Iceland’s prime minister seeks 2.5% cap on state fee rises

Prime Minister Kristrún Frostadóttir has submitted proposals to Iceland’s government to curb inflation and create conditions for interest rate cuts, mbl.is reported. The measures are intended to help protect collective agreements and ensure they hold.

The proposals follow talks between the government, the Icelandic Confederation of Labour and the Confederation of Icelandic Enterprise. Frostadóttir said they would not be formally presented without the labour-market parties.

At an annual meeting of the Confederation of Icelandic Enterprise on Thursday, Frostadóttir said the government was prepared to limit increases in fixed-amount charges and state agencies’ tariffs to 2.5 percent, provided collective agreements remained in place and other parties contributed. The government had previously announced plans for increases of 5.2 percent.

“I think it is fine for people to realise that this is money, and it is not a given that we would forgo it,” Frostadóttir told mbl.is after a cabinet meeting on Friday. She said fixed-amount charges had historically risen in line with the previous year’s inflation, and that changing this would involve a cost and require an active decision.

She said the proposals were brought to the cabinet to secure a mandate to put them forward in negotiations. Talks had been under way since May, she said, and the government had proposed the 2.5 percent limit in June but had not reached agreement on other measures.

Frostadóttir said it was positive that municipalities had joined the effort. The national congress of the Association of Local Authorities in Iceland recently approved keeping general tariff increases below 2.5 percent next year.