Response to interpellation 2024/25:96 on the economic theory behind the government's budget bill for 2025

Finansministern Elisabeth Svantesson (M)

Answers to interpellations

Mr. Speaker! Patrik Björck has asked me what economic effects I expect from the fact that, in the situation Sweden finds itself in, we borrow to fund tax cuts that primarily benefit high-income earners and capital owners. He has also asked which economic theories I and the government lean on for our economic policy.

With the budget bill for 2025, the Government shifts focus from combating inflation to investing in building a richer and safer Sweden. Growth in Sweden has stagnated, and the Swedish economy is in a recession with increased unemployment as a result. The Government wants to support the economy's recovery and therefore prioritizes reforms within three areas in particular.

Firstly, it is about strengthening the purchasing power of households. Even though inflation is now being fought, many households still have it tough. Wage earners, for example, have seen ten years of wage increases erased as a result of the previously high inflation. Therefore, in the budget bill, we are lowering the tax on work, savings, and pension, while simultaneously extending the supplementary grant in the housing allowance.

These are important additions for all of Sweden's wage earners. For example, a family with a police officer and a nurse will receive around 9,000 kronor in reduced tax in 2025 compared to 2024, as a result of the reinforced job tax credit and indexations.

Secondly, it is about re-establishing the work line so that more people enter employment and fewer get stuck in exclusion. It should always pay to move from benefits to work. Therefore, the government is working on a benefit reform and strengthening the job tax credit. But we are also investing in education, among other things by strengthening support for those who are far from the labor market and by increasing the number of places in vocational adult education.

Thirdly, it is about reforms that increase Sweden's growth. Sweden, like many other countries, has struggled with low growth during recent years. The government takes this very seriously. It is only higher growth that can sustain future welfare. With higher growth, tax revenues increase, which can be used to finance, for example, school, healthcare, and elderly care.

The government is therefore making historically large investments in infrastructure, the largest investment in research ever, and tax changes that make it easier to run businesses. The government also proposes that the highest marginal taxes be lowered to increase the incentives to educate oneself for a highly qualified profession and to put in extra effort at work. The lowered marginal taxes are expected to have such a large positive effect on the economy that the reform will, in the long run, be self-financed.

Overall, these are important reforms to increase household purchasing power, strengthen the incentives to work, and increase Sweden's growth moving forward. These are important steps to build a wealthier and safer Sweden.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Patrik Björck (S)

Mr. Speaker! Thank you for the answer, Minister for Finance! It is as the Minister for Finance mentions in his answer: Growth is at a record low, unemployment is at a record high, electricity prices are at a record high, the healthcare crisis is spiraling, and gang violence is escalating.

In this situation, the government is presenting a budget that primarily benefits wealthy men. One is more concerned about those who are already wealthy than about the societal problems.

Inequality is growing. The rich are getting richer, at least in the short term, and the poor are getting poorer, unfortunately not just in the short term. But the rich's joy over Elisabeth Svantesson's policy will, Mr. Speaker, eventually turn into disappointment when they are hit by the consequences of this policy.

When bankruptcies increase and growth falls, even Elisabeth Svantesson's core voters will be affected. Then even Elisabeth Svantesson's core voters will be reminded that right-wing politics always leads to exactly bankruptcies, falling growth, increasing unemployment, and worse welfare. This is, in fact, a policy that has been tested with the same results several times in Sweden's modern history: in the 90s with Carl Bildt, 15 years later with Fredrik Reinfeldt, and now with Ulf Kristersson.

Not a single figure is correct, and not a single arrow points in the right direction. Unemployment is rising, the healthcare crisis is worsening, electricity prices are going up, inequality is increasing, bankruptcies and gang violence are increasing. The only arrow pointing downwards, Mr. Speaker, is the one showing growth.

The Minister for Finance should be concerned. The Minister for Finance should ask herself what has gone so wrong now that she is in the second half of the mandate period - when her policy is obviously not working.

The Minister for Finance should, Mr. Speaker, learn from history. The policy she is pursuing does not work. The economic effects the Minister for Finance expects will not occur – they are not visible. On the contrary, everything is going the wrong way. Why is that so?

