Norwegian Prime Minister Støre Secures Backing for 2026 Budget, Averting Crisis

Government Reaches Consensus on 2026 Budget

Norwegian Prime Minister Jonas Gahr Støre successfully navigated a challenging political landscape this week, securing parliamentary backing for the government's 2026 national budget. The agreement, finalized on December 3, 2025, after intensive negotiations, averted a potential cabinet crisis that could have led to early elections. The final vote in Parliament is anticipated on Friday, December 5, 2025.

The ruling Labour Party, led by Prime Minister Støre, initially faced a lack of majority support for its proposed budget. To secure the necessary parliamentary backing, the government engaged in protracted discussions with four left-leaning parties: the Centre Party, the Red Party, the Socialist Left Party (SV), and the Green Party (MDG). These parties had previously expressed significant disagreements or withdrawn from earlier agreements.

Key Compromises and Policy Adjustments

The budget deal incorporates several key compromises and policy adjustments to address the concerns of the negotiating parties:

• Oil and Gas Transition: A significant point of contention was the future of Norway's substantial oil and gas industry. The Green Party (MDG) secured a commitment to establish a commission tasked with studying scenarios for Norway's post-oil economy and outlining strategies for transitioning away from fossil fuels. This represents a compromise, as the MDG had initially advocated for a complete phase-out of oil production by 2040.
• Electric Vehicle Incentives: The phase-out schedule for the Value-Added Tax (VAT) exemption on electric car purchases has been extended. The government's initial proposal to lower the VAT threshold from 500,000 kroner to 300,000 kroner in 2026 and fully remove the exemption in 2027 was modified. Under the new agreement, the complete removal of the VAT exemption will be postponed until 2028.
• Social Welfare and Healthcare: The budget includes substantial allocations to bolster social services. This comprises an additional 315.7 million kroner for Helfo (The Norwegian Health Economics Administration) to increase dental health rates, aiming to reduce patient co-payments by 10%. Furthermore, 500 million kroner will be allocated to strengthen hospital finances, with a particular focus on mental health and substance abuse beds. The maximum fee for kindergarten places will be set at 1,200 kroner per month (700 kroner in remote municipalities), providing significant annual savings for families. The tax-free income limit for recipients of disability benefits who wish to work will also be increased from 0.4 G to 1 G (approximately 130,000 kroner).
• International Aid: The budget includes a 1 billion krone aid package designated for Gaza.
• Public Transport and Taxes: Plans include a study into the feasibility of a national monthly pass for public transport and an allocation of 1.1 billion kroner for local transport services. Additionally, the agreement ensures no increase in petrol and diesel taxes and halts a new tax on artificial fertilizers.
• Defence Spending: The defence budget will see an increase of 4.2 billion kroner, bringing total defence expenditure to 3.4% of GDP in 2026.

Implications for Stability and Future Policy

The successful conclusion of these budget negotiations ensures continued economic stability and avoids political uncertainty for Norway. Prime Minister Støre's government can now proceed with its economic priorities, social welfare initiatives, and development goals for the upcoming year. The agreement underscores the Norwegian parliamentary system's emphasis on consensus-building, even amidst diverse political viewpoints.