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August 3rd, 2013

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Liberal Alliance (LA) has launched a plan to reduce Danes' tax burden by dramatically increasing the productivity of the public sector, a move they say can be done without reducing the level of welfare.

The libertarian party wants to make the first 7,000 kroner earned each month exempt from tax, which they argue will increase an average monthly salary by 1,600 kroner a month and increase the work force by around 10,000 people.

The party is also maintaining its proposal to abolish the top tax bracket, topskat, and introduce a flat 40 percent income tax rate, costing 11 billion kroner in lost tax income. 

Tax spokesperson Ole Birk Olesen argues that their plan would cut 53 billion kroner from the public sector while improving the finances of low-income earners. Olesen said the plan demonstrates that his party is more inclusive than its image suggests.

“Our political opponents have managed to successfully brand us as a party who only cares about wealthy people, but this proposal ensures that for many Danes it will pay to work,” Olesen told Berlingske newspaper, adding that it was possible to cut 53 billion kroner from the public sector without making major disruptions to society.

“Denmark has the world’s highest public sector which has arisen because politicians had a tendency to promise more money whenever a problem arose. But if the public sector had the same focus on improvement that the private sector had, we would be able to achieve a lower tax burden without providing citizens with worse service. We managed to improve the productivity of hospitals by five to six percent between 2010 and 2011. We are only really talking about 1.5 percent of the public sector as a whole through to 2020.”

The government has established a productivity commission to find savings in the public sector, but one of its members, Jan Rose Skaksen, the director of the think tank KORA, argues it is far from certain that such large savings are possible.

“The challenge is that we do not know which buttons to push in order to improve the productivity of the public sector by ten percent,” Skaksen said.

Nina Smith, a professor of economics at the University of Aarhus, also questioned LA’s proposal and argued that it is not possible to make such large cuts to the public sector without impacting the quality of services.

“I just think it's impossible,” Smith told Berlingske newspaper. “It’s crazy to think that you can cut 50 billion kroner without it being felt by the population.”

Politicians also criticised  LA. The trade minister, Pia Olsen Dyhr (Socialistisk Folkeparti), took to Facebook to argue that the plan is unrealistic, a position echoed by Henrik Sass Larsen (Socialdemokraterne).

“Liberal Alliance is underestimating the intelligence of Danes if they think we can make savings equivalent to closing 37 hospitals or firing 75,000 public employees without it being felt,” Larsen said according to Politiken newspaper.