In the interpellation, I posed a question to the Minister for Finance regarding which economic theory the government leans on. I did not receive a very good answer to this, but I can answer it myself.

The answer is that the economic theory on which the government builds its policy is the so-called horse shit theory. It goes out on that if you give the horse more oats to eat, the sparrows get more to eat when it comes out at the other end. That this is an inefficient way to feed sparrows is probably understood by most. If you also give the horse so much oats that it cannot manage to eat it all, it really does not get any better for the sparrows.

Elisabeth Svantesson will receive approximately 30,000 kronor a year in reduced tax when the government's budget takes effect. She was asked by Svenska Dagbladet what she intends to do with the money now that she needs to pay less tax. The answer from Elisabeth Svantesson is, Mr. Speaker: "Well, I have no thoughts at all about what I'm going to do with the money."

If one had instead, Mr. Speaker, asked a family with children with normal incomes, the answer would have come quickly: new winter clothes, a more fun Christmas - there would have been many holes to plug. It is why, Mr. Speaker, a raised child allowance is not only more just than large tax cuts for the rich but also better for the economy, for the companies, and for growth.

(Applause)

The speech at riksdagen.se, in Swedish (opens in a new tab)

Niklas Karlsson (S)

Mr. Speaker! It is said that self-interest never lies. In the government's policy, it becomes clearly evident which interests one actually represents.

We see the government's economic policy, which has been conducted for two years now. It is a policy built on a neoliberal economic theory, where principles come first and we see clear examples of what the bourgeois distribution policy looks like.

This theory, the so-called horse shit theorem or horse shit theory, which Patrik Björck spoke about, which is about feeding a horse as much as possible so that the sparrows can then peck at the droppings, has in reality proven not to work.

When we speak of values such as increased growth or higher employment, we see none of this in the economic policy that the bourgeois government and the Sverigedemokraterna now choose to implement. Our growth is among the lowest in Europe. We have an unemployment rate that is now the highest in ten years.

It is often said: If it rains on the priest, it splashes on the bell-ringer: But that is not how it is in reality. It shows in the current economic policy, and it shows through history when other countries have chosen to lean on this neoliberal economic theory.

The consequences of the pursued economic policy are that ordinary wage earners and the welfare system pay the price. We have a healthcare crisis. We have squeezed private finances and private households that people don't care about at all.

The redistribution, the bourgeois distribution policy, is furthermore double. At the same time as one chooses to lower the tax for those with the highest incomes and the largest assets, one is not prepared to invest in welfare or to give pressured households better economic conditions. It also means that the operations in municipalities and regions that perform the core of the welfare must now begin to rethink their situation and raise municipal and regional taxes.

As an example, I can take Bergs municipality. There, 0.7 percent of the population receive a share of the large tax cut that the conservative government has implemented, but everyone must share in paying the price when municipal and regional taxes must now be raised to manage the most essential parts of the welfare system. That is how reality looks.

What is now being implemented and the systemic shift we face is not based on any reality-based theory or perception of strengthening growth, lowering unemployment, or raising employment, but it is based on the bourgeois principle that it is actually good to give a little more to those who already have and, at best, throw small crumbs to those who have little.

(Applause)

The speech at riksdagen.se, in Swedish (opens in a new tab)

Finansministern Elisabeth Svantesson (M)

Mr. Speaker! I must admit that I am a little surprised by Patrik Björck's tone in this debate. Patrik Björck and I entered the Riksdag at the same time, in the autumn of 2006. Since then, during my time in the Riksdag, both in opposition and in the majority, and now as Finance Minister, I have been involved in lowering taxes for ordinary people, low- and middle-income earners. We have done it many times. We have seen that the tax burden has been high, and the tax on labor has been particularly high. It should simply pay more to work.

We have lowered taxes many times. As I recall, Patrik Björck has pressed the red button in the vast majority of cases when we have lowered taxes for all wage earners.

There are some occasions during these 18 years when Patrik Björck has voted yes to tax cuts. I know one with certainty, and perhaps he has also at some point voted yes to a tax cut for ordinary wage earners. But what Patrik Björck voted yes to was the removal of the värnskatt. It was a tax that meant an extra 5 percent on the state income tax. I thought it was a good proposal.

