Policy Statement

6/12/03

May 23 2003

The past eight years have been characterized by optimism, progress and growing national prosperity. A dynamic economy has laid the foundation for a flourishing society and advances in most fields of life. Strong national government has led to the longest continuous period of increasing real wages and prosperity in the history of Iceland and succeeded in securing economic stability. On this basis and in light of the large-scale economic growth which lies ahead, countless opportunities have now been created for Iceland to move forward towards greater well-being and even better living standards.

Such advances are a precondition for being able to ensure sufficient employment and price stability, to strengthen the welfare system and consolidate its foundations. The Government of the Progressive Party and Independence Party aims to enhance the health service still further and make it more efficient in specific areas. Development of the educational system will continue with the aim of consolidating Iceland's place among the most advanced nations of the world.

Priority will be given to national unity, through extensive consultation with the social partners and cooperation between regional and urban communities on economic stability, in order to achieve goals for further progress and development of the economy, improved communications, education and the security of citizens. The position of the family in society will be strengthened and parents provided with more opportunities for harmonizing their work and family life in the spirit of the Government's policies as reflected, for example, in legislation on maternity and paternity leave. Through its actions in the coming term, the Government intends to pave the way for even greater national well-being for the future.

In 2004, Iceland will commemorate two remarkable events in its history. February 1 that year will mark the centenary of Home Rule and the appointment of the first Icelandic government minister. On June 17 the same year Iceland will commemorate the 60th anniversary of the establishment of the Republic. These milestones remind the nation of the importance of nurturing its culture and history, and at the same time of the great achievements that previous generations have made in its interest.

The main objectives of the government of the Independence Party and the Progressive Party during the coming term of office are:

- Ensuring a balanced and stable economy. This will create conditions for even further growth in national income and higher real wages for the public at large. Economic stability is also a precondition for the improved competitiveness of Icelandic businesses.

- Maintaining fiscal balance. Fiscal policy will play a key role in economic policy implementation over the coming years and needs to be flexible towards economic developments. Reforms aimed at cutting costs in central government operations will continue and procedures will be evolved further for more efficient handling and implementation of the Treasury budget. In this respect it is important to take a longer-term view than one year at a time.

- Taking advantage of the Treasury's improved scope for securing higher real wages, through systematic tax policy measures. Action to be taken during the Government's term of office will include a reduction in personal income tax by up to 4%, the abolition of wealth tax, harmonisation and reduction of inheritance tax and a review of the VAT system aimed at benefiting the public at large. Furthermore, wider opportunities for tax-free supplementary pension savings schemes are planned. Tax cuts will be decided in more detail in connection with wage settlements.

- Promoting a system of government which reflects the changed character of society. A particular focus will be the best approaches for taking advantage of the benefits of the information society and electronic government in order to ensure equal access for all citizens to necessary information and services. The police will be strengthened further by means including more visible law enforcement. The security of citizens must be a priority. Measures aimed at improving road safety are needed both in rural and urban areas, among other construction of flyovers and lighting of roads.

- Ensuring dynamic competition in as many areas of business as possible for the benefit of consumers. Activities on behalf of government agencies will be contracted out where possible, at the same time as access to them and levels of service are guaranteed. Public sector monitoring agencies must have unquestionable independence and steps taken to ensure that their activities do not impose an unnecessary burden. Companies operating in competitive markets have been privatised in recent years. Parliamentary authorization for the sale of the state's share in Iceland Telecom will be followed through, taking care to arrange the sale under favourable market conditions to ensure that the Treasury obtains a fair price for this asset. It will be ensured that current services to the public in this field are not diminished.

- Increasing direct support for families with children, by raising child benefit and tax-free allowances, and making further reductions in means testing. Firm support will continue to be provided for sports and youth activities.

- Boosting research and development work, among other things to facilitate contributions by businesses for this purpose and thereby stimulate entrepreneurship. In accordance with new legislation on the Science and Technology Council, research activities and innovation will be systematically built up in as many fields as possible.

- Encouraging businesses and public sector institutions to promote gender equality. The status of men and women in the labour market will be studied and work will go on aimed at levelling out wage differences between the sexes.

- Continuing to base fisheries management on the current quota system with moderate quota charges. The management system for fisheries has been under ongoing review in order to achieve the widest possible consensus regarding this pillar of the Icelandic economy. Improvements in building up fish stocks and scientific fisheries management will remain a plank of policy. Research and development work targeted at enhanced catch value will be maintained. Efforts will be directed at bolstering the interests of coastal communities, for example by looking into the advantages of greater pre-emptive rights of local authorities and legal entities to buy quotas, allocating revenues from quota charges towards development of those communities, restricting quota transfers within the fisheries year, increasing regionally designated quotas and introducing concessions for long-line boats. A provision stating that marine resources are the collective property of the Icelandic nation will be incorporated into the constitution.

