Response to interpellation 2023/24:527 on the phasing out of interest deductions
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
M considers over-indebtedness to be a major societal problem and that the state should not subsidize bad loans without collateral 1 2 3. M proposes a phase-out of the interest deduction for these loans from 2026 and argues that there is a difference between loans for housing and consumption 2. M also wants to make ISK savings tax-free up to 300,000 SEK to create a buffer 3 and intends to proceed with changing the current interest deduction 3. S considers that the proposal risks sending vulnerable people into deeper debt and lacks a perspective of fairness 4 5. S instead wants a debt register, tougher measures against unserious companies, an interest cap, and a cost cap 6.
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! Anna-Belle Strömberg has asked the Minister for Finance what reasons underlie the proposal for a phased-out interest deduction for certain loans. The work within the government is distributed in such a way that it is I who shall answer the interpellation.
Over-indebtedness is a major societal problem. Household debts at the Enforcement Authority have almost doubled over the last decade. This means major problems for individuals and for society. One explanation for the increase is that loans without collateral are increasing - for example, unsecured loans have almost doubled in size over the last ten years. Loans without collateral, for example SMS loans, are extra problematic as they often involve higher interest rates for households and increased risks of payment problems. The Government is therefore actively working to counteract over-indebtedness in society.
As part of that work, the government referred a proposal in January regarding phased-out interest deductions on loans without collateral. Whether the proposal ultimately becomes a reality will be decided during the budget negotiations ahead of the budget bill for 2025.
Today's interest deduction provisions mean in practice that the state contributes to households indebting themselves with loans without secure collateral, for example, SMS loans. It is not reasonable. The proposal therefore means that from and including 2026, it shall not be possible to receive interest deductions on loans without secure collateral such as a home or a vehicle. The definition of what constitutes secure collateral is based on whether there is a regulatory framework ensuring that the value of the collateral is greater than the loan amount at the time of the loan. Such regulatory frameworks exist for homes, vehicles, and boats, but not for other types of collateral.
Anna-Belle Strömberg (S)
Madam Speaker! I want to begin by thanking Minister for Finance Elisabeth Svantesson for the answer. Just as the Minister for Finance describes, over-indebtedness is increasing, and it is a major problem, as is overconsumption.
Today, over-indebtedness is increasing in Sweden, and Swedes are becoming poorer. The debt amounts are getting higher, and now the development is accelerating. The total debt amount to the Enforcement Authority has increased by 3.8 billion, which corresponds to an increase of 35 percent compared to the first half of 2022. It is the highest figure ever.
To clarify the seriousness: The debts to the Enforcement Authority are increasing by 50 million per day, a nearly inconceivable sum. Unsecured loans or so-called SMS loans are a major contributing cause to this development. The increase in unpaid debts occurs primarily among young people, single parents, and elderly people with low pensions. Many testimonies from single parents show that there are now people in Sweden who even have to borrow money to buy food. It is not they who should pay for the tough times and be exploited by unscrupulous companies.
Today, there is a multitude of companies dealing with so-called quick loans. Some certainly fulfill their function, but far too many are completely unprofessional companies. The creativity regarding fees for this type of loan is astonishing. It concerns setup, disbursement, invoice, and brokerage fees. The average interest rate for this type of loan is 800 percent. The unprofessional companies fail in their credit assessment, and in many cases, loans are granted even though it is completely obvious that the borrower will have great difficulty in repaying.
But the government's proposal to scale back the interest deduction for unsecured loans, blankolån, risks sending people into even deeper debt. I am not talking about those who take out these loans for overconsumption, but about the most vulnerable target groups. They will have a very difficult time repaying.
We think it is the wrong way to go when only this proposal is being put forward. There is also a perspective of fairness that the government has completely ignored. Why should the person who borrows to buy a new car or boat be allowed to make a deduction for the interest, while the person who is forced to borrow to cover the rent, food, home care fee, healthcare costs or medicines should not be allowed to do the same?
It is my conviction that our society should strive for economic justice and equality. To only allow interest deductions for loans linked to certain assets while other loans, which are necessary for many individuals' survival, are ignored is not compatible with these principles.
