Response to interpellation 2023/24:38 on rut and rot
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
M proposes that the ceiling for the rot deduction be temporarily raised and that the rot and rut deductions receive separate ceilings to promote employment in the construction sector 1. M believes that the deductions are a way to save jobs and support households 2 and that it is a well-balanced budget where the tax is also lowered for ordinary people 3. S argues that it is unreasonable for tax money to go to services outside of Sweden and that the deductions primarily benefit high-income earners 4 5 6 7 8 9. S proposes that the resources should instead be used for energy efficiency, more housing, elderly care 4 5 6 or crime prevention work 7.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Eva Lindh has asked me what effects I expect the increase of rut and rot to have in and outside Sweden. The question is asked against the background that the government in the budget bill for 2024 has signaled that the ceiling for the rot deduction should be temporarily raised and that the rot and rut deductions should temporarily be given separate ceilings.
Sweden is in a serious economic situation. Inflation is at its highest in over 30 years and is hitting companies hard. Growth is developing at a slow pace, and Sweden is entering a recession with high unemployment compared to other European countries. This affects the construction sector in particular, which faces increased prices and decreased demand.
To temporarily promote employment in the construction sector, the government will therefore propose that the ceiling for the rot deduction be temporarily raised next year. The government will also propose that the rot and rut deductions shall have separate ceilings during 2024, which means that the rot deduction is not limited by anyone having purchased rut work. The measure is expected to increase demand for rot work during a period when demand for other construction and civil engineering works decreases. In this way, production and employment in the construction sector can be maintained to some extent.
The purpose of the temporary increase of the ceiling for the rot deduction is to create jobs in Sweden, not abroad. For EU law reasons, it is however not possible to limit the provisions to only include services performed in Sweden. However, the value of rot and rut work outside Sweden constitutes an extremely small part of the total rot and rut deductions. The measure is therefore judged to have a negligible effect outside Sweden.
Eva Lindh (S)
Madam Speaker! Rut and rot are tax deductions granted to private individuals for certain types of work performed in the home. When it comes to rot, it is primarily about renovations, and when it comes to rut, it is mainly household-related services.
When this was introduced, the reasons were that one wanted to promote Swedish job opportunities and reduce undeclared work. More services were to become white and be taxed. But today, the situation does not quite look like what was intended when rut and rot were introduced. Today, for example, it is possible to use these deductions even for renovations of household services in residences outside Sweden. It is becoming increasingly common that foreign entrepreneurs receive money from the Swedish Tax Agency for repairs and household help performed for Swedes living abroad; since 2014, it has increased by 40 percent.
It is still a somewhat strange prioritization - because everything in politics is about priorities - that it should become cheaper for high-income earners to luxury-renovate their homes in or outside Sweden while others around the country struggle to put nutritious food on the table for their children. And regardless of opinions on the design of the tax deductions, we should be able to agree that it is actually unreasonable that people can deduct tax through rut- and rot-deductions for work in homes outside Sweden.
The explanation for why it is this way concerns EU rules. Free movement is said to prevent Sweden from limiting the deductions. However, this has not been tested. In Finland, they have done so—when they introduced the tax deductions, they wrote in that they could not be used outside the country's borders, and that is how it became. However, this has not been done here, and Sweden has not tested the matter. My question, in addition to the one in the interpellation, is therefore whether the government intends to actually test limiting this.
My question, however, was not only about what feels unreasonable, that is, that we actually pay for services outside the country's borders, but it was also about what the meaning and purpose is. When the government invests even more resources in expanding rut and rot, they naturally do so because they believe in this – they believe that it actually fulfills what was the intention from the beginning. But what we know about rut and rot shows that it actually is not so. The rot deduction can be good when the economy is worse, and one could therefore imagine that it is a good situation today. But given how the construction sector looks, I doubt that it will actually have an effect.
One thing that Finland has done is to better control where the money goes. We do not do that. That is why it is a message to the government now, when you further strengthen this and expand the budget with more money in this area – that you control where the money goes.
I will stop there so as not to exceed my speaking time by bringing up anything new. I will return with more questions.
Sofie Eriksson (S)
Madam Speaker! I join the debate on rut and rot. The Minister for Finance argues that it is not such a big problem with luxury-rot and luxury-rut. It is not a problem that Swedish tax money can be used to fund terrace constructions and cleaning services in holiday paradises because not so many people take advantage of the opportunity. I would like to say that it is a big problem that the opportunity even exists.
