Response to interpellation 2023/24:390 on the cost-effectiveness of the repair deduction
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
M argues that the rot deduction is a proven measure that contributes to fewer black incomes 1 2. M wants to temporarily raise the ceiling to support the construction sector during a recession 1 2 and considers rot and rut to be good reforms that should be nurtured 3. S argues that the rot deduction is not cost-effective in its current form 4 5 and that the government should lower the ceiling 4 6. S believes that a raised ceiling benefits a small group with a high economic standard 4 and that the rot deduction can be used to launder money 6 7. S also argues that the rot deduction can be used to mislead customers 5.
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! Sofie Eriksson has asked me whether I, based on the Swedish National Audit Office's report, intend to take the initiative for a review of the design of the renovation deduction in some part to increase the efficiency of the renovation deduction. The question is posed against the background that the Swedish National Audit Office recently presented a report on the costs and effects of the renovation deduction.
The government's upcoming proposal to temporarily raise the ceiling for the rot deduction and to temporarily introduce separate ceilings for the rot and rut deductions is a measure to support the construction sector during the ongoing recession. The measure is assessed to increase demand for rot work during a period when demand for other construction and civil engineering work is assessed to decrease.
The rotavdrag is a proven measure that has also previously been used to alleviate the effects of a recession on the construction industry. I have noted that the National Audit Office's review does not cover the effects of the rotavdrag as a cyclical measure. The Government will return with answers to the National Audit Office's report.
Sofie Eriksson (S)
Madam Speaker! I thank the Minister for Finance for the answer.
Tonight, the trade unions GS and Byggnads have held a demonstration at Sergels torg. They are tired of strikes and escalating unemployment in the industry. They are tired of housing construction having crashed while the housing shortage is so great. If I have understood correctly, they handed over a petition to the Minister for Housing tonight. I want to take this opportunity to clearly join their demands that the government must act.
Then one might ask, Madam Speaker, why I should stand here in an interpellation debate and criticize the rot deduction a little bit. It is, after all, a cyclical measure? But the thing is that in times of difficult economic considerations, one must work smartly. One cannot throw money at things just however. And it is simply not smart to raise the ceiling for the rot deduction right now, with its current design.
It is not I who am saying this, but it is the Swedish National Audit Office. A report has recently been presented on the cost-effectiveness of the renovation deduction in terms of increasing the labor supply and reducing the proportion of undeclared work in the industry. The conclusions are very clear: the renovation deduction is not cost-effective in its current form. They therefore recommend that the government lower the ceiling. But the government is doing exactly the opposite, Madam Speaker – it is raising the ceiling and separating it from the renovation deduction.
This costs 10 or 11 billion, or whatever it ends up being in the end. People who can afford it today can renovate even more and take a deduction for it. These are funds that cannot be utilized by everyone, for example, not by people who live in rented apartments, and the problems with the rotavdrag that we see today are not being handled at all.
I would say it is embarrassing for the government to claim that a raised ceiling for the rotavdrag would save the construction sector from the crisis. If that were the case, the construction crisis would not be as deep as it is now.
We Social Democrats believe that it is possible to redirect the rotavdrag to services that are of greater importance for the common good, such as energy-efficiency measures. It is also possible to present more and larger measures for the construction industry; we have presented a five-point list with construction stimuli, construction credits, a state-owned property company, an investment in energy efficiency, and precisely a reform of the rotavdrag.
It is clearly positive that people can and want to renovate at home, but we think it would be good if more of the money could go towards things that dampen inflation or give lower electricity bills, i.e., energy efficiency measures. We are, however, also concerned about the criticism that the Swedish National Audit Office puts forward, namely that this is not a cost-effective system.
It is the case that a raised ceiling for the rotavdrag benefits a certain group over others. I read from the government's own memorandum on the issue: "The proposal is judged to primarily have an effect on the economic standard for households in the upper part of the distribution, and most of all for the tenth of the population that has the highest economic standard."
Hanna Westerén (S)
Madam Speaker! I shall begin with a quote: "The rotavdrag is not effectively designed. - - - To increase cost-effectiveness, the government should lower the limit for how large deductions may be made, as well as use more effective ways to counter undeclared work and other crime in the labor market."
It is not I who is saying this, and it is not Sofie Eriksson who is saying it. It is the Swedish National Audit Office, and more clearly than that it can hardly be said.
