Scripture about use of oil money: – Responsibility – E24

Ukraine and defense spending contribute to the high use of oil money. – Finance Minister says if we don't do that it would be totally irresponsible.

Three hours before Finance Minister Trygve Slacksvold Vedam (SP) presents the revised state budget for 2024, the finance ministry is releasing figures for this year's oil money use.

The government plans to increase the use of oil money to NOK 418.7 billion this year.

This is estimated to be 2.7 percent of the value of the oil fund. The operating rule states that the use of oil money over time should be three percent of the fund's value.

In October, the government had plans for oil money spending of NOK 410 billion in 2024, an estimated 2.7 percent of the fund's value.

Veda believes he can justify the increased spending.

– It is responsible, Vedam tells E24.

– Although there are large costs related to Ukraine, you will see that the cost is below the action rule. Ukraine-related costs are more than NOK 50 billion, he says, and you will get the exact figure today.

Earlier, Handelsbanken's chief economist Marius Gonsholt Howe believed there was room to use more oil money in this year's budget, not necessarily avoiding the central bank's plans for interest rate cuts later this year.

Besides using oil money, the government has raised estimates for both economic growth and price growth this year.

– About our security

Big increases in this year's budget are tied to, among others, Ukraine and defense.

– It would have been completely irresponsible if we hadn't done what we did. The largest expenditure in this budget is NOK four billion for the air defense system for Ukraine. It's not a typical Norwegian priority, but it's about seeing the brutality of that war. This too is about our security, says the Vedas.

– Russia should know that our allies will stand up if they want to attack us. Because they won't do it. That is why it is important that we stand up for Ukraine. It is ethically correct and in Norway's own interest as a neighbor to Russia.

The minister says some of the factors contributing to cost containment are higher tax revenue than expected, and some projects can be pushed forward.

– Will it be a more comprehensive budget than you expected last year or more neutral?

– It is clear that this high investment, especially in security, will have an impact. But it is within a responsible framework, says the Vedas.

– Incredibly important

Vedham says the estimates in the revised budget confirm that 2024 will be the year of real wage growth.

– People will find that they can afford to buy better, at least because wage growth will outpace price growth. It's incredibly important, he says.

– Many people have experienced our most demanding price hikes. It affects you and me, fathers and mothers of families who have to buy food, clothes and furniture and raise the bills, he says.

He believes this will lay the groundwork for increased economic growth later this year when people have more money to go around.

– Of course things can happen, but right now it's looking bright, says Vedam.

– The world around us is still rough, there are a lot of rough seas around the boat in Norway, but here at home we feel that the water is much calmer than it was a year or two ago.

– The right intensity

Vedam is not worried that spending in this year's budget will contribute to higher inflation and pressure on interest rates.

– We manage to do this within a responsible economic arrangement, even with an increase in Ukraine's expenses. And we expect price inflation to come down, he says, keeping the cost base in check.

– It's a strange time. Do you feel like a bad time boss?

– There are very serious times. The right intensity. Here at home, we experienced the brunt of it in the fall of 2022 because we feared high unemployment. Vedam says that it is very serious for people's private finances and has a dark background.

– That's why it's so good that our estimates confirm that there will be real wage growth. It's good when you notice things are getting a little brighter, he says.

No more surprise treasures

Criticized by the government's unpredictable tax policy. In 2022, it introduced, among other things, a temporary additional tax in the electricity sector, which was later removed, and the additional employer's tax will now be removed.

– It is absolutely necessary to do this in the fall of 2022. We had to improve welfare services. Vedam says that tax could not be increased for most of the people then.

– Increasing use of oil money in that situation is not appropriate. Then we raised some other taxes. The power sector had unimaginable returns and was well managed. As unemployment was rare in the higher income group, we increased the employer contribution. Now we're removing that, unemployment in that group is almost zero, he says.

– So you don't need any amazing treasures?

– Finance Minister says there is no answer.

– But we have made a permanent tax change, which is basic rent tax on aquaculture. People will be able to enjoy it only from this fall. The tax change means all families with children will receive lower nursery prices this autumn. It is its direct effect, says the Vedas.