Tag: budget

Government plans revealed

Not a perp walk. A budget walk. It’s a long 400 meters for the previous Minister of Finance.
source: Etuna news https://tinyurl.com/54zuc8hw

November 8th is Budget Day! For those who are interested in all things political, this is exciting – but it’s also kind of a spectacle. The 400 meter long Budget Walk, or budgetpromenaden, is its own Wikipedia entry. It’s that good. 

The stack of A4 paper that the budget is written on, wrapped up in a blue and yellow ribbon  and carried by the Minister of Finance while being mobbed by journalists and tv cameras, is actually the representation of a government’s idea for the country. The budget is a tool the government has to make its political ideas real – it shows how much money the government is planning to spend on the 27 different expenditure areas it comprises. These areas are, for example, items like financial support for students, industry and trade, energy, the EU, and financial security for the elderly. What items’ budgets get changed will reflect how the government realizes its priorities. 

The budget’s Top Three

The largest government outlay in Sweden always goes to the local, municipal governments. Most of this amount falls under the Swedish equalization principle. This effort guarantees local governments an equal financial ability to provide services to their inhabitants – regardless of tax base, population size, or other structural difference. To further income equality, for example, the richest fifteen municipalities pay a percentage of their local tax income to the government. That amount is then distributed to the remaining 275 other municipalities. 

”Health care, medical care and social services” is the second largest outlay in the budget, and ”financial security for those with illnesses and disabilities” is third. The full list can be seen on the government.se website here. 

The majority of the allocations to the different  expenditure areas don’t change more than incrementally. Most of the budget is basic services, which are not that controversial. However, there are a few budget items that may change significantly this year – the defense, international development cooperation, and police budgets. 

Guns and roads

Currently, the defense budget is around 71 billion kronor, which is about the same amount budgeted for communications (roads and trains and the like). By 2025, the defense budget is expected to go up 55 percent, to 110 billion kronor. The government has said it hopes to get Swedish defense spending up to 2% of GDP (meeting Nato expectations) by 2026. With prices skyrocketing, though, who knows how much materiel this will actually buy.

The amount budgeted for International development and humanitarian aid will go in the opposite direction. Instead of 1% of GDP, the government has flagged for a figure around 0.88% of GDP. Sweden’s aid competitor Norway also just abandoned the 1% of GDP goal for a 0.75% goal. With Russia out of the picture, however, Norway has been raking in money hand over fist by supplying oil to the world: Its 0.75% will be a huge amount. Sweden’s 0.88% will still remain a world-leading number, though. 

Finally, the Minister of Justice Gunnar Strömmer announced that the police will receive a bigger allowance, a raise of 1.4 billion kronor. In budget terms, though, this is again somewhat of an incremental increase. 

But we thought you were going to help

What happens with election promises is still a question. Perhaps most memorable were the promises regarding help with coming electricity bills and cheap gas prices, particularly diesel. These supports would likely come out of the budget surplus, which is thought to be around 30 billion. With the dismal economic forecast, though, including raging inflation, the government will have to be careful if it’s going to help, and not hurt. Besides, that ten kronor per litre gas price was a flag that SD flew, and they’re not officially in the government. 

The budget walk on November 8th will no doubt be televised per usual, and there will be a lot of people swarming around the Minister of Finance. But the real attention will be on that beribboned stack of paper she’ll be holding. 

Skål for state-owned businesses

Absolut midsommar – keeping health care funded
pic: absolut.com

Is Sweden a socialist country?! Although even through the 80’s it was still a thing, the idea that the Swedish state owned more businesses than not has pretty much been put to rest by this time. Still, there are several huge businesses that are owned or partly owned by the state, who has proven to be, at best, only a so-so business partner. SvD‘s Torbjörn Isacson went through part of the list today, with Telia’s recent sale of its Turkish business as a starting point.

Sweden owns 39.5% of Telia. The next biggest owner of Telia is Blackrock, which owns 3.1%. It’s safe to say Sweden’s ownership is the big one. Although it’s a controlling interest, the state doesn’t control Telia. Telia has a board like any other public company, who does the day to day work (for more about Telia see this blog post). However when Telia loses value or does bad business decisions it’s the state that takes a major hit as any huge shareholder would. Also when Telia does a good deal and makes money the state makes money. In this case, this means Swedish taxpayers.

That’s why Telia’s recent sale of its holdings in the Turkish company Turkcell must make the news. Not only did Telia and its shareholders take a huge, huge loss because the board’s idea was a disaster, Telia sold its holding to a buyer whose CEO is Turkey’s authoritarian leader Recep Tayyip Erdogan. As shareholders, Sweden’s taxpayers should be in the know – but in reality taxpayers have perhaps even less power than an average shareholder since the Swedish state must resign its active partner role to prevent a truly socialist state of affairs (see China for comparison).