Sweden is facing several parallel crises: we have a deteriorating security situation, an escalating climate crisis, and a wolf winter for households and companies. We have a crisis in healthcare and a very difficult housing crisis. To solve the housing crisis, we need to build more - more homes where more people can live - but we are renovating houses that already function. Given what Sofie Eriksson just said, it seems to be quite nice and well-functioning houses that will become even nicer. These are not well-used resources.
Furthermore, there is an imminent risk that the problems which are particularly severe in, among others, the construction industry will escalate. People are suffering on the Swedish labor market; we must be clear about that. It is deficient protective equipment, black wages, false employer certificates, and in some cases, pure human trafficking. And then I haven't even mentioned all the money that leaks out of the system every day. I really wonder how the Minister for Finance can let this continue on her watch. Whose interest do the tax deductions serve with the current design?
We must also not forget that everything is interconnected. I have said it before, and it is a bit tiresome to say it again, but I believe it is important: The one who says they want to make things difficult for the gangs and drive out organized crime - which I and my colleagues want and which I believe the Minister for Finance has said they want quite many times - must also combat crime in the working life. That is where it happens. To raise the ceiling for deductions without also addressing the risks of more workplace accidents, more people being exploited and utilized, more tax crimes, more double bookkeeping, and an eroding legitimacy for the tax system is, honestly, deeply irresponsible.
Those who have no housing are made to wait beautifully until later so that those who already have housing can renovate more. Is that really reasonable? Is it fair? I believe that this is a dangerous path to take. I believe it is dangerous because it increases the gaps between those who have and those who do not in our country. I believe it is dangerous because the tax system deserves better, more effective measures. I also do not believe that we can afford to spare a single tax crown given the challenges that Swedish welfare faces.
I therefore really wonder: What are the measures to address crime in the working life? It is, in fact, an imminent risk already now, and with a raised ceiling, it increases further.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I intend to stick to the basic question posed by the interpellor, namely whether I intend to take the initiative for a review of the design.
First and foremost, I welcome the National Audit Office's report. I am, and for many years have been, one of the National Audit Office's friends in the sense that I believe we need to be evaluated and audited from different sides. We naturally always need to take note of what different evaluation institutes and others come up with. We will, of course, return with a formal response here in the Riksdag, as we always do.
I believe, however, that we are discussing several things at the same time. One must keep in mind that the National Audit Office has reviewed the repair deduction as a structural measure, not as a cyclical measure. The increased ceiling for the repair deduction is therefore, in case someone looking at this or reading the minutes afterwards does not know it, a cyclical measure that is temporary. It applies for a single year, in order to support the construction industry during a difficult time.
It is not that the government believes that the renovation deduction and a raised ceiling for it will save the construction industry – of course not. It is an incredibly tough time with high financing costs, high production costs, and low demand. You cannot make the calculation work. Therefore, it is very important to bring down inflation and that interest rates can also come down over time. Then there will be a turnaround for the industry. Structural measures are also needed, which other ministers, for example Andreas Carlson who is responsible for housing construction, will return to.
When looking at the rot deduction in both of these parts, one should simply say that it is fundamentally a good measure. I maintain that both rut and rot are good. They contribute to fewer black incomes, which the Swedish National Audit Office also notes in its report. As I have said, we mean that a temporarily raised ceiling for the rot deduction can also facilitate the construction sector.
I do not intend to add anything more to this post. I can only state that we will return with a submission to the Riksdag regarding the National Audit Office's report and how we view the criticism in those parts.
Sofie Eriksson (S)
Madam Speaker! I thank the Minister for Finance for the contribution.
I would like to move on and focus on what I think is perhaps the most serious in the Riksrevisionen's report, which is the question marks that arise. According to Riksrevisionen, it is exactly as the Finance Minister says, that is to say that the demand for black wages has decreased. That is good. But at the same time, the amount of black wages is increasing. Work-related crime is worsening.
People are dying at Swedish workplaces. People are being injured and disappearing. People come here from other countries and hope to earn good money, but arrive at workplaces where they are expected to shut up and listen to the boss. Many testify about subcontractors to our large construction companies who oppose union organizing and threaten the workers. The border police find women in prostitution when they conduct raids on construction sites in Dalarna. The situation is extreme.
According to the Swedish National Audit Office, people want black labor at home to a lesser extent, and that is good. Still, black labor is increasing. How does that add up? I intended to read a few lines from the newspaper Byggnadsarbetaren, which has spoken with the Swedish National Audit Office about exactly that paradox. There it says: "The explanation is, according to the Swedish National Audit Office, that the craft services are marketed as white towards the customer but are still paid with black wages 'beyond the buyers' insight and control'."