At the same time as housing construction grinds to a halt and at the same time as welfare has large deficits, the state is spending new billions on subsidizing private balcony constructions and champagne glass polishing for those who can afford it.
The Minister for Finance argues that an expansion of these subsidies to high-income groups is justified by the fact that it secures employment among construction workers. The ceiling for the rotavdrag must be raised and, furthermore, it must be separated from the rutavdrag, so that the rotavdrag does not suffer for the Djursholms when they are going to maximize the rutavdrag.
Don't misunderstand me here. It is absolutely crucial in this situation that the construction sector receives stimuli. The question is what the money should be used for. Both Byggnads and Byggföretagen have objections to this measure being what would save the jobs in the construction sector.
When I talk to construction workers, I sometimes get a pretty straightforward question: Why do politicians spend billions of taxpayers' money on tearing out and replacing top-renovated kitchens and bathrooms just because the new owners don't like the color? Surely it must be possible to direct the money more towards construction that is more important for society?
I agree with this. This is about what provides the greatest social benefit. We from the Social Democrats have submitted proposals to reweight the rotavdrag (deduction for home improvements), so that it should instead go more towards energy efficiency so that people can get lower electricity bills. In addition to this, we have many proposals to stimulate the construction of more housing.
Madam Speaker! Both rutavdrag and rotavdrag are utilized to a significantly greater extent by high-income earners than by low-income earners. Approximately half of the state's costs for rutavdrag go to the richest tenth of our country. The higher the income a person has, the greater the probability that this person uses rutavdrag and furthermore makes larger deductions.
At the same time, there are many older people who cannot afford to use the cleaning deduction but who may have a real need for help with cleaning. This could, for example, take place through the home care service. But there are cuts there now with the government's policy.
According to the Growth Analysis Authority, the rut deduction has had low efficiency in terms of creating jobs. Each job costs 1.5–2 million kronor. The same money would have been enough to employ three or four nursing assistants in elderly care. Does anyone think that it is overstaffed in elderly care?
Madam Speaker! Just because it is pleasant to receive a proper discount on cleaning services does not mean that it is a reasonable public expenditure. Would it not be reasonable to redirect the renovation deduction to a more socially beneficial construction?
Peder Björk (S)
Madam Speaker! I intended to dwell a little bit on the RUT deduction, that is, the deduction that those who can afford to purchase household services can make. What we are talking about when we talk about household services is cleaning, childcare, gardening, and some other services. This is a deduction that costs taxpayers nearly 7.5 billion kronor. It is a deduction that is not distributed equally, neither geographically nor based on people's incomes. The tenth of the population who earns the most money receives approximately half of the RUT deductions given during a year.
One could imagine that when the government now proposes that the ceilings for rotavdrag and rutavdrag should be separated, there is an idea that the government wants to achieve something. Then I am utterly surprised, Madam Speaker, when I take note of the answer to the interpellation from Eva Lindh, where the Minister for Finance completely avoids answering the question of what the government's intention is regarding the effects of separating the ceilings for rutavdrag and rotavdrag. The Minister for Finance only sticks to the rotavdrag in the answer and does not say a word about what effects one wants to achieve by separating the ceiling for the rutavdrag.
Madam Speaker! My question to the Minister for Finance is quite simply: What is the idea behind making this separation and simply ensuring that more people can make standard deductions for higher amounts? Is it as simple as this being merely a concession to the Sweden Democrats in the budget negotiations? Or does the government have a thought and an idea that it should also produce societal effects?
Isak From (S)
Madam Speaker! The Minister for Finance has expressed here in the chamber regarding the climate goals: If we do not reach them, we do not reach them. That can be telling.
Here, a prioritization is made of an increased root and rut deduction to promote employment in the construction sector, which can be justifiable. But it can, of course, also be done in another way. It would have been possible to do it by promoting energy efficiencies - more heat pumps, geothermal heating systems, solar panels, additional insulation, and so on. It might have been double the bang for the buck. Then the Finance Minister might have been able to say that there are opportunities to reach the climate goals.
At the same time, a clear prioritization is being made by the right-wing government. We are in the middle of a housing crisis. In principle, only two or three counties show net production in the construction sector. Norrbotten is one of the counties. In Västerbotten, where much more housing would need to be built right now to meet the green industrial transition, the construction companies cannot afford to start new projects. The liquidity crisis in the construction sector is huge because the crisis has caused the construction sector in the metropolitan areas to collapse. The large construction companies cannot afford to start new projects.
