BUDGET STATEMENT. From the 2006 Spring Fiscal Policy Bill

Transcription

1 BUDGET STATEMENT From the 2006 Spring Fiscal Policy Bill

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3 Budget statement Economic and budget policy guidelines

4 Everyone must have a chance to help build tomorrow s Sweden Driving down unemployment and increasing employment is one of the Government s main tasks. Since 1994 employment has gone up by approximately But this is not enough. The Government s long-term goal is full employment. The Swedish economy is developing strongly, Growth in 2005 was higher than expected and surpluses in the public finances exceeded forecasts. The trend in the labour market, moreover, turned in the second half of The prospects for continuing strong economic development look good. The international economic situation is good, Swedish households are expected to increase their consumption and the rate of investment growth is high. The overall growth rate is expected to be 3.6 per cent in 2006 and 3.0 per cent in General government finances are also developing strongly. In 2006 central government debt is expected to decline both in kronor and as a percentage of gross domestic product (GDP). The labour market is continuing to show a positive trend. It is estimated that some more people will be employed in 2006 than in 2005, with more than half the increase expected in the private sector. However, it is not just employment that is on the rise the supply of labour is increasing too. Many of those who have been unemployed for an extended period may still have difficulty finding work. Consequently, measures to bring down unemployment must continue. Moreover, it is essential to anticipate the economic problems associated with good times, such as incipient labour shortages in certain industries and sectors. The Spring Fiscal Policy Bill contains new measures to reduce unemployment and increase employment. With these measures, open unemployment is expected to fall to approximately 4.5 per cent at the end of This means that the unemployment target according to Statistics Sweden s previous estimation methods will be reached by the end of The favourable economic situation must be used to equip Sweden for the future. This Bill proposes new initiatives for the elderly, young people, integration, dental care, housing, the environment and enterprise. Welfare must be extended so that social disparities can decline. Efforts to build a sustainable society must intensify. Everyone must have a chance to help build tomorrow s Sweden. The Swedish model must be developed not dismantled. The Budget Statement contains proposals for short and long-term economic and budget policy guidelines. It thus provides the basis for a broad discussion of economic policy. The Spring Fiscal Policy Bill is based on an agreement between the Social Democratic Government, the Left Party and the Green Party. Hawbir, Kjell and Cecilia, construction workers 4

5 Strong growth Continued strong global growth Despite high oil prices in 2005, the international economy continued to grow at a good rate, mainly due to the strength of the industrial economy. Even more countries and regions are expected to show strong growth in In the United States domestic demand has driven growth for an extended period. The growth outlook appears bright for 2006 as well, although the less expansive monetary policy is expected to restrain the development of house prices and lead to lower building activity. Growth in the second half of 2006 and in 2007, however, is expected to be slightly lower. In Japan the economy has continued to gain strength after many years of recession. Growth came to 2.7 per cent in 2005 and the outlook remains bright. The labour market is gradually improving, households are becoming more and more optimistic about the future, the business sector is reporting good profits and prices have started to rise. At the same time, the currency is weak and monetary policy expansive. In the euro area growth picked up considerably in the second half of A continued strong trend for investment will drive growth in the period ahead. Future-looking indicators reveal vigorous growth in early Consumption is expected to increase as the situation in the labour market brightens. Growth of 1.7 per cent is anticipated in Germany in GDP growth and CPI Percentage change unless otherwise indicated Domestic gross product (GDP) World United States Japan Euro area UK Norway Denmark Finland Sweden Consumer Price Index (CPI) United States Euro area Japan Sweden Sources: Statistics Sweden and Ministry of Finance. High growth rate in Sweden The Swedish economy is developing strongly, Households are increasing their consumption as a result of rising incomes, a good asset position, low interest rates and higher employment. Exports continue to grow as a result of good developments in Swedish export markets. The world market is expected to grow at a rate of 7.8 per cent in 2006 and 7.2 per cent in With capacity utilisation at a high level and profitability in the business sector being good, investment growth will continue to be high in the coming years, even if investment is not expected 5

6 to develop as strongly as in Increased consumption is anticipated in the local government sector, partly in response to the Government s bonus jobs initiative. GDP by type of expenditure Percentage change Household consumption expenditure General government consumption expenditure Central govt Local govt Gross fixed capital formation Changes in stocks Exports Imports GDP, actual GDP, adjusted for calendar effects Contribution to GDP growth, percentage points. 2 Estimated actual GDP growth in 2006 is lower than the underlying growth rate adjusted for calendar effects because this year contains fewer working days than Estimated actual GDP growth in 2007 is lower than the underlying growth rate adjusted for calendar effects because this year contains fewer working days than Sources: Statistics Sweden and Ministry of Finance. Stronger domestic consumption, continued good investment growth, strong exports and higher general government consumption all lead to expected GDP growth of 3.6 per cent in 2006 and 3.0 per cent in Taking calendar effects into consideration, the estimated growth is 3.9 per cent in 2006 and 3.1 per cent in Despite a substantial increase in employment during 2006 and 2007, there are still expected to be unused resources in the Swedish economy at the end of The growth forecasts for both 2006 and 2007 are being revised upwards relative to the figures in the Budget Bill for The Swedish economy has developed well in recent years. Between 1995 and 2005, Sweden has had higher economic growth than both the EU and OECD average. Contributions to GDP growth Percentage points Household consumption expenditure General government consumption expenditure Gross fixed capital formation Changes in stocks Net foreign trade GDP Sources: Statistics Sweden and Ministry of Finance. Between 1995 and 2004, Sweden s real gross national income (GNI) per capita increased more than the average for the fifteen pre-enlargement EU states and at the same rate as in the United States. Sweden also has lower inflation, a higher employment rate, less unemployment and lower interest rates than the EU average. As a consequence of active decisions, Sweden has undergone a series of institutional and structural changes over the past ten years. The National Institute of Economic Research estimates that the potential productivity increase resulting from these changes will rise to an average of 2.2 per cent per year from 2005 up to and including Real GNI per capita Average annual change, percent Sweden United States EU15 Sources: National Institute of Economic Research, OECD and Statistics Sweden The quality of statistics is crucial for the economic policy decisions that are taken, both nationally and in the EU. At present there are problems with regard to the quality of economic statistics that must be remedied. This is especially true of the national accounts. There is also a need to develop statistics in a number of other areas. In this Bill, the Government proposes an initiative to improve the quality of economic statistics and material flow statistics. Stable prices Low and stable inflation is a precondition for good growth and full employment. The overriding task of monetary policy, as defined by the Riksdag, is price stability. Subject to this basic principle, the Riksbank (Swedish central bank) conducts monetary policy independently. The Riksbank has defined price stability such that the increase in the consumer price index must be limited to 2 per cent per year, plus or minus 1 percentage point. The Government supports this orientation of monetary policy and endorses the target for inflation. In 2004 and 2005 inflation was restrained by 6

7 high productivity growth, moderate pay increases, relatively weak domestic consumption and increased competition. In early 2006 inflation has continued to be low, but it is expected to gradually increase during the year and in 2007 as employment and demand rise. However, low rent increases, a stronger krona and declining oil prices are expected to moderate the rise in inflation. The Riksbank commissions Statistics Sweden to calculate a measure of underlying inflation, UND1X, which excludes the direct effects of changes in interest rates, taxes and subsidies. A moderate rise is expected in underlying inflation during 2006 and The estimates put UND1X inflation at approximately 1.7 per cent at the end of Inflation measured by the consumer price index (CPI) rises slightly faster since CPI, unlike UND1X, is affected by the development of mortgage rates. In light of the fact that the inflation target has been in force for ten years, the Riksdag s Parliamentary Committee on Finance decided unanimously in spring 2005 to make an evaluation of the Riksbank s monetary policy between 1995 and The Government welcomes this evaluation. Well-functioning wage formation makes lower unemployment, higher employment and output growth possible. The social partners have acted with considerable responsibility in recent years. The nominal rate of wage increases since the mid- 1990s has been about half as high as in the 1980s, while real wage growth has been substantially better. Key indicators Percentage change unless otherwise indicated CPI Hourly pay Open unemployment 2, Labour market programmes Number of persons employed Real disposable income Household net saving ratio, level Balance on current account German 10-year government bond rate Swedish 10-year government bond rate TCW index There was an upturn in bond rates after the summer of 2005 and they have continued to rise since in response to higher key interest rates. The rise in interest rates has been about the same in the United States, the euro area and Sweden. In the United States the Federal Reserve is continuing to raise its key interest rate while in Europe the European Central Bank (ECB) began a tightening of monetary policy during the autumn. Mortgage rates Per cent Source: EcoWin. 95 Rörlig ränta year År Floating rate Overall the ECB has raised its key rate to 2.5 per cent. In Sweden the Riksbank raised its key rate by 0.5 percentage points in January and by a further 0.25 points to 2.0 per cent in February. The interest rate increase has led both floating and fixed mortgage rates to rise, though from historically low levels. Rising profits for listed companies and low interest rates have favoured the stock market. The Stockholm stock exchange and the exchanges in the euro area and in Japan have enjoyed strong development since last autumn. The stock exchanges in the United States have also gone up, though considerably less. The Swedish krona weakened during much of 2005, partly because interest rates were lower in Sweden than elsewhere. In the longer term, however, strong development in the Swedish economy and a narrower difference in interest rates will help strengthen the krona Annual average. 2 Per cent of labour force. 3 Figures refer to Statistics Sweden s labour force survey (LFS) after reorganisation of the statistics. 4 Excluding savings in occupational pension schemes. 5 Per cent of GDP. Sources: Statistics Sweden, National Labour Market Board, Riksbank and Ministry of Finance. 7

8 Sound public finances Sweden must continue to have sound public finances. This is a prerequisite for sustainable growth and a stable social welfare system. Surpluses in good times make it possible to avoid cutbacks when times are harder, when the welfare system is most needed. Sound public finances are also a question of fairness to future generations. The Government has two overall fiscal policy objectives: the public finances surplus target and the central government expenditure ceiling. Surplus target will be met The surplus target requires public finances to show a surplus of 2 per cent of GDP on average over a business cycle. The surplus target was introduced in 2000 to reduce net public sector debt, create a buffer to meet future demographic strains on public welfare systems and help towards a comfortable margin to the deficit limit of 3 per cent of GDP set in the EU Stability and Growth Pact. The public sector (general government sector) consists of central government, local government and the public pension system. The public finances surpluses have so far allowed a reduction in central government debt relative to GDP and the simultaneous accumulation of large assets in the pension system. In 2006 central government debt is expected to decline both in kronor and as a percentage of GDP. In the period since the surplus target was introduced in 2000 up to and including 2008, average public sector net lending (financial saving) is estimated at 2.0 per cent of GDP. This means the surplus target is being met. On the basis of the overall surplus target, every year the Government specifies a surplus target for the next fiscal year. The target is determined with reference to resource utilisation in the economy. Lower net lending in a recession helps soften the impact of a downturn while higher net lending during an upswing lessens the risk of overheating. The surplus target set for 2005 was at least 0.5 per cent of GDP, which was surpassed by a broad margin. In 2005 net lending amounted to 2.7 per cent of GDP. The main reasons for this good result were higher tax revenues, lower central government expenditures and higher net lending than expected in the local government sector. The surplus target set for 2006 is at least 0.5 per cent of GDP. On current forecasts, this target will also be passed by a broad margin. Net lending is expected to amount to 2.0 per cent of GDP in Net lending in the EU Per cent of GDP Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain 0,2 0.1 Sweden UK Total EU Total EU Note: The Government forecast for 2005 and 2006 is shown for Sweden. For other countries the European Commission forecast is shown. Sources: European Commission and Ministry of Finance. Compared with other EU countries, general government net lending is high in Sweden. In 2005 net lending in the EU averaged -2.7 per cent of GDP, while in Sweden it was 2.7 per cent. In 1997 Eurostat, the EU statistics authority, decided that savings in the Swedish premium General government fi nances Per cent of GDP Expenditure ratio Revenue ratio Tax ratio incl. EU Net lending Net debt Consolidated gross debt Source: Ministry of Finance. 8

