The government is planning to use reform of the student grant system (SU) to pay for policies aimed at stimulating economic growth, the higher education minister, Morten Østergaard, revealed today.

“We are living in a time in which we have to prioritise,” Østergaard told financial daily Børsen. “It is of course in students’ best interests that Denmark’s competitiveness is re-established so that more jobs can be created.”

Cutting SU will help free up two billion kroner annually that could potentially pay for tax cuts or lower levies on businesses that may in turn grow and create jobs.

Østergaard had already announced the government plans to reduce SU eligibility periods from six years to five, as well as the amount students could receive, and argued that without reform, the SU system will only continue to increase its burden on the welfare state.

Figures released by the Education Ministry today revealed that the number of students receiving SU had risen 32 percent in the past decade, and that the cost of SU rose 75 percent to 18.3 billion kroner in 2011.

“Expenses for SU have risen drastically and will continue to grow if the government’s ambition to make this the most capable generation is to be realised,” Østergaard stated in the press release. “But the government still maintains that Denmark will continue to have one of the world’s most generous student grant systems and ensure that a person’s financial background does not determine whether they get an education or not.”

With Denmark’s economy flat-lining, the government is under pressure to find ways to encourage job creation and economic growth. But any proposal to increase public investment is not likely to enjoy political support from the opposition, however, which the government needs if it is to pass the reforms with broad political support. Danish governments traditionally try to ensure that large reforms that affect the long-term future of Denmark are passed with large majorities with broad political consensus.

Political commentators now expect the government to combine reforms of the lowest unemployment benefit (kontanthjælp) and SU with a jobs package, due to be presented this spring.

Dubbed in the media as the 'Big Bang', the plan is likely to secure broad political backing.

Not everyone is happy with the government’s proposal to cut SU, however. A study by the trade union Dansk Magisterforening questioned the effectiveness of cutting SU, if the ambition is to encourage students to complete their studies faster.

According to Dansk Magisterforening, two-thirds of students would choose not to take an internship during their studies if the sixth year of SU eligibilty were cut, while only one in seven said it would encourage them to finish sooner.

Dansk Folkeparti (DF) was also opposed to cutting SU, arguing that doing so might dissuade students from taking an education.

“I don’t think we’re wasting so much money on SU that we should make students pay for tax corporate tax cuts,” DF spokesperson Jens Henrik Thulesen Dahl told Berlingske newspaper. “The point of SU is to make it possible for people to get an education so they can end up contributing to the economy. If you cut SU then I’m afraid that it will backfire and students will end up choosing not to take internships, yet end up spending the amount of time at school, or that they don’t even enrol because they are unsure how to finance it.”

DF voted for the current SU legislation and the party's approval is required if any changes are to be made to it.

Students living at home currently receive 2,860 kroner a month before tax, while students living away from home receive 5,753 kroner a month.