly in place,” she said. “That’s a premise for any Labor-led government.”

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