Response to interpellation 2024/25:153 on the effects of tax policy on growth
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 government has fought inflation and uses expansionary fiscal policy to strengthen the economy and household purchasing power 1. M believes that tax cuts on labor increase long-term growth 1 2 and that money to households through subsidies and tax cuts for everyone, including pensioners, keeps the wheels turning 3. M argues that the three budgets, in percentage terms, have benefited those with lower incomes 3. S argues that the government's tax cuts are distributionally unfair as they primarily benefit high-income earners 4. S claims that the economy is running on a shoestring, that bankruptcies are increasing, and that the government's policy harms the economy 4 5 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)
Mr. Speaker! Jytte Guteland has asked me how I, against the background of what she considers an uneven distribution of the tax cuts in the budget, intend to strengthen the economy. She has also asked me if I have taken the initiative for an analysis of how the tax cuts in the budget will help the economically squeezed families with children, and if so, asked me to account for the analysis.
When the government took office, inflation was at its highest in 30 years, and a restrained fiscal policy was necessary. The government therefore focused on supporting those who had it the toughest, among other things through supplementary grants to families with children receiving housing allowance. In fact, it appears in the distributional policy analysis that the group with the lowest disposable income also received the largest income increase, seen in percentage terms, during the mandate period.
That the high inflation is now being fought allows us to support the economy with an expansive fiscal policy. Next year's budget includes reforms of over 60 billion kronor. It supports the economy through the recession we are in. The income tax cuts that the interpellor mentions are part of this and contribute by strengthening households' purchasing power. The measures are also judged to increase Sweden's long-term growth, which is a prerequisite for future welfare.
The price increases of recent years mean that many households are struggling, and families with children are particularly hard hit. To support them, we are also implementing additional measures. We are extending the temporary supplementary grant to families with children receiving housing allowance, we are increasing the amount for individuals who receive sickness benefit in special cases, and we are increasing the housing supplement. At the same time, many grants have increased more than wages. Therefore, it is right and proper to also lower the tax for those who work. The government's policy thus ensures that growth is created while economically vulnerable households are supported. So we are taking important steps to build a wealthier and more secure Sweden.
Jytte Guteland (S)
Mr. Speaker! I thank the Minister for Finance for the answer.
The budget for 2025 is now passed. It was quite a long time ago that I submitted this interpellation. I am nevertheless glad that we can have this debate here and now. But the question is unfortunately just as relevant now. The economy is running on a low flame. Prices are just as high as before, if not higher. Bankruptcies are piling up. Ten years of real wage increases have been eaten up.
What I want to bring up is the following: A large part of the government's initiatives in the budget are tax cuts, but the distribution profile is very skewed. LO members get approximately 150-200 kronor more per month, while for high-income earners, it amounts to many thousands per month. This adds up to enormous injustices over the years. This is distributionally unfair. It also means that Sweden's economy will continue to run on a shoestring budget.
High earners spend less and save more, and the households that are currently on their knees would make great use of money that would make it possible to, for example, buy winter jackets, food, Christmas presents, Christmas food and manage to pay the bills. Not least the families with children suffer from this, as almost all prices have become higher for Sweden's families with children.
It is not only we Social Democrats who say this about the situation in Sweden, but also the chief economist of Svenskt Näringsliv, Sven-Olof Daunfeldt, says: Consumers must believe in the future. It is so gloomy now that the risk is that people save instead of consuming, which leads to lower growth. It is a quite clear message from Svenskt Näringsliv. The Finance Minister is not listening to this, not to us and not to Svenskt Näringsliv. One wonders who it is that the Finance Minister is listening to.
Unemployment is increasing. More Swedes end up with the Enforcement Authority. Aid organizations testify that more and more Swedes are seeking help for expenses that they previously managed themselves, for example for food purchases.
Earlier this year, Save the Children, the Red Cross, Majblomman, and the Tenants' Association also testified that inflation, rent increases, high interest rates, and rising food prices have led to child-rearing families having difficulty affording the most basic necessities. Eight out of ten parents in surveys from the organizations testify that they are worried about their finances. I think the Finance Minister should be worried about Sweden's economy.
It is almost Christmas. How many parents are not being tormented right now by not being able to make the finances work?
Against this background, I would like to ask Elisabeth Svantesson once again: How is the Minister for Finance going to strengthen the economy and get us out of this?
