Revised national budget – Empty the piggy bank

Internal comments: This is a comment. The commentary expresses the writer’s attitude.

Last time Vedum presented changes in the state budget, he threw his briefcase on the loading platform of his diesel-powered pickup and drove smiling and confidently through the center of Oslo.

On Thursday morning, the pickup show was canceled and the face of the Minister of Finance stepped on. In return, Vedum invites you to an oil money party the rest of the year. You just have to bring this with you.

But the hangover will not be pleasant. While Vedum roughly supplies itself with the oil fund, our savings can cry all the way to the central bank.

This week, the government presented a revised national budget. “Yawn,” you might think. Usually you are absolutely right, but this year there is good reason to care about this annual adjustment of the state budget.

This is where you usually update the map to fit the terrain. If more or less money comes in than you had expected, or if unforeseen expenses arise, you can make a small adjustment along the way.

But this year, most things have been unforeseen. Sky-high electricity prices, the omicron virus and the war in Ukraine have meant that Vedum has spent NOK 60 billion, which he has not really been allowed to do. At least if you compare it with the state budget that he presented last year.

The big question before Vedum was to present the adjusted budget was precisely where he was to get the 60 billion kroner from.

Now we know the answer. We caught him in the act with his hand far down in the country’s honey pot: the Oil Fund.

The government will spend as much as 30 billion in oil mer than what it promised us last year. The billions will be injected into an economy that is at a boiling point and can not withstand so much more demand. Unemployment is at a record low and prices are rising for the most part. A careless Vedum that makes it boil over is the last thing we needed now.

The most common criticism of any state budget is that the government is not doing enough. There is always too little money for the critics’ heart cause, no matter what it should be. This year it is quite different. The most serious criticism is that the government spends too much money.

What makes it extra strange with such an extravagant use of oil money is that Vedum has spent the last few weeks warning against spending billions over the budget.

His famous calculation, in which he thought it was quite common for a family to earn one million kroner after taxes, tried to show why.

If we throw billions into the economy now, it’s like throwing gasoline on the fire. Then the central bank must come on the scene and try to put out the fire, or to raise interest rates if you want. It can hit people with mortgages hard.

Both government parties have frantically tried to lower expectations of what the government should be able to afford in this budget. It will be tight, they said. I believed in them. Until the big numbers started to flow in today.

How Vedum dares to present this as a tight and responsible budget, I simply can not understand. With the large increase in the use of oil money, it will end up being as high as it was when the whole country was shut down due to the coronavirus for large parts of the year.

Then comes the “spin”. The government is of course trying to sell this as financially responsible. They say they are making major reprioritisations. They will scale down the government quarter and remove the VAT exemption on expensive electric cars.

That’s as far as it’s true. The large funds are raised by the government from the Petroleum Fund, increased dividends from state-owned companies, and increased tax revenues because the economy is doing well.

The “cuts” Vedum likes to highlight, namely a smaller government quarter and the removal of VAT exemptions for electric cars, will in any case not have a significant budget effect until next year.

In fact, Vedum grants mer money to build a new government quarter. Due to “liquidity needs”, the project will receive NOK 350 million more this year alone.

“Politics is about prioritizing” said Vedum when he presented the revised budget. He’s right, but he does not.

Prioritizing is still a theoretical exercise for Norwegian politicians. The Petroleum Fund has seemed inexhaustible to good ministers of finance. But since the new year alone, the oil fund has fallen 600 billion kroner in value.

It is very risky to believe that the oil fund will continue to grow into eternity. The more finance ministers who feel they have the right to make a living from it, the less it will be left to the next generation.

It would have been just right to tighten up now, but it did not happen. Now it’s the central bank’s move. Many economists predict that it may be to raise interest rates even more than they had thought before this budget was presented.

PS: Sondre Hansmark has been elected as the third deputy to the Storting for the Liberal Party. He is now employed as a commentator in Dagbladet, resigned from the party and will in that case meet as an independent representative.