My question to the Minister for Finance, Madam Speaker, is therefore: What considerations has the government made regarding the fairness of today's system for interest deductions, specifically with regard to those who need unsecured loans to cover basic living costs?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I would like to thank you once again for the interpellation. It is an important issue that the interpellator raises, especially considering that many people are currently struggling and very many are falling into over-indebtedness.
A question that must be asked is: Should the state, the taxpayers, subsidize and thus also encourage individuals to incur debt with bad loans, such as SMS loans or other loans that one gets stuck in for a long time? I do not think so.
I can understand those who have a different starting point on this issue, but for me, who has seen examples of people getting stuck in over-indebtedness in different ways - it could be gambling debts or purchases on credit because one simply does not have the means to shop in any other way at that moment - it is clear that we all have a problem. This naturally concerns first and foremost the people who end up there, but this affects the entire society.
That is why we in the government are working on a broad front with this issue. The Swedish Enforcement Authority, which I am responsible for, is currently working very actively with the issue. We also have an investigation that is currently being prepared in the Government Offices, which concerns how the consumers' role and position can be strengthened when it comes to lending.
I find it a bit difficult to understand that the Social Democrats think it is a bad idea to stop encouraging this type of borrowing. It leads, in fact, to over-indebtedness for very many.
One must, of course, remember, Madam Speaker, that this is not the only issue we will put forward in the budget for 2025. Already this year, we are strengthening households in various ways, for example by lowering the tax on work and pension, through lowered fuel tax, and through lowered reduction obligation, which has made it significantly cheaper to refuel. We are taking steps one by one to facilitate things for households. The phase-out aims to give households a chance to adapt and transition.
For me, however, it is difficult to understand why the Social Democrats persist in the view that subsidizing this type of loan through interest deductions would be a good idea, when we know that they to a greater extent drive people towards indebtedness.
Anna-Belle Strömberg (S)
Madam Speaker! Thank you, Minister for Finance, for the answer! We Social Democrats would wish that no household had to take out payday loans at all. But we believe that other proposals are needed to address this.
The current system for interest deductions favors those who already have economic assets, such as cars, boats, and houses. This leads to increased economic inequality because those who cannot afford to own such assets are excluded from the benefits that interest deductions entail. Many people may have to take out unsecured loans to meet necessary expenses, and they should not be disadvantaged compared to those who have assets to secure loans.
A just society should strive to provide equal opportunities and protection for all citizens, regardless of their economic situation. By only allowing interest deductions for certain types of loans, a situation is created where those who are already most vulnerable to economic insecurity fall even further behind.
We need a strong social safety net and an effective welfare system to support those who find themselves in economically vulnerable situations so that they do not end up with the Enforcement Authority. I am talking about families with low incomes, single parents, especially those who have sole custody of children and may face extra economic challenges, people who work but still live in poverty due to low wages, insecure employment or insufficient working hours, as well as young people and adults who have just started their careers or education. Minority groups may also face extra obstacles in the labor market.
Allowing interest deductions for loans that cover basic living costs can be part of building up the safety net around these groups. By making it harder for families to manage financially, we risk cementing a cycle of poverty that can be passed down from generation to generation.
Inequality can also affect child poverty. Many children live today in families that struggle financially and need to take out payday loans to cover basic needs. By denying interest deductions for these loans, we risk deepening the children's vulnerability. When parents struggle to manage to pay rent and food, it can affect the children's health, education, and future prospects. If we do not address the underlying causes of economic inequality and child poverty, we risk creating an uneven playing field for the children.
Madam Speaker! My question to the Minister for Finance is: Can the government ensure that the economic benefits are more equitable and accessible to all citizens, regardless of economic situation or assets?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! When I listen to the interpellor, I almost get the feeling that it is these loans that are to save these families. My picture is that it is these loans that are destroying things for these families, those who have it the hardest. There have been times when I have bought both milk and butter on the then-current petrol card, in the 90s. I did it sometimes, and it was not a very good idea. But we did not get stuck in over-indebtedness.
