Norway Votes For Higher Taxes And Public Spending

by Ulrika Lomas, Tax-News.com, Brussels

15 September 2005

The Norwegian electorate has voted against Prime Minister Kjell Magne Bondevik's promise of further tax cuts and in favour of higher taxes and more spending on the country's already substantial welfare state in Monday's national election.

Official results on Tuesday showed that the three-party Red-Green alliance, led by the 46-year-old Labour Party leader Jens Stoltenburg, had won 87 seats in the 169-seat national assembly, a number that is likely to be enough to guarantee Stoltenburg his second stint as Prime Minister, the first coming in a short spell between 2000 and 2001.

Norway already has one of the most generous welfare systems in the world, but the public appears to have been won over by Stoltenburg's pledge to spend an additional 60 billion kroner (US$9.5 billion) over four years on projects such as schools and old people's homes - some 20 billion kroner more than the government parties had promised to spend.

Much of this extra expenditure is likely to be funded by revenues accruing from Norway's vast mineral wealth, which have burgeoned as the price of crude oil has rocketed in recent months. However, Stoltenburg has also vowed to reverse the centre-right government's policy of tax cuts and restore the burden of taxation to 2004 levels.

"Shall we continue with tax reductions, or shall we not cut taxes and instead spend more on the elderly and to improve schools?" Stoltenberg asked during a news conference in Oslo on Friday.

"Polls show there is great support in Norway for spending more on these great challenges than on tax cuts," he added.

Meanwhile, Bondevik has informed King Harald V of his intention to step down from office if the three opposition parties have agreed terms on a new coalition by October 14.

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