9 pension system should be classified as general government lending. Now Eurostat has changed its decision. Beginning in 2007, savings in the premium pension system will not be counted as part of general government lending. The Government will present proposals on how to manage this change in the Budget Bill for Expenditure ceilings are being met A system of central government expenditure ceilings was introduced in 1997 to prevent temporarily higher income being used to finance permanently higher expenditure. Since the system s introduction the expenditure ceilings have been met every year, contributing to a strict budget policy and sound public finances. In 2005 the ceiling was met by a margin of SEK 5.7 billion. In 2006 and 2007, the expenditure ceilings amount to SEK 907 billion and SEK 949 billion respectively. With the proposals in this Bill, the margin to the expenditure ceiling will be approximately SEK 2.9 billion in 2006 and nearly SEK 9.7 billion in Proposed levels for the 2008 and 2009 expenditure ceilings will be presented in the Budget Bill for The Government s assessment in the Budget Bill for 2006 was that economic developments would allow an expenditure ceiling of SEK 982 billion for Expenditure ceilings SEK billion Nominal Source: Ministry of Finance In the Budget Bill for 2005 the Government announced that it was considering the introduction of a special employment margin. In the Budget Bill for 2006 the Government took a number of measures to boost employment and lower unemployment within the scope of the present budget policy framework. In the same Bill the Government took the view that the existing opportunities for pursuing an active fiscal policy 03 Per cent of GDP Per cent of GNP within the current regulatory framework for fiscal policy must be evaluated further before a special employment margin can be proposed. A stronger economy in the local government sector A good economy in the local government sector is crucial to the welfare system. During the last year, the economic performance of the local government sector has improved considerably, partly as a result of deliberate central government measures as well as active efforts by many local governments to improve their economy. In 2005, 94 per cent of all municipalities showed a surplus. This is an improvement compared with the four previous years, when between 61 and 68 per cent of municipalities were in surplus. County council finances have also improved. Seventeen of twenty county councils reported a positive economic performance in The Government expects a further strengthening of the economic performance of the local government sector as a whole in This is due to higher tax revenues, increased central government grants and targeted employment measures. Employment in the local government sector is also expected to rise as a consequence of strong underlying economic development and the employment package included in the Budget Bill for Municipalities and county councils need planning conditions with long-term stability. The Budget Bill for 2006 therefore proposed higher general government grants to the local government sector in 2007 and Finances in the local government sector SEK billion unless otherwise stated Revenue Taxes and government grants Other revenue Expenditure Consumption Change in volume, % 1,6 1,8 1,5 1,2 Other expenditure Net lending Per cent of GDP Surplus/deficit before extraordinary items Note: Government grants and taxes are reported together as the effect of reforms that influence the tax base is neutralised by adjustments in government grants. Sources: Statistics Sweden and Ministry of Finance. 9

10 Equal pay for work of equal value in the public sector In their agreement on cooperation the 121-point programme that they entered into on 4 October 2002 the Swedish Social Democratic Party, the Left Party and the Green Party expressed the need to look over wages and salaries in the public sector as follows: Pay levels are much too low in a number of areas in the public sector. The pay level in occupations where women predominate must be raised. The parties in cooperation consider it a matter of urgency to create economic scope to reduce the pay differentials. For this purpose, and to enable them to employ more staff, local governments will be given extra resources in the years ahead. It is important that the social partners use this additional margin to raise pay levels in occupations where women predominate. Local government employers have a particular responsibility to raise pay levels in these occupations. They must do so within a sound wage formation framework. The local government sector will be given additional resources over the next few years. Early talks will be held with the Swedish Association of Local Authorities and Regions ahead of the next round of collective bargaining to clarify the requirements for reducing the pay gap between women and men. Certain central government grants to the local government sector as compared with 2004 levels SEK million, accrued amounts General grants and employment support of which health care guarantee Extra staff in pre-schools Extra staff in schools Environmental investments in public buildings Training of staff in elderly care and health care (Steps for Skills) Support to care of misusers, psychiatry etc Support for family carers of elderly people Recruitment incentives including bonus jobs and educational leave replacement posts Ill health initiative Development plan for elderly people Integration initiative Youth initiative Incentive measures, temporary Asylum Act Total For tax expenditure the Ministry of Finance forecast for future disbursements is given. This applies to employment support up to and including 2006, support for environmental investments in public buildings, recruitment incentives, bonus jobs, educational leave replacement posts and Steps for Skills. 2 The investment in extra staff in schools amounts to SEK 5 billion in the 2005/06 academic year, compared with the level in 2001/02. From the 2006/07 academic year onwards, the entire grant will be included in the general government grant to the local government sector. 3 Refers to new initiatives in this Bill. 4 Three-year initiative starting in 2006, with the first disbursement in Source: Ministry of Finance. Milena, employment officer 10

11 More jobs lower unemployment Employment rate in 2004 Per cent of population aged 15 to Sweden United States Note: Employment rate as defined by the EU. Sources: OECD and Eurostat. Men EU 15 Women EU 25 The Government s short-term target is to drive open unemployment back down to 4 per cent and raise the regular employment rate to 80 per cent. The long-term goal is full employment. In the Budget Bill for 2006 the Government launched a broad employment package that will give up to people the opportunity of a job, work experience, education or training. This package, which includes bonus jobs, work experience places, educational leave replacement posts and more places in advanced vocational training, is now being implemented in the labour market. So far local governments and government agencies have given notification that they want to recruit about people to bonus job positions. Approximately a quarter of these have started their employment. Employment took an upward turn in the autumn of 2005 as a consequence of a stronger domestic economy. The positive trend has since continued during the winter. Indicators point to continued employment growth; the number of newly announced positions with a duration of more than 10 days posted at the country s employment offices and the number of positions available according to Statistics Sweden s vacancy statistics are increasing. In addition, the quarterly barometer published by the National Institute of Economic Research shows positive recruitment plans. Employment is expected to increase by about in 2006 and approximately in 2007, with the private sector accounting for around 65 per cent of the new jobs. The employment rate in Sweden is among the highest in the EU and OECD. The target set in the EU Employment Strategy is an employment rate of 70 per cent. In 2005 Statistics Sweden s Labour Force Survey underwent a major reorganisation. The concept of unemployment has been redefined and the survey methods changed. As a result, unemployment figures have gone up without any affect on real unemployment. An open unemployment level of 4.5 per cent is equivalent to approximately 4.0 per cent according to the previous definition. These circumstances must be taken into account when evaluating the Government s target for unemployment. In this Bill the Government proposes measures to lower unemployment and increase employment. These measures are expected to bring open unemployment down to approximately 4.5 per cent at the end of This means that the unemployment target according to Statistics Sweden s previous estimation methods will be reached by the end of New initiatives for more jobs and lower unemployment The Government proposes measures to supplement the autumn s employment package. It believes these extra measures are necessary even though employment is expected to continue to rise in This is because the supply of labour is rising along with employment people are returning to work after sick leave and many students are entering the labour market. As a result it can still be difficult for unemployed people to get a job, even though there are more positions to apply for. This requires continued measures to reduce unemployment, with a particular focus on the long-term unemployed, young people, Swedish people from immigrant backgrounds and people with disabilities. In addition, a range of measures must start to be taken now to forestall the economic problems associated with good times. In order to prevent the economic upswing coming to a premature end, the risk of a future labour shortage must be minimised, for example by better matching and increased mobility in the labour market. Initiatives for businesses and growth A number of measures are proposed to strengthen the climate for business, particularly among small enterprises. The basic financing of Almi Företagspartner AB (Almi Business Partner) will be secured. To 11

12 strengthen the development of small and medium-sized enterprises (SMEs), the Government is allocating additional resources of SEK 70 million to ALMI Företagspartner AB from 2007 onwards. Reinforced investment in innovation. In recent years the Government has committed major resources to measures to support innovation. ALMI Företagspartner AB and Innovationsbron AB have joint responsibility for providing financing and advice to all forms of innovation. To further strengthen this work, the Government is allocating SEK 10 million per year to ALMI Företagspartner AB in 2007 and Research and development at SMEs. The Government proposes to boost the resources available to the Swedish Agency for Innovation Systems by SEK 100 million from 2007 onwards. These funds are to be used for the programme Forska & Väx ( Research & Grow ), which targets SMEs. As stated in the Budget Bill for 2006, a five-year drive will put a total of SEK 900 million into research and development at SMEs between 2006 and Targeted business initiatives. In order to improve business opportunities for immigrants to Sweden, a proposed SEK 20 million per year will be put into ALMI Företagspartner AB and the Swedish Association of Ethnic Entrepreneurs (IFS). Investment in Industrial Development Centres. The Government proposes that the Swedish Agency for Economic and Regional Growth (Nutek) should be allocated SEK 10 million more per year in 2007 and 2008 to support Industrial Development Centres (IDCs). These funds, along with previously approved resources, will be used for product development at SMEs. Promoting development nationwide. The Government wants to continue to conduct an ambitious rural policy that will generate growth and employment throughout the country. The next programme for will have broader coverage than the present programme. Sweden will be allocated more funds from the EU budget. Furthermore, over and above the necessary Swedish co-financing, the Government intends to provide additional national resources to increase the scope of the programme. The proposal to be submitted to the EU Commission will include measures for energy and the environment, such as pastures and organic farming, renewable energy, rural promotion measures and initiatives aimed at small businesses. The contents of the programme will be prepared at the Government Offices during the spring of The Government intends to return to the issue of new programmes for for the European Social Fund and the European Regional Development Fund, as well as the European Fisheries Fund, in the Budget Bill for Strategic development programmes for Swedish industry. Sweden is one of the foremost countries in the world for knowledge-intensive industrial production. To strengthen Sweden s advantage, the Government, acting in association with the business sector and trade unions, has drawn up strategies for a number of key Swedish industries: forestry and wood products, metals, vehicles, aerospace, pharmaceuticals, biotechnology and IT/telecommunications. These industries account for more than 80 per cent of the business sector s investments in research and development. The investment in these programmes will involve a total of SEK 1 billion in state funds between 2006 and The Government is considering extending this initiative to more industries. If it does, the first in line will be the tourism industry and other parts of the services sector. The Government intends to revert to this issue in the Budget Bill for Organic food exports. In 2007 and 2008, SEK 2.5 million will be provided each year to promote organic food exports. Wealth tax in unlisted companies. In recent times, attention has been drawn to the wealth assessment of shares in unlisted companies. Several tax rulings on excess liquidity in unlisted limited liability companies have been appealed and the Swedish Tax Agency has issued more information. In order to prevent tax planning there must be rules that make it impossible to place private wealth in companies so as to avoid wealth tax. At the same time, there may be a need to evaluate the present regulatory system. However, this issue should 12

