Today the Government presents the 2009 Budget Bill, containing SEK 32 billion in reforms that will mitigate the effects of a weaker economic environment, permanently raise the level of employment and strengthen welfare. By these initiatives, the Government is acting both to meet current problems and prepare Sweden for the future.
"As a result of responsible policies with a clear focus on getting more people into jobs and encouraging more companies to start and grow, Sweden now stands on a firm foundation. Our position is stronger than that of most other OECD and EU countries. We will now take advantage of this to respond to a poorer outlook in the wake of growing unrest in the financial markets, while providing increased resources to education, health care and social services, and other areas", says Minister for Finance Anders Borg.
Restoring the work-first principle and combating people's exclusion from the labour market are important objectives for the Government. Policies to promote permanently high employment and reduced exclusion, combined with a strong economic upturn, have led to decreasing sick leave and unemployment and to more people getting jobs. The situation has been especially favourable for young people.
The dark clouds hanging over the world economy have thickened during the summer and autumn as unrest has grown in the international financial markets. In light of this, the Government, like most other analysts, is adjusting the Swedish growth forecast downwards. The Swedish economy is expected to grow by 1.5 per cent this year and 1.3 per cent next year. The Government expects growth to pick up again in 2010.
Despite a considerable decrease in the past few years, there is still widespread exclusion. The Government will therefore continue to implement structural reforms that will permanently raise the level of employment and make the Swedish economy work better, leading to rising welfare standards.
In this Budget Bill, the Government presents reforms in three main areas:
* a reform package for jobs and entrepreneurship,
* a reform package to prepare Sweden for the future,
* a reform package to strengthen welfare.
These reform packages will mitigate the effects of the economic downturn, make Sweden stronger as a growth nation, and reinforce welfare.
Keeping public finances in good order
One cornerstone of government policy is to keep the public finances in good order. Sweden's public finances continue to strengthen. This puts Sweden in a strong position to continue its work on enhancing policies for full employment while being able to respond to a weaker economic outlook. The objective of a one per cent surplus in the public finances is expected to be exceeded in the next few years. Both actual and structural net lending are expected to show average surpluses of between 2.0 and 2.4 per cent of GDP between 2008 and 2011.
A reform package for jobs and entrepreneurship
To strengthen the work-first principle and increase the labour supply, the Government proposes a third step in the in-work tax credit and a reduction in total state income tax. The proposals have an overall scope of SEK 15 billion. The three steps combined mean that approximately 97 per cent of all people in full-time work will have received tax reductions of more than SEK 1 000 a month.
The Government also presents a tax package for businesses that will lower their taxes by nearly SEK 16 billion in 2009. The aim is to strengthen incentives for companies to invest and take on new employees. The corporate tax rate will be reduced from 28 to just over 26 per cent and employers' social security contributions will be reduced by one percentage point. In addition, the administrative burden on businesses will be eased by a number of simplifications, as a step towards the Government's target of reducing the administrative burden on businesses by 25 per cent by 2010.
To strengthen work in the area of competition, resources will be allocated to improving the functioning of public procurement and to work on conflict resolution in situations where public and private actors conduct commercial activities in the same market.
Furthermore, the Government proposes an initiative for higher education in entrepreneurship.
Finally, the Government intends to improve integration and increase opportunities for people with foreign backgrounds to obtain work. To this end, from 2010 onwards, some SEK 900 million will be allocated to help newly arrived immigrants become established in Sweden.
A reform package to prepare Sweden for the future
To strengthen Sweden's competitiveness and safeguard future welfare, the Government proposes vigorous measures in areas such as preschool, research, infrastructure and the environment. A broad drive to raise the quality of preschool will include an expansion of universal preschool to include three-year-olds, a childcare voucher system, a clarification of the preschool curriculum and enhanced further training for preschool teachers and childcare workers. Other proposals include a special initiative for mathematics, natural sciences and technology, an expansion of the pilot project in upper secondary school apprenticeship programmes, an extension of the initiative for further training for teachers and enhanced measures for vocational education and training.
Competitive research and innovations that can be put into production are important preconditions for growth. The research policy must maintain and strengthen Sweden's role as a research nation. Substantial measures are therefore proposed to raise the quality of Swedish research and strengthen the competitiveness of the Swedish business sector so as to contribute to economic growth. In all, the extra resources will total close to SEK 15 billion over a four-year period, with a focus on the research areas of medicine, technology and the climate.
Well-functioning infrastructure is a prerequisite for maintaining and strengthening Sweden's competitiveness. With this in mind, the Government proposes a comprehensive near-term initiative, which together with the amortisation made in 2008 - which freed up SEK 1.3 billion - is equivalent to annual extra resources in excess of SEK 5 billion per year in 2009 and 2010.
The Government also proposes an increase in the appropriation for green car rebates and an allocation of SEK 795 million for climate and energy measures in 2009. SEK 1 070 million will be allocated to this purpose in 2010 and SEK 1 165 million in 2011. In addition, measures are proposed to improve the situation in the Baltic Sea and the North Sea.
A reform package to strengthen welfare
The Government proposes measures that will further strengthen Swedish welfare. Taxes will be reduced for pensioners. The annual tax paid by a pensioner receiving a full guarantee pension but little or no income-based pension will be reduced by between SEK 2 300 and SEK 3 500. In total the proposal amounts to approximately SEK 2 billion per year. Over 90 per cent of the country's pensioners will be affected by the reform.
To support municipalities and county councils in their work on developing well-functioning psychiatric nursing and care services, the Government proposes to allocate an additional SEK 650 million per year in 2009-2011. This means there will be total commitments of SEK 900 million per year during that period. With a view to creating clear incentives and further stimulating county councils to offer patients care with good availability, SEK 1 billion per year will be put into a performance-linked health care guarantee, beginning in 2010. In a further proposal, SEK 1 billion will be put into extending the 'healthcare billion' initiative, which is intended to give sick-listing issues higher priority in the health and medical care system. The compensation will refer to performance in 2009 and will be paid out in 2010. The Government also proposes further initiatives in elderly care and social services.
Finally, the Government will continue its drive to reduce crime and create a safer and more secure Sweden. Increased resources are proposed for the Swedish Prosecution Authority, the Swedish National Economic Crimes Bureau, the Swedish courts and the Swedish Prison and Probation Service.
Effects of the Government's policies
The reforms that the Government proposes in this Budget Bill will further strengthen the Swedish economy. The Government calculates that one effect will be more people participating in the labour force, which means the Swedish economy can grow more vigorously without resources becoming strained. In addition, tax reductions, for example, will help counteract the economic downturn.
On the Government's analysis, the long-term effects of the Government's reforms will be to increase employment by 2.8 per cent or 120 000 people. The number of hours worked is calculated to increase by 4.4 per cent and GDP by 3.4 per cent.
