High tax rates promote tax planning and hamper the growth capacity of an economy. Low, broad-based tax rates are preferable to high tax rates with a narrow base. Norway made headway with the tax reform of 1992. There is still room for considerable improvement in the Norwegian system. Many public services are of considerable economic importance. Infrastructure, education, sound legislation and a solid judicial system are necessary for the economy to function and grow. Public services may be important in order to secure equality and security. At the same time, the public sector is so large that it affects the economy at large. This means that requirements concerning efficiency and adaptability must also apply to the public sector. Chart 18  Over a twenty year period, the number of employed in the health, care and education sectors increased by 240,000, which account for about 60% of the increase in overall employment in Norway. The number of employed in the health and care sector has more than doubled in 20 years. More people are now working in this sector than in the whole of manufacturing. Nevertheless, every day we receive reports of personnel shortages at hospitals, in elderly care or at schools. The authorities constantly signal increases in appropriations in order to remedy these problems. Norway imports labour from other countries to cover its resource shortages. What are the reasons behind this situation? BIS Review 14/2000  16  Chart 19  Demand for health and care services rises sharply when incomes increase.
It is probably also easier if inflation is not too far from the target to start with, as inflation expectations are to some extent affected by the current rate of inflation. Also, a deviation from the inflation target is in itself more costly the larger the deviation is. Lack of practical experience So what is the current status of the debate? For natural reasons, an important dividing line here is the view of macroprudential policy and how well it can function as a first line of defence. Can it efficiently manage to counteract imbalances arising, or is it doubtful whether it can do so alone? This is essentially an empirical question, so the route taken by the international debate in the coming period will to a great extent be determined by the practical experiences from macroprudential policy and the tools at its disposal. So far, these experiences are relatively limited. Another important dividing line in the debate is the view of monetary policy as a tool to counteract financial imbalances. One argument that is often put forward against using monetary policy as such a tool is that it is far too blunt for this purpose and has limited effects  4  The arguments for and against that were put forward in the debate are summarised in Roubini (2006) and Posen (2006) respectively. 5  See, for example, Billi and Vredin (2014) and Woodford (2012). 6  See, for instance, Sveriges Riksbank (2013).