The Minister of Finance’s introductory remarks in connection with the presentation of the white paper on Long-term Perspectives on the Norwegian Economy 2021

Presentation (PDF)

The white paper on Long-term Perspectives on the Norwegian Economy means a lot to me. Because it is concerned with what kind of society our children are going to grow up in and take over.

It addresses the challenges we, as a society, are facing over the next 10 to 40 years. But it is challenging, as the Prime Minister said, to look 40 years into the future when we are in the middle of the worst crisis for many decades.

There is nonetheless a link. The Government’s crisis exit strategy – producing more and making working life more inclusive – is also what is needed to solve the long-term challenges.

We shall build on what we have been doing for 7 years. We need to invest in education and skills, get more people into work and solve the climate challenges.

But we also need to use public sector resources more efficiently and effectively, as well as reduce petroleum revenue spending.

Slide 2

The figure shows petroleum revenue spending via the fiscal budget, from the establishment of the Government Pension Fund Global in 2001 until now.

We will note that petroleum revenue spending has been steadily increasing, with a special peak during the coronavirus crisis.

Although spending has been especially high during the current crisis, we have over the term of this Government spent about NOK 300 billion less than if we had observed the fiscal rule to the letter. Our moderation in good times enables us to spend more when crisis hits.

If we had not been spending a lot right now, the crisis would have been much more severe. More businesses would have folded, and unemployment would have been higher. 

Slide 3

The white paper on Long-term Perspectives on the Norwegian Economy looks at the period until 2060. Norway will be undergoing a transition, and we need to solve three major challenges:  

• Firstly, the population is changing. There are currently four people of working age behind every person of retirement age, while there will only be two by 2060. It is fabulous that ever more people live longer and better lives. But it also means growing pension, health and care expenditure.
• Secondly, while expenditure is increasing, tax revenues will not increase by as much and petroleum revenues will decline.
• And, thirdly, we will be implementing the green shift.

Some may say: You have been talking about this for a long time. And yes, we were discussing these issues when I chaired the Young Conservatives 30 years ago. We called ourselves the clean-up generation. But this is no longer a future scenario; these challenges are here right now.

Fewer people of working age also means lower tax revenue growth. In the past decade, tax revenues increased by about NOK 18 billion on average per year. These increases will decline to NOK 10 billion per year in the next decade.

The Government Pension Fund Global is also expected to grow more slowly than before.

Government revenue growth will be halved towards 2030.

The Government Pension Fund Global is now of record size, but there will no longer, as we noted from the first figure, be room for increasing petroleum revenue spending via the fiscal budget by as much as before. We will notice this difference in the years to come.

Slide 4

This illustrates how revenues from petroleum activities are falling, while the value of the Fund is increasing. This is a success story, because it demonstrates that we are ensuring that petroleum revenues can benefit several generations.

The underground petroleum reserves are being gradually exhausted, and production is expected to decline until 2050. But the money has not been spent. We have a large Fund, although it will not be topped up by petroleum revenues in the same way as before. We are at the same time becoming more dependent on the return on the Fund.

We also need to be prepared for the possibility of major fluctuations in the size of the Fund due to stock market volatility and international turbulence.

Petroleum revenue spending increased by an average of NOK 12 billion per year in the last decade, while it will only increase by NOK 3-6 billion per year until 2030.

Slide 5

All in all, these economic trends tell us the following story: Pension, health and care expenditure increases are accelerating, while increases in revenues from taxes and the Government Pension Fund Global are slowing down.

The room for manoeuvre – which is what we can spend on new or priority initiatives via the fiscal budget after we have covered essential expenditure – will be significantly reduced in the years to come:

Over the period 2011-2019, the room for manoeuvre was an average of NOK 21 billion per year. Towards 2031, this number will fall to an average of about NOK 4 billion per year.

This is about the same amount as will be needed to cover the excess health and care expenditure resulting from population changes. In other words, this absorbs the entire scope for spending money on other worthy causes. New expenditure will need to be funded by reordering of priorities and by budget cuts.

Norway will thereby be looking more like other countries in terms of economic policy than has been the case until now.

If we look further ahead, the challenges will be mounting unless we succeed with the strategies we outline in the white paper on Long-term Perspectives on the Norwegian Economy. We may be looking at a fiscal gap of 5.6 percent of mainland Norway GDP by 2060.

In addition, we need to solve the main challenge of our time – the climate challenge. Minister of Education and Integration Guri Melby has already talked about this.

Slide 6

But we also need to bear in mind that few countries are as well placed for tackling the challenges of today and tomorrow as Norway. We are a country in which people trust each other, with small differences and great opportunities for creating flourishing lives. We have well-organised industrial relations and we cooperate to solve challenges.

The opportunities available to the Norwegian population have improved in most respects over the last forty years, including education, health, leisure, consumption and income opportunities.

Statistics Norway has compiled numbers that illustrate this in the form of a «study of opportunities».

Briefly summarised, these numbers tell us that:

• We live longer lives.
• More of us complete higher education.
• Women have joined the labour market and have narrowed the gender income gap.Ever more children are joining kindergartens and we spend less time on housework.
• We have more leisure time now than in the 1970s and 1980s.
• We spend less money on food, and more on homes.

The white paper on Long-term Perspectives on the Norwegian Economy looks at how we can build on what makes Norway a great place to live, while at the same time acknowledging that simply assuming that "it will be alright" is not an option.

