Last Wednesday, the Danish Welfare Commission published its final report.
Some, like the Conservative and Social Liberal Parties, looked forward to the event, while the Liberal Party probably had more mixed opinions. After all, one of the purposes of establishing the commission was to remove a troublesome issue from the political agenda.
Just to recapitulate: In late 1998 the Social Democratic-led government introduced a reform to the highly popular Early Retirement Benefit, which since 1979 has given wage-earners the opportunity to leave the labour market at 60, provided they are members of an unemployment fund.
Economists loved the reform and praised it as an example of good policy; Blue collar voters hated it and left the Social Democrats in droves. Unfortunately for the Social Democrats, there are more blue-collar workers than economists in the electorate.
Since then the received wisdom in Danish politics has been that tampering with the Retirement Benefit is a little like trying to dismantle an atomic bomb with a hammer: You do it at your own risk and the effects in case of an emergency will be deadly.
This has left Danish politics in an odd situation. On the one hand, the centre-right government wants to promote labour market participation and reduce benefit dependency.
On the other hand, the government has done what was possible to keep the question of reforming or abolishing the Early Retirement Benefit off the agenda. After all, it was the anger of blue-collar workers at the 1998 reform which triggered the great realignment in the Danish electorate and brought the present government into power.
Establishing the Welfare Commission back in 2003 was one way of keeping this potentially damaging issue under wraps. If asked, the Prime Minister could simply reply that the government was waiting for the Commission’s report to be finished.
Now, the wait is over, and Anders Fogh Rasmussen probably feels like one of the German guests in that famous “Fawlty Towers” episode.
Not only do the economists insist on the need for abolishing the Early Retirement Benefit – the equivalent of offering “Prawn Goebbels” on the menu – they also call for tax cuts on work income and increases in property taxes.
To a government whose main initiative in tax policy has been to freeze the entire tax system and leave it as it was in 2001 whatever its economic consequences, that is like performing the Prussian Stechschritt complete with fake mustache in the corridors of power.
And if the guests complain about the bizarre behaviour, they will be met with the answer: “Well, YOU started it, didn’t you?”
While the Social Liberal Party and the Conservative Party welcomed the proposals, the Liberals tried to stall the issue.
The result has been heated exchanges in the media between the Prime Minister and the commission (see for instance this article in the daily Politiken) and the commission even published an article stressing the need for tax reforms.
Just to add to the Liberals’ misery, the Government’s own advisors in the Economic Council also warned about the need for tax reforms that would shift the burden off work and to property.
In a really strange development, the P.M. and leader of the Liberal Party had to distance himself from an e-mail message sent by the party’s political spokesman Jens Rohde to local branches where Mr. Rohde warned party activists about making demands for reforms in social and tax policy.
No policies, please, we’re a government.
It is probably a good thing that the Liberals have the teachers and immigrants to hurl abuse at.