The National Budget 2023

A budget for security and fair distribution

There is a war and an energy crisis in Europe. High inflation is affecting people’s lives. The Government’s response is a fair and responsible budget, which improves distribution and enhances security at a challenging time.

“We are facing challenging times. This budget reflects the Government’s most important task which is to safeguard its people. The budget is designed to reinforce national preparedness and safeguard household finances. The Government aims to bring inflation under control and ease the pressure on interest rates, while promoting job security and reducing social and geographical differences. We are submitting a budget which entails a substantial redistribution, to benefit the nation as a whole. Those who have most can afford to contribute more, while ordinary people with ordinary income will get tax relief.  We are reinforcing emergency preparedness and civil protection and protecting important public services like schools, health, and elderly care across the whole of Norway,” says the Minister of Finance Trygve Slagsvold Vedum (Centre Party).

The National Budget takes into consideration the high level of activity in the Norwegian economy. Employment has risen substantially over the past year, and unemployment is at its lowest level since 2008. Although the economy is showing signs of slowing down, inflation has not been higher since the 1980s. A tighter budget is therefore necessary, where spending from the Government Pension Fund Global is reduced.

“Sound economic management in the current environment entails spending less from the fund to finance the National Budget. For a long time, the response to many political challenges in Norway has been to increase spending from the fund. That time has passed. Spending more money now will cause new problems because we risk contributing to inflation becoming entrenched at such a high level that the central bank will have to raise its policy rate higher and faster than necessary. Ordinary people would then pay the highest price in the form of higher mortgage interest rates, higher prices and potentially an abrupt economic downturn, which could lead to job losses. The Government wants to avoid that, which is the reason we are reducing spending from the fund,” says the Minister of Finance.

In the National Budget for 2023, spending from the fund is projected at NOK 316.8 billion, or 2.5 per cent of the projected value for the sovereign wealth fund at the start of next year. This implies a negative fiscal impulse, with a reduction in spending from the fund of 0.6 percentage points of trend GDP for mainland Norway.

Simultaneously with a reduction in spending from the fund, a substantial increase in government expenditure is needed. The additional expenditure is required for national insurance scheme payments (NOK 34.7 billion), receiving and integrating refugees, mainly from Ukraine (NOK 13 billion), ongoing construction projects (NOK 6.5 billion) and the continuation of the electricity subsidy scheme for households (NOK 44.7 billion). Expenditure for these four areas alone will increase by around NOK 100 billion in 2023, compared with the balanced budget for 2022.

“This budget reduces the cost of living for ordinary people. Those with low and ordinary income will pay less tax, while those with high income and assets will contribute more. We are also proposing a historic redistribution of the high profits from our common natural resources to benefit the whole of society. This is in line with a long and proud Norwegian tradition. The measures will provide security for household finances, reinforce our national emergency preparedness, protect fundamental public welfare services across the country, foster green industry and ensure that Norway stands strong through unsettling times,” says the Minister of Finance.   

Some of the most important measures in the National Budget for 2023:

On 28 September the Government announced measures for fairer distribution of profits from our common natural resources. The proposals included in the budget for 2023 are: introducing a resource rent tax on aquaculture and onshore wind power, increasing the tax rate in the resource rent tax on hydropower, and introducing a high-price contribution from wind and hydropower. The proposals are estimated to increase tax revenues by NOK 33 billion annually for the state and municipal sector combined. In addition, the government proposes to adjust the temporary tax rules for petroleum companies by reducing the uplift rate by around 30 per cent.

A budget which provides fair distribution and safeguards people’s everyday finances.

The Government proposes:

