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Delegation Reports
PARLIAMENTARY DELEGATION TO ICELAND
19-22 MAY 2008
Delegation
Sir John Butterfill MP (Leader)
Baroness Whitaker
Baroness Maddock
Rt Hon Lord Grocott
David Wilshire MP
Kenneth Courtenay (General Secretary, BGIPU)
The delegation arrived in Reykjavik during the afternoon of Monday, 19
May and were met by Ms Arna Gerdur Bang (Advisor, International Secretariat,
Parliament of Iceland).
They were driven to the Hotel Holt, a most comfortable and conveniently
located hotel within walking distance of Government House and the parliament
building (Althingi). That evening, they were received at Government House
for a briefing and dinner by their host, Mr Einar K Gudfinnsson (Independence
Party), Minister of Fisheries and Agriculture, together with Ms Asta Moller
(Independence Party), the Chair of the Icelandic IPU Group and Mr Karl
Matthiasson (Social Democratic Alliance).
On Tuesday, 20 May, the delegation left the hotel at 9 am and walked to
the Parliament building for a meeting with members of the Committee on
Foreign Affairs led by Ms Gudfinna S Bjarnadottir (Independence Party),
together with Mr Ludvik Bergvinsson (Social Democratic Alliance), Mr Kristinn
H Gunnarson (Liberal Party), Ms Asta R Johannesdottir (Social Democratic
Alliance) and Mr Steingrimur Sigfusson (Left Green Movement).
There was a wide ranging and interesting debate on possible EU membership
for Iceland. It was stressed that the benefits of EU membership were quite
controversial with opposition coming principally from the rural residents
but with enthusiasm from the business community.
However, the Icelandic MPs were most interested to talk about Britain’s
experience on this issue. The delegation also discussed at some length
with them Iceland’s membership of NATO and its feeling of insecurity
following the recent withdrawal of the US Air Force. The US Air Force
is now being replaced by squadrons from other NATO countries in rotation
and the role is currently being carried out by the French Air Force.
There has been a considerable increase in flights of Russian military
aircraft and although these have not violated Icelandic air space, they
have been flying in international air space without giving any warning
which sometimes causes problems for air traffic control. When Iceland
raised this with the Russian authorities, they were told, ‘You’ll
have to get used to it’. It was clear to Iceland that Russia was
flexing its muscles following its new found wealth from oil and mineral
resources.
Later that morning, the delegation met members of the Committee of the
Environment including Mr Arni Thor Sigurdsson (Left Green Movement) and
Ms Olof Nordal, (Independence Party).
Discussions with this group included the impact of tourism which is rapidly
growing and the need to protect Iceland’s special wild environment,
the impact of geothermal power stations which are producing heated water
and electricity and the impact from a fuel point of view on the production
of hydrogen using low cost electricity from geothermal resources. All
concerned recognised the special and unusual nature of the untouched areas
of Iceland, and it was clear that environmental considerations have a
very high profile in Icelandic politics.
The delegation left the Parliament building at 11 am to visit the Minister
of Industry, Energy and Tourism, Mr Ossur Skarphedinsson (Social Democratic
Alliance). Mr Skarphedinsson is something of an Anglophile, having studied
for his PhD at the University of East Anglia.
The delegation had a most interesting and varied discussion with him,
which ranged from the issue of geothermal energy to that of tourism. Mr
Skarphedinsson told us that within Iceland, over 90 per cent of homes
are heated by geothermal hot water and some 95 per cent of homes have
electricity at very low cost which is also produced by geothermal energy.
Iceland is engaged in ground breaking research relating to the use of
hydrogen power and also on the creation of biofuels from non food sources,
such as micro algae. This expertise is now being used by Iceland to help
countries with similar geological patterns such as East Africa and Djibouti
where their rift valley is similar in geological terms to Iceland’s,
and they are also working with China on similar joint ventures.
So far as industry is concerned, Iceland is now one of the largest smelters
of aluminium which could be carried out at very low cost given that the
cost of electricity produced by geothermal energy is uniquely low.
Mr Skarphedinsson stressed, however, that there is some resistance to
further expansion of aluminium smelting, both where it existed in the
west near Reykjavik airport, and also proposals to build further smelting
facilities on the east coast. This is because of objections on environmental
grounds.
However, the low cost of energy is enabling Iceland to expand its high
tech industries and in particular, data companies are attracted by the
low cost of electrical power.
Iceland’s financial and banking community has expanded considerably
in the last decade but, like all companies in this sector, it has been
affected by the world banking crisis. Mr Skarphedinsson stressed, however,
that Icelandic banks are very soundly based and have received offers of
support if necessary from other Nordic banks.
Tourism is a very well established and growing industry in Iceland, although
it is somewhat constrained by environmental considerations. Whale-watching
is a major area of attraction for overseas visitors but Mr Skarphedinsson
expressed some concern that this might be adversely affected by Iceland’s
decision to resume the killing of Minke whales.
After this meeting, the delegation were entertained to lunch at an excellent
restaurant, Humarhusid, hosted by Ms Asta Moller, who has frequently visited
the UK. She was supported by Ms Thuridur Backman (Left Green Movement),
Mr Arni Thor Sigurdsson and Ms Olof Nordal.
