2012-2013 budget unveiled

New government’s first budget aims to “kick-start” economy through increased spending

Can you have your cake and eat it too? Conventional wisdom says no, but with their first budget plan since the shift of power, the new Socialdemokraterne- RadikaleSocialistisk Folkeparti (SRSF) coalition appears to be giving it a shot.

Many of the elements of the new budget – which is expected to be released in its entirety on Thursday – will increase state spending at a time when the budget deficit has increased. But where the money will come from remained a mystery.

A number of the new budget items reinstate spending cuts made by the previous VenstreKonservative (VK) government. Here are a few of the major points:

Families: VK limited the stateÂ’s annual child support checks to 35,000 kroner per family. That limit has now been eliminated, meaning that many families will get larger child benefits. The government will also pay for fertility treatments and voluntary sterilisations.

Welfare: VK and Dansk Folkeparti (DF) introduced specialised welfare programmes that reduced the cash benefits for new immigrants. Those programmes have now been eliminated and going forward all residents in need of state support will receive the same welfare benefits.

Higher education and research: Universities will get an extra one billion kroner over two years to cover costs associated with a predicted increase in the number of students. Moreover, students will no longer pay administrative fees, and prospective MasterÂ’s students will have their prerequisite course tuitions paid. The government will also fund 1,500 more state-supported internship positions.

Infrastructure and job creation: Some 17.5 billion kroner will be invested over two years in infrastructure projects, such as a new rail line between Copenhagen and Ringsted, a project to widen the Holbæk motorway, erosion protection efforts along JutlandÂ’s west coast, and renovations to public housing. Prime minister Helle Thorning-Schmidt has said that these “kick-start” projects will create 20,000 new jobs in 2012-2013. The Danish Construction Association predicts 10,000.

Tax break: The unpopular ‘multimedia taxÂ’ introduced by VK will be eliminated, saving 525,000 Danes with employer-provided laptops and mobile phones 3,000 kroner per year.

Not everyone, however, can look forward to a cash infusion. Smokers and junk food lovers will be taxed higher on their vices, while international corporations will also see higher tax bills. SRSF plans to raise revenue by closing a number of tax loopholes going back nearly 20 years which allowed international corporations with activities in Denmark to escape paying corporate taxes.

All told, the spending increases in the new budget are not as big as the minister of the economy and interior, Margrethe Vestager (R), would like. She noted that VK underreported the deficit for 2012, making it imprudent to spend more. But Denmark will still meet the EUÂ’s financial responsibility benchmarks, despite the larger deficit, she added.

The opposition parties have claimed that the new budget is irresponsibly “gambling” on an economic upturn.

“If there are new setbacks in the economy in three years, we will have already played our cards with the billions we spent. It’s gambling with the national economy,” Konservative financial spokesperson Mike Legarth told Politiken newspaper.

“It’s not difficult to give money away, but where is it going to come from and how is it going to be financed?” the former finance minister, Clause Hjort Frederiksen (V), said. Making it cheaper to do business in Denmark is a better way to kick-start the economy, he added.

But Vestager maintained that the best way to quicken DenmarkÂ’s flagging economy when global economic indicators are so shaky is to increase spending now on the right things, namely education, infrastructure and people.

“When people are working, they also pay taxes. At the same time, it helps keep businesses going and that creates internships – which we also need,” Vestager told DR.

She emphasised that the spending had already been planned for later years.

“It’s just a matter of moving the investments forward,” she said, while acknowledging that they would indeed register larger deficits for 2012-2013.

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