COPENHAGEN (Reuters) – Denmark’s new government coalition has agreed to cut taxes and abolish a public holiday in efforts to increase labour supply and reform its generous welfare model, Social Democratic leader Mette Frederiksen said on Wednesday.
Frederiksen on Tuesday agreed with the main opposition party, the Liberal Party, and the Moderates to form a rare bipartisan government with her as prime minister.
“We have a clear goal of making the decisions needed to secure the future of Denmark,” Frederiksen said as she presented the coming government’s political platform.
The government faces high energy prices and the highest inflation in four decades eating into household economies.
“We face major challenges in our welfare society,” she said, adding that the government will “pursue a number of reform tracks”.
They include 5 billion Danish crowns ($717 million) in tax cuts to incentivise people to work more and abolishing a public holiday, lowering the number of annual public holidays down to 10.
The measures are aimed at boosting productivity and increasing the labour supply by 45,000 people, she said.
Danes pay some of the highest taxes in the world to finance their cherished cradle-to-grave welfare model, but have seen the quality of universal healthcare, education and elderly services erode as the population ages.
As a consequence of increased geopolitical uncertainty after the sabotage of two pipelines carrying gas from Russia to Germany through Danish waters, the government also agreed to accelerate defence spending.
Denmark will aim to meet a NATO spending target of 2% of GDP by 2030, three years earlier than planned.
The new government will also raise its climate change ambitions, as it now aims for Denmark to become carbon neutral by 2045 instead of 2050.
It also proposes to reduce greenhouse gas emissions by 110% compared to levels in 1990, effectively a negative emission target.
As part of efforts to achieve these goals it aims to introduce an emission levy on its agriculture sector and a tax on air travel, similar to those introduced in Germany and Sweden.
($1 = 6.9825 Danish crowns)
(Reporting by Jacob Gronholt-Pedersen and Nikolaj Skydsgaard)