In Skellefteå, Northvolt is now hiring 120-150 people per week - a number of thousands of people in the coming years. They need somewhere to live. Housing is being built, but much more needs to be built - so also in Norrbotten. With this in the rearview mirror, the government's priority becomes an increased interest deduction and travel deduction, which might go to those who own a condominium in Spain or something else, instead of actually focusing on things that could give double the impact for the money - larger energy efficiencies and more housing to benefit the green industrial transition.
The Finance Minister can remedy this. It is possible to present a supplementary budget and say that this is so important for Sweden and that one is therefore making a shift.
We do not need more new bathrooms, new tiles or marble slabs in the kitchen. We perhaps need more housing, heat pumps and solar panels.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I would like to thank the member for the interpellation.
Let me start by saying what we know. We are in a very tough economic situation. It is an economic winter. We have high inflation - higher than we have had in several decades. The recession is here.
This is, of course, caused by several things. What is now happening in the housing market, which has been hit harder than many other markets, is that high financing costs, high production costs, and low demand have resulted in a sharp brake in this sector. The best thing all of us in this chamber can do in this area is, of course, to ensure that inflation is dampened and that interest rates go down, so that one has calculations that are sustainable and so that one can build.
In this situation, the government chooses to support the sector with an enhanced root deduction. The reason we separate them is so that one shall not displace the other; it is not more complicated than that. This is temporary and applies for one year. Just as I said, this can save – and will save – some jobs in the sector. This industry, however, has incredibly great challenges right now, and what is required is, naturally, that demand turns around.
Madam Speaker! One could think that the Social Democrats here in the chamber are against rot and rut and that they want to limit or abolish these deductions. That is not, however, the case – I have known that from before. This is a somewhat surprising debate and discussion. I do not know if the Social Democratic members go home to people and see exactly what type of countertop they choose to put in the kitchen; I do not know if that is what they mean.
My point is that I see a great deal of support here in the chamber for both rut and rot, and that is good. Whether we should temporarily raise the ceiling to save jobs in a sector that is hit hard is something people can have different opinions about. I believe that it is right.
When it comes to the interpellation - for this is actually about the jobs abroad and about making deductions - one should know that half a percent of all deductions are made abroad. Do I think that is good? No - I think they should be in Sweden. But as the interpellator and - I believe - all other debaters in this chamber know, one cannot distinguish this. Finland did it, but then they had to change the legislation back. They were reprimanded by the commission because we have free movement for goods and services.
Is this a big problem? It would be a big problem if large sums were going out, but that is not the case. I completely agree with the interpellor Eva Lindh – of course, I want all this money to stay here. But since it is not possible to distinguish, it is exactly as it is.
It may be that you have other contacts than I do. However, I meet the commissioners often, and as I understand it, this remains fixed. Finland has, as mentioned, moved backwards.
Madam Speaker! This is a tough time. One can have different opinions on what needs to be done in the housing sector and in other areas. This year, for example, we have an energy efficiency deduction for small houses. Next year, we will do other things to get construction started in Sweden.
I believe that these are measures that work. We know that the Social Democrats have previously held onto their favorite reform, that is, investment support, and they seem to be holding onto it even now. This is an incredibly expensive way to ensure that houses are built. We also know from evaluations that most of this money goes straight into the developers' pockets. I do not believe that it is a better way to go.
This is one of many ways to support households and companies in a difficult time, but it is primarily about saving jobs in this sector. Will it save all jobs? Absolutely not. We are facing a rather tough winter, both economically and literally speaking. The government will, however, do what it can, and I am convinced that everyone else in the chamber will do what they can.
Eva Lindh (S)
Madam Speaker! I would like to thank the Minister for Finance for the answers in this round of the debate. We wonder, and that is why we ask the questions.
A budget always involves priorities, of course. One chooses to spend money on something instead of spending it on something else. The government could have chosen to strengthen crime prevention work or to strengthen welfare in general, but instead chooses to spend more money on "rot och rut" (root and rut). That is why I wonder what the government wants to achieve by strengthening this. The government raises the ceiling and differentiates so that one does not take away from the other.
