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Opposition leaders united on tax cuts

Published: 01 Sep 2005 11:22 GMT+02:00
Updated: 01 Sep 2005 11:22 GMT+02:00

The conservative opposition parties have come to an "historic agreement" over reforms to the Swedish taxation system.

Buoyed with confidence following a two-day meeting in Bankeryd, the leaders of the four parties announced plans to invest at least 45 billion kronor in cuts in income tax.

The ceiling for sickness pay will not be reduced, but savings will come from unemployment benefit and road insurance.

Christian Democrat leader Göran Hägglund said that the value of the meeting between the leaders could not be underestimated.

"Never before have our four parties in opposition been so united on something as big and as important as this," he said.

The leader of the Moderate Party, Fredrik Reinfeldt, declared that there is no longer a question mark over whether the conservative alliance was ready for power.

Specifically, the agreement means that a conservative government - assuming, of course, that they pull off a victory in the September 2006 election - will initiate a 37 billion kronor cut in income tax by the end of 2007, and then a further cut of 8 billion kronor over the following two years.

The precise details of the cut are not yet clear but an employee earning the average wage could expect around 700 kronor extra in their pocket each month.

According to the alliance, the first stage of the reform is completely financed. Nevertheless, the leader of the Liberals (Folkpartiet), Lars Leijonborg, put his foot down when it came to a lowering of the ceiling for sickness benefit.

"We won't associate ourselves with increased insecurity," he said.

But the conservative alliance still plans to drive through other savings, totalling around 15 billion kronor, in sickness benefit. Traffic injuries will be paid for through road insurance and the basis for calculating sick pay will be changed.

The income tax cuts will also be financed through savings in the pensions paid to those who take early retirement.

Unemployment pay will fall after 200 days to 70% of the previous salary and the top payment will be 680 kronor per day. After 300 days a basic rate of 320 kronor per day will be paid. Contributions to the unemployment fund (a-kassa) will be compulsory and the charge will be raised to a maximum of 300 kronor per month.

"The motivation for working is going to be a lot clearer. There's going to be more left over when you work," said Reinfeldt.

The alliance also reached agreement on a tax package for employers, with the most significant change being a reduction in the employer's contribution for small firms taking on new staff.

"The business package is fantastic for all small companies in Sweden, but also for people who don't have a job," said Centre Party leader Maud Olofsson.

The proposals brought an immediate, and not unexpected, attack from Prime Minister Göran Persson, who said that the sick and the unemployed would pay for the cuts.

"I'm surprised that the Liberals are going along with this," he said to TT.

Finance Minister Pär Nuder was equally sceptical:

"The point of this is to push down salaries. The unemployed will be forced to take any old jobs and this will hit those who are weakest."

TT/The Local

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Paul Rapacioli (paul.rapacioli@thelocal.com)

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