The Government’s strategies as outlined in the white paper on Long-term Perspectives on the Norwegian Economy will be recognisable, because the white paper is based on what we have done so far. We need to create private sector growth, get more people into work, as well as focus on education and skills, in order to ensure a sustainable welfare society in the short and long run.

Slide 7

We have on this occasion chosen to focus more on solutions than in previous white papers on Long-term Perspectives on the Norwegian Economy. The Government’s strategies for solving challenges in coming years are to:

1: Produce more

We need to continue to facilitate a diverse private business sector, operating within a business-friendly regulatory framework.

Some of the key priorities are therefore:

• a high-quality education system that provides businesses with skills that match their needs
• a focus on research and development
• well-functioning competition, effective regulation and more targeted use of policy measures
• a simple and growth-promoting tax system
• access to international markets – the EU and then EEA will be important to Norway in the years to come.

Productivity growth has been low since the financial crisis in 2009/10. Such is not only the case in Norway, but in most other high-income countries as well. Productivity growth means that we are getting ever more from our resources – in other words: that we are becoming ever more efficient.

Historically, productivity growth is the single most important determinant of our welfare growth, and it will remain a critical factor in coming years.

The figure illustrates that if we remain at the low growth level observed in the period after the financial crisis, our incomes will increase by only 32 percent by 2060.

But if we are able to get productivity growth back up to the level from before the financial crisis (1970–2007), incomes in 2060 will be almost triple those of today.

Slide 8

2: Make working life more inclusive 

It is often said that Norway is lucky to have the Government Pension Fund Global. And that is true, but our most valuable asset by far is the people who work here.

The portion of our national wealth accounted for by the value of our labour input is three times larger than that of the entire Government Pension Fund Global and all existing petroleum reserves.

Our number one priority in safeguarding welfare is therefore to get more people into work, as well as to get those already in the labour force to work more.

Having a job provides learning, creates a sense of belonging and offers the best insurance against poverty. In addition, it may solve the challenges we are facing in future.

If we are able to halve the gap between Norway and Sweden in the proportion of people on disability benefits over a decade, we will have NOK 4.4 billion more to spend each year. This means a NOK 44 billion increase in the room for manoeuvre in ten years.

And if employment increases by 10 percent towards 2060, we will almost eliminate the government budget gap between revenues and expenditure.

The most important priority by far in making our welfare society sustainable in future is work.

A six-hours working day has been proposed by some.

Calculations in the white paper on Long-term Perspectives on the Norwegian Economy show that central government expenditure would increase by about NOK 7 billion extra every year until 2060 if we had introduced a six-hour working day. Ordinary families might see their wage income fall by NOK 170,000, on top of which they would be facing a tax bill of about NOK 40,000-50,000 on average for a family.

As the need for health and care services will increase in the years to come, due to population change, we will need more health and care personnel, not fewer.

The most important step in getting more people into work is to get more people to complete upper secondary education: We aim for 9 out of 10 students to complete and pass upper secondary education by 2030.

Ever fewer jobs require no formal qualifications. Apprenticeship certificates and higher education have become increasingly important to gain access to the labour market. There is much to suggest that this development will continue in coming years. Norwegian labour demand is more focused on technological and other professional skills than in many other countries, and we have few routine jobs.

The skills reform; Lifelong learning, has been implemented. We must continue to further facilitate skills upgrading and supplementary training throughout everyone’s working life.

And we also have to do more for those who need a little extra help to get back into work. The skills immigrants have when they arrive in Norway also need to be examined and used. Those who need it must get the training necessary to enable them to participate in society and in the labour force. 

Slide 9

And much is already moving in the right direction! The figure shows that descendants of immigrants participate more in the labour force than their parents. This trend is especially pronounced for women. The daughters of immigrants from Africa and Asia are in fact almost as economically active as immigrant women from Western countries in the same age group.

This demonstrates that education delivers results. This group also performs very strongly in higher education.

We are now in the process of implementing an integration policy reform. The objective is to get more people to participate in society and in the labour force.

Slide 10

3: An efficient, effective and future-oriented public sector

The public sector employs one third of employees in Norway and controls more than 60 percent of mainland Norway GDP. We are therefore responsible for ensuring that we spend taxpayers’ money in an efficient and effective manner. Important reforms have been carried out in for example the transport sector.

These efforts need to continue. We also need to spend the money in smarter ways, facilitate public sector innovation and public service diversity, improve public investment planning and reap reform gains.

Public services need to be developed and renewed in step with a changing society. Many of us have experienced that digital solutions work better. Digital tax returns are for example much more efficient than when we were completing our tax returns on paper.

Such investments will improve resource use if we are able to unlock the gains and thereby free up brilliant minds and money for new challenges. 

Concluding remarks

As part of the process of preparing the white paper on Long-term Perspectives on the Norwegian Economy, I have had discussions with several classes in different upper secondary schools and I have listened to their concerns and suggestions.

This white paper is concerned with what kind of society they are going to grow up in and take over.

We as adults have a responsibility for handing them both a sustainable welfare society and a sustainable climate.

After all, the climate and the economy are closely linked. It is not the case that we must choose between meeting the climate objectives or maintaining our welfare society. In the white paper on Long-term Perspectives on the Norwegian Economy, we show how these go hand in hand.