Press release 20 September 2009
Ministry of Finance

The budget for 2010: Working Sweden out of the crisis

The Budget Bill for 2010 contains further assertive measures to tackle the recession following the financial crisis. A total of SEK 32 billion is being put into new measures for 2010 and SEK 24 billion for 2011.

"In the wake of the financial crisis, many people risk protracted and destructive economic and social exclusion after having lost their jobs. We are trying to limit damage from the crisis by taking forceful action to promote jobs and enterprise and by providing support to everyone who has been severely hit by unemployment so as to enable them to recover more quickly. We are making it possible to keep up the standard of education and care services despite the tough years ahead," says Minister for Finance Anders Borg.

The measures in the budget aim to:

• moderate the decline in employment
• prevent unemployment from becoming entrenched
• defend core welfare services
• encourage more business starts and business growth
• protect the climate.

Further measures are warranted

The Swedish economy, being dependent on exports, has been severely impacted by the sharp downturn in the global economy. It is estimated that Swedens GDP will fall by 5.2 per cent during 2009, which is the weakest growth performance in a single year since the Second World War. In tandem with this, unemployment is expected to continue to rise, reaching 11.6 per cent in 2011 before starting to decline.

Now there are indications that the global economy is beginning to stabilise. The situation in the financial markets has stabilised, improving opportunities for households and businesses to obtain loans. This reduces the risk of further negative repercussions on the economy and public finances. The general government sector finances are expected to be stronger than forecast in the 2009 Spring Fiscal Policy Bill. General government net lending is estimated at -2.2 per cent as a share of GDP this year and -3.4 per cent in 2010.

The economic downturn makes it even more important for the Government to continue its efforts to enable more people to work, with fewer left outside the labour market. Given the low level of resource use, the sharp fall in employment and the reduced risk faced by public finances, further measures are warranted to tackle the crisis.

Moderating the decline in employment

To moderate the decline in employment during the deep recession, the Government proposes a range of measures aimed at influencing public sector employment. They include increased support to local governments and infrastructure investments.

Preventing high unemployment becoming entrenched

The most difficult and most important task facing the Government is to prevent unemployment becoming entrenched at a high level - that is, to prevent the unemployment that will arise in the next few years from becoming persistent and permanent.

Consequently, policies cannot be directed solely at stimulating demand; they must also be supplemented by initiatives to ensure that the increased unemployment in 2009 and 2010 does not remain stuck at a high level. These initiatives include more measures to make the unemployed more employable, to improve the business climate and to make it more worthwhile to work.

The in-work tax credit makes it more worthwhile to work, helping ensure that more people remain active in the labour market. This improves the prospects of strong employment growth when it becomes clear that the economy has entered a new growth phase. An increased in-work tax credit will thereby contribute to higher employment even after 2010.

Maintaining important welfare services during the recession

Even in a deep recession, core welfare services such as health and social care and justice must be guaranteed. With the proposed measures, the Government wants to give priority to core public sector services and to create a more equitable distribution of public sector resources.

The temporary resources for municipalities and county councils in 2010 will help maintain important welfare services such as schools, health care and elderly care during the recession.

Increased appropriations for justice will make it possible for the police, courts and prison and probation services to become more efficient and to achieve better results.

Lower taxes for pensioners and higher housing supplements for people receiving activity and sickness compensation will cushion the impact of the crisis and contribute to greater security.

Encouraging more business starts and business growth

An innovative and dynamic business sector that is well able to adapt is of central importance for economic growth. In this Bill, the Government therefore proposes a range of measures to strengthen incentives to start up, run and develop businesses in Sweden. These measures will make entrepreneurs more secure, make it less risky to start new businesses and lower costs for many businesses. They include reduced social security contributions for self-employed people to improve growth and development opportunities for small enterprises.

Protecting the climate

To meet Sweden's energy targets, the Government is proposing additional measures to promote more efficient energy use in industry, agriculture and forestry, the construction sector, households and the public sector. The Government also proposes allocating additional funds to climate investments in developing countries so as to achieve Sweden's climate objective of reduced emissions of greenhouse gases. In addition, continued preventive measures are presented to adapt Sweden to the inevitable consequences of climate change.