13 be seen in a larger context and be part of the major tax review previously announced. Having said that, the Government considers that there may be reason even now to take account of the deferred tax liability when valuing owners shares in unlisted companies for the purpose of assessing wealth. The Government will therefore study this issue separately. In addition, the Government will instruct the Swedish Tax Agency to further clarify its information on excess liquidity in unlisted limited liability companies so as to simplify application of the current legislation. Competition on equal terms. The issue of competition on equal terms between the public and private sector has been under discussion for a number of years. In order to ensure that measures taken in this area are appropriate and well considered, it is of the greatest importance that the information on which the legislative preparations are based is up-to-date, relevant and as comprehensive as possible. New aspects came up when the Riksdag last debated this issue (report no 2004/05:NU16, Riksdag Communication 2004/05:297). The Government believes the entire issue of competition on equal terms between the public and private sectors must be addressed in a single context. The Government therefore intends to appoint an inquiry to make such an analysis. Increased mobility and better matching When the trend in the labour market picks up, it is important to increase mobility so as to make matching as effective as possible and avoid bottlenecks. Labour force mobility has a great influence on the speed at which the economy can grow. It is important that the requirement to broaden the occupational and geographical search area after 100 days of unemployment benefits is applied systematically and consistently everywhere in the country. Efforts to overcome gender segregation also help promote labour market mobility. Applicant travel for young people. Young people aged 20 to 24 who are unable to obtain employment where they live will be reimbursed for travel costs associated with employment interviews ( applicant travel ). Increased concentration on employment exchange services. In the Budget Bill for 2006 the Government proposed an initiative for better employment exchange services both in the form of help to jobseekers and employers and in the form of increased controls. In addition, the National Labour Market Board has received instructions to test a new model in 2006, which involves moving the responsibility for questioning unemployment benefits to a central unit at the Employment Services. Increased efforts to promote a better educated labour force With a view to equipping people better for the new jobs now appearing in the labour market, the following measures are proposed and announced more places in advanced vocational training. The drive to provide more places in advanced vocational training will be extended to add a further places from autumn 2007 until spring The Government has also proposed measures to enable advanced vocational training to be conducted on a contract basis from 1 July new places in labour market programmes in 2007 and With a view to ensuring that all those who have been unemployed for an extended period receive help in returning to the labour market, the Government announces an increase in the capacity of labour market programmes in 2007 and 2008, compared with the assessment made in the Budget Bill for At the same time, the Government is prepared to change its labour market policy measures if needed. Employment training targeting shortage occupations. The enhanced resources for labour market programmes provide scope for more places in employment training. Over and above this, as a further step in pursuit of more ambitious goals, existing resources will be redistributed. Employment training will be given higher priority than preparatory programmes. Furthermore, the Government considers that too few people make the transition from preparatory programmes to employment training. More women and men must be given the opportunity to begin employment training. The employment training must be adapted to meet national and regional needs and must be provided in areas where there is an existing or impending short- 13

14 age of labour. Part-time unemployed workers, a group in which women are overrepresented, may need support and measures. Better employment training. The Government will appoint an inquiry in the first half of 2006 to improve the effectiveness of employment training. More new jobs To increase the demand for labour, in this Bill the Government proposes that the employment package it presented in the Budget Bill for 2006 should be supplemented by the following measures. 250 more positions for generational change in the central government sector. Central government agencies have shown great interest in a special grant to enable them to bring forward new recruitment ahead of upcoming generational changes, so as to allow for skills transfer between the generations. The Government now proposes that central government agencies receive grants for a further 250 generational change appointments between 1 July 2006 and 31 December 2007, over and above the positions announced in the Budget Bill for new jobs in the cultural sector. There was great demand for the 650 jobs for unemployed graduates provided for in the Budget Bill for 2006 for the purpose of looking after the collections of state-owned cultural institutions. In this Bill the Government proposes an expansion of the initiative by a further 150 jobs from 1 July Bonus jobs up to retirement for 60-year-olds. The Government intends to give people with bonus jobs who are at least 60 years old the opportunity to keep the job until they are 65, unlike other bonus jobs that last for a maximum of two years more wage subsidies. In the coming years it is important to focus on giving people with disabilities better opportunities to work. In order to increase employment among people with disabilities, the Government proposes new wage subsidy places in the second half of 2006 and all of It is important that the increased volumes of wage subsidies benefit non-profit organisations. The Government wants to see their share of the wage subsidies increase. In the Budget Bill for 2007 the Government intends to present a revised analysis of long-term needs as regards both wage subsidies and other measures for people whose ability to work is reduced by disabilities. Co-financing requirements for work experience places will be abolished. As a trial, the co-financing requirements for employers offering work experience places will be abolished until the end of The Government is monitoring developments in the labour market closely and will propose further action if necessary. The Government is also pre- Employment, unemployment, wage growth and productivity growth Number employed 1, Business sector 1, Public agencies 1, Regular employment rate Open unemployment Cyclical labour market programmes Hourly pay Productivity growth, business sector Note: The figures for employment, open unemployment and regular employment rate may differ from figures now published by Statistics Sweden for the period This is because the figures in the table are adjusted due to the reorganisation of LFS, using linked series from the National Institute of Economic Research. As linked series are not available at sector level the figures for the business sector and public agencies do not add up to the figure for total employment. 1 In thousands. 2 Population aged in regular employment as a percentage of total population in the age group. 3 In per cent of the labour force. 4 Annual percentage change. 5 According to Statistics Sweden, labour force surveys. 6 According to Statistics Sweden, national accounts. Sources: Statistics Sweden, National Labour Market Board, National Mediation Office and Ministry of Finance. 14

15 pared to change the relative priority accorded to different labour market measures if needed. Meeting globalisation with security and knowledge World trade continues to grow rapidly. Since 1970 total trade in goods and services has more than doubled relative to aggregate world GDP, from 12 to 29 per cent. Globalisation creates opportunities, but also challenges. Competition is increasing in nearly all industries and between countries and regions, a process that is leading to cheaper products for world consumers and greater prosperity. At the same time, companies and workers are forced to constantly adapt to new conditions. Capital moves rapidly across borders, which can lead to international tax competition and social dumping. The rapid expansion of transport is leading to increased environmental impact. And the changes continue apace. Over the past ten years employment in Sweden has risen sharply. Approximately more people are employed now than in In the meantime, a total of some jobs have disappeared every year, according to a study from the Swedish Institute for Growth Policy Studies. This implies that the jobs that have disappeared have been more than made up for by new positions in growing industries. In order for Sweden to continue to benefit from globalisation, there is a need for both efforts to strengthen Swedish competitiveness and better welfare. Welfare systems build bridges from the old to the new. These bridges in the shape of unemployment insurance, employment training, adult education, higher education or continuation courses not only help people who have lost their job find a new one, they also help Sweden as a country to make the transition from old to new, growing industries. Secure people dare to adapt, meet change and develop. Sweden and the UK have initiated a joint project, Social bridges, to study the economic and social challenges confronting the two countries as a result of globalisation and to examine potential solutions. A report from this project has been presented to the EU Council for Economic and Financial Affairs in spring 2006, at the initiative of the UK and Sweden. Globalisation confronts Sweden with new Sara, games programmer 15

16 challenges. The present overall tax levy can be maintained, but this will require protecting the tax system by means of broad tax bases. Conditions for investment in Sweden must continue to be good. Since the 1990/91 tax reform a series of major changes have also occurred, both in society in general and in the tax system. A review of the tax system will therefore be initiated in In addition, the Ministry of Finance has appointed a long-term inquiry whose task will be to analyse the international competitiveness, structural transformation and adaptability of the Swedish economy. This inquiry is expected to complete its work in Increased employment a strategy for the future To finance future welfare services, it is important that more people are in work and the number of hours worked increases. A person who has a job and a means of earning a living has more security and more freedom. Society also benefits significantly from increased employment. If the employment rate were to rise to 80 per cent as a result of more jobs in the business sector, this would lead to an improvement of some SEK 50 billion in public sector finances, which could be used for better welfare provision. The challenge for the future is therefore to create conditions that give people the ability, desire and opportunity to work. The Government agrees with the EU and the OECD that an increased labour supply is the key to managing future welfare. The work-first principle is therefore a guiding principle of the Government s economic policy. A special expert group has been appointed with the task of analysing how the supply of labour can increase. This applies in particular to young people, immigrants to Sweden and older people. Focus on health Far too many people leave working life prematurely. Ill health means a great deal of human suffering, but it also creates substantial costs for the whole of society. Two thirds of all workers on sick leave are women. Ill health is therefore also a gender issue. The social insurance systems are intended to give individuals security if they become ill or if they lose the ability to work for some other reason. Social insurance is also intended to help people recover their health and return to working life as quickly as possible. Security at different times of life is not merely valuable for individuals, it contributes to the development of society as a whole. In recent years a number of measures have been taken to increase health in working life and give people on sick leave opportunities to get back to work. As sickness absence has many and complicated causes, efforts have been made along a broad front. In the Budget Bill for 2002, the Government presented an 11-point programme for better health and in December 2003 it made a declaration of intent for better health in working life. Large parts of this programme have been implemented and the determined efforts have paid off. Number of days of sickness benefi t Thousands Women Men Source: Ministry of Finance Since 2002 fewer people have been put on sick leave and many have returned to work from sick leave. Cases of sick leave lasting less than one year have declined by 35 per cent and cases of longterm sick leave by 23 per cent. There are good prospects of achieving the Government s goal of absence from working life due to sick leave reaching half the 2002 level by 2008, along with a simultaneous decline in the number of new awards of sickness and activity compensation. The Swedish Social Insurance Agency has translated the Government s target into a sickness rate. This rate captures the absence for which compensation is paid in the form of sickness benefit, rehabilitation benefit and sickness and activity compensation. The Agency s target is for the sickness rate to fall to an average of 37 days per person per year. The Budget Bill for 2006 set forth a new comprehensive strategy against ill health in seven points. The goal is to harness sick and disabled

17 people s capacity to work and for sickness insurance to serve as a bridge back to working life. 1. A billion kronor to encourage the health and medical services to make people on sick leave a priority. The Government has entered into an agreement with representatives of the county councils on enhanced measures in the health and medical services. Based on sick leave trends in each county council s area, a billion kronor will be shared out among the counties each year between 2007 and One requirement is that the county councils, together with the Swedish Social Insurance Agency, draw up action plans to give increased priority to sick leave issues. Ill health among women is to be given particular emphasis. 2. Enhanced occupational health services. Occupational health services have an important role to play in work environment efforts and can contribute to better health in working life. The Government intends to present proposals in the course of the year that will put occupational health services in a stronger position. This is a matter, above all, of supporting skills and quality development for both practitioners and users of occupational health, and encouraging cooperation between occupational health services and health and medical services. The Government is allocating SEK 30 million a year in 2007 and 2008, over and above the SEK 10 million initiative for better basic training and education in occupational health services that has already been approved. 3. Better sick leave procedures. The National Board of Health and Welfare and the Swedish Social Insurance Agency have been instructed to draw up proposals for ways of further improving sick leave procedures. Measures have been taken previously to strengthen training in insurance medicine for doctors. 4. More bridges back to working life. The Government has broadened the mandate of the Swedish Labour Market Administration so that people who retain some capacity to work but need to change employer will receive the same support and help as other people seeking employment. Furthermore, the Government has recently proposed that people who have been on sickness or activity compensation for at least one year should be entitled to dormant compensation for a period of two years of study. 5. A pilot scheme for people on long-term sick leave. The Swedish Social Insurance Agency and the Swedish National Labour Market Administration have been instructed to carry out a pilot scheme in Västra Götaland and Västmanland. The scheme involves going over all cases of sickness that have lasted more than two years and reviewing the situation of people receiving temporary activity or sickness compensation. The agencies will present proposals in 2006 aimed at strengthening the cooperation between the National Labour Market Board and the Swedish Social Insurance Agency to ensure that people on sick leave do not fall between their respective areas of responsibility. 6. More job opportunities for people with disabilities. All people possess knowledge, abilities and experience that are important to society. Improving accessibility, creating better opportunities for disabled people to work and fighting discrimination against people with disabilities, regardless of their gender, are additional ways to secure a higher labour supply in the long term. The ceiling for wage subsidies was raised from SEK to SEK a month on 1 July 2005 and will be raised further to SEK a month from 1 January The aim is to create more job opportunities for disabled people in the business sector, the public sector and in voluntary organisations. This Bill also proposes an increase in the number of places receiving wage subsidies from 1 July 2006 until 31 December 2007, adding an extra places. During 2006 a system of development and security positions will also be introduced to broaden the range of employers for disabled people with reduced working capacity. 7. Higher ceiling for sickness benefits. On 1 July 2006 the ceiling in the sickness benefit system will be raised from SEK to SEK a month. 17