Patrik Björck has a very high tone here and now. In 2020, when this occurred, we had a pandemic and a recession. But despite this, one chose to make this tax cut.

I just want to have this said. I think it was a good decision. But the interesting thing is that many times when I, as a Moderate, have lowered the tax so that those who struggle, set the clock and go to work should keep more in their pocket, the Social Democrats have voted no.

Mr. Speaker! We are in a tough situation. We have a recession. We have fought inflation. On the subject of what is going right or wrong, I can say: Inflation is fought for this time. We will always keep an eye on it.

Now we can – and we do – present an expansive budget that will take effect in just a few days. It ensures that those who work get more in their pockets and that we continue to support those who have it the toughest.

Getting the economy moving here and now is incredibly important. But we are also thinking long-term and making several important decisions so that the economy will grow. Because if the economy does not grow in the future, there is nothing that can bear the financing of the welfare or the large resources for the defense. In that case, we are working on a broad front. It is about infrastructure, research, and energy systems. It is about taxes, both to get the economy moving here and now and to lower the marginal tax, which has become as high as 56 percent.

I believe that the Social Democrats at one time thought it was reasonable that one was allowed to keep at least half of the money one had earned. Today it seems as if the Social Democrats do not think it is a problem to have marginal taxes over 50 percent. But I understand that one can have different opinions on this.

This is also an important step to increase productivity. OECD has touched upon this. The Productivity Commission has touched upon this. But for me, it is also a matter of morality. It is a matter of morality that we should not have to have a tax level higher than 50 percent. One should not have to pay more than 50 percent on the last earned hundred kronor or thousand kronor.

In summary: The budget we have laid down will affect demand. Large parts of Europe are now in a recession. We will do what we can to get the wheels turning. We will also do more to continue supporting households so that purchasing power will increase, but at the same time, we can think long-term. It is about doing what is important today so that growth will increase tomorrow, in ten years, and in 40 years.

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Patrik Björck (S)

Mr. Speaker! We Social Democrats proposed a fair tax cut for ordinary people in our budget motion. If one wants to look at the government's policy, one can read in the government's budget bill for 2025 on page 42: "The measures have different distribution profiles, but overall, household finances are most affected in income groups with high incomes. Proposals and notifications that affect taxes and transfers are judged to increase the economic standard in all income groups, but primarily in income groups with high incomes. This applies primarily to the proposals regarding the abolished tapering in the job tax credit, the job tax credit for the elderly and in the increased basic deduction, as well as the reinforced job tax credit."

One can continue reading on page 43, under the heading "Effects on economic equality": "Proposals and notifications that affect taxes and transfers are judged to provide economic resources to men to a greater extent than to women. It is primarily the proposals regarding the abolished tapering of the job tax credit, the job tax credit for the elderly and in the increased basic deduction, as well as the reinforced job tax credit that contribute to this result."

The government itself writes exactly what I am saying: It is a budget for rich men.

But this criticism does not only come from me as a Social Democrat. It also comes from the Fiscal Policy Council. Last year's budget, that is, the budget for 2024, was criticized by the Fiscal Policy Council. Under the heading "The Swedish labor market" on page 13 in the Fiscal Policy Council's report, it is written: "Lack of matching between employers' needs and the unemployed's skills seems to be a more important explanation for unemployment among groups with weak competitiveness. This applies in particular with regard to education, as job seekers often lack the specific skills that employers demand."

In the same report from the Fiscal Policy Council, it is written under the heading "Measures for more people in work": "Our assessment is therefore that the economic incentives to work are strong for the vast majority. We are therefore hesitant as to whether job tax credits that benefit everyone will have any significant employment effects. Even though the government's estimated employment effects for the job tax credit in BP24 are small, they are likely an overestimation."

Regarding this year's budget, the chairman of the Fiscal Policy Council, Lars Heikensten, gave his first analysis of the 2025 budget at a seminar organized by SNS after the budget bill had been presented. He explained his view as follows:

The government calls it a growth budget. The Fiscal Policy Council, however, doubts the effect of the tax cuts proposed in the budget bill for next year. "It is not a particularly effective measure if one wants to create more jobs," says chairman Lars Heikensten.