Studies and research have been conducted on the root and rut services, and there are some answers regarding what was actually intended when they were introduced. It can be said like this: It is not true that rut converts black jobs into white. It does so with 10 percent, but this is approximately the same amount as it reduces within any other sector. For example, there have been 10 percent more white jobs when renovating boats. It is just as much as within the rut sector, so this has no effect.
It is also not true that RUT creates jobs for vulnerable groups. The Swedish National Audit Office has looked into this, and it has instead shown that it primarily concerns people who were not registered as residents in Sweden the year before. The majority come from other EU countries – not from Sweden. One can therefore call this a tax-subsidized labor immigration, as 30 percent of those who work within RUT come from abroad. It is therefore not directly the case that this creates jobs for vulnerable groups. It has had an employment effect, but it primarily benefits people who come from countries outside of Sweden.
When one raises the ceiling, it sounds very good that this is supposed to benefit more people, but it is not the case that this will benefit more people. When one raises the ceiling, it just means that the one who has a lot of money and wants to buy RUT services can buy more such services than they could previously or renovate more than they could previously. It is not the case that this gives people increased accessibility. It is not the case that more elderly people will be able to use RUT. Today, every fifth person in the age group 65+ uses RUT. Very many pensioners have such low incomes that they cannot afford to use RUT even if we subsidize it.
Why is this specifically so important when one prioritizes choosing to allocate more money to raising the ceiling for rot and rut and separates it so that it can be used a bit more? Those who already can afford to use it can buy even more rot or rut services. The question remains.
Sofie Eriksson (S)
Madam Speaker! Thank you, Minister for Finance, for the answer!
I agree with the description of how serious the situation is both in the Swedish economy and within the construction industry. It is truly a total standstill that we have seen, and I understand that the Minister for Finance and the government are extremely stressed about this. It is a major problem.
I notice that the Moderaterna generally seem to be quite stressed about their own policy in this area. This week I read a debate article in Mora Tidning where Moderate representatives described that Mora municipality would receive a large construction bonus. This is not true, but it concerns approximately 100,000 kronor to possibly hire a planning architect, who does not exist, to perhaps work a bit with detailed plans.
The reason I bring this up is that it is this – and the raised ceiling in ROT – that is the government's entire policy on the housing area. It is completely incredible. At the same time, construction workers are sent home, and expansive municipalities – for example, Ludvika, where I myself live – see an enormous problem with meeting the industry's expansion because housing is not being built to a sufficient extent. That one then comes and says that the raised ceiling in ROT is the answer is completely incredible.
In addition to this, the argument we have put forward is that it is primarily high-income earners who benefit from these things. That one thinks this is a reasonable thing to invest in in the difficult economic situation - in the economic winter - that ordinary people find themselves in right now, and that those who already can afford it should be allowed to make even larger deductions, is completely unreasonable.
Peder Björk (S)
Madam Speaker! I note that the Minister for Finance seems incredibly uncomfortable speaking about the rut deduction. The rut deduction is, after all, a Moderate invention that Moderates in this chamber, before the Minister for Finance, have proudly stood here and spoken about.
In response to a direct question in an interpellation regarding what the Minister for Finance believes the effects will be in Sweden and abroad of an increased rut- and rotavdrag, the Minister for Finance does not address this with a single syllable in the interpellation response and not with a word from the rostrum. What positive effects does the Minister for Finance see from an increased ceiling for rutavdrag?
Madam Speaker! I am utterly surprised by this. Could it be that it is no longer a Moderate idea and a Moderate project, but rather a concession to the Sweden Democrats in the budget negotiations? Is that how we are to interpret the Finance Minister's silence?
The Minister for Finance does not want to speak about this here and now, and the Moderaterna may even have started to consider whether it is such a great idea. I still want to include something ahead of the bill with these proposals that will be presented before the Riksdag.
Is the Minister for Finance prepared to present a proposal in that bill to conduct an evaluation and a review of the travel deduction and its effects?
Isak From (S)
Madam Speaker! Colleague Peder Björk may have hit the nail on the head here, the Minister for Finance. Could it be a concession to the Sverigedemokraterna? It seems to be that the Sverigedemokratiska voters appreciate rut and rot to a great extent.
One does not seem to appreciate climate efficiency measures or investments in the green industrial transition. It would have been a significantly more understandable priority that we could have gained double from in several aspects.
Previous governments and even Moderate-led governments have implemented cyclical measures when things have gone poorly. During the 90s crisis, a number of large construction projects and infrastructure projects were started. It concerned the High Coast Bridge, the links in Stockholm and the construction at Hallandsåsen.
