News - 14.01.2025

The Government's Comment Section

At the beginning of this century, Margaret Thatcher, the former Prime Minister of the United Kingdom, was asked what she considered her greatest political achievement. She promptly replied: "Tony Blair and New Labour. We changed the way our opponents think." In other words, she did not measure her success by the size or victories of the Conservative Party but by her ability to shift the political axis as a whole. Ideas that had once been considered radical, even extreme, became mainstream. It is therefore beneficial to analyze the dominant political ideas of each era and their impact on workers' rights, wages, and society.

One of today's prevailing ideas is the belief that fiscal balance must be achieved in government finances, no matter the cost. The UK Labour government has made fiscal responsibility its key focus, prioritizing deficit reduction over urgently needed measures to address the growing number of full-time workers living in poverty due to wage erosion, rising prices (particularly for energy), and housing costs. In the United States, President Joe Biden has tasked billionaire Elon Musk with leading cuts in the public sector, a move likely to result in deregulation that benefits large corporations, including Musk's own. Meanwhile, in Iceland, the government has invited the public to discuss how to fulfill campaign promises of streamlining public operations.

Housing Issues Are Key
Before the elections, both Viðreisn and Samfylkingin proposed cuts to public spending, though the latter also suggested revenue generation. These priorities were framed as necessary to lower inflation and interest rates, despite the lack of evidence linking inflation to public spending. Instead, the driving factors have been price increases in housing, food, and rent. It is safe to say that the most critical measure to address inflation and interest rates would involve large-scale action on housing issues.

After the elections, attention naturally turned to the newly forming government with anticipation. Where would the cuts fall, and how would public operations be streamlined? In other words: what was "the plan"? The government's consultation portal would have been the ideal venue to present such plans, but instead, the Prime Minister chose to open a generalized comment section inviting the public to suggest ways to promote "efficiency in public operations."

Predictable Responses
The results were unsurprising. Thousands of comments poured in, many of which echoed familiar ideological themes. Suggestions included cutting all public funding for culture and the arts, reducing the foreign service, withdrawing from international initiatives, abandoning climate action plans, and halting the urban transportation project. Asylum seekers became a frequent target, as did the Central Bank's leadership, ministerial assistants, public servants, and even general workers, whom many accused of being overstaffed.

Penny Wise, Pound Foolish
Among these were a few good ideas, and perhaps this was the point of the exercise. For example, individuals familiar with the fishing industry highlighted necessary reforms, raised concerns about tax evasion and misuse of corporate identities, and called for increased preventive measures. The latter point is particularly crucial because this is not the first time public spending cuts have been implemented. On the contrary, cuts have been a leading political strategy for many years, both before and after the financial crash. The result has been a tendency to intervene too late in problems that could have been prevented or mitigated—whether in welfare services, infrastructure, education, or healthcare. The simplest path to budget cuts often involves saving pennies but wasting pounds.

The core issue is that the largest portion of government spending goes to welfare, health, transportation, and education. Significant savings can only be achieved by cutting in these areas, but this often results in higher costs later or as frequently happens, shifting the burden elsewhere. For instance, when the government sells assets to improve its debt position but simultaneously rents facilities for the same activities, it leads to much higher long-term costs for taxpayers. Similarly, when services are cut in rural areas for cost savings, the expense shifts to individuals (and unions, which often step in), who must incur significant travel costs to access the same services. And when prevention is neglected, the costs always come later.

Workers' Interests Must Come First
Fiscal responsibility in public operations is always important, and attention must indeed be given to state finances, particularly given the deficits caused by COVID-19 and the Grindavík earthquakes. However, the Treasury is in good shape, and there is no urgent need for hasty or ill-considered actions, especially when these ultimately lead to higher costs for workers in the form of fees or reduced services.
As the government processes the overwhelming volume of input from its comment section, it must remember that it bears responsibility for the overall vision. Workers' and the public's interests must be at the forefront.

Halla Gunnarsdóttir
Chair of VR

This article was first published in Morgunblaðið on January 11, 2025.