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Financial crises have triggered the tightening of public budgets in several of the countries of northern Europe in recent years. One of the main targets of spending cuts has been expenses incurred by the state provision of welfare. Denmark, which has so far avoided major budgetary crises, offers one of the clearest models of the universal' welfare state. In almost all European countries a range of welfare services is available to the public, but often they are either based on contributions to insurance schemes or linked to the individual's position in the labour market. The universal model, by contrast, provides assistance which is available to all households and financed by general contributions from the public at large. As a result. Danish public spending has reached almost 70n'o of GDP a proportion among the highest in the OECD area, with a correspondingly high tax-burden. That raises the issue of whether the system is sustainable in its current form and whether the distributional aims of the government could be achieved with lower spending and taxation.'
The two basic ideas underlying the development of the welfare state in OECD countries were that it was the responsibility of government to alleviate genuine poverty by guaranteeing all residents a minimum living, and that risk of temporary or permanent loss of income should be shared collectively through either the tax system or general insurance schemes. The intentions of the Danish welfare state go beyond these considerations, the success of welfare-related policies being assessed according to two additional criteria: that no individual should against his or her will be excluded from participation in the labour force; and that no household should be excluded from full participation in social life on economic grounds. It follows from the second criterion that combating relative poverty becomes an independent aim of the Danish welfare state, since households with a standard of living considerably below average would be at risk of social marginalisation.
Design and Generosity
A consequence of the strong emphasis on objectives of distribution and equity is that the composition of general government revenue differs markedly from other OECD countries: Denmark is one of the few countries which collects more than half...