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Norway's opposition Labour to campaign on less spending from wealth fund
May 19, 2017 / 8:27 AM / 7 months ago

Norway's opposition Labour to campaign on less spending from wealth fund

OSLO (Reuters) - The Norwegian Labour party, which polls suggest will win a September election, would spend less oil money, roll back tax cuts and review how Norway’s huge wealth fund is supervised before allowing other changes, its finance spokeswoman said.

Marianne Marthinsen is among the top contenders to take over as finance minister if Labour forms the next government.

“In the upcoming four-year period we must limit oil revenue spending,” she told Reuters, echoing comments by central bank governor Oeystein Olsen in February.

Norway channels oil and gas revenues into its two-decade-old sovereign wealth fund, now the world’s largest, at $940 billion, and a major international investor.

The government is allowed to spend a small proportion of the fund’s value each year and in 2017 will use that money to cover a 221 billion crown ($26 billion) budget deficit.

But Marthinsen warned against relying on windfalls from the fund’s investment earnings, saying: “The current trajectory, where spending has almost doubled in four years, is unsustainable ... The growth in oil revenue spending must come down.”

Labour also wants to roll back many of the tax cuts introduced by the right-wing government of Prime Minister Erna Solberg, particularly for high earners and the wealthy, while keeping in place a recent compromise to slash corporate taxes.

“Higher taxes and less oil revenue spending are not popular messages in themselves,” Marthinsen said in an interview at her office in parliament. But “I believe being the adult in the room, presenting a credible plan, will bring benefits.”

A May 2-8 poll by Norstat suggested Labour and two supporting parties would win 88 seats in parliament, three ahead of the 85 needed for a majority. The current ruling coalition and its backers were seen taking a combined 79 seats.

WEALTH FUND

If she becomes finance minister, Marthinsen will be responsible for the wealth fund, which is seeking to add new higher-yielding investments to the stocks, bonds and real estate it currently holds, such as unlisted equity or infrastructure.

But that is unlikely to happen until the fund’s supervisory regime is looked at, if at all, she said. Today the fund is managed by a unit of the central bank.

“I don’t want to rush like some others do,” said Marthinsen. “These are complicated investments, though the return possibilities are good.”

“What differentiates this fund from others is that it is democratically owned. The fund must have legitimacy with the Norwegian people, and parliament must have democratic controls, which is much easier when you track indexes.”

A key landmark will be the expected June publication of a report by a government-appointed commission led by former central bank governor Svein Gjedrem, which is examining how the fund is supervised.

Marthinsen said she was currently more inclined to keep the fund as a unit of the central bank.

“It would become a big power center establishing itself outside the central bank and the democratic structures of the bank,” she said. “There would be a danger of a completely different culture, around bonuses, recruitment, growth in the management itself, were it to be outside of the central bank.”

Editing by Catherine Evans

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