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BUDGET

EXPLAINED: What Norway’s revised budget means for you

Norway has presented its revised budget for 2021, designed at helping the country recover from the coronavirus pandemic. Here's The Local's round-up of some of the key proposals and how they may affect you.

EXPLAINED: What Norway's revised budget means for you
Norway's revised budget has been proposed with the aim of helping the country recover from the pandemic. Photo by Pixaby, Pexels.

What is the revised budget?

The original provisional budget for 2021 was presented in October 2020, but the government has reviewed and revised the original budget with the aim of reducing the long-term effects of the coronavirus pandemic, and strengthening the country’s efforts to reopen society.

“The reopening of society has started. Vaccination is well underway, and within months, most of the adult population will be offered vaccines. We have been in this crisis together, and together we shall leave it behind. With the revised budget, we strengthen the effort to create more jobs and include more people in the job market,” PM Erna Solberg said at the budget’s unveiling.

The budget was presented by Norway’s Finance Minister Jan Tore Sanner, and the country will be leaning heavily on its oil fund to finance its recovery from the coronavirus pandemic.

“It has been necessary to face the crisis with strong measures, and it is in line with the rule of action to increase the use of oil money in times of crisis like this,” the finance minister said.

The government is proposing extending financial support for businesses and employees, extra funding for hospitals, and airports. In addition to this the government wants to extend the cut in VAT until the end of summer, set up a new tax scheme for startups and tax wind farms.

Here’s how some of the proposals may affect you.

Funding for quarantine hotels until November

The Directorate of Security and Emergency Preparedness will receive more than 1.1 billion kroner in extra funding so that the quarantine hotel scheme can run until November 10th.

“The quarantine hotel scheme has proved to be an essential tool for limiting import infection as much as possible. Our proposal means we have the necessary budget to continue the scheme,” Justice Secretary Monica Mæland, said in a statement.

A further 29.1 million kroner of funding has also been set aside for the country’s entry registration system.

Everyone entering Norway from so-called “red” countries – those with high infection rates –  is required to fill out a registration form prior to their arrival. Part of the funding will go to call centres that deal with travellers queries, where demand has been much higher than expected. 

Extension of support schemes

The government’s various Covid-19 support schemes will be extended, with some being reduced.

Support for workers made redundant due to the coronavirus, called permittering, will now only be able to benefit for a maximum of 26 weeks, beginning in July. 

Workers on permiterring are laid off either fully or partially. Workers laid off at least 40 percent of regular hours can access financial support from NAV. Workers will receive either 80 or 60 percent of their wages from NAV, depending on how much they earn.

Workers on hourly contracts are paid an average based on their earnings. 

The government has pledged to extend the compensation scheme for businesses, wage support scheme and loan guarantee scheme for companies until October 2021, but they may be phased out from September if there is little demand.

“We emphasise that temporary crisis measures should be temporary. When Covid-19 measures are gradually lifted, the compensation schemes must also be scaled down,” finance minister Sanner said.

VAT reduction extended to the end of summer

Last year the government cut VAT for certain industries and businesses to 6 percent. This cut will stay in place until the end of the summer. 

The lower VAT rate will be in place until September 30th 2021, after that it will return to 12 percent.

The lower rate applies to passenger transport, hotels and accommodation, public broadcasting, cinemas, museums, amusement parks and sporting events.

This means anyone planning activities or a staycation in Norway this summer as society reopens could save a pretty penny thanks to the reduced VAT rate being extended.

More money for healthcare

Hospital budgets will be boosted to the tune of 7.3 billion kroner this year.

Around 800 million kroner is already earmarked to cover the costs of laboratories’ analysis of the Covid-19 virus. A further 1.5 billion kroner will be used to compensate hospitals for revenue lost to the Covid-19 pandemic.

There will also be increased funding for IVF treatment.

Estimated growth of 3.7 percent

The government forecasts economic growth based on GDP of 3.7 percent in 2021. This is down compared to the 4.4 percent the government predicted in its original budget last fall.

READ MORE: Rising house prices: What’s next for the Norwegian economy? 

However, this isn’t cause for concern as 3.7 percent is only 0.2 percent higher than what is considered the ideal growth rate of 3.5 percent. This is regarded as the sustainable rate an economy can grow without facing any adverse side effects.

Tax on wind farms 

Government is introducing a tax on the production of wind turbines from 2022. 

The tax has been described as “moderate” by government.The money raised by the tax will go to municipalities that host wind turbines, 

READ MORE: Why Norwegian fisherman are against more offshore wind farms 

More money for airports 

Avinor, which operates Norway’s airports will receive an additional one billion kroner in funder, taking total funding for 2021 to 3.8 billion kroner. 