18 Making Sweden the best place in the world to grow old Every year more and more Swedes are able to experience their hundredth birthday. Last year there were people women and 205 men who were aged over 100. The positive trend is continuing. More people are reaching old age and in most cases the extra years are healthy ones. This is a wonderful development, perhaps one of the greatest triumphs of the welfare state. However, not everything works as it should. Many elderly women and men still have narrow economic margins. Even now, not all elderly people are receiving good enough care. Many family members, particularly women, bear a great responsibility for their near relatives. In ten to fifteen years, moreover, the number of elderly people over the age of 80 and the need for elderly care will increase even more. Further, needs will vary enormously from healthy old people who only need a little extra help at home, to elderly people suffering from dementia. The Government s goal is for Sweden to be the best place in the world to grow old. This will require numerous measures over the coming decade. In 2006 the Government has presented a development plan for health care and social services for the elderly. This plan will be subject to continuous follow-up and supplementation. In the development plan, the Government announced that it will work to secure a gradual increase of SEK 10 billion in total resources for the elderly over the next ten years. The responsibility for achieving this rests jointly with the state, municipalities and country councils. This Bill also presents a proposal to strengthen financial security for the elderly by raising the level of compensation in the housing supplement for pensioners. Billion kronor initiative for better health care and social services for the most infirm elderly people The health care and social services provided to the most infirm members of the elderly population need to improve. Many elderly people who suffer from multiple illnesses now need to be in contact with several different doctors, nurses and other health professionals. The lack of coordination can make it more difficult for elderly people to obtain the right help. To give one example, many people receive too many medicines, which sometimes counteract one another. Another example is deficiencies in rehabilitation for people on sick leave. SEK 600 million will be invested in 2006 and SEK 1 billion per year in 2007 and 2008 to improve the health care provided to the most infirm and improve home health services. These extra resources are intended to be used for rehabilitation, nutritional work, medication reviews and augmented participation by doctors at both special service homes and in home health services. In 2007 and 2008, moreover, SEK 200 million per year will be put into improving the quality of dementia care. Secure housing for elderly people Everyone must be able to live in good and secure housing, including elderly people with special needs. Many elderly people are both able and eager to stay in their own home, maintaining a high quality of life to an advanced age. At the same time, those who have more extensive needs must be offered a place in a special service home. At present, however, there is a shortage of special service homes in many parts of the country. The Government therefore wants to encourage the building of new and improvement of existing special service homes. This Bill proposes new investment grants for special service homes and community rooms in conjunction with them. From 2007 onwards, an annual sum of SEK 250 million will be dedicated to this purpose. In addition the Government intends to establish a special housing delegation to promote secure and purpose-built housing for elderly people. The Government will assess the needs from 2008 onwards in the Budget Bill for The Government also intends to introduce a housing guarantee for couples. In cases where married couples, cohabiting partners or registered partners are both in need of a place in a special service home, they will be provided with a place in the same home if they wish. The possibility of couples being able to continue to live together even when only one partner needs to live in a special service home will be examined. Equal standards nationwide and local development Everyone must have the right to good, high-quality care in old age. Naturally there has to be room for local variation, but no matter where in the country they live, everyone must be able to rely 18

19 on elderly care being good enough when the day comes that they or a near relative are in need of it. An inquiry has received instructions to propose measures that will strengthen supervision in the area of elderly care that is regulated by the Social Services Act (2004:178). In order to reinforce the statutory rights of elderly people, in the national development plan for health care and social services for elderly people the Government proposes an obligation for municipalities to report when they do not implement favourable decisions under the Social Services Act. As a means of bringing pressure to bear in the last resort, the Government has also proposed the introduction of a financial sanction to encourage the implementation of favourable decisions within a reasonable time limit. To be able to develop the quality and accessibility of health care and social services for the elderly, more needs to be known about the views of elderly people. The Government therefore intends to give the National Board of Health and Welfare responsibility for national user surveys. Investments in research and development and strategic technological development in the elderly area are also proposed with a view to improving elderly care. Sweden has many elderly people with mother tongues other than Swedish. This makes special demands on health care and social services. One area where this is particularly true is dementia care, since people with dementia illnesses often lose their language proficiency and need health care and social services in their mother tongue. Consequently, in 2007 and 2008 special resources of SEK 50 million per year will be dedicated to stimulating the development of elderly care adapted to the needs of a multicultural society. Continuing professional development for staff The elderly care services most important resource is their staff. People who work in health care and social services are facing increasing demands as the needs of elderly people grow more complex. In ten years time, moreover, elderly care will need many new recruits. It is therefore important to raise the status of the caring professions and offer good working conditions and opportunities for development. The Government intends to appoint an inquiry with instructions to propose a national system for professional requirements, skills development and measures to facilitate future skills provision in elderly care. In order to lay a stable foundation for continued development efforts, two major initiatives to support skills development among staff in health care and social services for elderly people are being carried out: the Steps for Skills and educational leave replacement positions. A total sum of SEK 3.5 billion has been allocated to these purposes between 2005 and Irene, nursing assistant 19

20 Preventive work Preventive efforts targeting elderly people can be of great benefit to both individuals and society. For example, the number of falling accidents can be reduced by means of simple improvements in the home. The Government intends to put SEK 150 million into reinforcing preventive work by municipalities in 2007 and Ancillary services for help in everyday life Different elderly people have different needs. Municipalities are required to offer home-help services to people who are unable to prepare their own food, clean their own homes and do their own shopping. However, elderly people who are not sufficiently sick to qualify for home-help services may also need extra help at home. The Government has therefore submitted a legislative proposal in the spring of 2006 concerning ancillary services for elderly people. Under the proposal, municipalities will have a legal option of offering elderly people over the age of 67 services that will prevent injuries, falling accidents or other ill health, without prior means testing. Higher housing supplement for pensioners In recent years the Government has taken various measures to strengthen the economic position of pensioners (see page 37). Despite this, many elderly people are still in a difficult economic position. In order to improve the position of the worstoff pensioners, often single women, this Bill proposes a further improvement of the housing supplement for pensioners. The Government proposes a rise in the level of compensation from 91 to 93 per cent of the cost of housing up to the ceiling, to be effective retroactively from 1 April After a proposal in the Budget Bill for 2006 the ceiling in the housing supplement for pensioners was raised to SEK a month from 1 January Measures for the elderly SEK million Targeted initiative for local government for better health care and social services for the most infirm Initiative for dementia care More multicultural health care and social services Targeted preventive work initiative for municipalities Research in the elderly field Technological development in the elderly field Investment grants for special service homes Housing delegation Higher compensation in housing supplement for pensioners Miscellaneous Total Rune, pensioner 20

21 Initiatives for the young an investment in the future Young people are not a homogeneous group; they represent a multitude of values and lifestyles. Young women and men have different starting conditions, opportunities and ambitions. Many young people have come to Sweden from another country or have parents with foreign backgrounds. Despite these dissimilarities they have many challenges in common. They all need to get a good education, find their first job, enjoy meaningful leisure activities and eventually move away from home. Youth is a time of upheaval and change. It can be an exciting period with new friends, leisure activities and experiences. However, it can also be a time of great demands in school, in leisure time and at home. Some young people are subjected to bullying, violence or abuse. Far too many young people are finding it hard to cope psychologically. It has also become more difficult to enter adult life in the sense of getting a first real job and moving away from home. At the same time, young people today are better educated and have more opportunities than ever. Increasing numbers travel, study or work in other countries. The Government s broad objective for youth policy is that young people should have real access to welfare and power. A great deal is already being done to improve the conditions of life for young people in Sweden. But this is not enough. In this Bill the Government therefore proposes a raft of new initiatives. They have to do with work and education, housing and increased security. Work and education A good education lays the foundation for obtaining work. A job puts a person in a position to get a place to live and start a family. These days it takes young people considerably longer to establish themselves in the labour market than it used to. This is a disquieting sign. To be sure, this development can largely be attributed to the fact that more young people, especially young women, go on to higher education, but this is not the whole explanation. Many young people are unemployed, while others depend on short, temporary and insecure positions. Young people must be welcomed into adult life. They must not get stuck in unemployment. Active labour market policies are therefore also required for young people. Bonus jobs for young people. To make it easier for young people to get a foot in the labour market, the Government is announcing a rise in the number of bonus jobs from 1 July 2006, with an extra places specially intended for young people. More jobs for unemployed young people. To make it easier for unemployed young people to get a foot in the regular labour market, in 2006 young people will be eligible for general recruitment incentives after being registered at the employment service for six months. Normally a period of twelve months registration is required to be eligible for such support. General recruitment incentives enable businesses or organisations to recruit unemployed people at half the actual wage cost (maximum SEK 350 per day) for six months. The shorter registration criterion for young people will also apply in Summer jobs. Summer jobs give young people valuable labour market experience, as well as their own income. In 2006 the Government proposes that SEK 100 million be put into support for municipalities offering young people summer jobs. Making it easier to look for work all over Sweden. To increase mobility in the labour market, it is proposed that young people aged 20 to 24 will be reimbursed for travel costs associated with employment interviews ( applicant travel ), if they are unable to obtain employment where they live. Increasing job security. More than half a million employees have temporary positions. Young women are greatly over-represented in this group. The new form of employment flexible fixed-term employment recently proposed by the Government will remove the possibility of a succession of short, insecure positions with the same employer. After 14 months with the same employer in the course of a five-year period, flexible fixed-term employment will become permanent employment. Alongside this such forms of employment as substitute positions and appointment on probation will remain under present rules. Continued support to municipal navigator services. In 2005 and 2006, the municipalities, in cooperation with employment offices, organi- 21

22 sations and local businesses, are offering support and personal advice to young people. The Government intends to support these services in 2007 as well. National coordinator. The Government has appointed a national coordinator to look over what needs to be done to make it easier for young people to enter the labour market. A final report is due in November Summer courses for young people needing extra support. Municipalities will be given an opportunity to offer summer courses to school students who have fallen behind, such as extra help for students between years 8 and 9 of compulsory school and supplementary courses to give students who lack complete grades basic eligibility for upper secondary school. Support for apprenticeship training. Apprenticeship training can be a good alternative as part of the present system of upper secondary vocational training. Between 2007 and 2009, SEK 20 million per year is being put into establishing such programmes. These resources are being channelled to 20 municipalities with a high proportion of upper secondary students who lack final grades from the vocationally oriented programmes. In another measure to strengthen vocational training at upper secondary school, support is also being provided to expand several regional vocational training centres. Increased focus on boys results in school. The Swedish National Agency for School Improvement will be given a special assignment to deepen what is known about existing differences between girls and boys results in school and identify measures that improve boys results. A four-year project will be carried out, with a budget of SEK 10 million per year. Better information about study choices and jobs. The Swedish National Agency for School Improvement is being instructed to work with a number of municipalities to raise the quality of study and vocational guidance provided by schools. There will also be a special information drive for students in year 9, to teach them more about the labour market before they choose upper secondary school. Education at folk high schools for the young longterm unemployed. The folk high schools have teaching methods that are very appropriate for young people who are somewhat removed from the labour market. The 500 new educational places introduced for young long-term unemployed people in 2005 will therefore be extended until more places in advanced vocational training. The initiative providing more places in advanced vocational training that was announced in the Budget Bill for 2006 will be extended from autumn 2007 until spring Higher study grant. Young people must also share in the benefits of the improved economic trend. The Government therefore proposes an increase of SEK 100 in the study grant for upper secondary school students, bringing the grant to SEK 1050 a month, the same level as the child allowance. The increase is proposed effective retroactively from 1 April Higher study support. Study support will be raised as early as on 1 July this year by SEK 300 a month, of which SEK 100 will be a grant and SEK 200 a loan. This reform will cost close to SEK 500 million per year. Housing for young people Many young adults these days lack a home of their own. It is important that housing is available at a reasonable price. The Government intends to propose several measures in the Budget Bill for 2007 to put young people in a stronger position to establish themselves in the housing market. Rent guarantees. The Government intends to introduce a central government grant for municipalities that want to use rent guarantees to make it easier for young people and others to establish themselves in the housing market. An annual sum of SEK 100 million is being set aside for this purpose. Extended investment-support schemes. In order to reduce the housing shortage, the temporary investment subsidies for building small rental units will be extended until 30 June More housing for students. To promote more student housing, the investment grant will be raised by SEK 100 million in 2007 and SEK 50 million in Possible housing loans for young people will be studied. The national housing coordinator will receive additional instructions to improve opportunities for young people to be granted housing loans. 22

