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What is in Denmark’s draft 2023 budget?

Finance Minister Nicolai Wammen is scheduled to present a draft budget for Denmark in 2023 on Wednesday. Several elements of the draft budget have been reported ahead of its publication.

What is in Denmark’s draft 2023 budget?
Printed versions of the government’s draft budget for 2023 were distributed to ministers on August 30th. Photo: Philip Davali/Ritzau Scanpix

People in Denmark who are worst-affected by increasing prices and inflation can expect a helping hand from the government provided by the 2023 budget, according to reports by Danish media including broadcaster DR in advance of its official presentation on Wednesday.

Printed versions of the government’s draft budget for next year were distributed to ministers late on Tuesday. 

Notable points of the draft budget include two billion kroner set aside for inflation aid, a 1.3 billion kroner Covid-19 reserve and 100 million kroner to boost internet access in rural Denmark. 

The government has already paid out relief this year to around 400,000 homes hit by high energy bills, while rent increases have been capped at 4 percent.

Additional assistance is now planned according to reports on the draft budget.

Up to two billion kroner is earmarked for inflation assistance in the budget, DR writes. Wammen confirmed to the broadcaster that money would be spent tackling the issue.

“We are putting aside a framework to give additional inflation help. We will sit down with parliamentary parties and say, ‘here is an amount which we should look at together and see how it can best be used for Danes badly affected by inflation at the moment,” the minister said.

“This will be a tight budget because we don’t want to fan the inflation that has hit Denmark and the rest of Europe,” he also said.

The inflation help will reportedly be paid for by cuts to public infrastructure spending. This means additional money will not be spent, thereby limiting further inflation, the government reasons.

Specifics as to who would receive the inflation help are not clear in advance of the draft budget presentation, scheduled for 1pm on Wednesday.

Inflation in Denmark in June was 9.7 person, according to Statistics Denmark. This encompasses food and energy prices as well as other essentials.

The draft budget sets aside 600 million kroner for a so-called “negotiation fund” (forhandlingspulje) for which the target of spending can be thrashed out between parties in parliament. The pool would rise to 1 billion kroner annually in 2024-26.

The amount, which can for example be spent on the health system if a need was deemed to arise, is lower than it was in the last two budgets (1.2 billion and 1.5 billion kroner in 2020 and 2021 respectively). The government is reported to favour mental health services and the elderly as areas which could benefit from the fund in 2023.

Additional spending on the health service (outside of the negotiable fund) is set at 447 million kroner in 2023 and 2.5 billion kroner during the years 2024-27.

Also included in the budget is 615 million kroner for ongoing management of Covid-19, 1.3 billion kroner for civil law measures related to company taxation in 2023-26, 760 million kroner on elementary education in 2023-26 and a Covid-19 reserve fund of 1.3 billion kroner.

Up to 100 million kroner could also be spent on improving broadband internet in rural regions, a break with the government’s previous stance that the market should ensure improvements in this area without state spending.

The overall amount of spending and number of new measures in the budget are relatively limited, reflecting what the government is calling a “tight and responsible” approach given the unstable broader economic climate.

Inflation is not expected to decrease as much as the Ministry of Finance projected in an earlier prognosis from May this year, news wire Ritzau reports.

However, while consumer prices are expected to grow by 3.3 percent in 2023, private sector wages are forecast by the ministry to go up by 3.6 percent.

READ ALSO: Denmark’s economy grows with clouds visible on horizon

The draft budget must be discussed and negotiated with other parties – normally the government’s allies on the left of centre – until a finalised version is agreed on with backing from enough parties to see it voted through parliament.

Left wing parties the Red Green Alliance (Enhedslisten) and the Socialist People’s Party (SF) have already called for more spending on some elements of the budget, while the opposition Conservatives said increased inflation assistance was not the correct way to bolster the economy.

Negotiation of the budget usually takes place during the autumn with the final version concluded no later than December, but this could be disrupted by a potential general election this autumn.

READ ALSO: How likely is Denmark to have a general election ahead of schedule?

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’Record number’ of foreigners move to Denmark for work

A record number of people moved to Denmark from abroad for work reasons in 2022, according to national agency Statistics Denmark.

’Record number’ of foreigners move to Denmark for work

A total of 31,600 people moved to Denmark to work last yer, according to a Statistics Denmark review released on Tuesday.

The figure corresponds to a 24 percent increase compared to 2021 and is the highest in the history of the statistic, which goes back to 1997.

The average number of work immigrants in the decade prior to 2022 was 21,000 people.

Specifically, the number describes the amount of people who were given work permits in Denmark in a given year.

The fact that the statistic has reached a historical high is remarkable, according to an economist.

“In a time with a major labour shortage, Danish businesses have succeeded in recruiting labour from abroad. That is a big success story, which certainly ensures growth and stability in the Danish economy in the period after the coronavirus pandemic,” senior economist Tore Stramer of the Danish Chamber of Commerce told news wire Ritzau.

“The large inflow of foreign labour has held of a threatening overheating of the labour market and ensured stable high growth in the economy,” he said.

READ ALSO: Danish parliament set to vote through relaxed work permit rules

Broken down by nationality, the largest proportion of people moving to Denmark to work came from EU countries in Eastern Europe.

Some 6,000 Romanian nationals were granted Danish work permits in 2022, with 3,700 coming from Poland.

Employment levels in Denmark continue to set records, confounding an uncertain economic outlook and high inflation.

READ ALSO: Danish economy defies headwinds to grow by 3.6 percent

Foreign labour is a driving factor for high employment levels, Stramer said.

“The large inflow of foreign labour has been the absolute primary factor behind the strong rise in employment in recent years,” he said.

“Specifically, foreign labour has driven around 40 percent of the overall increase in employment over the last three years,” he said.