So, the Fiscal Policy Council's rejection of the budget was justified. The government's tax cuts are not effective.

The criticism has some historical basis. We have, just as I said in my first post, tried this policy during the 1990s under Carl Bildt. It did not work. It led to chaos in the economy and high unemployment. We tried it during Fredrik Reinfeldt's time in power 15 years later. It also led to chaos in the economy and high unemployment.

Now we are trying it during Ulf Kristersson's time, and so far, Mr. Speaker, it leads to just the same result. It is perhaps not so strange. If a policy at two previous occasions has led to this result, perhaps one should not be too surprised if, when one tries it a third time, it leads to high unemployment, poorer growth, and poorer welfare. It is almost a self-evident matter that that policy leads there.

Mr. Speaker! The Minister for Finance beats his chest because inflation is not as high as it was earlier. That is all well and good, but food prices have not fallen. They are just rising a little less. If one does not then see to helping ordinary people, it simply means less food on the table.

(Applause)

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Niklas Karlsson (S)

Mr. Speaker! When the arguments are a bit weaker, one can naturally focus on the opponents' tone, but I still want to clarify that it is about conflicts of interest. Fundamentally, politics is based on that, because different interests are represented.

We now see the economic policy that the bourgeois government, together with the Sweden Democrats, is implementing. They represent the interests of the people who have the high incomes and the large assets. There are other political alternatives to this. We want to focus on ordinary wage earners and on holding society together.

We can observe, without in any way being sarcastic, that in the economic policy advocated by the bourgeois government, principles take precedence over knowledge and experience.

Mr. Speaker! When the Minister for Finance then tries to argue for his case by saying that it is a policy that focuses on the people who struggle and "sets the clock," one wonders what that actually means. Who are the ones who get to share in the economic policy that the government implements? It is primarily those who have the large incomes.

They are removing the tapering of the job tax credit. It is those with incomes over 65,000 who can now put a sirloin steak and a glass of fine wine on the table for Friday night cozy time - before they perhaps ate tacos.

It is this policy that the bourgeois government advocates.

We are not joking. We are stating. We think this is wrong. We think it is out of date. We think it is unfair.

There is an alternative to the policy that the government advocates. It focuses on welfare, on broad groups of wage earners, and on helping and providing support to all people when it comes to getting through the crisis that Sweden is currently experiencing.

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Finansministern Elisabeth Svantesson (M)

Mr. Speaker! A nurse has received 4,000 kronor more per month from the tax cuts that we have voted through in the Riksdag since Patrik Björck and I entered the Riksdag as members - 4,000 kronor.

I have certainly seen Patrik Björck and other Social Democrats vote no to everything we have proposed regarding tax cuts for ordinary wage earners.

For me, it is completely obvious that diligence, hard work, and entrepreneurship have served Sweden well and made Sweden wealthy. The journey that Sweden made over a hundred years - from being one of the poorest countries to becoming the wealthiest - was, among other things, about cooperation. It was about toil, about diligence, about working together, and about people fighting.

Then came a policy where taxes rose and rose and where the Social Democrats completely lost their way, I would like to say. Of course, we should have taxes that finance everything that we need. But the answer to every single problem, Mr. Speaker, cannot be increased taxes. It will not be that here in Stockholm, where they are now raising the tax for the second year in a row. The region has raised it once. Sometimes one must also prioritize and do what is the most important.

Mr. Speaker! What do I want to say with this? The Social Democrats say here today that they stand on the side of ordinary people. I think one should look at decisions, at how they are made and at what we have done. Then one can judge who stands on the side of ordinary wage earners.

I completely share the picture that both Niklas Karlsson and Patrik Björck provide – that many are having a tough time now because prices are still high. This government has decided to support households. That is why we have lowered the tax this year and next year for everyone who works and for those who have a pension and who have worked. That is why we have lowered the fuel tax several times. That is why we have changed the reduction obligation so that fuel, diesel, became 4 kronor cheaper in January.

