Government announces decision on 2013 - 2016 spending limits
The Government has on 4 April 2012 announced its decision on the spending limits for central government finances in 2013 – 2016. The decision will be submitted to Parliament as a Government report. The decision is based on the on-budget expenditure limits adopted in October 2011 for the 2012 - 2105 electoral term.
The spending limits decision is informed by the Ministry of Finance’s cyclical outlook, which is published on the same date. The outlook takes account of the measures adopted in connection with the Government’s spending limits discussions on 22 March 2012. Some of the revenue and expenditure projections have been revised since then to reflect updated economic forecasts.
The spending limits decision for 2013 - 2016 includes a set of new adjustment measures aimed at reducing the central government debt to GDP ratio. The annual net effect of the permanent adjustment measures comes to around EUR 2.8 billion from 2016 onwards.
The measures adopted by the Government will reduce central government net expenditure by around EUR 1.2 billion at 2015 levels; this is the net effect of savings and additional costs. Tax increases and tax reductions will increase central government revenue by a net total of around EUR 1.2 billion at 2015 levels. Changes to earned income taxes and VATrates will have the greatest effects of all tax base changes. Cost savings will result from cuts in central government transfers to local government and the suspension of index-linked increases to child allowances, central government funding for universities, Armed Forces acquisitions of supplies and materials and central government transfers to the administrative branch under the Ministry of Education and Culture.
In 2013 - 2016 on-budget expenditure will increase nominally by an annual average of around 1%. During the same period real expenditure will decrease by an average of 1% a year.
It is estimated that over the 2013 - 2106 planning period, on-budget ordinary revenue will show an annual average increase of 4.4%. Tax revenue growth is forecast to come in slightly higher at about 4.9%. With the slowdown of economic growth and tax base growth towards the end of the budget planning period, tax revenue growth is also set to slow.
Over the planning period central government debt will increase from around EUR 94 billion in 2013 to around EUR 105 billion in 2016. The rate of debt accumulation will be clearly slower than in the past few years. As a result of tax policy and cost-cutting decisions it is anticipated that the increase in the central government debt to GDP ratio will slow and begin slightly to fall in 2016. In 2016 the debt to GDP ratio will be around 45%.
Inquiries: Mr Juha Majanen, Ministerial Adviser, tel. 358 9 160 33105
The 2013-2016 spending limits decision will be published in English later.