Quality of Public Spending

Ladies and gentlemen,

It is a great pleasure for me to represent Norway here today.  

As you know, Norway is not a member of the European Union. However, our relations with the EU are extremely close, not least because Norway is part of the European Economic Area and therefore part of the internal market. 

Norway’s interests are very closely aligned with those of the EU and its member states.  

Beyond the EEA Agreement, Norway is in some ways more closely integrated into EU cooperation than some of its member States. The security challenges of the EU also affect Norway.

Norway and the EU therefore have close cooperation and regular dialogue on the foreign, security and defence policy, which has intensified over the years.  

We have contributed to several crisis management operations and aligned ourselves with the EU restrictive measures against Russia. EU migration policy also affects Norway.

We play an active part in the Schengen cooperation. We are involved in Frontex, have provided vessels and crew for Triton operations and are involved in the follow up of Triton.

On this visit to Paris, I have already had the opportunity to discuss some of the key issues on the European agenda with our French partners.

At the top of the list is building a strong, competitive and sustainable European economy.

Norway’s EU strategy and European work programme are closely in line with the priorities of the EU and its member states.  

Efficient economic management at national level is crucial, and European countries have a great deal to learn from each other on this issue. The topic of this seminar is therefore very timely and important. It is especially relevant for me as I am also minister in charge of Nordic cooperation.

Norway will chair the Nordic Council of Ministers in 2017. This the official body for inter-governmental cooperation in the Nordic countries, where we cooperate on a wide range of issues. Under the Norwegian presidency, the Council will focus on three areas of strategic interest for the Nordic region: energy, climate and environment, and digitalisation.

There are of course differences between the Nordic countries, including differences in the structure of our economies. But on most issues, there is a very high level of cooperation, integration and shared views. This is also true of today’s topic. Indeed, we share a common fiscal and administrative tradition with Sweden and Denmark, and also with Finland.

In this brief introduction, I should like to highlight just a few characteristics of the Norwegian economy and our approach to fiscal administration and the organisation of public spending.

Norway has a robust economy, a well-developed welfare state, a rather flexible labour market, and a dynamic private sector. Norwegian government finances are solid.

This has been of special benefit during the financial crisis. The Norwegian economy quickly rebounded after the global financial crisis, supported by robust public finances and strong growth in the petroleum sector.  

The oil and gas industry has been an important engine of the strong growth in the Norwegian economy over the past 40 years. The sector will continue to be a vital part of the economy in the years ahead. Gas in particular will continue to be a central component of the European energy mix. However, activity in the petroleum sector has passed its peak, and we are currently preparing for and expecting lower returns in the oil industry. Consequently, we are in the process of restructuring.

One example of a sector where there is a major potential for growth is seafood, which is already very important in the Norwegian economy.  

As former Minister of Fisheries and Coastal Affairs, and also because I come from Harstad in the north of Norway, I know this sector and the potential it represents very well.

Indeed France has been one of our most important markets for a long time, to the benefit for French consumers and industry.

One reason Norway’s economy has so far coped fairly well despite the drop in oil prices is that we have established a macroeconomic buffer. Some components of our economic policy framework have proved particularly important.

First, Norway has strong public finances and a prudent but flexible fiscal framework. Second, we also have a robust and well-functioning financial sector. 

The fiscal rule that was introduced in 2001 required saving a large part of the increasing petroleum revenues in a fund, the Government Pension Fund Global.

This fund today amounts to more than 7 255 billion Kroner, around 670 billion euro. Our fiscal policy framework is based on prudence and on sharing oil wealth between generations.

The whole of the government’s petroleum revenue is paid into the fund, but only the expected real return on the fund is included in the budget. In other words, Norway does not spendits oil revenue as such, but only the financial return on the fund.

In the late 1980s, Norway went through a banking crisis that had severe consequences for our economy. The financial industry is vital to both economic stability and growth. A fragile financial sector tends to amplify an economic crisis, whereas a solid, well-capitalised one may even be able to cushion a downturn.

The international financial crisis has shown the need for good financial market regulation and supervision both nationally and internationally. 

Norway has a very ‘lean’ treasury system compared to most other European countries. 

There is no separate treasury organisation. All the main operational treasury tasks are delegated to line ministries and agencies.

This system is based on a high level of trust, with few control mechanisms to ensure that action is taken in compliance with defined goals and targets.

The line ministries are responsible for controlling the spending activities of agencies. The Ministry of Finance does not carry out any commitment or spending controls.

I do not believe that this situation is unique to Norway – many aspects of it are shared by all the Nordic countries.

More than the petroleum revenue, trust in government is probably our most important asset. It is an asset that is difficult to build, but is easily lost. We have perhaps taken it for granted. We should not do so; trust is by far the most important source of efficiency in public administration.

To conclude, ladies and gentlemen, in this seminar the focus is on France and what can be learnt from the Nordic countries. I hope this can be followed up by another seminar where we look at what our countries can learn from France. It is vital to share knowledge and experience. The welfare of our citizens and the sustainability of our public finances in the longer term depend on how we handle these issues.

Thank you.