Still, that doesn’t mean that the state ignores its business holdings entirely. Just recently, SvD reports, the parliamentary committee on enterprise (näringslivsutskottet) called on the three top state-owned businesses – Vattenfall, Jernhusen and Swedavia – to answer some questions on business practices like annual dividends, and handling the corona epidemic.

Vattenfall has been a leading money-loser. If it’s not one thing, it’s the other: too much snow, too little sun, too little snow, too much sun – and we won’t even bring up wind – they’re all reasons why Vattenfall needs to raise prices on Swedish energy consumers. Then there are other issues like nuclear power and electricity infrastructure that the state of Sweden is directly responsible for but again, must somehow disengage from their effects on its own business, Vattenfall, which, again, is somehow the reason Vattenfall must raise it’s prices on Swedish energy consumers. But it isn’t only Sweden where Vattenfall has its business. Vattenfall has business all over the world and the current record-low cost of electricity is again a reason that Vattenfall is losing money.

Jernhusen owns buildings and other real estate all along the Swedish railroad network and also has dealings inside Norway. Swedavia runs the airports. Both of these were taking losses even before Covid pulled the rug out from under them. And then, of course, we have SAS of which Sweden and Denmark each own just under 15%.

Another 100% state-owned, and Covid-hit business like all others, is Svenska Spel where the lack of sports and the closing of casinos has been financially disastrous. One would think that the state would be happy about less gambling, but it’s uncomfortable when it’s also making money for the state. We all know PostNord, which is 70% owned by the Swedish state and 30% owned by Denmark (note: for some reason, however, voting power is split 50/50). It has the impossible task of trying to be profitable while being prevented from raising prices or laying off workers, or even quitting the business entirely, by its own owners.

To make matters worse, it was in the 100% state owned LKAB (Luossavaara-Kiirunavaara AB) mines in Gällivare that a cluster of Covid virus has recently exploded. But even before that a number of questions regarding work practices were piling up.

Corona makes life more difficult for basically everybody, and misbehaving companies are common. Plus, some essential services should be guaranteed by the state, even if they’re not profitable. But as a general rule, should states be in the business of making money? Oh. Wait. We can’t forgot the good news – Systembolaget! A sure money-winner in Covid times and not. Swedes will have to keep drinking to keep the money rolling in – good thing it’s Midsommar.

EU summit and budget coming right up

many factors at play between Sweden and the EU budget
pic: wired.com

The EU’s Corona crisis support package/recovery plan/budget is still being negotiated, and quite rightfully so. It’s a huge number that is being thrown around – 1.85 billion euro, or 2000 million dollars. (The United State’s bailout package is way more – 2 trillion dollars aka two million million dollars.)

Sweden has been one of the “frugal four” – countries that want the aid package to countries who have been hardest hit by covid to be in the form of a loan instead of a gift, but it looks like that position is weakening.

Sweden’s EU commissioner Ylva Johansson says that Sweden’s position is short-sighted. “The lessons learned from the finance crisis [in 2008/9] is that we acted way too slowly” Johansson said in Sweden’s Radio Saturday interview program: “If we don’t implement a big recovery, we’re going to have the worst crisis that the EU has ever experienced. Way, way worse than than the finance crisis.”

However, the package’s main financing comes from loaning money with all of the EU countries as guarantors. This would be a first, and is likely also precedent-setting, and allows the EU to act – even more – as a single, overarching government sitting far away from Sweden. The Swedish government’s critique of the plan, Sweden’s radio reports in another article, is that the budget is too big, there is too much money in the fund, the funds should be loaned out and not given out, and it should be a fairly short term loan at that. The way in which the money is spread out is not popular in Sweden either: “A lot of money goes to countries that aren’t even hard hit by corona” remarked Minister for Finance Magdalena Andersson, “and that seems a little strange.”

The Left party, never a fan of EU in the first place, is more virulently opposed to the plan. In a debate article in Aftonbladet a few days ago, party leader Jonas Sjöstedt and EU parliamentarian Malin Björk write that the recovery fund increases EU’s power over Sweden dramatically. Money that could have gone to climate investments and welfare in Sweden now goes to “Orbán’s oligarchies and Brussels’ bureaucrats.”

On the other side of the equation is the Liberal party who have always been very EU-friendly. Both of them, officially or unofficially, are supporting parties for the reigning Social Democrats. The Left party has way more votes and is an ally of old, while the Liberal party has always been on the right, before former party leader Björklund’s children pushed them into the center-left camp. The Social Democrats are getting it from both sides, and the EU is pushing as well, in the form of EU commissioner Johansson.

The next EU summit (via video this year) is – per usual – during Midsommar. Sweden was never able to persuade the EU to change the date, even by a day, to accommodate the single biggest holiday in Sweden, so it’s kind of unlikely (sadly) Sweden will have a deciding voice in the EU budget.