General government revenue and expenditure, 2012

General government revenue totalled NOK 1 655 billion in 2012, up 5 per cent from the previous year. The government receives revenue from petroleum activities through taxes on income and wealth from the industry as well as on goods and services related to extraction of petroleum. It also receives dividends from Statoil and SDFI (State's Direct Financial Interest). Petroleum revenue rose by 8 per cent in 2012, noticeably lower than the previous year’s increase of 25 per cent.

Continued growth in retirement pensions

General government expenditure is calculated to NOK 1 251 billion for 2012. Wages and salaries to government employees and use of goods and services account for almost half of the expenditure, while a third is made up of social benefits to households, such as pensions and unemployment benefit.

Retirement pensions have grown considerably in the last few years – partly due to an increasing number of pensioners under the age of 67. As of 2011, it became possible to withdraw retirement pension from the national insurance scheme from the age of 62 years, while pension rights may be accumulated up to and including the year a person turns 75 years. Flexible withdrawal from the national insurance scheme is constructed in such a manner that the annual pension received will be higher the later it is commenced. Retirement pension can also be combined with income from work without reduction.

General government surplus amounted to NOK 404 billion in 2012. This is high both in a historical sense and compared to other countries in Europe. To a large extent, the surplus is invested in foreign financial markets through The Government Pension Fund.

Extended use of road tolls

The use of road tolls as a way of financing public road investments has increased in recent years. From 2011 to 2012 road investments financed by tolls grew by more than 30 per cent – to NOK 9 billion. This was due to several new projects with a road toll as the main source of financing, as well as increased use of road tolls for the financing of already ongoing projects.

Widened responsibility for the local government sector

From 2010, the responsibility for 17 200 km of classified roads and 78 ferry services was transferred from central government to the county authorities. This duty carried with it a financial burden for the local government, through increased operating and maintenance expenses and investments. The reform contributed to the substantial increase in investments carried out by the local government from 2009 to 2010. The increased expenditure expenses were compensated by larger grants from the central government.

In 2011, the Coordination Reform was put into effect. This is an incentive-based reform that has far-reaching goals of a more economically viable health care sector, with the aim of also preventing illness rather than just treating it. This is to be achieved by providing health care services closer to where people live, through better cooperation between the hospitals and the municipalities towards these goals. Municipalities have therefore been given increased responsibility for taking care of their inhabitants through this reform. The reform is financed by transferring resources from the hospitals to the local authorities. For 2012, this amounts to approximately NOK 5 billion.

The Coordination Reform has no short-term effects on general government revenue and expenditure as grants between the central and local government have been netted out. However, the situation is very different when we consider the isolated case of revenues and expenditures within the local government. Between 2011 and 2012, grants from the local government to the central government increased by more than NOK 5 billion. In the long term, the Coordination Reform is expected to push up compensation of employees, use of goods and services and investments, as the local government is given the financial incentive to provide more treatment to its own inhabitants.

Measured in book values, revenues in the local government rose by 6 per cent in 2012. Together with a more modest increase in expenditures, the deficit in the local government was reduced from NOK 19 billion in 2011 to NOK 16 billion in 2012. The deficit accounts for 4 per cent of the total revenues. The deficit, as reported in the preliminary estimates in February, has been revised downwards due to new actuary estimates of employers’ social contributions.

Over the last 5 years, the deficits from the local government have amounted to more than NOK 100 billion, measured in book values. The high level of investment is the main reason behind the strong growth in the debt level since 2007.