How Norway's revised budget for 2023 affects you
Increased pensions, benefits and changes to the electricity subsidy scheme are among the key proposals in the Norwegian government's revised budget for 2023.
Norway's government unveiled its revised national budget on Thursday, with the tweaked fiscal plan leaning heavily on the country's oil revenues to fund public spending.
In total, the plans draw 56 billion kroner from the oil fund for government spending. The government will spend 372.6 billion kroner in 2023, which corresponds to three percent of the fund's total value. Three percent of the oil fund also acts as a limit for public spending.
Some 27 billion kroner from the budget will go towards spending on hospitals, the police, pensions and social security. Meanwhile, 22 billion has been earmarked for measures related to the war in Ukraine.
"The goal is to make everyday life a little better for people. We take responsibility for ensuring that the municipalities and those who run basic welfare services, such as care for the elderly, schools, police and hospitals, are compensated for the high prices," Norwegian Minister of Finance Trygve Slagsvold Vedum said of the proposals.
Subsidy scheme to change
Norway's energy bill subsidy, which sees the government cover a significant portion of energy bills when the price rises over a certain amount, will be tweaked.
From June, the government will cover 90 percent of the costs when the price rises above 70 øre per kilowatt hour. Secondly, the scheme will cover the hourly spot price, not the monthly average. This will protect households against large monthly fluctuations.
Changes to pensions
Pensionerss will benefit from tax cuts amounting to more than 1.4 billion kroner. The cuts will apply to those with the smallest pension pots and will amount to around 4,500 kroner less in taxes,
Those with bigger pension pots won't see their taxes go up. In addition to this, pensioners are set to see a raise of around eight percent this year.
Increased benefits and social security
The government has said it will adjust benefits and social assistance generally. The rates will be increased by 150 kroner for single people and 300 kroner for those living together. Those with children up to 17 will see their rate increase by 100 kroner.
Also, the government has set aside 519 million kroner extra in housing allowance to assist those with low incomes and high housing costs.
Furthermore, the income limit for contribution advances has been increased. This has been done to reverse the effect of those who received the child benefit increase of 5,000 kroner losing their entitlement to advanced contributions.
The advanced contribution is money that NAV pays out to single parents who are supposed to receive child support but do not.
Could the budget raise inflation and interest rates?
The proposed budget could have a number of more significant macroeconomic effects. Among these are an increased economic activity, higher inflation and interest rate hikes.
Unveiled last year, the original budget was more subdued to have a neutral effect on the Norwegian economy. However, the revised fiscal plan would lead to increased value creation to the tune of 0.3-0.4 percent, according to public broadcaster NRK.
Ola Grytten, a Norwegian School of Economics professor, told NRK that the increased activity could drive up inflation and interest rates.
"This can lead to some inflation and thus also a slightly higher interest rate," he told NRK.
Higher inflation pushes up interest rates as the central bank of Norway, Norges Bank, uses key policy rate hikes to try and curb inflation.
Comments
See Also
Norway's government unveiled its revised national budget on Thursday, with the tweaked fiscal plan leaning heavily on the country's oil revenues to fund public spending.
In total, the plans draw 56 billion kroner from the oil fund for government spending. The government will spend 372.6 billion kroner in 2023, which corresponds to three percent of the fund's total value. Three percent of the oil fund also acts as a limit for public spending.
Some 27 billion kroner from the budget will go towards spending on hospitals, the police, pensions and social security. Meanwhile, 22 billion has been earmarked for measures related to the war in Ukraine.
"The goal is to make everyday life a little better for people. We take responsibility for ensuring that the municipalities and those who run basic welfare services, such as care for the elderly, schools, police and hospitals, are compensated for the high prices," Norwegian Minister of Finance Trygve Slagsvold Vedum said of the proposals.
Subsidy scheme to change
Norway's energy bill subsidy, which sees the government cover a significant portion of energy bills when the price rises over a certain amount, will be tweaked.
From June, the government will cover 90 percent of the costs when the price rises above 70 øre per kilowatt hour. Secondly, the scheme will cover the hourly spot price, not the monthly average. This will protect households against large monthly fluctuations.
Changes to pensions
Pensionerss will benefit from tax cuts amounting to more than 1.4 billion kroner. The cuts will apply to those with the smallest pension pots and will amount to around 4,500 kroner less in taxes,
Those with bigger pension pots won't see their taxes go up. In addition to this, pensioners are set to see a raise of around eight percent this year.
Increased benefits and social security
The government has said it will adjust benefits and social assistance generally. The rates will be increased by 150 kroner for single people and 300 kroner for those living together. Those with children up to 17 will see their rate increase by 100 kroner.
Also, the government has set aside 519 million kroner extra in housing allowance to assist those with low incomes and high housing costs.
Furthermore, the income limit for contribution advances has been increased. This has been done to reverse the effect of those who received the child benefit increase of 5,000 kroner losing their entitlement to advanced contributions.
The advanced contribution is money that NAV pays out to single parents who are supposed to receive child support but do not.
Could the budget raise inflation and interest rates?
The proposed budget could have a number of more significant macroeconomic effects. Among these are an increased economic activity, higher inflation and interest rate hikes.
Unveiled last year, the original budget was more subdued to have a neutral effect on the Norwegian economy. However, the revised fiscal plan would lead to increased value creation to the tune of 0.3-0.4 percent, according to public broadcaster NRK.
Ola Grytten, a Norwegian School of Economics professor, told NRK that the increased activity could drive up inflation and interest rates.
"This can lead to some inflation and thus also a slightly higher interest rate," he told NRK.
Higher inflation pushes up interest rates as the central bank of Norway, Norges Bank, uses key policy rate hikes to try and curb inflation.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.