The direction of fiscal policy in the budget for 2016

Investing in Sweden’s future

Sweden should be a country in which everyone plays their part. A country in which people are given opportunities. A country characterised by people’s desire to develop and their ability to take responsibility for themselves and for society. A country in which women and men have the same chances in life. This is essential if we are to tackle tomorrow’s challenges for Sweden and take responsibility for future generations. Self-confidence and solidarity should be Sweden’s hallmark and people should be able to meet as equals. People should be able to feel security in their day-to-day life and hope for the future.

Challenges for Sweden

Sweden is a wonderful country in many ways. Nonetheless, we face considerable challenges. Unemployment must be combated so that more people can have a job, earn their own living, secure good and fair working conditions, and as a result gain greater power to shape their own lives. Increasing employment and driving unemployment down are key to improving welfare, and this is also crucial for women’s living conditions. The negative trend in school performance needs to be turned around so that all pupils have an honest chance to succeed. This is the only way to guarantee Sweden’s long-term development and competitiveness. Climate impact needs to decrease so that our children and grandchildren can also live a good life. Sweden must be a country that keeps together. The gaps between social classes, women and men, and rural and urban areas need to shrink to enable everyone who lives here to reach their full potential. Feminist values will run through every policy area. Equality builds trust and better living conditions.

The people who flee to Sweden and have grounds for asylum should not just find security. Their strength and knowledge must be used and opportunities must be provided for them to stand on their own feet.

Starting position of the Swedish economy

The Government will tackle these challenges for Sweden by adopting a responsible economic policy. In the coming years, the Swedish economy is expected to improve. Many of the world’s emerging economies will experience slightly weaker economic development. However, the US economy is growing strongly and Europe is gradually emerging from a long period of economic stagnation, unemployment and poverty in the wake of the financial crisis. Overall we are seeing a gradually strengthening international outlook, leading to an improved state of the economy, increasing prosperity and falling unemployment in Sweden. However, the upturn is uncertain and there is a substantial risk of weaker growth. In this position, Swedish fiscal policy must nurture the upturn while having a high level of preparedness for a rapid change for the worse.

Keeping public finances in good order is a prerequisite for more jobs and sustainable welfare financing. Sweden’s public finances have gradually deteriorated in recent years and in 2014 the general government sector recorded a deficit of SEK 75 billion. At the start of the financial crisis, the general government sector showed substantial surpluses. In that situation, an expansionary fiscal policy was warranted to moderate the negative impact of the financial crisis on Sweden. The previous Government concentrated on implementing extensive tax cuts, which have a poorer effect on unemployment and growth than an equivalent increase in public investments or improved public sector services. In addition, the previous Government continued to implement extensive unfunded tax cuts despite the improving economic situation. This policy was not sustainable. The Government has therefore changed the direction of fiscal policy. New reforms will be fully funded by expenditure savings in certain areas and by revenue increases. According to the forecast in this budget, the deficit will be halved.

Economic policy will be steered by a clear employment target. The Government’s goal is that the number of people in work and the number of hours worked in the economy will increase so that Sweden reaches the target of the lowest unemployment rate in the EU by 2020. More people will have a job to go to and fewer will be part-time unemployed. Women's employment and labour force participation must increase.

Investments in jobs

To tackle the challenges of the future, we need to invest in Sweden. Investments in jobs will be made under the Government’s jobs agenda. This agenda has three parts: investments in housing, climate adaptation and infrastructure; an active enterprise and innovation policy; and investments in skills and matching. Since increased gender and social equality is part of the solution, the work will be pursued with a clear gender perspective across all parts of the agenda. Strengthening welfare and extending it to include more people generates new jobs, while also creating better conditions for working and for full-time work.

When we increase investments in infrastructure and housing, we create jobs here and now and also conditions for new jobs in the longer term. Investing more in maintaining the country’s railways and roads is a means of securing jobs and reducing society’s environmental and climate impact. By building, we improve people’s chances of finding a place to live and either commuting or moving to jobs. Investments in public transport are particularly important to promote women’s participation in the labour market and their opportunities to increase the number of hours they work. Other measures are of course also needed to increase women’s participation in the labour market. The shortage of housing is not just an obstacle to an efficient labour market. It also contributes to rapidly rising prices in the housing market, which pose a risk to macroeconomic stability and make it increasingly difficult for people to enter the housing market. The shortage of rental accommodation is particularly problematic, as this plays an important role in an inclusive labour market and an efficient housing market.

