The Statement of the Government, February 17th 2008

Economic stability is the main goal of the Government, since it promotes economic growth and welfare in the long run. Under the present circumstances, it is of utmost importance that conditions be created for a lower level of interest rates.

Wage agreements for three years that are based on modest wage increases, and a substantial increase in the lowest wages help increase income equality and economic stability. The Government is prepared, based on its original Policy Statement, to resort to wide-ranging measures in order to facilitate the conclusion of wage agreements.

1. In the preparation of frame budgets for the next four years, the Government will propose the following goals regarding taxation:

2. A housing policy will be drafted where the duties of the public sector will be defined and the division of tasks and costs between the central government and the local governments will be reviewed with the aim of creating equality between forms of residence and creating personal support. At the same time, the Government will review the interest rebate arrangement as well as rent subsidies in consultation with the parties in the labour market, along with other issues. Furthermore, the Government will initiate the following measures in consultation with local governments:

• Rent subsidies will increase to a maximum of 46 thousand krónur a month instead of 31 thousand krónur. Special rent subsidies will also be increased, and qualifications for them will be eased in order to extend them for an increased number of households. General and special rent subsidies could therefore reach 70 thousand krónur a month instead of 50 thousand krónur.
• The increased demand for housing will be met with more liberal mortgage limits on loans for rental housing and an increase in the number of loans for housing units that will be financed with subsidised interest rates to 750 such loans a year for four years as of 2009.
  
  

The Government also intends to implement the following measures:

• The asset curtailment limits for the calculation of interest rebates will be increased by 35 per cent in 2008.
• The stamp tax on mortgages will be abolished on purchases of a real property for first-time buyers.
• A housing savings system with tax deductions will be established for individuals 35 years of age or lower in order to encourage savings amongst those who plan to purchase their first home or homestead right.
  
  

3. Unemployment compensation will increase in line with the increase in the lowest wages. Income-related maximum compensation will also increase by the same percentage.

4. Social security benefits will increase in conformity with existing law. A committee under the auspices of the Ministers of Health and Social Affairs will be appointed with the main task of drafting proposals for a thorough review of the social security system with the aim of simplifying it and review ways and means of establishing a defined cost-of-living reference minimum.

5. The parties to the wage agreement have agreed to initiate an insurance arrangement for serious personal injuries or setbacks that could lead to disabilities. A new 0.13 per cent payroll tax will be imposed on employers in line with wage agreements. When this arrangement will become effective, the Treasury will appropriate an equivalent amount to the Rehabilitation Fund as of the year 2009. The Government will propose legislation that ensures that payments from the Rehabilitation Fund, from sickness as well as education funds of unions that will be used to pay the cost of rehabilitation, health services and certain professional services along with job education and adult education courses that have been confirmed by the Ministry of Education will not be counted towards taxable income of the individuals concerned. The Government will also initiate discussions with the labour market partners regarding the coordination of the tax treatment of the payment of costs from these funds for preventive measures and job education.

6. The Government and the labour market partners have agreed to the following measures and efforts of emphasis in the field of education, with special reference to the education of people in the labour market with a limited education:

• The goal is that no more than 10 per cent of people in the labour market will be without a certified occupational or secondary education by the year 2020. A determined effort will be made to create opportunities and incentives for the education of people in the labour market with a limited education. The secondary education level will be improved in order to enable more people to find appropriate education for the completion of a specific final examination certificate at the secondary education level.
• Legislation is being drafted to ensure that all people will have the opportunity for an education upon completion of the elementary school level where a balance will be maintained regarding the cost participation of the public sector. The financial support of the central government to education at the secondary level, the university level and in job education will be coordinated.
• The lending rules of the Student Loan Fund will be reviewed with the aim of maintaining an equal opportunity between individuals and groups regarding education opportunities. In accordance with the already stated policy of the Government, care will be taken that the cost of students in secondary education of registration and materials fees will be insignificant and kept to a minimum.
• Appropriations for continuing education and adult education that is of use for people in the labour market will be increased in equal steps by 300 million krónur over the next two years.

7. The Government will appoint a working party with the participation of the labour market partners that will be entrusted with the task of finding ways and means of ensuring that employees with a legal residence in this country who are working abroad for a subsidiary of an Icelandic firm can maintain their rights within the Icelandic welfare system.

8. The Government intends to propose changes in the current legislation of compensatory damages to the effect that the joint responsibility for accidents in the workplace will not be considered the fault of the employee unless the damage can be traced to the wilful intent or gross negligence of said employee.

Reykjavík, February 17th 2008