The government’s budget is putting pressure on state finances and is leading to surplus targets being missed, says the Swedish National Financial Management Authority (ESV).
According to ESV, the surplus in the public sector’s financial savings will fall from 0.9% this year to 0.6% next year as a result of the government’s budget bill, which is expected to reduce tax revenue and increase expenditure. This means the government will not achieve the surplus target of 1% over a business cycle.
Finance Minister Magdalena Andersson promised a record election budget when she met journalists yesterday prior to budget negotiations in Harpsund. The investments so far presented for welfare, the police and defence amount to around SEK 10 billion, and she is willing to consider more reforms.
However, the National Institute of Economic Research’s (NIER) Ylva Hedén Westerdahl commented: “We are surprised that the government has so much room for reform. In our forecast, it would mean that they are moving away from the new surplus target.” She points out the government views the underlying potential of the economy more positively.
The Liberals’ economic spokesperson Mats Persson focused on what he sees as a lack of job reforms, which means new arrivals will not get into employment. “It is remarkable that a Social Democrat government is allowing a new underclass to develop,” he says.
Defence Minister Peter Hultqvist (S) hopes cross-party agreement can be reached on defence appropriations for 2016-2020 by Thursday evening. The government has proposed raising the defence budget by a total of SKr 6.2 billion, which is less than the Moderates have proposed and just a third of the SKr 18 billion the Liberal Party has proposed.
“The Liberal Party believes this is what is required if our capabilities are not to be reduced further. There is a structural deficit that the Armed Forces have had to face since 2009,” said Liberal defence spokesman Allan Widman during a break in the negotiations on Monday evening.
The Armed Forces have said they require an annual boost of SKr 4 billion to meet the goals drawn up by the Defence Commission (Försvarsberedningen) – quite a bit more than the government has proposed. Furthermore, the Armed Forces would require an extra capital injection of SKr 15 billion in order to procure an additional submarine and expanding its Air Force, from 60 to 70 Gripen fighter jets.
Late yesterday Finance Minister Magdalena Andersson (S) said the government’s proposal was “balanced”. Afterwards, Moderate MP Hans Wallmark said: “The Finance Minister has been extremely frosty. Others in the government do not make it any easier for the Defence Minister”.