Of course, one should be able to borrow. This debate is not about whether Swedes should be able to borrow. This is about the state, the taxpayers, not subsidizing and encouraging this type of bad debt.
There is a difference between loans and loans; one must still say that. There is a difference between borrowing for a home where one has collateral and a young girl borrowing for clothes. It is easy to click through and order lots of clothes. Then one gets into trouble and takes out SMS loans on SMS loans, and this is encouraged by an interest deduction.
Of course, one should be able to borrow, but the state and the tax collective should not subsidize. That is our basic position. Here, it almost sounds like the Social Democrats are thinking the opposite. Either everyone should have the same interest deduction even if it is bad, or we should remove the interest deduction for everyone, because then it becomes more fair. I don't really know where the Social Democrats will land on this issue.
One must also remember that this is just one of many things ahead of the budget. Already this year, we are strengthening households that are in the worst position in many different ways. I have mentioned a few things, but it is also that the housing allowance is both increased and extended. It is very important.
I know what it is like to live with small margins. But the key for those people is that, on one hand, we work with over-indebtedness, and on the other, we ensure that more people have a job to go to and can support themselves. Those are the problems that should be addressed, not maintaining an interest deduction which, in terms of state finances—when it is fully removed, if it even becomes so—amounts to 8 billion per year. Those funds can be used in other ways for households, for example.
Madam Speaker! For me, this issue is quite simple. If one does not have collateral for loans – there are different regulations for that – one should also not have this type of interest deduction. There is a difference between loans and loans. Borrowing for a home is completely necessary, and in that case, it is not wrong that we have this interest deduction.
Anna-Belle Strömberg (S)
Madam Speaker! Unfortunately, it is the case that certain target groups must take out these blank loans to cover rent and food. That is unfortunately the case, and I do not believe that any of them would actually want to do so.
We Social Democrats consider that a reduction of the interest deduction for unsecured loans, for example blankolån, is not sufficient. More needs to be done. Therefore, we have other concrete proposals for over-indebtedness, for example a debt and credit registry. Such a tool would be a powerful tool to ensure that those who are granted loans also have the ability to pay them back.
We also say that there should be tougher measures against unserious lending companies. Those who fail in credit assessment should bear a higher cost during enforcement at the Enforcement Authority (Kronofogden). We also say that a cooling-off period of, for example, 24 hours should be introduced for the payout of quick loans. There should also be room to change one's mind during the cooling-off period.
The over-indebtedness investigation states that it is clear that several different proposals and measures must be undertaken simultaneously to counter the undesirable development we are seeing. We Social Democrats believe that the proposals are well worth considering, for example, a lowered and expanded interest rate cap and an absolute cost cap. These are simple but effective measures that would have a positive effect. We do not think it is enough, as the government is doing now, to present only a single proposal which, moreover, places the burden on those who are already in a difficult situation.
In conclusion, I would like to thank the Minister for Finance for the debate and take the opportunity to ask one final question. Are there plans to reform the interest deduction system to include those who need an unsecured loan for necessary expenses such as rent and food?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I feel that we have a common view on the problem picture - there are many who are struggling, and people have ended up in situations where they have borrowed for various reasons. Of course, loans should remain, but I mean that it is not obvious, but rather unreasonable, that the tax collective and the state should subsidize it.
If we turn the matter around a bit: Something that should be encouraged even more is saving. More people need to have a salary to live on, and more people need to be able to set aside some money in a savings account. Therefore, we four parties have referred a proposal to make ISK savings tax-free up to 300,000 kronor. It is to reward something that is very good, that is to say, having a saving, a buffer, so that one manages further ahead, for example if one has to buy a home or for retirement or something else. It is a very clear line from our four parties.
Another clear line that this debate is about is that loans were needed, but that bad loans put people into over-indebtedness in difficult situations. Children grow up with parents who cannot buy milk, not just because it was a problem a year ago, but because one is now paying so much interest on interest that the household budget suffers, and ultimately also the children.
I think this type of interest deduction is somewhat poor. We intend to proceed with this, but of course, we will return to this proposal and many other proposals that should be included in the budget to strengthen households before the budget.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.