The Socialist People’s Party Leader Villy Sørensen is calling for Flexible Working Arrangement (FWA) and child benefit payments to higher bracket earners to be curbed as the party prepares to enter intra-government negotiations on reforms of transfer payments.

“I fail to understand that we tax hard-working wage earners in order to send money on to well-off families with children. It’s a social imbalance. We are looking at the distribution of wealth with the broadest shoulders contributing most,” Søvndal says.

Current FWA arrangements allow those with disabilities to have flexible or reduced working arrangements, with the state making up the rest to a full wage. Child benefit is a benefit paid to all families with children, irrespective of income.

In 2011, the FWA system involved 53,000 people and cost the state some DKK9 billion.

The issue of potential changes to the child benefit system came to the fore earlier this year when Prime Minister Helle Thorning-Schmidt (SocDem) and Economy Minister Margrethe Vestager (SocLib) announced that there were no taboos in the welfare reform process.

But Søvndal’s initiative, which comes at a time when his party is doing badly in the polls, does not appear to be welcome among his coalition partners.

Both Thorning and Vestager have warned that the marginal tax rate will increase, and thus job availability reduced, if child benefits to higher wage earners is cut.

“If you take the child benefits from the rich and don’t do anything else it’s a de facto increase in their marginal tax rates. Our intention is not to remove or graduate child benefit without doing something else. It cannot stand alone,” says Social Liberal Tax Spokesman Nadeem Farooq.

The issue of the child benefit system is to be discussed in connection with the government’s tax proposals which are due to be published later this year, while that of FWAs and the early retirement system is expected to be presented this spring.

High School teachers have often been mentioned as an example of the FWA system. If and when the system is amended, this income bracket and above will probably not be able to receive supplementary payments.

“You can continue to offer FWAs – but we will look at the supplementary benefits for higher wage earners. I won’t discuss the High School teacher, but the idea is that we start at the high end and find a cut-off point to those who have a reasonable wage,” Søvndal says.

But even the Red Green Party, which is the government’s safety net for a majority in Parliament, suggests that FWAs are necessary so that people with handicaps can have a job, with the state supplementing their income.

“This would easily end up by affecting people with perfectly normal incomes, even though higher incomes are the target group,” says Red Green Group Chairman Per Clausen.

The Liberal Party Tax Spokesman Torsten Schack Pedersen is urging the government to present its overall initiative soon.

“The government should stop its public study groups and agree on something. That will allow the rest of us to have something to respond to,” Schack Pedersen says.

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