  • Reducing income tax for people with income below NOK 750 000. A family with two incomes of NOK 550 000 will pay about NOK 7 800 less tax in 2023, compared with the 2021 rules. This calculation is based on the assumption that wages are their only income, and that they only have standard deductions, meaning the personal allowance and the minimum standard deduction.
  • An annual income increase of up to NOK 11 500 for single parents with low income. In 2023 the increase will be NOK 9 600, as the restructuring of this support will take place from 1 March.
  • NOK 7 billion for continued electricity subsidies for households throughout 2023. As an example, the estimated subsidy for power consumption of 22 000 kWh in southeast Norway will be NOK 33 000 in 2023.
  • Continue the specific upward adjustment of indicative rates for social assistance in the Revised National Budget for 2022.
  • An extended period of work assessment allowance (AAP) for recipients who need more time for assessment, and holiday supplement for unemployment benefit.
  • Increase of NOK 660 per month in the housing grant for pupils who are unable to live at home while attending upper secondary education, and increased equipment grant for upper secondary education pupils.
  • More people in work, through a young persons’ guarantee for unemployed people under 30 years of age, and a qualification and employment package.
  • Increase the tax deduction for trade union fees to NOK 7 700. The deduction has now been doubled since 2021, while from 2013 to 2021 the amount remained unchanged.
  • An additional price adjustment of the study grant, paying NOK 1 500 more in the grant for the school year 2023-24.
  • Reduction in the road usage tax on fuel of nearly NOK 1.9 billion, which contributes to lowering the total duties on fuel.
  • Ferry fares to be halved compared with rates as of 1 January 2021, and free ferries to island communities without road connections.

A budget that prioritises security for our public welfare services

The Government proposes:

  • Growth in the municipal sector’s free income to secure fundamental welfare services.
  • Increased activity in hospitals beyond requirements from demographic development.
  • Measures to keep and recruit more general practitioners.
  • Package of measures within mental health and substance addiction.
  • Increased funding for grants for social inclusion measures for children and young people.
  • Reducing the maximum price for daycare to NOK 3 000 NOK per month. From 1 August, day care will be free for all children in Finnmark and Nord-Troms (geographical target area), and for the third child in the family in daycare at the same time, in the rest of the country.
  • Increased cancellation of student loans from the Norwegian State Educational Loan Fund for people living and working in the geographical target area in Finnmark and Nord-Troms.
  • Continued investment in vaccines and the vaccination programme against COVID-19 – in addition to emergency storage for medicines and infection control equipment.

A budget which cuts emissions and promotes climate-friendly business

The Government proposes:

  • Increase of 21 per cent in CO2 duty on none-ETS emissions, from NOK 766 to NOK 952 per ton CO2.
  • Increase in the biofuel sales requirement in road traffic, and introduction of a new biofuel sales requirement in non-road mobile machines.
  • Increased funding for implementation of the demo project Longship – capture and storage of CO2.
  • NOK 500 million increase in funding to Enova. The Government also proposes allocating NOK 1.2 billion to an energy subsidy scheme for business.
  • Increased funding for more rapid development of offshore wind, renewable energy and the power grid.
  • Announcing new allocations of NOK 600 million in total as part of the Green Platform Initiative in the period 2023-2025. The programme supports research and innovation projects which contribute to green transition.
  • Climate-friendly investment of NOK 600 million in capital for Nysnø Klimainvesteringer AS.
  • Investment of NOK 100 million in capital to the government enterprise Siva’s property initiative, for the development of green industry and property projects.
  • NOK 10 million in increased funding to Innovation Norway’s work with strategic export promotion, relating to «Hele Norge eksporterer».

A budget which prioritises security for us all and shows solidarity in troubled times

The Government proposes:

  • Increasing the defence budget with NOK 6.8 billion compared with the balanced budget for 2022. The proposal raises the Government’s ambitions beyond the long-term plan for defence.
  • Approximately NOK 420 million to continue measures for increased civil protection and preparedness from Prop. 78 S (2021–2022).
  • Funding for increased operating costs for the Norwegian Police Service, the Norwegian Directorate of Immigration and the Norwegian Directorate of Integration and Diversity in preparation for a possible rise in arrivals from Ukraine.
  • Continued emergency storage of infection control equipment and medicines.
  • Reinforcement of food preparedness through emergency storage of food grains.
  • Receiving and integrating Ukrainian refugees.
  • Maintaining a high aid and development budget, including substantial humanitarian support to Ukraine.

Table 1: Key figures for the Norwegian economy. Percentage volume change from previous year, unless otherwise stated

 

NOK billion1

 

 

 

 

 

2021

2021

2022

2023

2024

  Private consumption

1 616.0

4.9

5.9

1.4

2.3

  Public consumption

968.3

3.8

0.0

1.3

..

  Gross fixed investments

960.5

-0.9

2.3

0.3

3.5

  Of which:  Petroleum extraction and pipeline transportation

178.7

-2.7

-4.5

-2.2

7.8

              Businesses in mainland Norway

353.5

2.2

6.8

0.3

4.1

              Housing

206.5

0.6

-0.7

1.6

0.3

              Public sector

219.5

-4.0

3.2

0.8

..