23 Health and security for young people The picture that emerges from Statistics Sweden s 2005 living conditions survey is that most children and young people in Sweden enjoy rather good conditions. Nonetheless, there are many young people who experience ill health and a lack of security. For instance, the proportion of children and young people who sought help from child and adolescent psychiatry services rose substantially in the second half of the 1990s. The Government is taking a range of measures to enhance health and security among young people. Enhanced preventive work for better health in schools. The Government intends to initiate a number of pilot projects aimed at bringing about increased cooperation between schools, the police, social services and child and adolescent psychiatry services. The Swedish National Agency for School Improvement will also be assigned the task of identifying and disseminating information about successful projects. Initiatives for psychiatric services for children and young people. In order to reverse the trend of increased mental health problems, a targeted initiative is proposed to improve the availability of child and adolescent psychiatry services. This initiative will have a budget of SEK 250 million per year in 2007 and Under this initiative a national centre will be established to promote knowledge and methods development as well as support for children and young people who risk developing serious mental health problems. Support for young victims of crime. Girls and boys who are victims of crime must no longer have to undergo repeated questioning and interviews with different people for different purposes. The Government has therefore instructed the National Police Board, the Swedish Prosecution Authority, the National Board of Forensic Medicine and the National Board of Health and Welfare to conduct trial activities for better cooperation on investigations concerning children who are suspected to be victims of serious crime. Reducing youth crime. The Government proposes several measures to address youth crime and its causes. They include more appropriate penalties for young people convicted of crime. For example, community service for young people is proposed as a new independent penalty. In addi- tion, a three-year trial is proposed to strengthen action for young people with criminal records. Influence and participation One manifest objective of youth policy is that young people must have real influence, as expressed in the Convention on the Rights of the Child. The experience and knowledge of young women and men are an important resource and play an important part in the development of society. Many young people are interested in social issues and are involved in various ways. In spite of this far too few young people are represented in decision-making assemblies and far too many feel that it is difficult to make an impact. It is particularly alarming that participation by first-time voters has gone down in recent elections. The Government has given the National Board for Youth Affairs the task of arranging the project Skolval 2006 ( 2006 school elections ) ahead of the general elections in September. Sweden will also take part in the Council of Europe campaign against discrimination All different all equal, which starts in June Culture and leisure Leisure time is of great importance for young people s social development and their mental well-being. The leisure activities young people choose can also increase their chances of getting established in adult life. It is important that young people have access to a varied and good quality leisure, irrespective of their background and economic resources. It is especially important that the leisure activities available are attractive to young people and that young people themselves have an influence on these activities. It is also important that young people with disabilities have access to the activities. The Government proposes to dedicate SEK 80 million per year between 2007 and 2009 to developing leisure activities and meeting places for young people. The intention is to enable municipalities, county councils, businesses, central government agencies and not least young people themselves to participate in creating these new meeting places. In addition, the Government will devote SEK 2 million per year for three years starting in 2007 to spreading dramatic art for, by and with young people, by means of a targeted grant to the Swedish National Touring Theatre s Open Jam project. 23

24 Initiatives for better integration The Swedish population includes more than 1.1 million people who were born abroad. Sweden is blessed with a wealth of language proficiency, as well as experience and knowledge of different cultures. This country is home to people with roots in nearly 200 countries. This is a vital asset, which we must put to use. Integration is about the right to work, education and freedom from discrimination. At present, integration in the labour market is far from satisfactory. Even if the differences have diminished in recent years, the employment rate among people born abroad is still considerably lower than the rate for people born in this country. In 2005, 62 per cent of all foreign-born people of working age were employed 59 per cent of the women and 65 per cent of the men. People born abroad are also over-represented among the long-term unemployed. The Government is taking general action to increase employment and fight longterm unemployment, and this has created new opportunities for people born abroad. The right to education is another important factor in promoting integration. At present not all schools are in an equally strong position to give all their students good teaching. Extra resources are therefore needed for the schools where conditions are most challenging, so as to ensure that all children and young people have equally good opportunities. The Government s ambition is for all schools to be good schools. Various measures have been implemented in recent years so as to offer supplementary education to bring foreign qualifications into line with Swedish conditions and validate foreign professional skills. Everyone, regardless of ethnic background, must enjoy equal rights, responsibilities and opportunities. To achieve this goal, all forms of discrimination must be combated. New anti-discrimination legislation has been introduced. The Office of the Ombudsman against Ethnic Discrimination now has sharply increased resources at its disposal. However, anti-discrimination measures need to be stepped up further. Over and above the Government s broad general initiatives to provide more jobs, this Bill presents special measures to improve educational and working opportunities for women and men with foreign backgrounds. Children and young people 100 schools special resource staff. A targeted central government grant will be made available to certain municipalities to enable them to recruit special resource staff for schools where the proportion of students with foreign backgrounds is high and/or underachieving schools, with a view to improving school students results. The resources are intended for use to recruit teaching and other staff. Schools will be included in this initiative regardless of whether they are run publicly or privately. Schools that want to focus on bilingual teaching will be able to use the resource 24

25 staff for this purpose. In addition, a special national strategy will be developed for the education of newly arrived children and young people. Apprenticeship training. There will be a threeyear initiative providing development support to establish apprenticeship training, targeting 20 municipalities where the proportion of upper secondary school students with final grades from the vocationally oriented programmes is low. Meeting places for young people. SEK 3.5 million per year will be allocated in 2007 and 2008 to give young people in the metropolitan regions in particular better access to public places where they can meet. Jobs and enterprise Speedy establishment of new immigrants. New arrivals in this country must quickly enter employment. A trial project will start on 1 July 2006, giving the Swedish Labour Market Administration a comprehensive responsibility for getting newly arrived women and men established in the labour market. Measures to prepare people for working life will start earlier than at present. This new assignment for the Swedish Labour Market Administration will start off as a geographically limited trial over a two-year period. Workplace induction will be integrated into ordinary activities. The workplace induction trials conducted in 20 municipalities will be incorporated into ordinary activities. Review of the General Vacancies Registration Act. At present only about a third of all vacancies are reported to the employment services. As a result, people with poorer networks, such as people from foreign backgrounds, have more limited access to vacancies. The Government intends to review application of the General Vacancies Registration Act. More new entrepreneurs. In order to level the playing field for enterprise, a proposed SEK 20 million per year will be put into ALMI Företagspartner AB and the Swedish Association of Ethnic Entrepreneurs (IFS). Out of these funds, in 2007 and 2008 SEK 10 million will be set aside to facilitate continued integration of IFS advising services into the activities of Almi Företagspartner AB and to ensure that all regional ALMI companies have equivalent expertise at their disposal. Better education in Swedish. In order to improve education in Swedish for people born abroad, an initiative is proposed to promote skills Ahmad, architect 25

26 development for teachers of Swedish for Immigrants (SFI). In addition, the purpose of Swedish for Immigrants will be streamlined to concentrate on proficiency in the Swedish language and literacy. The National Agency for Education will be instructed to develop a new syllabus for Swedish for Immigrants, with a greater emphasis on advanced language education. Supplementary education and validation. Many university graduates with foreign education lack employment commensurate with their education. An initiative to provide teacher education for 300 students per year for two years will therefore be carried out, along with a pilot project providing a two-year supplementary programme for 30 lawyers with foreign degrees. Furthermore, the advanced education programme in administrative practice at Stockholm University, Göteborg University and Malmö University will be extended. In addition the National Agency for Services to Universities and University Colleges will be given extra resources to improve the validation of foreign upper secondary school grades and shorten its processing times. Work for asylum seekers. Asylum seekers can already work during their asylum-seeking period if the Swedish Migration Board expects the assessment of their application to take more than four months. The Government believes that an opportunity to start working as soon as possible after arriving in Sweden can be very significant for the asylum seeker. It is therefore important that asylum seekers are informed about this possibility as soon as they have submitted their residence permit application. Strengthening anti-discrimination efforts Better supervision of anti-discrimination legislation. Appropriations to the Office of the Ombudsman against Ethnic Discrimination will increase by SEK 13 million per year in 2007 and 2008 to improve supervision of the applicable legislation and reach vulnerable groups. Strengthening anti-discrimination offices. The central government grant to anti-discrimination offices will increase by SEK 1 million in 2006 and SEK 4 million per year from Trials for anonymous application documents. The Government intends to carry out trials for anonymous application documents when recruiting to a number of government agencies. The significance of ethnicity for conditions in working life. The significance of ethnicity in working life will also be investigated to shed light on the ethnic segmentation of the labour market. Fighting discrimination in the legal system. The National Council for Crime Prevention will be instructed to investigate discrimination in the legal process against claimants and defendants with foreign backgrounds. Discrimination-free public procurement. The annual value of procurements in Sweden is more than SEK 40 billion. It is important that government agencies set a good example. The Government has decided on an ordinance on anti-discrimination conditions in procurement contracts. This ordinance will oblige 30 central government agencies to include terms and conditions in their procurement contracts for the purpose of combating discrimination among their suppliers. Rent guarantees. Many landlords often make rental contracts dependent on requirements other than strictly financial conditions, such as permanent employment. This prevents many people from finding a place of their own to live. The Government therefore intends to introduce a central government grant to municipalities that wish to use rent guarantees. An annual sum of SEK 100 million is being set aside for this purpose. Integration measures SEK million Speedy establishment of new arrivals new assignment for Swedish Labour Market Administration Better education in Swedish special resource staff in schools Apprenticeship training Meeting places for young people 4 4 Permanent workplace induction scheme More new entrepreneurs initiatives for IFS and ALMI Supplementary education and validation Office of the Ombudsman against Ethnic Discrimination Anti-discrimination offices Broader metropolitan policy work Initiatives for integration, total Note: Figures are rounded. Source: Ministry of Finance. 26

27 Expansion of metropolitan efforts Letting more municipalities take part. Experience gained in the Government s metropolitan policy work in Stockholm, Göteborg and Malmö will be carried over to more municipalities. Another 20 of the largest municipalities will be offered an opportunity to sign local development agreements within the framework of metropolitan policy work. Speedy integration of people receiving permanent residence permits under temporary Asylum Act In the autumn of 2005, the Social Democratic Government, the Left Party and the Green Party agreed on a common objective to the effect that no one should be forced to live in hiding in Sweden. It was therefore proposed that all people in hiding should have their impediments to enforcement of repatriation reviewed. In autumn 2005, with a view to achieving an accommodation between the 1989 and 2005 Asylum Acts as regards the possibilities of effecting a reconsideration of cases involving certain categories of people whose stay in Sweden has become prolonged and whose refusal-of-entry or expulsion orders have not been enforced for one reason or another, the Riksdag adopted an amendment to the Aliens Act (1989:529). The legislation came about as a result of an initiative taken in one of the Riksdag s committees and was passed with a broad Riksdag majority. The report (Committee on Social Insurance Report 2005/06;SfU5) states as follows. If new circumstances come to light that, in certain specific circumstances, constitute an impediment to enforcement of the order, the Swedish Migration Board shall be able to grant a residence permit. It shall be possible to grant a residence permit if there is a need of protection or if there are practical or medical impediments to enforcement. Such as case may arise if the intended country of return will be unwilling to receive the alien or the alien has become so seriously ill that it is impossible to carry out enforcement. Further, the Swedish Migration Board may grant a residence permit if there are other urgent humanitarian reasons for doing so. In assessing whether there are urgent humanitarian reasons particular account shall be taken of whether it is deemed impossible to enforce the refusal-of-entry or expulsion order by coercive means, because of conditions in the country of return, or enforcement should not be implemented in view of a child s social situation or ties to Sweden, always assuming the person in question has been in Sweden for an extended period. The report goes on to state, The interest in maintaining regulated immigration shall not be taken into account to the same extent as normally. The amendment was in force between 15 November 2005 and 30 March Approximately cases have been registered by the Swedish Migration Board for consideration under the temporary legislation. The Government expects all the cases to have been considered in summer 2006 at the latest. The numbers of refugees the municipalities receive will therefore increase during The Government is making a major effort in the Spring Fiscal Policy Bill to ensure that people who have obtained a residence permit are quickly able to settle into Swedish society. The municipalities will be given a one-off payment of SEK per refugee that they receive in In addition, from 2007 onwards the standard compensation will be raised by approximately 6 per cent, which will provide SEK for adults. The resources are to be used to offer a good reception in terms of housing, education, employment, and so on. Extra funds over and above the temporary support may be needed to facilitate the increased reception activities in Resources will therefore be set aside for possible use, for instance, in special housing solutions or action for people with special needs. In addition, measures are proposed within the framework of the integration initiative to promote the speedy settlement of newly arrived immigrants. The Government is following developments in the area closely and will present additional proposals in the Budget Bill for 2007 if necessary. Measures resulting from the temporary Asylum Act SEK million Incentive measures for municipalities 606 Compensation to municipalities Swedish Migration Board 795 Total Source: Ministry of Finance. 27

