Figure 15: Primary balance with and without
reform
Source: Velfærdskommissionen (2005d).
The contribution of the various reform elements to the improvement in public
finances is shown in the table below.
Table 1: Decomposition of the contribution of the various reform
elements to the change in the primary budget position
|
2005 |
2020 |
2030 |
2040 |
2060 | |
|
Base scenario |
^^30 |
-0.1 |
-1.5 |
-2.1 |
-3.4 |
|
Education |
0.0 |
0.1 |
0.2 |
0.3 |
0.5 |
|
Labour market |
0.0 |
0.4 |
0.4 |
0.4 |
0.4 |
|
Integration |
0.0 |
0.2 |
0.2 |
0.3 |
0.3 |
|
Retirement |
0.0 |
0.9 |
2.0 |
2.1 |
2.8 |
|
Tax |
0.0 |
-1.2 |
-0.7 |
-0.6 |
-0.6 |
|
Other reform elements |
0.0 |
-0.3 |
-0.2 |
0.0 |
0.3 |
|
After reform |
^^30 |
-0ω |
^^04 |
^04 |
^05 |
Velfærdskommissionen (2005d)
Assessed in terms of fiscal sustainability the reform package solves the prob-
lem27 The contribution of the various elements to the fiscal sustainability prob-
lem is: i) retirement 82.6% , ii) labour market 14%, iii) education 12.6%, iv)
integration 10.4%, while iv) the tax reform worsens sustainability by -21% .
The reform package includes one element where the timing plays a very cru-
cial role, namely the tax reform.The tax reform is motivated by both concerns
for asymmetries in the existing tax structure as well as the need to make the sys-
tem more robust to globalization. The particular tax reform considered involves
27 Exactly 99.6% of the sustainability problem identified in the base case is eliminated.
30