They were certainly costly projects. But they were done in the sense of maintaining the construction sector and creating something that is better for everyone. It is clear that an increased root and rut deduction creates prosperity and is better for someone or some, but far from everyone. The Finance Minister still has some work to do.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! One could truly believe that the Social Democrats are now phasing out both rut and rot. It is good for those who are now watching SVT Forum or see the debate afterwards to see the criticism that this meets. I do not understand why you did not remove it during eight years in government if it was so bad.
I would think that it is not only Moderate or Sweden Democrat voters who appreciate rut och rot. It is all voters who see a need to, for example, renovate at home. It is about getting an opportunity to renovate the house or renovate the patio. It concerns people who live in Borlänge, Bjuv, Dorotea or in Örebro where I live. It is a good way to make things easier for people but above all to ensure that we create jobs.
I completely share the view that there is much work to be done. It is strange that the Social Democrats did not address those problems during those eight years. I promise that I will do so. I will turn over every stone to ensure that the taxpayers' money is used in the best possible way.
I will briefly turn to the interpellator Eva Lindh. There is talk of priorities. The budget that I laid before the Riksdag a few weeks ago, time flies, is a well-balanced budget in a difficult time.
What is it that is difficult? Right now, it is difficult that we have a very high inflation. It is thankfully on its way down. But one cannot take for granted that it will be low. It will not come down by itself. At the same time, we have a recession.
It is a difficult situation. Therefore, we are presenting a well-balanced budget that is technically neutral, meaning that it does not drive demand and in that way drive inflation. It is in the sense that the Riksbank will not need to raise the interest rate because of what we do in fiscal policy.
Then one can have different priorities. We allocate 40 percent of our reform space to the various activities of the welfare system. We also lower the tax for ordinary people who have been hit hard by precisely a real wage reduction during a period of high inflation.
Many people struggle and go to work every day. This applies whether they work as a nursing assistant or as a teacher. They can also work as an industrial worker at Meritor, where I was the other day. For them, the value of the wage has decreased.
That is why it is important and right to lower the tax for those who go to work every day. Both guarantee pensioners and those with maintenance support have received a compensation for inflation. It is also a good structural policy to lower the tax on work. But I shall not take that debate here.
Madam Speaker! I return to the interpellation. Rut and rot have been used by many parties as a way to maintain employment. Is this the only way? Absolutely not. But as I said, it is a tough situation. The entire sector is fundamentally waiting for the economy to turn and for inflation to come down.
We do different things. We separate and raise the ceiling, which we are now debating. We have planning incentives for municipalities to be able to facilitate for small houses. This year, there are deductions and support for energy efficiency in small houses.
Will it save the industry? No, nothing of what we do together will be able to do that in the sense that everything will turn completely tomorrow. It is a tough time with high inflation. It must come down.
We do what we can to support the sector. I know that the sector wants much more. This applies, for example, to regulatory simplifications. A very large amount of what is currently an obstacle to housing construction structurally and in the long term is not about money. It is about rules. The government, and most notably the Minister Andreas Carlson, is working on this daily.
Eva Lindh (S)
Madam Speaker! I will begin by responding to a statement from the Minister for Finance. No, we have not intended to abolish it. We do not have it in our budget. But we Social Democrats do not want to raise the ceiling for the deduction for repairs.
We also do not want to do what the government has done. It is simply a misguided economic policy. It is completely unreasonable to do it at a time when people are struggling to make ends meet - to make this investment which once again targets people who are high-income earners. They do not only get much lower taxes. They also get greater opportunities to invest in rot- or rut-deductions. It is unreasonable in these times.
It also has consequences, which the Minister for Finance says are only tiny: half a percent. It has increased during these years by 40 percent. Even if it is a small part, it is a proportion.
For me, it is about both money and about people thinking that it is something reasonable that happens from what we do with our tax money. It is not reasonable that we taxpayers should pay for luxury renovations outside Sweden or that one gets their pool cleaned outside Sweden. That is something we can work to get rid of. It is not as if it is set in stone.
We have also pointed out that above all rut but also rot have not given the effects that have been desired. To do this in a time when we have limited resources and one must focus on prioritizing in one's budget is to use the money incorrectly. They should have gone to something of all the other things that we need to invest in in Sweden today.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.