28 Fairness and security Teeth must not be a sign of class Far too many people these days do without dental care for financial reasons. This is unfair. Teeth must not be a sign of class. The Government intends to implement a reform of dental care that will both strengthen preventive dental care and protect against excessive costs. In this Bill, resources are being allocated to a first stage of this dental care reform, with substantial commitments to preventive dental care. The resources are intended to go to introduce basic support of SEK 500 to allow everyone to go to the dentist once every eighteen months at a cost equivalent to the cost of visiting out-patient health care. When the reform is implemented, a check-up will cost a maximum of SEK 200. SEK 500 million will be allocated to this first part of the dental care reform in 2007 and SEK 1.7 billion from The reform will enter into force in The Government intends to present more specific details on entry-into-force as soon as possible. In the Budget Bill for 2007, moreover, the Government will present a proposal on a scheme to protect everyone against excessive costs in the dental care system. The dental care reform may lead to more visits to dental care. The Government will therefore monitor developments closely to minimise the risk of shortages of dentists and other dental care professionals. More housing There are major housing shortages in Sweden s growth regions. There is a particular lack of affordable rented accommodation. The Government has therefore made efforts to stimulate housing construction in Sweden and in recent years the pace of housing construction has increased sharply. The target of at least new housing units in the course of this term in office will be surpassed. To meet housing needs, it is important that construction continues to increase. This applies to rented accommodation in particular. Much renovation is also needed to modernise housing and make it more accessible, not least in the areas built during the Million Homes Programme ( ). The Government is working on developing a sustainable system of housing finance. The issue has been studied by a working group at the Government Offices, which delivered a report containing proposals in autumn However, the Government considers that additional analysis is needed before the reform can be implemented. By definition, investments in new housing construction are an undertaking for many years into the future. It is therefore important to have stable conditions in the housing market. A new regulatory framework for housing financing should set the long-term conditions for actors in the market housing companies, building companies and households. Public economic policy levers can aim to promote both production and consump- 28

29 tion of housing. The new regulatory framework should set its sights on a construction sector that is sustainable in the long term. Neutrality between different forms of tenancy must be taken into account when modifying the regulations. A new proposal for housing financing will be presented in the Budget Bill for 2008 at the latest. Pending a reform of housing financing, the Government now announces the following measures: Temporary investment support will be extended until 30 June The present temporary investment grants for building small housing units will be extended. SEK 700 million will be allocated to this purpose in 2007 and SEK 350 million in Within this frame, SEK 100 million in 2007 and SEK 50 million in 2008 will be set aside for building housing for students. SEK 1 billion will be set aside for stimulating investment in 2007, with another SEK 500 million in New grants of interest subsidies in their present form will no longer be made after 30 June At the same date, interest subsidies already granted will begin to be gradually reduced. The arrangements for this phase-out will be described in the Budget Bill for 2008 at the latest. In addition, the Government intends to propose the following measures: Rent guarantees. Many landlords often make rental contracts dependent on requirements other than strictly financial conditions, such as permanent employment. This prevents many young people, and other groups as well, from finding a place of their own to live. The Government therefore intends to introduce a central government grant to municipalities that wish to use rent guarantees. An annual sum of SEK 100 million is being set aside for this purpose. Building/Living dialogue project. For a three-year period starting in 2007, the Government will put SEK 13.5 million per year into support for a healthy indoor climate and efficient energy and resource use in the building and property sector. Limitation of real estate tax. This Bill announces a broadening of the limitation rule for real Carina, dental hygienist 29

30 estate tax to make it applicable to holiday and weekend homes as well. In addition, households that now benefit from the limitation rule but have properties assessed at more than SEK 3 million will pay a reduced real estate tax on assessed values between SEK 3 million and approximately SEK 5 million. Sustainable community development. Urban development is an important strategic issue. It is a matter of shaping living environments that contribute to sustainable development. At the Government Offices work is underway on a report on policies for sustainable urban development, to be presented in May Fighting homelessness Having somewhere to live is a fundamental welfare issue. Homelessness is an ultimate expression of social exclusion. The ambition must be for no one to be homeless. Homelessness must be fought on two fronts: to ensure that people who are now homeless can obtain dignified housing and to prevent homelessness arising. Despite the intentions of the Social Services Act, children are evicted from their homes. Efforts by society to ensure that families with children do not become homeless must improve. The Government considers that the rules concerning the right to assistance given in the Social Services Act should be sufficient to guarantee that children do not become homeless, but to ensure the attention of the social services at an early stage when a family with children is threatened by eviction, a number of measures are proposed. Immediate processing when a rental contract is terminated. When the social services receive a message from the landlord that a rental contract has been terminated, they must immediately appoint an official to handle the case, notify the landlord and contact the individual. A provision to this effect will be added to the Social Services Ordinance. Action against eviction of families with children. A provision will be added to the Social Services Ordinance concerning cooperation to prevent and act against eviction of families with children and homelessness in this group. Manual for prevention of homelessness. With a view to increasing knowledge about how homelessness can be prevented, the National Board of Health and Welfare will be instructed to produce a manual on how to prevent and act against homelessness among families with children. Personal representatives. In order to act against and prevent homelessness among people with mental disabilities, the Government proposes an increase in the personal representatives scheme, adding SEK 20 million per year in 2007 and 2008 so as to bring the total annual amount to SEK 110 million in each of those years. New measures against homelessness. The Government intends to increase the resources available to the National Board of Health and Welfare by SEK 23 million in 2007 and SEK 33 million in 2008, to contribute to projects to counteract homelessness. These may be projects of a similar nature to the Stockholm model as well as different forms of individual support, for example, for personal contacts or representatives. Revision of the Rent Act. The Rent Act will be revised so as to clarify and modernise it. This revision is to pay particular attention to the situation of families with children. A clear children s perspective should be incorporated in the Rent Act. Clarifying municipal responsibility. Work is underway at the Government Offices to clarify the responsibility of municipalities for housing provision. Every municipality should have some form of organisation to help people looking for somewhere to live. Education for all Liberal adult education is a force for democracy, lifelong learning and personal development. Folk high school courses and study circles arranged by educational associations offer an alternative to the public education system. Due to the unique teaching methods and ideological basis of activities, liberal adult education is particularly well qualified to take on students with limited formal education. Liberal adult education has a compensatory mission, to promote equality through education. The Government proposes augmenting central government appropriations for liberal adult education by SEK 400 million per year from 2007 onwards. 30

31 Investing in the environment of future generations Sustainable development is an overall objective of government policy. All decisions are to be framed so as to take into account economic, social and environmental consequences. Work on sustainable development builds on the recognition that growth and welfare can only be maintained by investing in the common resources that are the foundation of our economy. The Government aspires to make the idea of the green welfare state a reality. To this end, it will use new technology, construction and planning and pursue an active energy, consumer and environmental policy. Leading the way, Sweden can both win successes in export markets and support global sustainable development. Proactive energy and environmental policy ending dependence on oil Environmental policy is an important part of the Government s sustainable development policy. The overall goal is to hand over to the next generation a society in which the major environmental problems have been solved and the human living environment and public health have been made more robust. The basis of environmental policy are the 15 national environmental quality objectives that the Government presented in These objectives have given Sweden s environmental policy work a systematic quality, long-term perspective and regional and local dissemination that are unique by international standards. At the time of the Environmental Objectives Bill in 2005 the Riksdag decided to establish a new environmental quality objective on biological diversity and new subgoals and measures to show how the long-term objective for environmental policy is to be achieved. The evaluation on which the Environmental Objectives Bill was based showed that further action is needed to meet the goals. Work on the environmental quality objectives will therefore be enhanced by providing an additional SEK 150 million in 2007 and SEK 200 million in One of the greatest challenges in the environmental area is the climate issue. A large majority of the research community believes that emissions of greenhouse gases have already led to temperature change. The industrialised countries bear much of the historical responsibility for the rising concentrations of greenhouse gases in the atmosphere and account for over half of present emissions. Consequently, Sweden and other industrialised countries have a special responsibility for leading the way in climate adaptation. Sweden has set a target to reduce emissions of greenhouse gases by 4 per cent between 1990 and In a Bill on future climate policy that was presented in March 2006 this short-term target was supplemented by medium and long-term objectives. By 2020 Sweden s emissions should be 25 per cent lower than emissions in In preparation for the 2008 review a more detailed investigation should be made as to how the different sectors of society could contribute to meeting the medium and long-term objectives, with separate indicative targets for 2015 for different sectors. In the long term average global warming must be a maximum of two degrees Celsius over the pre-industrial level. Sweden must shoulder its responsibility for reaching this target, which requires international cooperation. Sweden s energy policy must serve to promote sustainable energy production and a cost-effective energy supply, with a low impact on health, the environment and the climate. Over a third of Sweden s energy use is oil-dependent. At the same time it is forecast that supplies of cheap oil will decline in coming decades. This is partly due to rising demand, for example from China and in future from India, and partly to a shortage of capacity and dwindling future resources. In order to prepare Sweden for this and to successively break the country s dependence on oil a Commission on Oil Independence was appointed in December It will provide the Government with facts and advice in the work to significantly reduce Sweden s dependence on oil and other fossil raw materials by In connection with the Budget Bill for 2006 a number of concrete measures were taken to stimulate renewable energy sources and more efficient energy use. As a result, resources for energy research are being increased by SEK 270 million in 2006 and 2007 respectively and SEK 370 million in At the same time the Government believes that the resources in 2008 are appropriate to the needs in this area and should subsequently remain at that level. Energy research should be conducted as other research policy, with 31

