Article | Last updated: 29/03/2012 | Ministry of Finance
The areas of responsibility allocated to the Minister of Finance determine the functions of the Ministry. Within the framework laid down by the Government and Stortinget (the Norwegian parliament), the Ministry is responsible for:
- planning and implementing economic policy
- co-ordinating the preparation of the budget
- ensuring government revenues by maintaining and developing the system of taxes and duties
- monitoring financial markets and drawing up regulations
The Ministry of Finance functions as the Minister's secretariat, preparing documents for presentation to Stortinget and background material containing advice on, for instance, economic policy and taxation policy for the Government. In addition, the Ministry has important administrative functions, implementing political decisions and managing government agencies, such as those dealing with taxes, duties and natural statistics.
The responsibility of the Minister of Finance as a member of the Government is to develop and co-ordinate the Government's economic policy. Although the political authorities - the Government and Stortinget - make the decisions, the Ministry of Finance is required to give expert advice before decisions are made and executed.
The Government presents its plans and proposals to Stortinget every autumn in the National Budget and the fiscal budget, and each spring in the Revised National Budget. Before the budgets are presented, the Ministry of Finance gives advice on government expenditure and revenues.
The Economic Policy Department monitors and analyses economic trends in Norway and abroad.
Important areas include production, consumption and investment, prices and wages, the labour market and foreign trade. The department is responsible for co-ordinating important areas of economic policy, including fiscal policy and monetary policy and work on the National Budget. The department also analyses the effects of the annual wage negotiations and wage settlements on the national economy and central government finances. The Economic Policy Department is responsible for the regulations governing the Government Petroleum Fund and the National Insurance Scheme Fund, for raising and servicing government loans at home and abroad and for the management of Norway's cash reserves and short-term claims, which are largely deposits in Norges Bank (the central bank of Norway).
The Department also produces long-term analyses and reports on subjects such as population trends, developments in income and living conditions, environmental issues, labour market trends, pensions and public services. These analyses can be included in official government reports, Reports to Stortinget (White Papers to the Norwegian parliament) or in the annual budget documents. The Economic Policy Department also has a special responsibility for methodology issues with regard to economic policy analysis and therefore maintains close links with academic and research communities.
The Ministry of Finance serves as budget secretariat to the Government, and is in charge of co-ordinating the work on the budgets submitted to the Stortinget. This means that the National Budget, the fiscal budget and the Government's four-year long-term programme are all prepared by the Ministry of Finance - in co-operation with the other ministries.
The other ministries are required to submit to the Ministry of Finance all matters that might have an impact on expenditure or revenues in the fiscal budget or on the national economy. This step precedes the Government's review of the matter prior to preparing draft Reports to the Storting (White Papers), Propositions to Stortinget (parliamentary bills) or Propositions to the Odelsting (draft bills).
Expenditure in the 2010 fiscal budget approved by Stortinget is estimated at NOK 907.5 billion, which is 40 per cent of Norway's gross domestic product (GDP). The way in which revenues and expenditure are organised in the budget plays a very important role for growth in the Norwegian economy and the distribution of wealth.
The Budget Department is responsible for co-ordinating work on the budget.
The Government's role in preparing the budget is based on the principle of lump-sum allocations. This means that the Government sets priorities, determines the size of the total budget and divides it among the various ministries. The individual ministers have considerable autonomy in how they spend their allotted share of the budget. Several primary objectives must be taken into account: government spending must be kept under close supervision, the work of government agencies must be carried out in accordance with political objectives, and efficient use must be made of the resources the public administration has at its disposal.
The Government's budget proposal for the next calendar year is submitted to Stortinget in the autumn, and consists of several documents. Report to Stortinget No. 1 is the National Budget, in which the Government gives reasons for its priorities and budget proposals, and in which the central government budget is presented in the context of trends in the national economy. A document known as Proposition to Stortinget No. 1, the "Yellow Book", contains a presentation of the Government's proposals for budget resolutions. The total government budget is set out, showing how funds are proposed allocated to the various budget chapters and items for each ministry. A more detailed description of the budget proposal is found in annexes to Proposition to Stortinget No 1. These annexes are produced by each ministry.
