As presented at VR's seminar on austerity earlier this year, such policies typically fall into three categories:
- Harsh cuts to public spending, privatization, and neglect of infrastructure development.
- High-interest-rate policies as a response to inflation.
- Wage cuts and the weakening of organized labor.
Cuts to Public Spending, Privatization, and Neglect of Infrastructure
Political parties have varying stances on cuts to public spending. The responses from Sjálfstæðisflokkurinn, Viðreisn, and Miðflokkurinn indicate that these parties view public spending as excessive and suggest reducing the number of government institutions, cutting funding to ministries (xM), withdrawing the state from banking and alcohol sales (xD), and liquidating state-owned assets (xC).
Vinstri græn, Flokkur fólksins, Píratar, Framsóknarflokkurinn and Sósíalistaflokkurinn oppose cuts to public spending. However, Flokkur fólksins emphasizes reducing "unnecessary expenses." Framsóknarflokkurinn suggests that increased value creation could generate government revenue, while Píratar believe that digital transformation could save significant funds. Samfylkingin believes that public sector costs can be reduced and proposes internal auditing for larger public institutions and seeking international expertise to improve efficiency.
Framsóknarflokkurinn, Flokkur fólksins, Samfylkingin og Vinstri græn all emphasize infrastructure development. Vinstri græn rejects austerity entirely, while Samfylkingin advocates amending fiscal rules to prevent them from hindering infrastructure investments.
Although no party supports increasing taxes on wage earners, several parties are open to other tax system changes. Samfylkingin, Píratar, Vinstri græn and Sósíalistaflokkurinn support increasing the capital gains tax for higher-income groups. These parties, along with Flokkur fólksins, also mention resource taxation, with Sósíalistaflokkurinn proposing a wealth tax and Flokkur fólksins suggesting an increase in bank taxes. Sjálfstæðisflokkurinn, on the other hand, wants to lower taxes. Some parties suggest higher fees on tourism.
Conclusion: The next government will likely agree on some measures to reduce public spending. However, the parties generally do not provide details on the scope of potential cuts or their impact on services, fees, or other aspects affecting wage earners. While tax increases on wage earners are not being considered, other tax system changes could be on the table.
High-Interest-Rate Policies as a Response to Inflation
Interest rates are set by the Central Bank, which is independent, but the framework is defined by politics. There has been little discussion about this framework or the cost borne by the public due to high-interest-rate policies. All parties agree that reducing interest rates and inflation is a priority, but their approaches differ. Sósíalistaflokkurinn, Framsóknarflokkurinn, Flokkur fólksins, Vinstri græn and Samfylkingin emphasize housing issues as part of tackling economic challenges. Meanwhile, Viðreisn, Miðflokkurinn and Sjálfstæðisflokkurinn focus more on managing state finances.
Few parties address measures to support households that have borne the brunt of high-interest rates in recent years. Vinstri græn proposes targeted interest rate support, while Samfylkingin suggests emergency measures, including restrictions on Airbnb rentals—a point also supported by Vinstri græn and Sósíalistaflokkurinn. Flokkur fólksins proposes rent caps and, along with Sósíalistaflokkurinn, advocates introducing rent control standards. Píratar proposes increasing interest relief, child benefits, personal tax credits, and more. Samfylkingin, Flokkur fólksins, and Sósíalistaflokkurinn all propose building modular housing as a short-term measure.
Conclusion: Political parties are willing to act against high interest rates and inflation, but their strategies differ significantly. Right-leaning parties prioritize state finances, while center-left parties emphasize housing issues. There is little consensus on emergency measures to assist households most affected by high-interest rates.
Wage Cuts and the Weakening of Organized Labor
Icelandic labor unions are strong by international standards, and union membership is high. Proposals often arise to change collective bargaining processes which could limit unions’ ability to advocate for their members. One such proposal involves increasing the authority of the state mediator.
Píratar, Vinstri græn, Sósíalistaflokkurinn and Flokkur fólksins oppose expanding the mediator's powers, with the latter even suggesting greater strike rights. Framsóknarflokkurinn and Samfylkingin do not see such changes as necessary, with Samfylkingin emphasizing collaboration with unions.
Viðreisn wants to review labor market laws, including the mediator’s authority to delay strikes, and proposes a rule where mediation proposals would be automatically approved if not voted on within a set timeframe, Sjálfstæðisflokkurinn plans to increase the mediator's authority, and Miðflokkurinn claims the Icelandic labor market is too conflict-prone and needs a review of the mediator's role.
Conclusion: In a right-leaning government led by the Sjálfstæðisflokkurinn, Viðreisn and Miðflokkurinn, it is more likely that the mediator’s authority will be expanded. These parties, particularly Sjálfstæðisflokkurinn and Miðflokkurinn, are also interested in further changes to labor laws, such as regarding union membership.