  Mainland Norway demand2

3 363.8

3.4

3.7

1.3

2.1

  Exports

1 721.9

4.7

2.1

5.6

2.3

  Of which:  Crude oil and natural gas

861.7

2.8

1.6

8.3

2.0

              Goods and services, excl. oil and gas

717.7

4.9

1.5

4.1

3.5

  Imports

1 214.2

2.3

8.3

1.1

3.2

  Gross domestic product

4 141.9

3.9

2.7

2.8

1.9

  Of which: Mainland Norway

3 267.4

4.1

2.9

1.7

2.0

Other key figures:

 

 

 

 

 

  Employment, persons

 

1.2

3.3

0.8

0.3

  Unemployment rate, LFS (level)

 

4.4

3.2

3.2

3.4

  Unemployment rate, registered (level) 

 

3.1

1.7

1.7

1.9

  Annual wage growth

 

3.5

3.9

4.2

..

  Consumer price inflation (CPI)

 

3.5

4.8

2.8

2.4

  Underlying inflation (CPI-ATE)

 

1.7

3.2

3.1

2.8

  Crude oil prices, NOK per barrel (current prices)

 

609

986

912

845

  Crude oil prices, USD per barrel (current prices)

 

71

103

91

85

  Three-month money market rate, pct.3

 

0.5

2.1

3.7

3.6

  Import-weighted exchange rate (I-44), annual changes in pct.4

 

-5.7

1.5

1.7

0.0

1 Provisional national account figures at current prices.

 2 Excluding inventory changes.

 3 Assumption used in calculations based on forward rates.

4 Positive figures indicate a depreciation of the NOK.

Sources: Statistics Norway, OECD, IMF, international central banks, national sources, Norges Bank, the Norwegian Labour and Welfare Administration, Reuters and the Ministry of Finance.

 

Table 2 Key figures for the fiscal budget and the Government Pension Fund. NOK billion

 

2021

2022

2023

Total revenues

1 502.7

2 521.1

2 875.0

1 Revenues from petroleum activities

312.2

1 195.5

1 412.6

     1.1   Taxes and duties

91.8

580.2

854.9

     1.2   Other petroleum revenues

220.4

615.3

557.7

2 Non-petroleum revenues

1 190.5

1 325.6

1 462.4

     2.1   Mainland Norway taxes

1 099.5

1 219.8

1 355.6

     2.2   Other revenues

91.0

105.9

106.8

Total expenditure

1 584.2

1 656.8

1 747.8

1 Expenditure on petroleum activities

24.7

26.7

28.3

2 Non-petroleum expenditure

1 559.4

1 630.1

1 719.5

Fiscal budget surplus before transfers to the Government Pension Fund Global

-81.5

864.4

1 127.3

- Net cash flow from petroleum revenues

287.5

1 168.8

1 384.3

= Non-oil fiscal surplus

-369.0

-304.4

-257.0

+ Transfer from the Government Pension Fund Global

390.1

304.4

257.0

= Fiscal budget surplus

21.1

0.0

0.0

+ Net transfer to the Government Pension Fund Global

-102.6

864.4

1 127.3

+ Interest and dividends, etc., on the Government Pension Fund1

223.7

252.8

287.8

= Fiscal budget and Government Pension Fund consolidated surplus1

142.2

1 117.2

1 415.0

Memo:

 

 

 

Market value of the Government Pension Fund Global2

10 907

12 340

12 500

Market value of the Government Pension Fund2

11 199

12 673

12 848

National insurance retirement pension liabilities2,3

9 242

9 644

10 208

Structural non-oil fiscal deficit, NOK billion

350.4

323.7

316.8

     Percentage of the fund capital

3.2

2.6

2.5

     Percentage of mainland Norway trend GDP

10.5

9.3

8.8

Budget indicator, percentage points4

-0.8

-1.2

-0.6

Real underlying expenditure growth, pct.

-1.3

1.5

1.3

1 Including Government Pension Fund Norway and Government Pension Fund Global. Not including securities gains or losses.

2 At the beginning of the year.

3 Net present value of already accrued rights to future retirement pension payments under the national insurance scheme.

4 Positive numbers indicate an expansionary fiscal stance. The indicator does not take into consideration that different revenues and expenditure items may differ in their impact on economic activity.

Sources: Ministry of Finance and Statistics Norway.