EXPLAINED: What's in the Danish government's budget proposal?

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EXPLAINED: What's in the Danish government's budget proposal?
Finansminister Nicolai Wammen holder pressemøde om finanslovforslaget for 2022 samt Økonomisk Redegørelse, i Finansministeriet i København, mandag den 30. august 2021.. (Foto: Mads Claus Rasmussen/Ritzau Scanpix)

Denmark's government on Monday published a proposed budget for 2021 that dramatically scales back the heavy spending of recent years in the hope of cooling the country's overheating economy. Here's what you need to know.


What is the budget proposal? 

According to the Danish constitution, the annual budget is framed as a law, finansloven, or "the finance law", which must be passed by a majority in parliament.

When combined with Denmark's tradition of parliamentary agreements, often across the political divide, this means the budget normally contains funding for proposals and measures desired by parties outside the government. 

The process starts with the government making a "budget proposal", before entering talks with all the other political parties during which time the budget can change quite substantially. 

The parliament normally votes through the next year's budget in December, so there's still a lot of time for talks. 



What has the Danish government presented in this year's budget proposal? 

The government intends to spend about 790 billion kroner this year, a sharp reduction from the roughly 1,222 billion it spent in 2021. 

Finance minister Nicolai Wammen said at a press conference on Monday that he was proposing "a tight and responsible budget", intended to "lift the foot from the accelerator to ensure a long, strong recovery". 

Denmark's economy is expected to grow 3.8 percent this year, the highest level in 15 years, and the finance ministry in the economic analysis accompanying the budget said it now expected house prices to rise 13.1 percent this year, up from a forecast of 11.2 percent in May. 

A less expansionary budget for 2022 should act as a drag on Denmark's growth, and hopefully go some way to tempering the rate of inflation.

What measures stand out? 

  • Covid-19 'war chest'. The government is adding four billion kroner to the Covid-19 'war chest' set up last year to cover unforeseen expenses connected to the Covid-19 epidemic, something Wammen said was being included "in the hope that we will not need it".
  • Housing job scheme. The government wants to return the boligjobordningen, or “housing job scheme”, to "normal levels". The scheme gives tax breaks to those who employ cleaners, babysitters, nannies, window cleaners, gardeners, as well as for home improvements like replacing windows, insulation, installing solar cells, and painting outside walls. 
  • Labour shortages. The government will allocate 35m annually in 2022 and 2023 to fight labour shortages in Denmark, by measures to "support a better match in the labor market and strengthen the recruitment opportunities to get everyone involved". 
  • Prison service. The government wants to set aside 240m in 2022 to improve the prison service. '
  • Vulnerable people. The government is setting aside 840m for initiatives aimed at helping the most vulnerable groups in society, including the homeless, the disabled, the elderly, and vulnerable children and adults.


How much can the other parties change the budget?  

The budget proposes creating a 1.2bn kroner pot of money which other political parties can draw on to fund for their own priorities, down from 1.5bn kroner ahead of the 2021 budget, and 2.1bn kroner ahead of the 2020 budget. 

The government's support parties have said that they want this pot to be expanded, and Wammen in the press conference said that the government would consider using some of the funds earmarked for the Covid-19 war chest for other parties' priorities. 

How have the other parties reacted so far? 

The government's support parties, the Social Liberal, Socialist Left, and Red-Green Alliance parties, have criticised the budget for being somewhat lacklustre. 

“We are not committed opponents to what we’ve just seen but we believe it is unambitious,” said Lisbeth Bech-Nielsen, the Socialist Left party’s finance spokesperson. “We think that it lacks a welfare focus.” 

The party wants a maximum of 24 pupils per class in primary school, among other measures. 

The Social Liberal party, on the other hand, want more money for climate measures. 

“We want to do something good for the climate and take some steps towards our 70 percent goal,” the party’s finance spokesperson Andreas Steenberg said.  

Mai Villadsen, from the Red Green Alliance agreed that the government was not doing enough to reduce Denmark's impact on the climate. 

“The government us completely overlooking the green transition with this budget bill,” she said. “Nature and the climate are in crisis. Investment in green transition is needed now – not just after climate change has swept over us.” 


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