As part of its increased ambitions in the area of investment, the Government has drawn up an investment plan for central government capital assets. Among other things, this plan shows that central government investments in infrastructure are expected to increase by approximately 43 per cent between 2015 and 2019.

Investments in climate adaptation are also important for employment. Technological solutions to combat climate change pave the way for increased exports and new jobs. Investments in climate adaptation help to maintain and improve business sector competitiveness and develop Swedish industry. Industries in the tourism, fisheries and agriculture sectors are dependent on a good environment.

An active enterprise and innovation policy will improve the business climate, enabling more companies to start up and giving existing companies greater opportunities to grow. Continued active work on gender equality, aimed at making use of both women’s and men’s skills and entrepreneurial abilities, will also strengthen Sweden’s competitiveness. Better coordination and increased resources for export promotion, re-industrialisation and innovation, and a reform of central government venture capital have considerable potential to strengthen job growth throughout the country. Strengthening the business climate in rural areas requires, in particular, improved local services and initiatives to strengthen the tourism industry, forestry, agriculture and infrastructure, as well as more coordinated central government planning of the location of certain government agencies. When appropriate, procurement conducted by central and local government, which is worth over SEK 600 billion per year, can also be used to secure jobs and work experience for unemployed young people and the long-term unemployed.

Matching in the labour market functions increasingly poorly. Unemployment is high, yet there are many vacancies to apply for. To get more people into jobs, we need to increase investments, improve opportunities for education and training, and enhance matching activities so that people have the knowledge and skills demanded. The fact that unemployment is unevenly distributed between different groups makes this particularly important. Everyone must have the chance to get a first job. These days, upper secondary education is often essential for labour market entry. Consequently, it is important on the one hand that people have the right to complete upper secondary education through municipal adult education, and on the other hand that demands can be made of the individual, for example that they participate in the education contracts that are now being introduced. In addition, vocational higher education needs to be expanded and given better planning conditions. To increase the flow from long-term unemployment to work and education, the Government considers that employmabilities. Examples of such measures are extra jobs, subsidised positions, education and training, and work experience, which will contribute to the gradual elimination of Phase 3. Good working conditions are fundamental.

A troubled international context demands a capability to defend Sweden and an ability to take our share of responsibility for the victims of repression and armed conflict. Turbulence in countries such as Syria and Iraq has forced many people to flee. The number of displaced people has not been so high since the Second World War. In a European perspective, Sweden has taken a relatively very high share of responsibility in this refugee situation. More EU countries need to take their responsibility.

The Government is well aware of the great strain that the current situation imposes on many municipalities. All municipalities need to take responsibility and they need to be put in a better position to do so. Shortening introduction times and improving opportunities for people to begin working is the best sustainable policy in the long term. The Government is therefore investing in measures to improve the introduction process, such as a validation initiative and a ‘fast track’ to the labour market. The Government considers that all municipalities should contribute to the reception of refugees and proposes a rise in the standard compensation provided to municipalities for the reception of new arrivals.

Knowledge-based education in equal schools with time for each pupil

The Government’s objective for education policy is knowledge-based education in equal schools with time for each pupil. School performance has declined in Sweden year after year. At the same time, compulsory school in Sweden has become increasingly unequal, and segregation and differences in performance between schools have increased over the past ten years. The differences between girls and boys in compulsory school – with boys generally performing less well than girls and girls experiencing higher levels of stress and ill-being – are not acceptable.

Stereotypical gender norms, abusive treatment and discrimination must be actively counteracted. One starting point for preschool and school is that children and pupils must be given the opportunity to try out and developtheir abilities and interests. Every pupil must be given a chance to achieve the national educational goals, regardless of their sex or gender identity. Everyone must have a chance to do their very best.

The most important resource for schools is the teachers. By acting today to recruit, retain and develop more good teachers, we can improve future performance. This will require higher salaries for teachers and better conditions for teachers to be able to give each pupil individual attention. In addition, central government needs to take more responsibility for supporting under-performing schools. Investments in early action, making the teaching profession more attractive and the national development programmes will boost performance and overcome segregation. More staff will be employed in compulsory school so that teachers have more time for their work and primary school classes can be smaller. All schools must be good schools.