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! I thank Jytte Gutelund for the interpellation.
It is truly many who are affected by the fact that from 2021 until approximately this spring we have had a brutal increase in prices and costs, which has now nevertheless been dampened after the Riksbank, we through fiscal policy, and the parties have taken a great responsibility and pushed down inflation.
We are in a recession. The fact that Sweden is doing so is because we are a very interest-sensitive economy. Many households have high debts and, furthermore, very short interest rate binding periods. For information, approximately 80 percent in the USA have a 30-year binding period, while we in Sweden often have a three-month binding period. It naturally affects housing costs very dramatically when interest rates increase.
We have a recession, and the best recipe for getting out of it is precisely about stimulating demand. I am very glad that we can present an expansive budget, and expansiveness is not just about taxes. It is about different types of investments. That money enters society and starts working and demand increases is what will take us out of the recession.
The challenge, Mr. Speaker, is first and foremost the global risks, which I want to say something brief about and then move on to the households.
In Germany, the economy has now stalled for far too long. Furthermore, they are in a political crisis. In France, it is almost even worse regarding the political crisis, but also their large debts and high deficit.
Why do I say this? Well, in Sweden we are very dependent on how things go in the world around us, because we are so dependent on exports. But this government ensures that we can get the economy moving and that we can also stand strong if the economic cycle turns, or rather, if the recession were to deepen further due to global factors.
Okay, the households that I have before my eyes every day when I go to work, Mr. Speaker, are many of those that Jytte Guteland mentions, many who struggle to make the finances work. And as I said earlier, we have indexed many of our compensation systems, but the one who has a low salary has not received a reinforcement but on the contrary. Therefore, the tax cuts are important. It is also important to have a focus on fuel prices, so that one can get to work, and on the tax. But it is also important that those who have it the toughest get the reinforced housing allowance. It is important so that one can manage through this tough time.
Mr. Speaker! When my children were small, I had quite a few years that were very tough. There are those who have it much worse, but the 20th was the most important date for our family for many years. That was when the child allowance arrived, and one could buy food again.
I know what it is like to have it tough, and it is also these people I have in mind when I say that we must turn the crisis around here and now and strengthen the purchasing power of those households that have it toughest, but also ensure that we get the economy moving so that it turns and the economy can grow in the long run. Our children shall not only have a good education; when they are adults, Sweden shall be both wealthier and safer, as I usually say.
It was many words at once, but in summary, we are going to get out of this recession. We support households, and we strengthen their purchasing power. Unfortunately, the Social Democrats have in many cases voted no to our proposals on fuels and tax cuts on work.
Jytte Guteland (S)
Mr. Speaker! Thank you, Minister for Finance, for the answer!
It is important and pleasing that the Minister for Finance has these parents' and not least the children's situation in mind. Unfortunately, the Minister for Finance has ended up in bad company regarding which ideology the Minister for Finance professes to.
I and we Social Democrats are once again told that it is the expansive policy for those who have the most that is supposed to trickle down to those who have the least, the so-called horse manure theory. It is, as we have witnessed before, about feeding the horse a lot, and then the sparrows should be able to eat from the horse manure.
It does not work that way. We have encountered it before, and every time it ends in the same way. It becomes unfair. It leads to great poverty. When the right, with ideological blinkers on, implements a policy that primarily addresses those with the highest incomes, it always leads to the economy also being damaged.
That is what we see now. This week, we could read in Tidningen Näringslivet that bankruptcies are hitting records with this government's policy. "What we see now is something exceptional," says Henrik Jacobsen at Creditsafe. The bankruptcies are more than during both the pandemic and the financial crisis. We are talking about a risk of 10,000 bankruptcies during the full year. That is, therefore, twice as many as during the pandemic. Then one wonders how this fantastic expansive fiscal policy works in practice.
And now we are going to get more of the same for next year, which risks worsening the economic situation. I do not think anyone in Sweden is pleased by that or wants to see it. It probably doesn't matter what economic situation one is in right now: One sees that Sweden is doing poorly.
The Minister for Finance has become stuck in an ideology with blindfolds that will not lead us out of this. I would therefore like to ask the Minister for Finance if she has taken the initiative for an analysis of how the tax cuts in the budget, which primarily benefit high earners, are to help the economically squeezed families with children. Is there such an analysis?
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! There are definitely analyses in the budget bill. Let me just mention something.