- Creating an operating environment in which Icelandic agriculture can provide consumers with healthy and safe products at favourable prices. Conditions will be established for the sector to exploit its strengths in order to tackle growing competition, among other things in light of the pending WTO agreement. This will be done, for example, by reducing levies on agricultural production, boosting agricultural educational and research establishments and supporting innovation and recruitment in rural areas. These measures will aim to unleash the full potential of the agricultural sector for further growth. Farmers' pension rights and entitlement to sickness benefit also need to be improved.

- Taking advantage of opportunities for growth within the travel industry where possible. The sector will be provided with comparable operating conditions to those in other countries with which it competes. The Icelandic Tourist Board will work closely with the industry in marketing and development work, with the aim of established the travel industry on a year-round basis in order to create more well paid and secure jobs.

- Consolidating the foundations for living in regional Iceland and establishing equal conditions for work, education and culture. Particular emphasis will be given to distance learning, to enable as many people as possible to study locally. Regional urban centres will be developed in accordance with the government's regional development strategy which was approved by parliament during the last term. Support for industrial development in regional areas will continue, underlining that systematic cooperation between the capital and regional areas and mutual understanding are in the national interest.

- Completing the framework plan for utilisation of hydro and geothermal resources, to provide a comprehensive overview of Iceland's opportunities for exploiting the highly valuable assets represented by harnessing of energy. The energy resources of each part of the country will be sensibly harnessed in order to build up industry and communities. Harmony between harnessing of energy resources and nature conservation will be underlined. It is aimed to embark on new phases in hydrogen fuel production and to base Iceland's future energy consumption on renewable and thereby sustainable resources.

- Safeguarding the Icelandic language and Iceland's history and national culture. Conditions will be created to allow the further growth of flourishing cultural activities. A dynamic art scene will be made accessible to everyone in Iceland and suitable facilities will be provided for cultural activities, for example with a concert hall and conference centre in Reykjavík and cultural centres in regional areas. Support will be provided for promoting Icelandic culture and artists abroad.

- Guaranteeing equal opportunities to study for all, irrespective of residence and financial status. University studies will be strengthened and distance learning developed in partnership with educational establishments at secondary and tertiary level. A powerful lifelong learning network will be evolved in collaboration with the social partners, and vocational training will be boosted in particular. The Student Loan Fund will remain in the main role of ensuring equal and universal opportunities to study. Ways to reduce the repayments burden on students loan will be considered and the law on the Student Loan Fund will be reviewed.

- Ongoing housing market reforms in line with the objectives set for the Housing Financing Fund. The mortgage ceiling for ordinary housing will be raised in stages during the Government's term of office to as much as 90% of the value of the property, up to a certain limit. The market for rental accommodation will be invigorated.

- Open and equal access to health services for everyone in Iceland, irrespective of age, residence or financial status. Funds need to be deployed as efficiently as possible, taking advantage of new forms of operation and service contracts for specific fields where appropriate, in order to ensure quality services without diminishing the universal right to them. Healthcare centres need to be strengthened as the cornerstone of the Icelandic health service. Work will continue on providing enhanced services for the mentally ill. Particular attention needs to be directed at children and young people with mental and behavioural disturbances. Help for people with disabilities and the mentally ill needs to be consolidated, by such means as greater supply of short-term accommodation for them and other support services. People with long-term illnesses will be provided with financial and social support to help deal with them.

- Reviewing and simplifying the social security system, including a special examination of its interaction with the tax system and pension funds. The cost-effectiveness of assigning pension funds the tasks of handling old age and disability pension payments will be examined. In connection with disability pensions, means testing will be reduced and benefits paid to younger people in this group will be especially raised. A particular focus will be to ensure the welfare of people with disabilities and senior citizens within the lowest income groups. Home help for older people will be stepped up and measures taken towards enabling people to live for as long as possible in their own homes. It is important to integrate central and local government services for senior citizens in order to maximise their effectiveness. Development of nursing homes and residential homes will continue.

- Systematic action in the battle against the drug problem. A comprehensive preventive strategy will be devised in cooperation with the police, schools, sports associations and parents. No lenience will be shown towards drugs, their importation, distribution or use. More types of treatment will be made available and a strong focus given to preventive action.

- Maintaining Iceland's position as a leader in environmental issues, including the campaign against marine pollution. Plans for a new national park north of Vatnajökull will be followed through and planning of the highlands will be reviewed. Steps will be taken to increase the responsibility of individuals and businesses towards the environment.

- Securing Iceland's position in the international arena. Iceland will continue to participate actively, in cooperation with other nations, in NATO, the CSCE and the United Nations. Defence cooperation with the United States will remain the core of Iceland's security policy, not least in light of the global threat of terrorism. Relations with the European Union will continue to be secured on the basis of the European Economic Area Agreement and other agreements to which Iceland is a signatory. The European integration process and its impact on Icelandic interests will be closely monitored. Cooperation in the Nordic Council is important to Iceland, which will continue to foster its close links with its Nordic friends and neighbours. Continued efforts will be laid on maintaining the international competitiveness of Iceland businesses, for example by providing greater services for companies and individuals in foreign markets. Other emphases will be to strengthen Icelandic peacekeeping work and the activities of the International Development Agency. Iceland will be in the forefront of nations campaigning for human rights.

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