POLITICAL PACKAGES

It's a recent trend that changes in Danish political life are presented as "packages", a bit like at Christmas. Last week there was an S.U. package, and yesterday there was a "kontanthjælp" package, a proposal to change (i.e. cut) the transfer income paid to the worst off in society. Today it was the turn of a "growth" package, designed to kickstart the economy and create jobs.

Denmark has lost roughly 170,000 private sector jobs since 2008, all of them well-paid (by European standards) and nearly all of them destined never to return. The Government had hoped that by now, the economy would have climbed out of the trough into which it had sunk, but that has not happened. A number of Danish companies are making a lot of money; but that money is being made abroad and is not being translated into new jobs at home. When combined with the disastrous aspects of the Danish fiscal cliff, something had to be done.

The core of that something is a cut in corporation tax from 25% to 22%, the dropping of a number of planned burdens on business, plus Dkr.4 billion to be spent on renovating buildings. This will be financed by reducing the planned growth of the public sector from 0.8% to 0.4% and holding it on a tight rein for the next seven years, plus savings generated by the other reforms outlined above. All in all, the Government expects the measures to produce 150,000 new jobs by 2020, which is roughly the amount that have been lost during the crisis.

There are however two big problems with the package. First, there is a good deal of scepticism about that prospective job figure. The measures will undoubtedly make Danish companies more profitable. But as noted above, more profitability does not necessarily translate into more Danish jobs. Secondly, and more immediately, the package creates a political problem. Basically, it involves taking money from some of the least well-off in society (students, those on the dole, people reliant on public services) and giving it to companies. Standard stuff for a right-of-centre Government; eventually those companies will generate more jobs and wealth. But this is a left-of-centre coalition, that was elected on the premise that Danish welfare could, and would, be maintained. The people that voted for that coalition have already begun to howl, and look set to continue to do so.

Walter Blotscher