Government will also pay out 212 million kroner in lost revenue to Top Sandefjord and Haugesund airports. 

Start Ups 

Government is proposing a new tax option scheme for companies in the start-up and growth phase. The scheme will make taxes simpler for companies and employees and will provide a more favourable tax treatment to encourage growth in the start up sector. 

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For members

MONEY

What are the best savings options in Norway?  

Having some money set aside for a rainy day is always smart. Luckily, there are plenty of options available in Norway. However, what's best overall may depend on your situation. 

What are the best savings options in Norway?  

After your rent or mortgage, taxes, bills, and other monthly expenses are covered, you should hopefully have some money left over to put into savings and plan for your future. 

Whether you’re thinking of a rainy day fund, a nest egg, or money to put towards a home, Norway has plenty of options. 

What’s best overall will depend on your own needs. For example, if you want flexibility, you’ll want an account that allows you to make deposits and withdrawals whenever you wish. However, if you want a good rate, you’ll likely need to pen the ink on an account restricting withdrawals. 

For the best returns, look further ahead with a savings account that invests in stocks. These accounts deliver the best returns after around ten years. 

If it’s a house you’re after, you may want a BSU account. 

READ MORE: The key things you need to know about savings accounts in Norway 

The best rates come with strings attached

In terms of the best interest rates, BSU accounts typically offer the best returns. The Boligsparing for Ungdom (BSU) accounts have interest rates of around 6-6.5 percent at the time of writing. 

However, these accounts come with a catch. First, there are limits on how much you can invest per year, second, there are age restrictions, and third, the accounts can only be used for housing-related spending. 

Flexibility 

When it comes to savings accounts with more flexibility, there are several options. 

Buffer accounts (bufferkonto) are savings accounts that allow you to save up for unforeseen circumstances, such as an unexpected bill. Typically, these accounts aren’t expected to be the main savings pool. 

You can normally open these accounts without being an existing bank member, meaning you can shop around for the best rate. As these accounts are supposed to act as a buffer, you can make deposits and withdrawals as frequently as you need. 

These accounts will typically have rates comparable to savings accounts that don’t require a minimum monthly deposit and allow flexible withdrawal. 

At the time of writing, these accounts pay between 3.7 and 4.7 percent annual interest. 

For the medium term 

Some savings accounts offer slightly higher interest, but they may restrict or charge deposit fees. 

Other restrictions, such as being a bank customer, having a mortgage with it, or being a union member, may also apply. 

In a recent survey on banking among readers, a number said that union membership offered them competitive rates with savings accounts. Meanwhile, OBOS, Norway’s biggest housing association, also offers a high-interest savings account. 

Fixed-interest accounts may also offer an attractive option in the medium term. While interest rates in Norway are currently high, they are expected to fall in the coming years, so you may wish to consider a fixed interest rate account. 

Banks typically offer fixed interest for 1-3 years. The longer the rate is locked, the lower the overall rate. Therefore, it may be worth calculating whether you can expect to be better off overall by signing up for a fixed rate rather than going with the flow. 

These accounts typically offer rates a percentage point below flexible accounts.  

Longer term 

Those with an eye on the future could put even more money into their pension accounts. Typically, you will already be paying towards a state pension and workplace pension scheme in Norway. 

However, you can also invest in an IPA, individual pension account. The Sparebank group typically offers the best rates on these. At the time of writing, anywhere between 3 and 4 percent is considered a good rate. 

If you intend to save for longer than three years but don’t want to wait until retirement, consider putting some of your savings into a fund. In the longer term, these typically offer better returns than a bank. 

An index fund (indeksfond) is considered the easiest and cheapest to invest in. The cheaper the fund, the less it will affect returns. 

Mutual funds (aksjefond) are more actively managed but have higher costs. 

Then you will need to consider the scope of the fund. A more global fund will, generally, have lower risk.

Such funds are risky. Stock markets rise and fall, and over ten years, there is no guarantee that they will outperform a savings account. 

Some banks like DNB offer a combination of traditional savings and investment into funds. They offer accounts where anywhere from 30 to 100 percent of the money will be invested in shares while the rest will sit in a savings account. 

Such accounts also allow savers to choose the level of risk they are comfortable with.

If you are saving large amounts, then you may be subject to a tweak to the exit tax rules should you relocate from Norway. 

READ MORE: What we know so far about Norway’s plans for an exit tax

Where to check for the best rates 

When looking solely at savings accounts and not funds, then Finansportalen from the Norwegian Consumer Council will be an essential tool. 

It allows you to input the type of account you’re after, the money you expect to deposit and your age. From there, it will list the most important T&Cs of the accounts and order them from the best rate to the worst. 

You can also filter out banks that require you to already be a customer or take on other products. 

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