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

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.

EXPLAINED: What's in the Danish government's budget proposal?
Finance Minister Nicolai Wammen arrives at a press conference on the new budget proposal. Photo: Mads Claus Rasmussen/Ritzau Scanpix

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. 

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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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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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