32 a follow-up every fourth year. Support for wind power pilot projects was also extended for five years, starting in In addition new economic incentives for transition from direct electrical heating and oil heating to more environmentally friendly energy sources were proposed. This will involve tax relief totalling SEK 400 million per year over a five-year period. Apart from this, the reduced fringe benefit assessment for green cars was extended to the end of Furthermore, the Government intends to grant tax exemption for carbon dioxide-neutral fuels until In spring 2006 the Government has presented several more bills to stimulate renewable energy. Examples are proposals to facilitate development of wind power both at sea and on land. In order to implement these measures the Government estimates that SEK 30 million per year must be allocated in 2007 and This also covers stimulation of renewable electricity through green certificates. The Government estimates that continued support, of SEK 500 million in 2007 and 2008 respectively, for energy-saving measures and conversion to renewable energy in premises used for public activities is needed, with SEK 50 million of this sum going to support solar cell installation. In order to augment the possibility of sanctions against environmental crime, in spring 2006 the Government presented proposals to tighten up the Environmental Code s system of sanctions and make penal provisions more effective. The new legislation should make it possible to impose penalties for environmental crime if there is a risk of environmental damage, and not as is the case today, where proof is required that a dangerous emission has really led to pollution. In addition the system of sanctions is being streamlined to imply criminal liability for the most serious offences, while less serious offences are instead subject to other sanctions. This Bill proposes that the state investment programmes in support of climate investments (KLIMP) be augmented by SEK 75 million per year in 2007 and 2008, in addition to the SEK 320 million per year proposed in the Budget Bill for Another SEK 50 million will be allocated to renewable fuels in 2006 and SEK 100 million in 2007, by stepping up the appropriation for climate investments. Green tax shift and related measures The main purpose of the green tax shift is to make individuals and companies more aware of environmental costs when making consumption and investment decisions, without raising the total tax levy. Tax increases on energy and environmental emissions are balanced by other tax reductions. At the same time the tax shift is consciously designed to have as positive a redistribution policy effect as possible. The current green tax shift is not the first of its kind. Already as part of the 1990 tax reform a carbon dioxide tax was introduced at the same time as tax on earned income was reduced. In the 1990s preparations for continued tax shifts were made by the Green Tax Commission (SOU 1997:11). After this the matter was raised in the 2000 Spring Fiscal Policy Bill, where the scope for a green tax shift was assessed to be SEK 30 billion for the period 2001 to Since the present shift was started in 2001 a tax shift of over SEK 17 billion has been achieved. The higher taxes on energy and environmental emissions have focused on increased carbon dioxide taxes and electricity taxes on energy for heating purposes. At the same time taxes have been reduced for households and companies, mainly through increased basic income tax allowances and reduced employers contributions. Since the start of the green tax shift other economic policy instruments have emerged in the energy and environmental field. A system for trade in electricity certificates has been introduced, programmes for energy efficiency improvement have been started and an emissions trading system has been launched. In the same way as the environmental taxes these create financial incentives to introduce environmentally friendly and resourcesaving lifestyles and technology, in parallel with those created via the tax system. The Budget Bill for 2006 announced a tax shift of SEK 3.6 billion. This tax shift includes taxes on air travel and on burning waste. At the same time taxes on households and companies are being reduced by increasing the basic income tax allowance and reducing employers contributions. Because some proposals could not come into force as soon as was then anticipated the framework for the tax shift has contracted. Accordingly, this Bill proposes a postponement of the abolition of carbon dioxide tax in the trading sector until 1 January

33 Green indicators Since the 1999 Spring Fiscal Policy Bill, green indicators have been reported as a supplement to the economic indicators. The idea is to give a simple and informative picture of national developments in the environmental area. Variations in the indicators in individual years are often a result of variations in the weather and the business cycle. However, over longer time periods the figures serve to indicate environmental developments. Total energy use continues to grow. Over time, however, there has been a gradual reduction of energy use relative to the size of the economy. Sweden has succeeded in reducing emissions of greenhouse gases relative to 1990 levels and so has laid a good foundation for fulfilling the national target in this area. Of the 15 previous EU members, Sweden is the country that has lowest greenhouse gas emissions measured in tonnes per person and relative to gross domestic product (GDP). Swedish emissions of carbon dioxide, the largest greenhouse gas in terms of volume, can vary considerably from year to year. This is largely connected with the availability of hydroelectric power and variations in energy use. Here too, emissions excluding emissions from international aviation and shipping (known as bunkering) have been falling since Swedish emissions of sulphur dioxide have fallen sharply since This is largely a result of increased use of low-sulphur oil along with new purification technologies. Excluding emissions from international aviation and shipping, emissions of sulphur dioxide have been cut by more than half since The Swedish emissions of nitrogen oxides continue to decrease, mainly due to improved combustion and purification technologies in the transportation sector. Nitrogen and phosphorus concentrations in estuaries are an indicator of the nutrient supply to offshore waters. The annual indicators relating to eutrophication vary widely according to weather, which makes comparisons with selected reference years problematic. Looked at in a relatively longterm perspective, however, the total burden is declining. Most air pollutants in Swedish urban areas diminished strikingly from the 1980s until the end of the 1990s. In the past five years, however, the trend has levelled off. Weather conditions may be one cause of this, along with other factors such as increased transport and energy use. Thanks to catalytic converters and lower benzene contents in petrol, the average concentrations of benzene in urban air have fallen substantially since the beginning of the 1990s. Green indicators Energy use (TWh, Wh/SEK) Total final use Energy intensity Emissions to air (thousands of tonnes) Climate impact 5 Greenhouse gas emissions excl. bunkering bunkering Carbon dioxide excl. bunkering Acidification Sulphur dioxide excl. bunkering Nitrogen oxides excl. bunkering Burden on offshore waters (thousands of tonnes) Eutrophication Phosphorus Nitrogen Impact on air quality (micrograms per cubic metre) / / / / /05 Nitrogen dioxide Black smoke Benzene Total energy use excluding energy conversion losses at nuclear power stations. 2 Energy intensity is measured as total energy use relative to GDP, price reference year Values not corrected for normal year. 4 Calculated by an older method and so not directly comparable with figures for 1990 and later. 5 Sinks are not included. Measures are expressed in carbon dioxide equivalents. 6 Winter half-year means in urban air. The time series only exists from 1992/93. Sources: Swedish Energy Agency, Swedish Environmental Protection Agency, Statistics Sweden, Swedish University of Agricultural Sciences and Swedish Environmental Research Institute AB. 33

34 More welfare per tax krona The foremost strategy for managing welfare financing in the future, when elderly people will make up a growing share of the population and the demand for welfare services will increase, is to reduce unemployment and raise the employment level. However, we must also be economical with our common resources, so as to be able to spend every krona of tax revenue as effectively as possible. This involves combating fraud in the tax and benefits systems and increasing the productivity of the public sector. The legitimacy of the Swedish welfare model is based on everyone doing the right thing and benefits and allowances going to the people they are intended for. It must be easy for individuals to do the right thing at the same time as the authorities work must be based on a legally secure and uniform application of the rules the right benefit to the right person at the right time. This assumes that rights and obligations are clear. Both the individual and society as a whole gain from things being right from the start, regardless of whether it is a matter of taxes or benefits. Fighting tax and benefit fraud Tax evasion and unregistered labour distort competition and risk undermining the legitimacy of the Swedish welfare model. In its Budget Bill for 2006 the Government continued its broad programme against tax and benefit fraud, which it launched in the 2005 Spring Fiscal Policy Bill. The programme is now continuing in Stricter tax controls. The Swedish Tax Agency has been given resources to employ 420 people from 2006 to tighten controls and stop tax evasion. The Tax Agency will implement special action to enhance controls in the construction industry and to prevent cross-border tax planning. Type-approved cash registers. The Government has recently proposed that companies in cashbased businesses should use type-approved cash registers and that the Tax Agency should be empowered to make unannounced visits to check them. It is proposed that the rules apply from 1 July An ethical construction industry no cheating. The Government has proposed a reverse charge principle for VAT to combat tax evasion in the construction industry. Fighting unregistered labour. The Government has proposed that restaurant and hairdressing businesses should keep a staff ledger. Furthermore, the Swedish Tax Agency is to be allowed to carry out unannounced staff checks at these companies. It is proposed that the rules apply from 1 January More effective investigation of tax crime. In order to improve the effectiveness of the tax crime units it has been proposed that they be allowed to participate in searches of premises and to seize certain documents. The tax crime units have also been given better opportunities to access information from the Swedish Tax Agency s records. In addition the tax crime units are to investigate trading prohibitions. It is proposed that the rules apply from 1 July Fighting tax evasion in international company groups. According to a recently submitted proposal international companies will be obliged to document transactions with associated undertakings in writing as of 1 January The Government is also continuing its work against cheating on benefits and allowances. Reform of the criminal law regulations. The Government has appointed an inquiry to consider special criminal provisions for irregularities relating to benefits and allowances. The inquiry is to be completed at the end of April

35 Regulations for demanding repayment of benefits and allowances will be reviewed. A working group at the Government Offices is looking over the rules concerning obligation to repay in cases where someone has obtained a benefit or allowance on false grounds. The working group has prepared an interim report, which is now under consideration by the Government Offices. The working group is to present its final report by 30 June 2006 at the latest. Assignment for the Swedish Agency for Public Management. The Swedish Agency for Public Management has been instructed to evaluate the existing exchange of information between the Swedish Social Insurance Agency, the unemployment insurance funds and the National Board of Student Aid. The Swedish Agency for Public Management is to present its report in June Increased information exchange. The Government has appointed an inquiry with instructions to extend the existing exchange of information between the Swedish Social Insurance Agency, the unemployment insurance funds and the National Board of Student Aid to include more government agencies. The inquiry is to consider whether the Swedish Tax Agency should provide information to other agencies to a greater degree and under what circumstances agencies should be obliged to take the initiative to inform other agencies if they suspect fraud. The inquiry is to present its report no later than the end of October More resources for controls. The Swedish Social Insurance Agency and the National Labour Market Board have been allocated resources to employ 300 people each to strengthen efforts to prevent and minimise errors and irregularities in the social security systems. Better internal governance and control in government agencies. The Government intends to strengthen incentives for agencies and authorities to prevent and discover fraud and error. The Government has included more stringent requirements in appropriation directions for the agencies concerned. Work is in progress at the Ministry of Finance to clarify responsibility for the internal governance and control of public administration. This includes a proposal that in signing the annual report the agency s management affirms that it has taken measures to create efficient internal governance and control in the organisation for which it is responsible. Stricter requirements for committees. Committees that draw up proposals that lead to subsidies or grants being paid must make sure that the Martin in his first flat 35

36 risk of incorrect use is minimised and that the information on which the payments are based can be checked. This will require committees to produce any necessary proposals for information exchange and to report on the consequences of these proposals from the point of view of controls. This will also apply to proposals drawn up at the Government Offices. Trial of new control model at the National Labour Market Board. The National Labour Market Board will be instructed in 2006 to test a new model that involves moving the responsibility for questioning unemployment benefits to a central unit in the Public Employment Services. Need for increased supervision a priority. The social insurance systems have an annual volume of some SEK 400 billion, which is equivalent to a sixth of GDP. The administration of these systems involves a great many decisions on payouts and disbursements. There is therefore good reason to give supervision higher priority. Furthermore, a committee on measures to prevent incorrect payments from the social security systems was set up in 2005 to monitor the agencies operations, promote cooperation, pass on experience, develop measurement methods and propose targets for reducing irregularities. The committee, which has representatives from 18 agencies and organisations, submitted an interim report in December A final report on the committee s work will be submitted by July On the basis of the interim report, the committee is now continuing its work in three strategic areas: 1. Preventive work. The agencies and organisations must develop a common standpoint on and identify the risks of incorrect payments. 2. Calculating the extent and analysing the reasons for incorrect payments. This includes examining how documentation and decision-making processes may need to be changed and simplified. 3. Increased cooperation. There are good examples in various parts of the country of how cooperation between agencies has improved efficiency of processing and the quality of decisionmaking data. The committee is to pinpoint and spread good examples. The bodies responsible for administration of justice have an important part to play here. Increasing public sector productivity For the purposes of getting more welfare for every krona of tax revenue, the potential for increased public sector productivity must be utilised. Development of new technology is one instrument, but systematic productivity enhancement is also necessary. The state must contribute to this by increasing the efficiency of its own activities. A new administrative policy agency has been established with a view to strengthening the Government s efforts to modernise and renew the central government administration. The new agency will bring together strategic functions that have previously been divided between several different agencies. A central task of the new agency is to promote the development of central government administration and the use of information technology in public administration. Work has been initiated in the Government Offices aimed at increasing productivity in the local government sector. The work is intended to provide knowledge on what helps to raise efficiency and productivity and find a model for how the Government can follow efficiency and productivity trends in local government. The idea is that both central and local government should benefit from this work. In order to further develop the local government database that enables comparisons to be made between municipalities and between county councils, the Government, together with the Swedish Association of Local Authorities and Regions, has established the Council for Local Government Analysis and Benchmarking. The Council is also to support the follow-up of goal achievement and resource use in local government, stimulate comparisons between municipalities and county councils respectively, market the database, develop and quality assure existing and produce new indicators, as well as further develop statistics in cooperation with the agencies responsible for public statistics. Apart from this, the Government has previously directed the Committee on Public Sector Responsibilities to review the structure of and division of responsibilities in the whole public domain. 36