As far as I know, the Social Democrats have said no to all of this. That is my point, Mr. Speaker. One must judge based on the policy. I can promise that it is not any theory that governs my stance. There is laughter here in the benches, but then I feel quite bad. I think Patrik Björck feels a bit better.

What guides me is about making Sweden better. I believe that is also what guides you. We have different paths to this. But I want to encourage the one who strives and works. I also see that we must support households now. We do that in many ways. I have mentioned some.

Furthermore, I believe that when one has responsibility, one must be able to think a bit beyond this year and this mandate period. One must think forward. What shall we do so that the economy grows? What shall we do to have the resources we need in the future? Then increased taxes that hinder productivity and growth cannot be the answer. It must be about priorities but also about ensuring that the economy grows. We do this in many different ways.

Finally, Mr. Speaker, I shall just provide a piece of factual information to those listening. We have progressive taxation in Sweden. Those who earn more also pay a higher percentage. There are two differences here. Let us say that one earns 25,000 and that another earns 125,000. The difference in tax is then eleven times even though the difference in salary is five times.

We think this is reasonable in a productivity sense. If one does not believe in that, one might think it is reasonable from a moral perspective that the person who works should be allowed to keep at least half of everything they have earned.

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Patrik Björck (S)

Mr. Speaker! Elisabeth Svantesson described a hundred years of development in Sweden. Almost every other proposal the right voted no to - holidays, pensions, etcetera. It was not the right that led Sweden out of poverty and underdevelopment. It was the Social Democrats who did it - just so we are in agreement.

Then it concerns this with how it is going. I received a report from Makalösa Föräldrar in my hand today, Mr. Speaker. There it says: We are going down on our knees completely and turning over every krona.

To strengthen my argument in previous posts, I referred to the Fiscal Policy Council, which does not make a partisan assessment but an assessment of the budget based on strictly economic terms. They reject the government's policy.

Today I was also informed that SCB reports that employment is decreasing and that the economic situation is worsening. It is the statistics agency. So it is not some party-political fabrication, but it is fact.

I can speak about interests, as Niklas Karlsson also did. The Right was formed to safeguard the interests of the rich and the powerful. The Social Democrats were formed to safeguard the interests of ordinary people - ordinary people, who do not automatically have access to power and money.

What is unfortunate for the right is that while their policy favors their core voters in the short term, in the long term it leads to stagnation and to the common cake shrinking.

Mr. Speaker! What is interesting for us Social Democrats is that our policy benefits our core voters in both the short and long term. Furthermore, it leads to development and to the common cake growing. This benefits all Swedes. Ordinary people get it better. The companies get customers. The economy grows. That is how it looks. This is a lesson we have drawn from history. Our policy is good for both the heart and the brain, and that is why I am a Social Democrat.

(Applause)

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Finansministern Elisabeth Svantesson (M)

Mr. Speaker! I thank you for a good debate.

It is important to discuss differences in Swedish politics. We can certainly go back very many years - before I was in the Moderaterna - to the time of the Högerpartiet and the Socialdemokraterna. Our parties have changed. My view is still that the Socialdemokraterna previously always stood on the side of the wage earners and the workers. Now, one more often drives the question of higher benefits than the question of lower taxes.

Mr. Speaker! I believe we should have a strong protection system, a safety net that works for those who need it. I also see that there is an opportunity to do more so that Sweden's growth can increase while we support people who need it.

One not entirely insignificant factor right now is, unfortunately, that there is quite a lot of cheating with our common systems. The criminal economy also takes a part of the cake.

In summary: Sweden is, like many other countries, in a recession. We are on our way out of it.

We see that consumption will begin to increase, and next year, interest rate cuts and tax cuts in several areas will make it easier for households. But with that said, Mr. Speaker, many are having a very tough time. Many are having a tough time now ahead of this Christmas. That is why it is good that our compensation systems, which we agree on, compensate for the high inflation. That is why it is good that we agree to have an increased housing allowance. It is also why we have ensured to lower various taxes to strengthen those who have it the toughest.

The most important thing now is to get the economy moving, so that even more people can get into work and can have their own salary to live on.

With this, I would like to wish Patrik Björck a Merry Christmas - this may be our last debate for this year - and thank him for the debate.

The interpellations debate was hereby concluded.

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