The parties in the new government have now presented their first proposals for next year’s budget.
In an interview with Berlingske on Monday, the party leaders of the Social Democrats (Socialdemokratiet), the Green Left (Socialistisk Folkeparti), the Moderates (Moderaterne), and the Social Liberals (Radikale Venstre) floated their ideas.
These include cuts and limitations to student grants, higher taxes on electric vehicles, limits on interest deductions, and more spending on defence.
This article will take each proposal and the reaction to it one by one. But first, it’ll consider what the budget process actually looks like.
How does the proposal work?
It should be noted that these ideas are only proposals.
For next year’s budget to pass, it will need a majority behind it, which the government must find with other parties, as it does not hold a legislative majority itself.
That majority could be found to the left, with the Red-Green Alliance (Enhedslisten) and the Alternative (Alternativet).
It could also be found to the right of the government, most likely with Venstre or the Conservative People’s Party (Det Konservative Folkeparti).
Altogether, this means the proposals may not end up in the final budget after negotiations and compromises with other parties.
Changes to SU and the graduate allowance
The proposal that has received the most attention appear to be the government’s plans to cut student grants.
In Denmark, over-18s who are studying (both in upper secondary school and at university) receive student grants known as SU.
The government now suggests ending SU for students living at home whose parents earn more than 710,000 Danish Kroner a year. This would affect roughly 81,000 people.
Recent university graduates in Denmark also receive an allowance while they look for work after completing their studies.
The government is now proposing to make this contingent on the graduate having worked an average of four hours a week in 18 of the 24 months before graduating.
These suggested changes have been criticised by a range of interest organisations, including the Union of Danish Upper Secondary School Students and the Danish Union of Teachers.
The proposals are also causing internal difficulties for the Green Left and the Social Liberals, two parties that advocate a strong student grant system.
Green Left leader Pia Olsen Dyhr said in a comment to TV2: “It is no secret that this is not our invention.”
The Social Liberals’ finance spokesperson Katrine Robsøe told Berlingske: “It is not a proposal that we find particularly great. We are not a party that wishes to reduce the SU.”
Higher taxes on electric vehicles
Another idea in the new proposals concerns the exemption from registration tax on electric vehicles.
As it stands, the exemption applies to electric cars priced under 419,000 Kroner. The government proposes lowering that threshold to 366,000 Kroner.
This has also met opposition from interest organisations, including the Danish Automotive Industry Association and Mobility Denmark.
Green organisations such as Concito are less concerned. In a comment to DR, Concito said: “The green transition will not stall, even though buyers of electric vehicles costing more than 366,000 Kroner will have to pay (a little) registration tax.”
It should be noted that registration tax was already due to be introduced at the start of the new year; the suggestion is merely not to renew a temporary exemption that was extended last year.
Limiting deductions on interest payments
Another proposed change is a cap on how much interest paid on house loans can be deducted.
There is currently no overall limit, though different rates apply at different levels of interest payment.
The government wants to set a limit of 150,000 Kroner a year per person. According to the Finance Ministry, this would affect roughly 60,000 people.
Nordea Kredit economist Lise Nytoft Bergmann told TV2: “Young people will be hit hardest by this, because they are typically the ones who need to take out a large loan – and if you happen to be single on top of that, it’s going to be extra painful.”
There is also a significant discrepancy regarding impact between different municipalities. Wealthier municipalities such as Gentofte are expected to be more affected, poorer municipalities less so.
More spending on defence
The final element in the government’s proposal concerns defence spending.The government has allocated an additional 22 billion Kroner in 2027, rising to 40 billion Kroner in 2030.
This is part of its plan to meet NATO’s defence spending targets for 2035 and a separate European target for 2030.
Denmark has also, through its recent trilateral agreement with the United States and Greenland, promised to increase its defence capabilities in the Arctic.
Finding a majority can be tricky
Altogether, this package of proposals could be difficult to pass in the Folketing as it stands.
Parties on the left are hesitant to support cuts to SU, while parties to the right have criticised some of the effective tax increases.
None of these proposals should therefore be treated as final until negotiations are completed and a majority is found.