The tax cuts and benefits dividing Swedish politicians ahead of the autumn budget

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The tax cuts and benefits dividing Swedish politicians ahead of the autumn budget
Finance Minister Magdalena Andersson. Photo: Fredrik Sandberg / TT

With Sweden's government preparing to present next year's budget in September, extensive measures are expected to be announced to kick-start the economy. But exactly what form those should take may be hard for the parties to agree on.


Unemployment insurance funds

The Swedish Trade Union Confederation (LO) has asked for support for the unemployed to be factored into the new budget, given the large scale of job cuts due to the coronavirus pandemic. One of the issues on the table is temporary changes to unemployment insurance funds, called A-kassa in Swedish.

Changes to these funds were introduced by the government this spring, meaning more people were eligible to claim payment if they lost their jobs, and the maximum amount that can be paid out was increased, to support the large numbers of people who became unemployed due to the crisis.

LO has asked for these changes to be made permanent.

"It doesn't make society better in any way if people become poor because they lose their job," the organisation's spokesperson Susanna Gideonsson said.

Sweden's centre-left Social Democrat-Green government has been working with the right-of-centre Centre and Liberal parties on many policy points after agreeing to a 72-point policy deal in January 2019. A reform of Sweden's unemployment insurance funds was actually one of the points in that agreement.

However, amongst the right-of-centre parties there is strong opposition to permanently making unemployment funds and sick pay more generous. 

"We need to focus more on the 'work first principle' and that means A-kassa must be a temporary insurance policy, not something to live off long-term," said Liberal Party leader Nyamko Sabuni.


Sick pay

Usually, workers are paid nothing for the first day of sickness in Sweden, and then 80 percent of their usual salary for each day after that when they're too ill to work. 

During the pandemic, the government has covered the cost of sick pay (although still at 80 percent) for the first day of illness in an effort to encourage sick people to take time off work when they need it.

LO thinks this measure is necessary even in normal times, and has also asked for changes to the time limits attached to sick pay.

Four of the leaders of Sweden's eight parties. Photo: Fredrik Sandberg/TT

Home maintenance deductions

Discussion is also ongoing about Sweden's ROT and RUT deductions -- tax deductions for home-owners on services for home maintenance. 

In the January deal, the parties agreed to raise the RUT deduction (which is for cleaning, laundry and maintenance costs) and extend it to cover more services. This was something that the Centre Party in particular has pushed for.

But LO is critical of this proposal, arguing that it ends up benefiting high earners who are more likely to own their homes and pay for this kind of servce.


What to expect?

There will certainly be some tax cuts in the new budget, because the January deal states that households need to be compensated for higher climate and environment taxes, which the Green Party pushed for.

Finance Minister Magdalena Andersson has said that this means there must be a focus on jobs in the budget. For the Social Democrats, that translates to investing in welfare and public investments.

For the Centre and Liberal parties, tax cuts are the way to create jobs and give the economy a boost, with the Centre hoping to reduce tax on income and pensions and the Liberals also calling for lower income taxes, but also lower employer contributions and corporate tax.

Either way, the September budget will be an unusual one, taking place in the midst of an ongoing national crisis. The National Institute of Economic Research estimates that the new measures may amount to 80 billion kronor, and negotiations are also ongoing about a supplementary budget with additional crisis measures.


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