In the afternoon, the delegation were taken by coach to the Thingvellir
National Park where they could see for themselves the creation of the
rift valley which continues to move further apart every year, expanding
in both directions on the west towards America and on the east towards
Europe. The park itself is extremely beautiful and has magnificent lakes
and surrounding mountain views.
Later that afternoon, the delegation visited the Nesjavellir power plant
which is one of many plants providing both hot water and electricity from
geothermal sources. They were able to see the insulated pipeline which
carries the hot water to the city of Reykjavik.
In the evening, the delegation were given a briefing and dinner, hosted
by His Excellency Mr Alp Mehmet, the Ambassador of the United Kingdom
in Iceland, together with his wife, Elaine.
This excellent briefing gave the delegation a much greater insight on
Iceland’s politics and economy which was very useful when they returned
to the Parliament the following day.
On Wednesday morning at 9.30 am, the delegation visited the Parliament
building where they met members of the Committee of Trade and the Committee
of Economy and Taxation: Mr Bjarni Benediktsson (Independence Party),
Mr Magnus Stefansson (Progressive Party), Jon Magnusson (Liberal Party)
and Mr Agust Olafur Agustsson (Vice-Chairman, Social Democratic Alliance).
There was a most interesting discussion on the Icelandic economy. The
delegation were told that Iceland is now reducing its business tax from
18 per cent down to 15 per cent.
Personal taxation is a flat rate of 36 per cent but there is a relatively
high threshold to protect lower paid workers. VAT produces about a third
of national income with a rate of 24.5 per cent. However, some essential
items are excluded or, in some cases such as food, are levied at only
7 per cent. Contributions to personal pensions are wholly tax deductible
and the elderly have a high level of disregard from all taxation.
In recent years, growth has been very rapid, and the high level of immigration
has been beneficial to the economy. Unemployment is as low as 1 per cent.
Minimum wages are the norm but are not imposed by Government but agreed
voluntarily between the Confederation of Icelandic Employers and the Icelandic
Confederation of Labour.
After a break for coffee, the delegation met Mr Hannes G Sigurdsson, the
Vice-Chairman of the Confederation of Icelandic Employers, Mr Finnur Oddsson,
Chairman of the Icelandic Chamber of Commerce, together with Mr Gylfi
Arnbjornsson (General Secretary) and Mr Stefan Ulfarsson (Economist) of
the Icelandic Confederation of Labour.
These gentlemen confirmed the arrangement that was reached regarding minimum
pay. They also told the delegation of the agreement reached between employers
and unions on parental rights under which both parents are entitled to
take three months’ parental leave, although this is not always taken
in one long stretch but can be staggered during the early life of the
child. They found that this meant that women had become much more reliable
from the point of view of employers and, as a result, any differential
in pay between the sexes was now diminished. The present level of minimum
wages is set at approximately £1,000 per month.
The delegation were told that, in general, these arrangements worked well
but that there is still some residual element of discrimination against
women. However, the system did now provide some incentive for child bearing
which is important to the Icelandic economy in view of the shortage of
labour within the country. During times of parental leave, the state pays
parents 70 per cent of their previous earnings although this then reduces
substantially after two months.
On the issue of pensions, state pensioners currently are given an income
of approximately £1,000 per month but pensions are now moving to
a new scheme of compulsory pension savings with contributions of 4 per
cent of pay being made by the employee and 8 per cent by the employer.
Private pension savings are 100 per cent tax deductible.
Following these discussions, the delegation were entertained to an excellent
lunch at the restaurant, Skolabru, where we were joined by Mrs Asta Moller,
Mr Agust Olafur Agustsson, Ms Thuridur Backman and Mr Peter Blondal (Independence
Party).
This was followed by a brief meeting with the Vice-President of the Althingi,
Mrs Asta Ragnheidur Johannesdottir after which members of the delegation
signed the official visitors’ book and had a tour of the building.
The delegation were able to view the session in progress from the visitors’
gallery and were fascinated to see the way in which individual Ministers
were questioned in turn by backbench MPs. In general, this questioning
was good natured and often amusing.
In the afternoon, the delegation were taken on a sight-seeing tour of
Reykjavik by Mr Sigurthor Adalsteinsson, a leading Icelandic architect,
who gave them a considerable insight into the development of Icelandic
architecture from its early beginnings to the present day.
There was some free time that afternoon for individual exploration of
the city although the delegation were somewhat deterred by heavy rain.
In the evening, they were taken from the Hotel Holt to a dinner at the
restaurant Perlan. This is one of the most fascinating pieces of Icelandic
architecture where a revolving restaurant has been built on top of large
tanks containing heating water for the city. This restaurant not only
serves excellent food but enjoys amazing panoramic views of the whole
of Reyjavik. The dinner was hosted by Mrs Asta Moller, together with Ms
Thuridur Backman and Mr Agust Olafur Agustsson.
On Thursday, en route to the airport, the delegation visited Grindavik
to see the fishing harbour and the museum devoted to the dried fish industry
and then to the Blue Lagoon for bathing in the hot springs, followed by
lunch before departing to London.
All the members of the delegation were most enthusiastic about the reception
they had been given and the information that had been provided to them
and they were particularly grateful for the first class hospitality and
friendship that had been shown throughout the visit.
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