Economic and Public Finances

The main lesson to be learned from economic management during the republic years, whether viewed in the long term or short term, is the importance of ensuring that the public treasury is always well-prepared to tackle internal and external economic shocks. Recent years provide strong testimony to this importance. The interaction of a secure state economic policy in cooperation with a robust development of the business sector is crucial to laying the groundwork for the prosperity of individuals and families.

The primary objectives of economic management are to promote full employment and support stable prices, conduct balanced trade with foreign countries, and work towards a balanced public sector, promoting healthy economic growth that fosters equitable income and wealth distribution in society.

Framsókn has over the years emphasized that a mixed market economy is the most sensible and successful way to ensure prosperity for the people of the country. The Icelandic economy needs to be stable, transparent, and secure. Companies and individuals need a working environment where cooperation, initiative, diligence, and social justice are at the forefront. In this regard, it is necessary to ensure that the regulatory framework is transparent, simple, and efficient, and encourages people and companies in their work. A stable economic environment and predictability are prerequisites for individuals and companies to make long-term plans.

Lower Inflation is a Priority for National Economic Management

Framsókn believes that a strong collaboration between the monetary policy of the Central Bank of Iceland, public finance, and labour market participants is a key prerequisite for promoting stable prices and creating conditions for lowering inflation and interest rates – which is the greatest interest of the people and companies in the country. In favour of this, increased prioritization in public finances is required, aligned with government measures for long-term collective agreements in the labour market, aimed at investing in people. It is appropriate to work on comparable long-term collective agreements in the public sector, aligned with newly concluded agreements in the general labour market. Agreements in the public labour market must not lead to wage drift in the general labour market. Government measures should aim to curb inflation and inflation expectations in society.

Housing is a Matter of Macroeconomic Policy

It is urgent to prevent cost-push inflation from taking hold and becoming an independent problem in the Icelandic economy. Significant measures on the supply side of the economy need to materialize, especially with development plans in the housing market. Local authorities must ensure a sufficient quantity of buildable land for rapid development and seek ways to ensure affordable financing for the development of private ownership and rental housing for individuals and families. Framsókn wants the right of individuals to use additional pension savings for mortgage repayments to be permanently established.

Reliable and Responsible Public Sector Based on Value Creation

The Treasury of Iceland is the common fund of all the nation's people meant to have resilience in the face of economic shocks. Efforts must be made to achieve greater balance in the operation of the state with deficit-free operations and for debt ratios to be further reduced for the future, along with concerted work to improve the creditworthiness of the Treasury. During this process, it must be ensured that the public sector can continue to invest in people and infrastructure throughout the country in a responsible and sensible manner. Framsókn strongly emphasizes increasing state revenue through increased growth and value creation rather than by increasing taxation on people and companies. In this context, predictable, funded, and efficient incentive systems for increased value creation must be established, including reimbursements for research, development, and filmmaking and securing funds for marketing Iceland as a destination.

Consideration should be given to further expanding the foundations of the economy. Over the past decades, the economic foundations have increased from one to three. The focus should include creative industries and innovation to ensure continued prosperity. However, it is equally important to continue supporting the growth of existing industries, as they have laid the foundation for some of the best living standards found in inhabited places. The size and nature of the economy mean that foreign trade is highly important and competitiveness of industries compared with major trading countries must be ensured. Emphasis should be placed on active participation in international institutions and fostering relationships with neighbouring countries on both sides of the Atlantic.

Opportunities exist to strengthen the state's institutional system with an emphasis on merging institutions or increasing their joint operation. It is also important to continue the implementation of digital solutions in public sector operations.

Simple and Fair Tax System

Framsókn supports a progressive income tax system for individuals to promote fair income and wealth distribution, as is customary in Iceland's main comparison countries. Framsókn also supports utilizing the tax system and personal tax credit arrangements for income equalization. The tax environment must be clear, fair, and competitive with neighbouring countries. It is important for the tax system to work with the economic cycle.

One of the most important roles of the tax system is to ensure a strong welfare system and safety net, equal opportunities for people in society, and to encourage individuals and companies, based on freedom of enterprise, to be more enterprising and create value. The tax system can also be used to encourage positive regional development in the country. An efficient tax enforcement system must be strengthened to reduce black market economic activity, promote fair competition, and participate in the building of the community. It is important to revisit the revenue streams of municipalities and the Municipal Equalization Fund with the aim of increasing the financial sustainability of municipalities.

Independent Monetary Policy with the Icelandic Króna

A central bank with independent decision-making power, strong macroprudential tools, and sizable foreign exchange reserves is one of the cornerstones of economic management. Effective transmission of monetary policy is important for a small, open economy. An independent currency, the Icelandic króna, continues to best serve Iceland's interests.

The Financial System

Framsókn emphasizes the interests of households and businesses in the organization of the financial system, and it is important that in this regard, the government continues to supervise and oversee the financial system. Framsókn supports the continued sale of the state's share in Íslandsbanki. In the sale of the state's share in the bank, transparency, timing, broad participation, and dispersed ownership alongside the financial interests of the Treasury must align. Framsókn does not consider it timely to consider selling the state's share in Landsbankinn and believes in holding a significant stake in the bank in the long run, as is customary in the Nordic countries. The state's ownership policy in financial companies should be sharpened to ensure they do not take further steps in investing in major companies in the financial market.

Framsókn aims for the introduction of tax exemptions related to investment in shares listed on a regulated market. Additionally, innovation companies will be enabled to enjoy the benefits of investment in collaboration with a financial market trading platform.

Other State-Owned Assets and Companies

There is broad social consensus on the public ownership of systemically important companies in Iceland, such as Landsvirkjun, which is a symbol of the mixed market economy we live with. Framsókn opposes the privatization of such companies as well as other important basic infrastructure of society that are publically owned. Transparency and good and socially responsible governance should guide the management of such companies. It is worth examining in an organized manner how various state-owned properties and lands can support increased development in the housing market or strengthen the financial position of the Treasury.

The Pension Fund System

The primary role of the pension fund system is to ensure payouts to fund members in their senior years. It must be ensured at all times that the pension funds operate within a legal environment that allows them to fulfill this role responsibly towards the public and the fund members. The possibility of the pension funds participating in accelerating profitable infrastructure projects, for example, in cooperation with the public sector where applicable, should be especially explored. The number of pension funds should be reduced with the aim of decreasing costs and strengthening the rights of fund members.