The Fiscal Policy Council is an expert authority tasked with reviewing fiscal policy every year. This year's report is not easy reading for the government.
Future generations will have to pay the interest costs when financing is postponed, Council Chairman Lars Heikensten said at a press conference.
This year's report is, according to the council, the "most serious" criticism to date of the government's approach to the fiscal policy framework.
Does not account for long-term financing
The authority primarily criticizes the state for borrowing money for defense, something that the parties in the Riksdag agree on, without explaining how the increased defense spending will be financed in the long term.
But it also criticizes the expansive budget that Finance Minister Elisabeth Svantesson (M) presented last fall, with a historically large reform space of 80 billion kronor.
According to the council, it is "remarkable that debt financing is described as necessary" while income tax is reduced by a similar amount.
It is a political choice you make, Heikensten said.
Last Friday, Svantesson held a press conference to announce that the scope for reform for the upcoming term has been exhausted.
The Fiscal Policy Council shares this view.
"There is basically no space at all," Heikensten said.
Politically difficult to raise food VAT
According to the council, neither the temporary reduction in food VAT nor the temporary reduction in employer contributions for young people should be implemented. The reduced food VAT will apply from April this year until the end of 2027, and the contribution reduction from April this year until September 2027.
At the same time, the council notes that it is politically difficult now to back down from lowering food VAT and employer contributions, and to raise them again in a year or so.
It is easy to see that there would be problems implementing those takebacks, Heikensten said.
The government defends the expansionary policy by saying that Sweden is in a recession and that the economy needs to be stimulated.
The Fiscal Policy Council writes that the reforms can provide "some stimulus." But the council believes that an expanded earned-income tax credit is an ineffective way to increase employment, and that the reduced food VAT increases distortions in the tax system.
Johanna Ekström/TT
Facts: Government budget
TT
Of the government's reform space of SEK 80 billion in the budget for 2026, the reduction in income tax and the halving of food VAT are the single largest items.
The government's in-work tax credit means reduced revenue for the state of SEK 21 billion annually, the same amount that the reduced food VAT is estimated to cost in 2027.
The temporarily reduced employer contributions for young people will mean approximately SEK 6 billion less in the treasury in both 2026 and 2027.