The Ministry of Finance starts work on the budget about a year before it is presented to Stortinget. About six months before the presentation, the Government holds the first of a total of three conferences to discuss the proposed budget. Work on the budget then continues until the autumn, and as soon as Stortinget has reconvened for the autumn session, the Minister of Finance presents the Government's budget proposal and the annual budget speech. Stortinget subsequently considers the budget proposal until December. From October to November, the Government's budget proposal is reviewed by the Standing Committee on Finance and Economic Affairs, which submits proposals for total revenues and expenditure and for expenditure ceilings. Stortinget debates these proposals in plenary session and approves the allocation of the budget within the budgetary ceilings. The various standing committees then discuss the parts of the budget that apply to their particular area of expertise and submit proposals as to how the funds allocated to that area should be distributed internally. On the basis of the proposals put forward by these committees, Stortinget approves the budget in December and it comes into effect on 1 January the following year.
A number of amendments to the budget are usually made in the course of the fiscal year. The most extensive changes are made in connection with the Revised National Budget in the spring and the final balancing of the budget in December.
The government accounts are prepared by the Ministry of Finance when the budget year is over, and presented the following spring in Report to the Storting No. 3. This document details how the different allocations have been spent. The Yellow Book is largely prepared by the Budget Department in close co-operation with all the other ministries.
Taxes and excise duties provide the bulk of central and local government revenues. These sources of revenue are used to finance a number of important tasks such as pensions, health care and the running of hospitals, education and road construction.
The function of the tax system is to ensure sufficient revenues for the public sector. It is important that taxes are fairly distributed. They are also used as a way of reducing the consumption of products that can damage health or the environment.
The Ministry’s Tax Law Department is responsible for the drafting, interpretation and administration of regulations relating to income and wealth tax, petroleum tax, national insurance contributions, property tax, inheritance tax, value-added tax, customs duties and various special taxes.The Department places motions on altering the laws and regulations in these areas in order to achieve clearly defined regulations both politically and technically. Regulations and agreements are continually adapted to the increasing international co-operation. The Department is responsible for ensuring that the tax and customs authorities stipulate and collect taxes and excise duties as efficiently as possible. It has also the supervisory responsibility for the activities of the State Recovery Agency.
The Tax Policy Department evaluates the economic impact of the tax system on public revenue and income distribution. The department analyses the incentive effects of specific taxes on i.e. investments and labour supply. The department is responsible for the presentation of tax proposals in the annual budgets. The department is also responsible for the Ministry's work related to the petroleum sector, and for co-ordinating presentations of structural reforms in product markets.
The Ministry of Finance is responsible for the regulation of financial markets and financial institutions in Norway. One of the main objectives is to ensure that the latter are financially sound and that there is competition between them. This aspect of the Ministry's work is the responsibility of the Financial Markets Department.
Financial institutions include commercial and savings banks and insurance companies. Other areas dealt with by this department include stock exchange activities, securities trading, private occupational pension schemes, accounting, audits and auditors.
The Financial Markets Department prepares proposals for acts and regulations and also deals with a number of individual matters, such as applications for licences. For example, an insurance company might apply for authorisation to own a bank, or an institution may submit an application for exemption from various regulatory provisions. Regulations relating to the activities of Norges Bank and the Banking, Insurance and Securities Commission of Norway are dealt with by this department.
Large revenues from the petroleum sector have resulted in the Ministry of Finance now managing significant financial assets through the Government Pension Fund. The purpose of the Government Pension Fund is to facilitate government savings necessary to meet the rapid rise in public pension expenditures in the coming years, and to support a long-term management of petroleum revenues. Petroleum revenues are different to other state revenues, since they reflect a reduction in physical petroleum assets.
The Government Pension Fund was established in 2006 and consists of two parts: "The Government Pension Fund - Global", which is a continuation of the Petroleum Fund, and "The Government Pension Fund – Norway", which was previously known as the National Insurance Scheme Fund. The inflow in the Pension Fund – Global consists of all state petroleum revenues as well as the return on the fund’s investments. The outflow from the fund is the sum needed to cover the non-oil budget deficit, making net allocations to the Fund equal to the total budget surplus including oil revenues. The return on the Pension Fund – Norway is added to the fund’s capital, and there are currently no transfers from this fund to the state budget.
The Ministry of Finance’s responsibility for the management of the Government Pension Fund is primarily handled by the Asset Management Department, whose key responsibilities include investment strategy, follow-up of the operational management and ethical guidelines for the Pension Fund – Global.
The operational management of the Pension Fund - Global is delegated to Norges Bank, which invests the fund’s capital in bonds and equities outside of Norway in accordance with guidelines issued by the Ministry. The operational management of the Pension Fund – Norway is carried out by the National Insurance Scheme Fund. The value of the Government Pension Fund at the end of 2008 was around NOK 2 400 billion, and expectations are for the fund to continue to grow in the coming years.