Government Unveils ISK 17 Billion Cost-Saving Strategy

Minister of Finance Bjarni Benediktsson

State-run institutions are poised to streamline operations through staff reductions and various optimizations, aiming to save approximately ISK 17 billion ($129 million / €119 million) next year, according to the latest fiscal strategies disclosed by the Minister of Finance in a press briefing last week. The Chair of the Centre Party maintains that labelling these actions “saving measures” is inaccurate, for they would be more accurately described as “fee increases,” Vísir reports.

Treasury outperforms forecasts

At a press conference last Friday, Bjarni Benediktsson, Minister of Finance and Economic Affairs, revealed that the state treasury is projected to post a primary surplus roughly ISK 100 billion ($760 million / €703 million) higher than initially estimated when the 2023 budget was ratified last year.

Consequently, the treasury is expected to show a positive balance of ISK 50 billion ($380 million / €351 million), rather than slipping into a deficit. This performance also underscores a significant improvement in the state treasury’s debt position compared to the pandemic period’s forecasts, Vísir reports.

Health sector and public services gain traction

Bjarni also maintained that Iceland had rebounded from the pandemic faster than most nations; economic activity was thriving and the unemployment rate had hit a five-year low. Even as the treasury rides high on its current fiscal performance, the Minister stressed the government’s intent to further solidify its financial standing, while reinforcing robust public services.

A focus point of this endeavour will be the health sector. A dedicated fund of ISK 25 billion ($190 million / €176 million) will be earmarked for the new hospital this year and the next. Bjarni also highlighted imminent contributions to health insurance, nursery homes, law enforcement, higher education, innovation initiatives, the energy exchange, and housing projects, alongside a revamped child benefit system.

Strategic reorganisation to save ISK 5 billion on labour

As part of the ISK 17 billion ($129 million / €119 million) fiscal discipline package for the next year, the Minister indicated that labour costs across state institutions will be reduced by an estimated ISK 5 billion ($38 million / €35 million). Bjarni met with directors of state-run institutions last week to explore the effective implementation of these measures.

In addition, operating costs like travel will be pared down, with greater emphasis on value-driven public procurement. Bjarni also stated that he foresaw great potential in simplifying the government’s institutional framework, digitising operations for optimal fund utilisation, reducing housing costs through shared workspaces, and leveraging joint ventures and competitive tendering.

Revenue-boosting measures: taxes and fees

Matching the scale of the cost-saving efforts, the government also plans to raise additional revenues through several channels. One such measure will be increased user fees for electric and plug-in hybrid vehicles. Fees for tourism services, including cruise ships, are also set to rise, along with a tax hike on fish farming companies commencing in 2024. Additionally, a temporary 1% increase in corporate income tax has been announced for the next year.

“In the corporate sector, the quest to do more with less is perpetual. The same principle should naturally apply to the public sector,” Bjarni remarked. “Even though our financial health is better than we had ever anticipated, there’s no room for complacency. Through digital innovations and efficient operations, I’m confident we’ll successfully implement these planned measures while continually enhancing services to our citizens.”

In the ensuing weeks, ministries and state institutions will commence work on actualizing these measures to achieve the set objectives outlined in the government’s performance plan. More details are expected to be revealed when the budget proposal for the next year is officially presented on September 12.

Not “savings proposals” but “fee increases”

In a post-press conference interview with Stöð 2, Sigmundur Davíð Gunnlaugsson, the Chair of the Centre Party, expressed scepticism towards the measures of the government, which had recently announced a spending hike of ISK 193 billion ($1.45 billion / €1.36 billion).

“What captured my attention, again, is the disingenuous labelling of what they’re calling a ‘savings proposal,’ when in reality, it’s a ‘fee increase.’ This choice of words could be indicative of the government’s mindset; if they aren’t taking all the money from the citizens, then they’re making concessions with it,” Sigmundur noted.

In his assessment, the government’s fiscal strategy would not effectively mitigate the inflation issue. Moreover, he accused the administration of taking counterproductive steps in the wake of the pandemic by ramping up spending, instead of focusing on savings. According to Sigmundur, the current government had surpassed all previous administrations in terms of the rapidity and scale of its spending increases.

When queried about what he considered to be the government’s most pressing duty in the face of rising inflation, Sigmundur articulated his views as follows: “It was openly acknowledged, even by the ministers themselves, that curtailing value creation and production within the country, largely due to the impacts of Covid, while simultaneously printing more money, would inevitably fuel inflation. Therefore, the logical next step, once circumstances permit, is to apply fiscal restraint, focus on savings, and work on reducing debts,” he stated.

“Contrary to this, the government chose the inverse path,” he continued. “After the pandemic subsided, instead of curbing their expenditure and focusing on generating value, they shattered all existing records for hikes in government spending. No previous administration has been as extravagant or has escalated its spending as precipitously.”