Madam Speaker! Can the deduction for renovation costs, therefore, be used to launder money from criminal activities and mislead consumers? Could it be that the deduction in its current form hinders the work of combating crime in, among other things, the construction industry? The reason I ask is that things need to be investigated here. My impression, however, is that the government does not plan to do so. What is being done right now is to throw more money into the system where these serious question marks exist.
Madam Speaker! I understand that it can be a bit embarrassing. The parties currently in government abolished the investment support. There can be a bit of prestige involved in this. The National Audit Office's report also arrived after the government had presented its proposals in the budget.
I believe, however, that it is important to be able to rethink. We have a construction crisis and need more active action from the government to counter it.
We have now received it in black and white. The most important argument from those who have argued that the rotavdrag in its current form is among the best that has happened has been that it counteracts the black wages, but here we have seen very clearly that it is not cost-effective in this specific measure. It may even be the case that the rotavdrag itself misleads customers into believing that they are purchasing white services when they are not.
I think these are extremely serious question marks that should be clarified. How does the Minister for Finance view precisely this part of the problem?
Hanna Westerén (S)
Madam Speaker! I listened and listened, but I heard incredibly little from the Minister for Finance about crime in the working life. It may have been entirely deliberate.
On the other hand, I heard a rather lighthearted attitude towards the Swedish National Audit Office's explicit recommendation to the government that, if one is to proceed with this, take action against crime in the labor market so that no more funds should leak out of the systems and fall into the hands of unscrupulous actors.
We know that occupational crime is a threat to life and limb for Swedish construction workers, but it is also an obvious threat to serious companies that want to conduct business in fair competition. It simply doesn't work; it is a major problem. At least this should really concern the Finance Minister.
I think it is deeply irresponsible to increase the repair deduction. It is a deduction that is not judged to be sufficiently effective when the housing crisis is so deep and when the risks for even more work-life crime, death, injuries, and exploitation are so great.
I suspect that I will not receive any answer, but I still want to ask the question: Does the SD government have nothing more to contribute? Then it is very awkward. I also believe that it is expensive, bad and dangerous.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! This debate goes around a few times in slightly different ways.
I was asked if I am prepared to take the initiative for a review of the design of the tax deduction for renovation (rotavdraget). I answered that we, from the government's side, will follow up with a letter where we will explain our position on various parts.
Some want to insinuate that the Moderate-led government does not care about white-collar crime. I will only say this: If there is something that I devote a lot of time to, it is to ensure that the criminal economy is strangled and does not grow. Therefore, I am pleased with the decision on a referral to the Council on Legislation. Authorities can share more information, specifically when it concerns white-collar crime. I am glad that we are now seriously turning over all the stones - not just a few - within all sectors in authorities and departments to truly ensure that we strangle the criminal economy. Regardless of whether it concerns companies in the root industry or completely other services and industries, it shall be strangled everywhere.
However, I do not intend to throw the baby out with the bathwater. Rot and rut are two good reforms. They must be nurtured and improved. They must not be used for incorrect purposes.
We will therefore return with the government's collective view on the National Audit Office's report.
Sofie Eriksson (S)
Madam Speaker! The question here is whether the Minister for Finance, against the background of the National Audit Office's report, intends to take some form of initiative toward a review of the system. We have received good answers - the government will, of course, take the formal route and respond to the report.
However, I wonder what one takes away from this. We hear from the Swedish National Audit Office about the discrepancy here – the demand for black wages has decreased, but the black wages are still increasing. According to the Swedish National Audit Office, it could be that craft services are marketed as white towards the customer but are still paid with black wages, beyond the buyers' insight and control. I cannot interpret that as anything other than that the rot deduction is used to wash black wages white, at least cosmetically. Is that not serious?
Many of us in here think it is important to get rid of the criminal economy. Many of us in here are fighting so that going to work is not associated with danger to health and life. Many of us are fighting so that people, regardless of where they come from, are not exploited on the Swedish labor market. Now we have received in black and white that this measure is not cost-effective. It may even be the case that the rotavdrag is used to mislead customers into believing they are buying a decent service when in reality it is people who are being exploited who are at home and working.
TREDJE VICE TALMANNEN
The Minister for Finance waives his concluding remarks in this interpellation debate.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.