VR chair condemns budget tax rises as workers fall further behind

Halla Gunnarsdóttir, chair of Iceland’s VR trade union, has criticised the government’s 2027 budget proposal, saying tax and fee increases will fuel inflation and leave wage earners worse off, mbl.is reports.

The proposal presents a balanced budget, but various taxes and charges are set to rise by 5.2 per cent next year.

“It should be an inviolable duty to manage public funds responsibly, but a balanced budget serves no purpose if the result is increased inflation, rising unemployment and stagnation,” Gunnarsdóttir wrote in a post on Facebook after reviewing the proposal presented by Finance and Economic Affairs Minister Daði Már Kristófersson.

“The government achieved zero, but wage earners are deeper in the red,” she wrote.

Gunnarsdóttir said balanced state spending could not be a goal in itself, but should instead support a strong economy and social welfare.

She said she was particularly concerned that increased fees were being used to close the budget gap rather than taxes on those with the greatest wealth. Higher charges would feed directly into inflation, she said, meaning people would pay not only through kilometre charges and service fees but also through inflationary pressure and, ultimately, higher housing costs.

She added that this could prolong the high interest rate policy, while interest costs were already among the heaviest burdens on the state treasury.

Gunnarsdóttir said the economic situation had undermined the conditions underpinning collective agreements. She said the budget proposal contained no measures to support the agreements remaining in force.

“It is disappointing that nothing has emerged to encourage optimism that collective agreements can hold,” she said. VR, LÍV and Fagfélögin have begun talks with the Confederation of Icelandic Enterprise on ways forward and are also pursuing joint issues with the government and the confederation through the Icelandic Confederation of Labour.

She said the labour movement and employers had called for a freeze on charges to reduce inflation and fulfil commitments under current collective agreements. According to the budget proposal, charges will instead rise in line with inflation, increasing the burden on working people and helping to maintain inflation.

Gunnarsdóttir also criticised a sharp increase in the kilometre charge, saying it would affect most people’s finances and feed directly into inflation. She said it appeared that the fuel price ceiling would not continue, despite having protected Icelandic households from the inflationary effects of the war described in the post.