“Finance the deficit through tax increases”

Kópavogur Mayor Ásdís Kristjánsdóttir says the government is using tax increases and delayed investment to deal with its deficit, while putting further pressure on inflation.

In a Facebook post responding to the government’s budget bill, Kristjánsdóttir criticized its plan to raise public fees by 5.2%. She said the increase would push up both inflation and inflation expectations. Finance Minister Daði Már Kristófersson presented the budget proposal at a news conference earlier that day.

Kristjánsdóttir said the government of Prime Minister Kristrún Frostadóttir had won office with a clear promise to lower inflation and interest rates, but that neither goal had been achieved. “Inflation has increased and interest rates have risen since the government took office,” she wrote.

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The government of Kristrún Frostadóttir was elected with a clear promise of lower inflation and interest rates. Neither has happened. Inflation has increased and interest rates have risen since the government took office.

She also cited the Central Bank’s view that higher public charges had made a significant contribution to rising inflation. Kópavogur, she said, had chosen a different approach by limiting fee increases affecting families with children to 2.5% in 2026, in line with the Central Bank’s inflation target.

“A balanced budget is certainly a long-overdue goal, but the government is largely financing the deficit through 23 billion krónur in tax increases,” Kristjánsdóttir wrote. She added that the government’s so-called restraint relied heavily on postponing projects that would supposedly save 26 billion krónur, rather than reducing operating costs. She called on the government to set an example through genuine spending restraint, ease tax increases on households and businesses, and keep fee increases within the Central Bank’s inflation target.

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Although a balanced budget is certainly a long-overdue goal, the government is largely financing the deficit through 23 billion krónur in tax increases.