Friday, May 30, 2008

Large increase for minimum pension in Norway - but will it be enough to keep the left in power?

Leaders of Norway’s three governing parties - Kristin Halvorsen (Socialist Left - SV), Jens Stoltenberg (Labour - Ap) and Åslaug Haga (Centre Party - Sp)

The centre-left government in Norway on Wednesday announced a historic increase to the minstepensjon (minimum pension) of 14% - from 119,820 kroner this year (around £11,500) to 136,296 kroner (around £13,000) in 2010 - by comparison the basic state pension in the UK is just £4,700 a year. Disability benefits have also been increased by a similar amount and the settlement has overall been seen as an extremely positive one for the poorest sections of society.

But with opinion polls consistently predicting a strong lead for the four opposition parties of between 5 and 20% all is not well in Norway. Especially when much of the declining support for the three governing parties has gone to the Progress Party (Frp) - a populist and highly opportunistic right-wing party which plays on people’s dissatisfaction with high tax rates and their fears over issues like crime and immigration. The Frp cannot, I think, be compared to the neo-fascist and overtly racist parties which have been gaining support across Europe but their high level of support (over 25% in recent polls) is nevertheless a worrying phenomenon.

Large numbers of public sector workers are currently on strike as teachers and nurses are demanding higher pay from local councils and the government’s recent decision to increase fuel taxes in a country which already pays the highest prices for petrol anywhere in Europe isn’t exactly popular. In addition a range of reports of run-down schools and universities, a declining quality of care in hospitals and residential homes, and dangerous and poorly maintained roads, have led many to seriously question the competence of both local and national authorities.

I recently read a comment on Dagsavisen partly blaming the government’s unpopularity (and the rise of the Frp) on the social and cultural impact of Norway’s enormous oil wealth - people have apparently came to think that anything is possible, that public services should all work perfectly and that they shouldn't personally have to bear the costs of something which could be funded through the oil revenues. They demand to see all the possible benefits of the oil wealth now without realising the importance of saving it for future generations and for dealing with the impact of the oil running out in the next few decades.

The Frp is clearly on the right economically, calling for tax cuts and greater private involvement in the provision of public services. But much of their support has been gained, not through this, but through their lavish spending promises - particularly for the elderly but also when it comes to education and healthcare. In most countries it would be impossible to combine this with lower taxes but, at least in the short term, this may appear not to be the case in Norway where oil revenues guarantee a large budget surplus each year.

There may be some truth in that observation but it’s also the case that the governing parties had promised far more than they've yet been able or prepared to deliver and inevitably large sections of the electorate are likely to feel let down. The pension and benefit increases this week are a good start for a government trying to get in touch with the mood of its people again but they're long overdue and it will take a lot more over the next 15 months to get enough of the population back on side before the election. The government will also need to put across their agenda more effectively and take on the arguments of their opponents rather than allowing themselves to be scared by them.

One area to look at here is income tax - the government has so far avoided increasing it in the fear that it will harm their chances electorally. But in actual fact what they should be doing is making the case for taxation which is both high and, at the same time, progressive. Opinion polls have repeatedly found that Norwegians don't object to paying high taxes on income as long as they can see real benefits to their public services. What is unpopular are indirect and regressive taxes, particularly on basic consumer goods bought equally by the rich and poor alike. If the red-green government are genuinely committed to closing wealth inequalities then they must take concrete steps now to start shifting the burden away from ordinary people and on to those who earn the highest incomes.

Even if the worst comes to the worst and the centre-left doesn’t significantly regain its support by September next year an Frp led government is far from certain as although Høyre (the conservatives) have left the door open to cooperation with them, the other two opposition parties - Venstre (the liberals) and the KrF (christian democrats) - have not. The radical left's decline meanwhile looks likely to continue as the SV's inability to, as of yet, take the Labour dominated government in the radical direction many of their supporters had hoped has disillusioned many and harmed the party's reputation as a force for challenging the established political scene in Norway.

EDIT: This article from Red Pepper (which I found a few months later) is I think useful in explaining some of the tactics used by the Progress Party and perhaps why they've been so successful among sections of the Norwegian electorate.