The law will roughly oblige any government to ensure that more money is spent in the public sector corresponding to the population changing composition – for example, by more people getting older.
The latest update of the Ministry of Finance’s estimates for the next few years shows that it will require an increase in public spending of between 0.5 and 0.6 percent per year.
It may immediately sound like small change, but it is billions.
Based on figures from the Ministry of Finance, Cepos’ chief economist Mads Lundby Hansen has compiled a calculation.
If public spending remains the same from 2022 to 2030, politicians can find spending of about $ 30 billion and still have balance in government finances.
If you want to follow the Ministry of Finance’s estimate of what it will cost to let the expenses follow the changes in the population, it will, according to Cepos’ calculations, cost approximately DKK 25 billion by 2030.
In addition, the politicians have already opened up the room for maneuver and have financed other agreements, such as more money for the Armed Forces, with money from the room for maneuver.
When the agreements have been paid, and the expenses have followed the development in the composition of the population, according to Mads Lundby Hansen’s calculations, there is a little over three billion kroner left.
Thus, the politicians’ amounts for various political wishes have been significantly reduced.
– It is, so to speak, the money that politicians have to do well with. It is money they can use for either lower taxes or increased public spending, says Mads Lundby Hansen.
However, this does not mean that politicians can not do things to increase the room for maneuver again, he points out.
– The government and the red support parties explicitly write in their understanding paper that there must be balance in 2030, he says.
– If you want to provide more room for maneuver, you can meet that requirement and say that you want a deficit of no more than half a percent of GDP.
– Then you will get 13 billion kroner, so you smoke up to 16 billion kroner after paying for the demographic move.
This is exactly the proposal made by the Labor Movement’s Business Council. Here, chief analyst Jon Nielsen points out that it may make good sense for the state to run a deficit for some years.
Exactly in the 2030s and 2040s, there will be especially many older people who will fill in the health care and elderly care. Therefore, for a few decades, we will have the prospect of a deficit, he says.
– But there is nothing dangerous in that, because public finances are sound in the long run.
Both Jon Nielsen and Mads Lundby Hansen have a number of other proposals for how to increase the room for maneuver towards 2030.
Jon Nielsen points out that politicians can scrap the housing job board, also known as the craftsmen’s deduction, they can lower the interest deduction and they can let the top tax limit follow the price development.
Mads Lundby Hansen, on the other hand, points to, for example, a lower graduation rate or other measures to increase the labor supply and hence hopefully employment.
As a starting point, however, the chief economist from the bourgeois-liberal think tank thinks that the government and the Folketing should refrain from adopting the Welfare Act:
– I am critical of the fact that the public sector must automatically grow with the demographics by law, says Mads Lundby Hansen.
– One can increase productivity and re-prioritize within the public budget. Therefore, I see no reason to get this automatic.