Norway votes to spend oil riches on welfare state

Even before the latest surge in oil prices, Norway was ranked for five consecutive years by the United Nations as the best place to live in the world. Yet its low unemployment and a much-envied social security system have not stopped the issue of how much the government spends from dominating debate in the world's third-largest oil exporter.

The Labour Party leader, Jens Stoltenberg, a 46-year-old economist who briefly served as Prime Minster between 2000 and 2001, looked set to regain power in a narrow victory, having fought a campaign which held that more could be done to eliminate the country's remaining social problems.

With 90 per cent of the vote counted last night, the indications were that the Labour party had won 88 seats of the 169 seat parliament, Mr Stoltenberg fell short of declaring a victory, but he said that should his party win, he would form a "red-green" alliance with the Green Party and Socialist Left and Centre Party.

The alliance wants to spend more oil cash on jobs, care for the elderly and education and a key plank of the parties campaign was that the tax cuts introduced by Prime Minister Kjell Magne Bondevik have served only to help the rich.

In contrast, the centre-right governing coalition, led by Mr Bondevik, a 58-year-old Lutheran clergyman, had fought on a platform of lowering taxes.

Speaking from his party campaign headquarters in Oslo, Mr Stoltenber said last night: "In this campaign we had two goals: a strong election for Labour and a chance to form a majority government. The one goal has been reached, the other is with in reach." He is likely to form a " Red-Green" coalition with the Socialist Left and Centre party.

Mr Bondevik, whose alliance comprises his Christian People's Party, the Conservatives and Liberals, said he would stand down if the near-complete results proved to be the final outcome, but planned to stay on until parliament opened in mid-October. "If the forecasts are correct and this is the final result I will take the consequences," he said in a televised debate with other party leaders.

Should he have survived the election, he would have faced calls for his resignation from the anti-immigration Progress Party, part of the centre-right coalition which had been denied cabinet posts, and had demanded a change of Prime Minister as the price of its support for any new administration.

The Labour Party dominated Norwegian politics for nearly four decades after the Second World War, but no single party has commanded a majority since the early 1990s.

The outgoing centre-right government has presided over four years of unprecedented prosperity in the country of 4.6 million, and unemployment in August was just 3.7 per cent, which compares favourably with 5.8 per cent in Denmark and 5.5 per cent in Sweden.

Luxembourg is the only European country that can claim to be richer per head than Norway. And, as the biggest oil exporter after Saudi Arabia and Russia, the nation's wealth has been boosted by a windfall from record high energy prices.

Norway's indigenous Sami people were also voting yesterday in elections for their own parliament, the Sametinget, a political contest given added significance by laws passed earlier this year extending the assembly's powers over the Arctic lands.