A family where the woman is a police officer and the man is a nurse will have a tax reduction of 23,000 kronor next year compared to 2023, i.e., last year. Lower taxes on work are important. When we can lower the tax for those who work, I think we should do it if we can simultaneously prioritize and ensure that other parts also receive resources.
Defense thus has 27 billion kronor more this year than last year. We are building it strong. Police and the justice system receive large resources with this government. We ensure that we strengthen welfare - 40 percent of the reform space this year, Mr. Speaker, has gone to welfare, because their pension costs have increased and they have had great needs. Now we see that there were no mass layoffs. Of the 1.2 million who work in municipalities and regions, I believe that somewhere around 2,000 have been laid off.
At the beginning, I mentioned a family with a police officer and a nurse, and regarding the talk of horse shit, I do not think those who are currently struggling here in Stockholm with high mortgage loans and high costs think that it is cat shit or horse shit, or whatever it is called when one is a Social Democrat, to receive a reinforcement of 23,000 kronor.
What are the Social Democrats doing in Stockholm for ordinary wage earners? They raise the tax. They raise the income tax in the municipality, and they have raised it here in the region. It helps no one.
Mr. Speaker! It is quite simple to explain what we are doing. From the first day, we have fought inflation while simultaneously supporting households. Now that inflation is fought, we ensure that we strengthen purchasing power. We do it in a different way than what the Social Democrats think is good, but I truly believe that it is the right way to go to ensure that people keep more of their income and to make other tax cuts that facilitate everyday life.
Mr. Speaker! Every day I have the Swedish people before my eyes. I know that there are many different situations. Many have it very tough, others do not have it as tough. It looks different in different parts of the country, but it is about fighting inflation and strengthening the economy. The IMF forecasts that we will have a good development next year compared to very many European countries. Therefore, we see that what we are doing is right.
Jytte Guteland (S)
Mr. Speaker! Thank you, Minister for Finance, for the account of the underlying considerations behind the government's budget and the arguments that the government and the Minister for Finance have for the economic policy!
I and we Social Democrats note that we do not receive complete answers to our questions regarding the analyses that form the basis for the policy. We also do not receive satisfactory answers on how the future can rectify the development we see regarding the economic cycle.
The situation in Sweden right now is that people are struggling, and they are struggling broadly. Everywhere, it is tough with the economy. It is tough in Stockholm with the interest rates, but it is also tough out in rental housing areas with the rising rents. It is tough for families with children to afford Christmas presents or Christmas food and the extra when they are already struggling under bills whose fees just keep rising and rising.
Inflation is stopped, says the Minister for Finance. But no, it continues to plague the Swedish people in the form of continued high prices everywhere.
The Minister for Finance also says that the alerts have been dealt with. But out in our regions and municipalities, we continue to have high alerts that plague and worry many ahead of Christmas. The economy is not heading in the right direction.
If I were the Finance Minister in this country, I would be very concerned and want to turn the ship around and acquire a new economic policy - especially if it were the children and the families with children who were close to my heart.
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! Thank you, Jytte Guteland, for the debate!
I see and hear that very many are struggling, and I speak with many who are having a tough time. That is exactly why it has been important to get out of the tough situation with high inflation. But just as I said, even though it sounds to you as if I haven't said it many times already, the consequences of inflation still remain and are tough for many people.
That is why we now continue to strengthen purchasing power with tax cuts in various parts. That is also why, in other areas, we ensure that the economy gets moving. An expansive budget is therefore not fundamentally about tax cuts. That is not what expansiveness is. Expansiveness means that one has large deficits in a recession to get the economy moving.
Then one can choose to do different things. We believe and know that when money reaches households, both through continued support in the form of grants and by us lowering the tax for everyone – including pensioners, which we did this year – it will get the wheels moving and start turning.
Transparency is almost my middle name. I always try to be transparent - what you see is what you get. In my first post, I said that these three budgets have, in percentage terms, benefited those with lower incomes the most, which is completely true especially now when very many are struggling, and I am also very open about what we do. We write it clearly in the budget bill.
I don't understand anything. I have Sweden and the Swedes in mind and want both Sweden as a country and every Swede, every person who lives here, to have a better and stronger economy and be able to support themselves and afford both food and Christmas presents for their children.
I take this opportunity to say thank you and Merry Christmas!
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.