“They then hastily convene a meeting, raising expectations for some significant announcement. But no, all we get are discussions about open workspaces and statements implying that combating inflation isn’t the government’s responsibility.”

Costco Fined ISK 20 Million for Gross Negligence Over Oil Spill


Costco has been fined ISK 20 million ($152,000 / €141,000) after 111,000 litres of diesel leaked into Hafnarfjörður’s sewage system. The Environment Agency of Iceland stated that it was fortunate that the consequences were not more severe, RÚV reports.

A threat to environmental and public health

The Environment Agency of Iceland has imposed a hefty fine of ISK 20 million ($152,000 / €141,000) on Costco for a diesel spill originating from the retail giant’s gas station in Garðabær. The spill saw 111,000 litres of diesel contaminating Hafnarfjörður’s wastewater system and eventually making its way into the ocean last December, RÚV reports.

Residents in the western region of Hafnarfjörður raised complaints about a pervasive smell resembling oil or tar cleaner. After an exhaustive investigation, evidence began to converge on the Costco gas station as the source of the leak.

In a public statement, the Environment Agency expressed its concern over Costco’s apparent lack of proactivity, oversight, and timely response to the incident. The agency further accused the company of “gross negligence,” marked by a notable level of indifference toward the spill, which led to a substantial volume of diesel leaking into the natural environment, much of which is irrecoverable.

Costco’s response and ongoing scrutiny

In response, Costco emphasised its full compliance during the investigative process. The company also challenged the notion that it was merely fortuitous that the spill did not result in more severe environmental degradation.

The Environment Agency countered by reiterating that the spill constituted a significant threat to both environmental integrity and public health, citing a lack of proper organisational protocols and attentiveness on the part of Costco.

While the Environment Agency acknowledged Costco’s subsequent cooperative stance, it pointed to past interactions as indicative of a less-than-transparent relationship. Reports from the health inspectorate suggest that in earlier stages of the investigation, the company was slow to respond and failed to provide necessary information in a timely manner.

Rainbow Flag Defaced on Reykjavík’s Skólavörðustígur

Skólavörðustígur rainbow flag

In an act of vandalism, the rainbow flag adorning the Skólavörðustígur street in Reykjavík was defaced with white paint early Sunday morning. A resident of Skólavörðustígur told RÚV that he was saddened by the act.

Saddened by the sight

The Reykjavík police received a report of the incident early Sunday after resident Óttarr Makuch discovered the damage around 8 AM. “I woke up, poured some coffee, and saw our beautiful rainbow defaced,” Óttarr told RÚV. “This must have been done between 6 and 7 this morning. From now on, I’m going to wake up at 6!”

The rainbow painted on the street had been splashed with white paint; the derogatory phrase “LGBT LOSER” marred the symbol of inclusivity. Óttarr urged the community not to dwell on the incident. “The colours are much brighter than the vandalism, so the joy really shines through. But the individual responsible clearly needs help.”

Óttarr added that he had heard tourists outside his house passing through Skólavörðustígur, many of whom were surprised by the incident. “They are surprised that there are such acts of vandalism on a rainbow in Iceland, where everything is supposed to be so peaceful and great.”

City of Reykjavík employees arrived at Skólavörðustígur Sunday morning to begin cleaning, according to Óttarr. “Örn with the City of Reykjavík is going to clean up this mess and make our rainbow beautiful again.”

The white paint has since been removed.

Special Forces Respond to Knife Incident at Nightclub

police lögreglan

Special forces were twice deployed in the capital region Saturday night: first for a man with a replica gun, and then for a drunk man with a knife at a nightclub, Vísir reports. In a separate incident, a concealed knife was seized at a Mosfellsbær festival.

A busy night for law enforcement

It was a busy night for law enforcement in the capital region on Saturday night extending into early Sunday morning. The National Police Commissioner’s special unit (i.e. special forces) was deployed twice: first in response to a report of a man brandishing a pistol, and then due to another individual allegedly intimidating patrons with a knife outside a nightclub, Vísir reports.

The official police log covering the period from 5 PM Saturday to 5 AM Sunday reveals the series of events. Authorities were first alerted to the presence of a firearm visible through a window of a building in Reykjavík. Police and special forces were dispatched to the location, where they apprehended one individual in relation to the incident. Upon examination, the supposed firearm was determined to be an air gun, albeit an exact replica of a handgun. The matter is currently under investigation.

Subsequently, reports were received about a man appearing threatening and in possession of a knife outside a nightclub. Though the man was not actively using the knife in a threatening manner, he was carrying it. Police and special forces arrived at the scene, arresting the individual who was later found to be inebriated. He was detained and placed in a holding cell pending further investigation.

Knife seized at Mosfellsbær festival

In a separate event in Mosfellsbær, police received reports of a young man at the Í túninu heima festival carrying a concealed knife. Acting on witness descriptions, the police located the individual and discovered a kitchen knife hidden within his clothing. The knife was confiscated, and relevant information was collected at the scene for ongoing investigations.