37 Reforms to promote sustainable growth and social justice since 1994 In 1994 Sweden was in deep economic crisis. Unemployment, central government debt, interest rates and budget deficit had multiplied in the course of just a few years. Swedish creditworthiness was low. Several international and Swedish experts foresaw the end of the Swedish model. The Swedish economy did not grow sufficiently in the 1970s and 1980s. Cost increases were too high in relation to the rest of the world. The krona was devalued on several occasions. In the first half of the 1990s the situation worsened dramatically. Growth was negative for several years in a row. Public finances were at a record weak level. In November 1992 Sweden abandoned its fixed exchange rate. In 1994 every fourth policeman and every fourth child allowance were paid with borrowed money. Open unemployment had risen from 3 to 8 per cent in three years. Employment had fallen by a half million. Public finances required reorganisation in order to restore confidence in Sweden. From net debt to net wealth In the years from 1994 to 1998 a programme of reorganisation was implemented that strengthened public finances by SEK 126 billion. The programme entailed necessary cutbacks but health care, education and social services were spared as much as possible. The financially weak were also protected. The twenty per cent of households with the highest economic standard contributed 43 per cent of the budget strengthening, while the twenty per cent with the lowest standard contributed 11 per cent. Today, Sweden s public finances are among the strongest in the EU. Net lending (financial saving) in the public sector in 2005 was SEK 71 billion, or 2.7 per cent of GDP. Net public sector wealth has improved from a deficit that at its worst was 25 per cent of GDP to a surplus of 12 per cent in From a deficit of SEK 9 billion in 1994 the local government sector had a surplus of over SEK 10 billion in A new fiscal policy framework has been introduced, with an expenditure ceiling and surplus target, to prevent public finances from again becoming weakened. Strong public finances have meant a substantial fall in interest rates. The 10-year interest rate has fallen from 10.9 per cent in 1994 to 3.3 per cent in 2005 and the corresponding figures for the three-month interest rate are 8.1 and 1.7 per cent respectively. The lower interest rates have in turn meant lower housing costs. The cost of a mortgage Monthly cost of borrowing SEK 1 million Interest rate, per cent Monthly cost, SEK , , , , , , , , , , , , Note: Stadshypotek s 5-year mortgage interest rate (annual average). Monthly cost excluding tax relief on interest. Source: Ministry of Finance. Net public sector wealth Per cent of GDP Largest real wage increases since the 1960s The deep crisis in the first years of the 1990s and subsequent budget restructuring required major sacrifices. But the budget restructuring and economic policy also laid the foundation for longterm sustainable growth, low inflation and better private finances. Since 1996 Sweden has had an average real wage increase of three per cent per year. Real wages have not shown such strong growth over such a long period since the 1960s. Sources: Statistics Sweden and Ministry of Finance 37

38 Real wage growth Per cent more jobs Work is the foundation for welfare, prosperity and fair distribution, but also for individuals personal and social development. From 1991 to 1994 employment fell by almost a half million people. Total unemployment rose to 14 per cent. In 1996 the Government introduced the goal of halving open unemployment, from 8 to 4 per cent. The restructuring of public finances has meant lower interest rates and increased confidence in Sweden. Moreover, the education system has been extended substantially, considerable investment made in infrastructure and the conditions for business have been improved. Direct measures to fight unemployment have also been implemented. Adult Education Initiative. From 1997 to 2002 an education initiative directed at adults with short formal education was implemented. About people participated in the Adult Education Initiative. This is the greatest adult education programme ever implemented in Sweden Sources: Statistics Sweden and Ministry of Finance 1985 More effective labour market policy. Today labour market policy is directed towards better matching to prevent bottlenecks and help people furthest from the labour market. Support for local government. Temporary local government employment support was introduced in From 2002 to 2005 a total of SEK 21 billion was granted in employment support. In 2006 the framework is estimated at SEK 7 billion. Employment in rural areas. In 2002 regional incentives for small-scale enterprise were introduced in the category A development area, which mainly covers the interior parts of Norrland. The incentive was in the form of a lower employer s contribution. Activity guarantee. In 2000 an activity guarantee was introduced to increase the chances of entering the labour market for the most vulnerable groups in society. The activity guarantee entails full-time organised labour market measures, including education, training and work experience. Since the start people have taken part. Employment package. In 2006 an employment package will be implemented, giving people the opportunity of work, training or work experience. RMI deduction. Tax deductions for repairs, maintenance and improvement of properties have been allowed for two periods as an economic policy intervention since 1994: from 1996 to 1999 and from 15 April 2004 to 30 June Open unemployment Per cent Source: Statistics Sweden All in all the number of people in employment has increased by since The number of young people who have been unemployed for more than 100 days has fallen by 90 per cent

39 from in 1994 to just over in The employment rate has risen more among people born abroad than those born in Sweden. The goal of halving open unemployment was achieved in In recent years, however, unemployment has risen. In 2005 average open unemployment was 6 per cent. The Government has therefore taken a range of measures to reduce unemployment and increase employment (see page 11). Major strategic investments in knowledge Education is an important factor for people s personal development, but also for Sweden s future competitiveness. So the education system must be of high quality throughout, from pre-school to university. More adults in pre-schools and schools. In the difficult economic situation prevailing in the 1990s the teacher/student ratio fell in schools. Between 1997 and 2000 general government grants to local governments were gradually increased. At the same time it was stated that these funds were intended to help maintain and further develop good quality in health care, schools and social services. It was an important contribution to enable more teachers to be employed in schools. This general initiative was followed by additional contributions as well as a targeted drive for staff reinforcements. Between 2001 and 2006 an extra teachers and other specialists were recruited. A targeted effort is also being made between 2005 and 2007 to allow an extra pre-school teachers, child-carers and other staff to be employed in pre-schools. Higher education for more people throughout Sweden. More places in higher education and better study allowances have made it possible for more people to study. The number of students in higher education has increased by more than since A further places will be created up to and including Social and regional bias in recruitment has decreased and people with foreign backgrounds are now represented in higher education to the same extent as in the rest of society. Advanced vocational education. To meet the need for skilled labour the advanced vocational education scheme was introduced in This is post-secondary education designed in cooperation with working life. The education programme has expanded from 846 participants in 1996 to over in Reinforced study support. The study support system was reformed in The grant component was substantially increased, as was the exempt amount for earned income. The study allowances were also made pensionable. To improve the possibilities of combining studies and family life a child supplement for students was introduced in From 1 July 2006 the age ceiling for entitlement to study allowance was raised from 50 to 54 years and facilities for financing studies for those over the age of 40 were also improved. Commitment to research. Sweden is the country that invests most in research and development relative to the size of its economy, with the exception of Israel. To further strengthen Sweden s position, appropriations to research are being increased by just over SEK 2.3 billion between 2005 and The long-term target is for public resources invested in research to reach one per cent of GDP. Key indicators, higher education Number, unless otherwise stated 1994/ Students in higher education of whom women of whom men Number of students with foreign background 2, Percentage of new students in higher education with working class backgrounds Number of master s degrees of whom women of whom men Number of Master of Engineering degrees of whom women of whom men Number of licentiate and doctoral degrees respectively of whom women of whom men Refers to autumn terms 1994 and 2004 respectively. 2 People born abroad or born in Sweden of two foreign-born parents. Per cent. 3 Refers to academic year 2003/04. 4 As percentage share. Sources: National Agency for Higher Education s NU database and Statistics Sweden. The major investments in the education system have brought results. Today 91 per cent in the age group 25 to 34 have at least an upper secondary 39

40 school education. The number of students in natural sciences and engineering has doubled in ten years. Sweden has a larger percentage of postgraduate degrees per annual cohort than any other country. Research expenditure (public and private combined) per inhabitant has doubled since More newly started enterprises Globalisation places new demands on us. To meet the challenge Sweden s competitiveness must be strengthened. It must be easier to run a company, start a company and get a company to grow. Conditions for companies have improved since Most important is having the macroeconomic foundations in place, which has led to lower interest rates and higher demand. However, special measures have also been taken. Wealth tax, inheritance tax and gift tax abolished. Inheritance tax and gift tax were abolished on 17 December One effect of this is to make generational succession in small companies easier. Better access to risk capital. Over a ten-year period, starting in 2005, SEK 2 billion will be spent on seed financing of projects poised between concept and enterprise. Simpler rules. An extensive programme was started in autumn 2004 to reduce the administrative burden on companies. Close to 300 measures are being implemented. Lower taxes for close companies. In 2006 the tax rules for close companies (the 3:12 rules ) were amended. In the long run these measures will mean tax relief worth SEK 1 billion. Strategic development programmes for Swedish industry. Between 2006 and 2010 SEK 1 billion is being invested in strategic development programmes for a number of key Swedish industries: forestry and wood products, metals, vehicles, pharmaceuticals and biotechnology, aerospace, and IT/telecommunications. Lower employer s contributions for solo entrepreneurs who take on staff. Nearly half of the country s solo entrepreneurs say they would like to take on at least one employee. To encourage this, the Government proposes a temporary reduction in the employer s contribution for an entrepreneur s first employee. The employer s contributions will be lowered to per cent. Number of newly started enterprises Source: Swedish Institute for Growth Policy Studies New enterprise has increased from companies in 1994 to companies in The number of business bankruptcies has fallen from per year in 1994 to less than per year in Reduced social divides The conditions of people s lives differ. Some are born in scarcity, with their parents struggling to make ends meet. Others are born into families where resources, contacts and abundant options are taken for granted. According to the UN Human Development Report, Sweden is one of the world s most prosperous countries and enjoys one of the highest standards of living. Sweden is also in the category of countries with the lowest proportion of financially weak households. The Swedish welfare model is a major explanation for the relatively small economic disparities. The economic standard of households improved by 26 per cent between 1995 and The trend has been most favourable for couples with children, whose disposable income adjusted for number of dependants has increased by 30 per Number of people in need of social assistance Full-year equivalents Women Men Source: Statistics Sweden

41 cent. The trend towards increased income gaps has been broken and the income spread is now somewhat lower than its peak in The Government has set the target of reducing the need for social assistance to half the 1999 level. Between 1999 and 2003, the need for financial assistance dropped 26 per cent. In 2002 and 2003 the rate of reduction slowed and in 2004 there was a slight increase in this need. The main reason for this is the weakness of the labour market. The trend for 2005 seems likely to be somewhat brighter. In the distribution policy appendix to this Bill an in-depth account is given of how different groups have shared in recent years economic developments. Better conditions for families with children and young people The economic crisis in the 1990s affected children and families with children more severely than other groups. Since the economic recovery a number of reforms have taken place to improve conditions for children and their families. Maximum charge in childcare. In 2002 a maximum charge for childcare was introduced which at that time reduced average pre-school charges by SEK per year for a fam- ily with two children. According to the follow-up by the National Agency for Education the number of children in pre-schools has increased, without any increase in the size of the child groups. Hours of attendance have not become longer. Right to pre-school. From 1 July 2001 the municipalities have been obliged to offer preschool activities for at least 15 hours per week to children with unemployed parents. Children of parents on parental leave were also given the same right in Universal pre-school preschool three hours per day free of charge for 4-5 year-olds was introduced in Higher child allowance. Child allowance has been increased in several stages, from SEK 750 in 1994 to SEK In both nominal and real terms, the present allowance is the highest since child allowances were introduced. The supplementary allowances have also been raised. On 1 October 2005 a supplementary allowance for the second child was introduced. As of 2006 maintenance support has also been raised. Augmented parental insurance and extra month s benefit each for mother and father. In 2002 Ibrahim, father to Faysal and Emelie 41