General government revenue and expenditure, 2005

The large increase in government revenue is mainly due to high oil prices that give a high income from petroleum activities. The increased petroleum related revenues are principally provided to the general government as operating profits from the State's Direct Financial Interest (SDFI) and as higher government tax revenue.

The central government receives tax revenues from all the subsoil extractors operating on the Norwegian continental shelf. SDFI, which is a part of the central government, does not pay taxes. The central government fiscal account shows that the recorded numbers for taxes on income and wealth from the extraction of petroleum amounted to NOK 165 billion in 2005. This is a growth of NOK 51 billion, or 45.1 per cent, compared with 2004 as the matching taxes amounted to NOK 114 billion. Accrued taxes from petroleum activities the first six months of the year are paid in October the same year, while accrued taxes for the activity the last six months are paid in April the next year. Consequently, in periods with increasing oil price and revenues from the petroleum activities, the accrued taxes will be higher than those recorded (see table 9). Both 2004 and 2005 show this pattern.

In addition to the petroleum taxes, the central government receives the surplus from SDFI's shares on the Norwegian continental shelf. The surplus is shown as withdrawals of income from central government enterprises in the central government fiscal account. The operating surplus at SDFI came to NOK 100 billion in 2005. This corresponds to a 29.7 per cent increase compared to 2004, when the surplus totalled NOK 77 billion.

General government's total expenditure raised from NOK 739 billion in 2004 to NOK 763 billion in 2005. Increase in pensions and wages constituted the major part of the increase. The general government surplus, measured by net lending, is in 2005 amounted to NOK 304 billion, an increase of NOK 108 billion compared with the previous year. The petroleum activity seen as a separate unit generated a surplus of more than NOK 300 billion. This calculation contains accrued taxes, transfers, interest and dividend plus other income and expenditure due to the petroleum sector.

Reduced deficit in local government

Total revenue in local government amounted to NOK 215 billion in 2005. This corresponds to an increase of NOK 14.7 billion compared with 2004. The increase in revenue is mainly due to a raise in tax revenue and transfers from central government. The total expenditure amounted to NOK 218 billion, an increase of NOK 7.6 billion from the year before. The major part of this growth is due to increased wages and salaries.

An increase in total revenue of NOK 14.7 billion combined with an increase in total expenditure of NOK 7.6 billion gave a lower deficit in local government. The deficit measured by net borrowing amounted to NOK 3.1 billion in 2005. This is an improvement of more than NOK 7 billion compared with the year before.

Government expenditure classified by function

Social protection, health and education represented the major share of general government total expenditure. Social protection came to 40.5 per cent of total expenditure, and amounted to NOK 309.2 billion in 2005. Health and education functions represented a 17.2 per cent and a 14.0 per cent share respectively.

Compared with 2000, the expenditures within each of the function groups have increased in absolute figures. However, the composition of the functions has changed. In 2005, social protection expenditure counted for 40.5 per cent of total government expenditure, an increase of 1.9 percentage points from 2000. The functions within this group also changed internally. The share of sickness and disability expenditure increased by 3.9 percentage points, whereas the share of old age expenditure decreased by 3.0 percentage points in the same period. In 2005 sickness and disability made 15.6 percent of total government expenditure, while old age expenditure came to 12.9 per cent. The expenditure share of health functions also increased during the period, and rose by 1.0 percentage point. On the other hand, the shares of economic affairs functions and defence declined by 2.1 percentage points and 0.9 percentage points respectively. The share reduction of economic affairs expenditures is mainly due to decline in expenditure shares to transport purposes and primary industries.