A sustainable future

Climate change is the defining issue of our time. The impact of climate change on sea levels, weather conditions and local habitats has enormous consequences for human, plant and animal life. In a global perspective, women are often particularly severely affected by climate change. Limiting global emissions of greenhouse gases so that the temperature increase stays as far below two degrees as possible will improve the prospects of long-term prosperity. Sweden must be a leading force in climate adaptation. By setting ambitious goals, Sweden will take a leading role in the international negotiations on a new climate agreement. Only by doing so do we take our moral responsibility for future generations, while taking advantage of the job and innovation opportunities that the green transition brings. If Sweden is to meet its commitments, we must pick up the pace in this transition – through increased investments in environmentally friendly and resource-efficient technology, but also through climate financing in developing countries. The pace of work towards reaching the environmental quality objectives must also increase.

Increased welfare, equality and security

Jointly financed welfare services must be available to everyone, irrespective of their background and ability to pay. A well-developed welfare system also contributes to increasing the number of hours worked, partly because it offers women and men alike the opportunity to work full-time. Continued investments in welfare are therefore necessary. Far too many people, primarily women, have reduced their working hours or completely stopped working in order to look after a family member. Better elderly care and higher quality out-of-school centres are not just a matter of security in old age and childhood, they are also a matter of people’s opportunities to work and essential to improve women’s conditions in life. The Swedish Government is a feminist government.

Public health in Sweden is good, but unevenly distributed. To close the health gaps that can be influenced, vigorous reforms are needed, not least with respect to women’s health and young people’s mental health. Accordingly, investments will be made in free mammography screening, youth clinics and free dental care. Early intervention can help reduce sick leave. Investments will also be made to strengthen the professions on which Swedish health care depends.

Unemployment and protracted illness must not lead to poverty. People want to work and contribute to the best of their ability. For this reason, the highest daily allowance and minimum level of compensation in the unemployment insurance system were raised in September 2015. The maximum time limit for sickness insurance will be abolished. In addition, investments will be made in summer holiday support, in social services to strengthen work on cases involving children, and in raising the national standard level of income support to strengthen the finances of the most financially vulnerable families with children.

Widening gaps lead to fewer shared experiences and common points of contact. This undermines an understanding of other people’s living situations. It makes it more difficult for Sweden as a nation to tackle the great challenges of the future together. When the distance between people becomes too great, it reduces freedom. Instead, unrest and suspicion grow. The widening gaps are also a threat to economic development. Policies will therefore be used to increase economic equality – an equal Sweden is a successful Sweden. This is important, not least, to counter the growing racism and xenophobia. Most pensioners can look back on a long working life. They have helped build our welfare state. Pensioners deserve security in their daily lives and welfare services that are available when needed. The difference between the tax rates applied to earned income and pensions is fundamentally wrong and bad distribution policy. The Government is therefore now taking the first step towards closing this gap in taxation. The gap will be closed completely for the pensioners with the lowest incomes. This will benefit women in particular, since their pensions are the lowest. The Government is boosting resources and taking several initiatives to help municipalities and county councils manage to staff the services that elderly people need. Regardless of whether or not you have family members or another extensive network around you, you must be able to feel secure.

New investments on top of previous initiatives

In this bill, which is based on an agreement between the government parties and the Left Party, we tackle the major challenges of the future. In total, we are now proposing investments and other initiatives worth more than SEK 24 billion in 2016. These additional funds are on top of the SEK 20 billion that the Government announced for 2016 in the 2015 Spring Fiscal Policy Bill (2014/15:100), see table 1.1. As a result of the unique situation that arose in connection with the processing of the Budget Bill for 2015 by the Riksdag, the Spring Fiscal Policy Bill contained more extensive proposals and announcements than in normal circumstances.

We will not solve the problems of unemployment and matching in the labour market, poor school performance or the climate challenge by further cutbacks and short-sighted tax cuts. To tackle these challenges, we need to invest in Sweden. In housing, climate adaptation and infrastructure, in knowledge and competitiveness, and in welfare and gender equality.