Is the government betraying agreements?

During the week, a news article appeared in Morgunblaðið about the proposals from the Confederation of Icelandic Employers, which aim to save the state certain amounts of money. What is mainly surprising is that many proposals revolve around the state disregarding its obligations and reducing important measures for the people of the country.

Being a party to agreements is a responsibility that must be handled with integrity and honesty, and it benefits no one if the state withdraws promises, obligations, and signed agreements. Such a government would hardly be trustworthy in the eyes of the nation, let alone individuals who are placing great hopes on the measures the state has committed to.

Of course, the state should have responsible and sensible economic management. We see that the austerity and measures of the current government are beginning to have an impact on decreasing inflation, and interest rates have started to fall.

Involvement in wage agreements

It is worth considering that it seems the Confederation of Employers has little respect for the well-established principle of contract law that agreements should be upheld. It is true that there are differing opinions on whether the state should have intervened in the last wage negotiations. It is also true that it is important that we participate in such contract negotiations with caution, as the Confederation of Employers has pointed out. But when promises have been made, it is crucial to stand by what has been put forward.

The signing of wage agreements in March of this year in the general market was a significant step. The parties in the general labour market demonstrated great responsibility and foresight with these agreements. The involvement of the government, both state and municipal, was crucial in the negotiation process. The measures that the state committed to are designed to increase the disposable income of households, with a special focus on housing construction, ensuring housing support, and greatly enhancing support for families with children. This is support for those who are at a disadvantage in the housing market and have suffered increased burdens due to housing costs. Measures to increase the supply of residential housing contribute to improved equilibrium in the housing market and lower housing costs.

Is the Confederation of Employers really suggesting increasing the burden on families with children and adding to the housing costs of those who are least able to bear them? To renege on obligations and impose additional costs on that group can have long-lasting effects, even if it would save the treasury some amounts today.

Important government actions in housing matters

Regarding the proposal from the Confederation of Employers for a reduction in the interest benefit system and shared equity loans, it is necessary to reiterate that the state and municipalities have involvement in a third of the construction of housing each year. It is not new for the state to take action in the housing market with the aim of assisting vulnerable groups and equalizing access to the market.

The period from 2019 to 2024 has been the greatest construction period in Iceland's history, but that has not been sufficient. Demand for housing has increased significantly in a short time alongside considerable population growth here in the country. Therefore, we are building to meet the estimated housing need, rather than due to inaction in housing matters.

We in the Progressive Party have placed a major emphasis on increasing access to housing, especially for young people, first-time buyers, and renters. We are doing this, among other things, through shared equity loans, which have proven beneficial to these groups and have been an important measure in housing matters.

Shared equity loans for first-time buyers are here to stay, and the government has already approved a budget of 4 billion for shared equity loans this year, partly to support first-time buyers and to encourage developers to continue building. This was also done to induce developers to lower prices to fit within the parameters of shared equity loans. The shared equity loans directly contributed to keeping property prices down, contrary to the statements of the Confederation of Employers.

We stand by what we say

To address the increased interest costs for households in recent months, a special interest support was paid out in 2024 to households with housing loans. The basic amounts of housing benefits and asset limit thresholds in the housing benefit system will increase on June 1, 2024, and increased consideration will be given to family size, and contributions to housing benefits will rise by 2.5 billion ISK on an annual basis because of this.

There will be a continued reduction in income deductions for child benefits so that many more parents can receive support. Child benefits will thus increase significantly, and efforts will be made, in cooperation with the state and municipalities, to make school meals for primary school children free of charge starting in the autumn of 2024. Furthermore, the maximum payments from the Maternity Leave Fund will be raised in three phases over the next two years. Once the changes to the contributions to the Maternity Leave Fund are fully implemented in 2027, the accumulated increase will amount to 5.7 billion ISK on an annual basis.

We in the Progressive Party place great emphasis on the welfare of the Icelandic nation as a whole, among other things through necessary government intervention in the housing market. We will continue with measures to ensure stability and reduce negative impacts on the economy and wish to contribute to ensuring that work continues with the foundation that has already been laid.

Ingibjörg Isaksen, chair of the parliamentary group of the Progressive Party.

The article first appeared in Morgunblaðið on October 12, 2024.