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.
The government’s announcement that it will lower tax deductions for domestic service work and household repairs (ROT deduction) from 50% to 30% has brought the sector to a standstill.
According to estimates by the Swedish Construction Federation (BI), there is a risk that up to 8,300 jobs will disappear if the ROT deduction is lowered.
“As yet no decision has been pushed through the Riksdag so there is still an opportunity to back down from the proposal,” says Björn Wellhagen, enterprise policy director at BI.
Both the Economic Crime Authority (EBM) and National Financial Management Authority (ESV) have given thumbs down to the government’s proposal and warn of an increase in the shadow economy.
Two years ago, state-owned utility group Vattenfall and mining company LKAB paid SKr 6.8 and SKr 5.5 billion respectively in dividends to the state. However, the decline in electricity and commodity prices over the last few years has meant that the dividend paid into the state coffers by LKAB for the 2014 financial year shrunk to SKr 139 million, and the forecast for the next few years is gloomy.
The National Financial Management Authority (ESV) forecast in its June report that Vattenfall will pay a dividend of SKr 2.6 billion, and that LKAB will pay SKr 1.6 billion for the 2015 financial year.
The Ministry of Enterprise provides an overall assessment of the dividend pay-out from all of the state-owned companies, rather than predicting dividend pay-outs for individual companies, and will do so in conjunction with the autumn budget proposal.
“Of course we took into account in the spring already that it’s a new situation for many companies in the state portfolio, not least for Vattenfall and LKAB,” says Anna Magnusson, head of division for corporate governance at the Ministry.