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Politics For Members

Why the budget negotiations in Norway are more important than you think

Robin-Ivan Capar
Robin-Ivan Capar - [email protected]
Why the budget negotiations in Norway are more important than you think
The manner and outcome of the budget negotiations are always a sort of litmus test for the current political environment in Norway. Photo by Marco Süssi on Unsplash

The 2024 budget negotiations in Norway are more than just an annual fiscal routine. These negotiations represent a crucial juncture in Norwegian politics with several outcomes that could directly affect you.

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The ruling Labour and Centre parties have launched their 2024 budget negotiations with their preferred budget partner, the Socialist Left Party (SV), on Monday, November 13th.

In Norwegian politics, a "preferred budget partner" refers to a political party that a ruling government chooses to collaborate with to pass its annual budget through the Norwegian parliament (Storting).

This concept is particularly relevant in the context of minority governments, which are common in Norway.

In a minority government setting, the ruling party or coalition does not have a majority of seats in the Storting, and, therefore, the government must seek support from other parties to pass legislation, including the annual budget.

Generally speaking, a preferred budget partner is typically a party outside the governing coalition that aligns closely with the government's fiscal and policy priorities, and the government negotiates with this party to secure the support needed to pass the budget.

In the process, the ruling parties often need to make policy and fiscal concessions in order to secure the support they need from their partner.

The 2024 budget negotiations

The negotiations for the 2024 budget will involve Eigil Knutsen from the Labour Party (AP) and Ole André Myhrvold representing the Centre Party (SP), along with the Socialist Left Party's (SV) fiscal policy spokesperson Kari Elisabeth Kaski. Other politicians will also likely join the process.

A key aspect of these negotiations is the tight deadline: parties have until November 28th to reach an agreement, with the financial debate in the parliament scheduled for December 4th.

This condensed timeframe, under three weeks, places pressure on the involved parties. The recent trend of negotiations stretching beyond their intended period adds to the uncertainty.

The real risk lies in the possibility of not reaching an agreement on time, leading to the budget being presented as a loose proposal in the parliament.

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The broader implications of a no-deal scenario

The manner and outcome of the budget negotiations are always a sort of litmus test for the current political environment in Norway.

Successful negotiations that respect the deadline indicate a certain level of political stability and an ability to build consensus across different political spectrums – which Norway has historically been very successful in doing.

Conversely, protracted negotiations or failure to reach a consensus might suggest underlying political tensions and a more fragmented parliamentary landscape.

How these negotiations are conducted and concluded will also impact public perception and trust in the government – and politics overall.

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Transparent and efficient negotiations that result in a balanced budget usually improve public confidence in the government and the political class, while a chaotic process leads to scepticism about the government's ability to manage the country's finances effectively.

This year, the budget negotiations between the governing parties (AP and SP) and the Socialist Left Party (SV) will likely revolve around their differences in tax policy, social welfare priorities, and approaches to child benefits.

While SV is expected to push for tax increases and enhanced social welfare programs, the government will try to prioritise economic stability and inflation control.

Should the parties reach an agreement, the outcome of the negotiations will have a notable impact on Norway's fiscal and social policy landscape.

To get a sense of the political priorities the government wants to pass through parliament, see The Local's article on how the next state budget will likely affect foreigners.

Which proposals do you need to know about? 

If the Socialist Left Party were to have it all its own way, those earning between 300,000 and 750,000 kroner per year would see an annual tax cut of 6,000 kroner.
It also wants to increase the controversial wealth tax, which has seen the wealthy leave Norway at a record rate.
Increases to benefits for the disabled, people on employment verification allowance and minimum state pensions have also been floated.
An increase in child benefits has already been floated. The government has already increased child benefits before following talks with the Socialist Left Party.
Norway's government has warned off too many raises, believing this would also contribute to inflation.

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