Prime Minister Orpo’s Government: Long-term economic adjustment continues, focus shifts to growth

The 2025 budget proposal of Prime Minister Orpo's Government bolsters conditions for economic growth. Economic growth driven by the private sector will also serve to secure the financing base for central government finances. The fast-acting measures to curb indebtedness that were decided on due to the difficult situation in central government finances will move forward.

The Government will continue its efforts to put Finland's economy on a sustainable growth track. Halting the growth of indebtedness is a necessity for ensuring that future generations can enjoy the services of the welfare state: good schools, healthcare and social welfare services and care services. If the Government’s decisions are implemented in full and within the planned timeframe, the growth of the debt ratio will come to a halt in 2027.

The in Budget for 2025, central government expenditure amounts to EUR 88.8 billion and revenue to EUR 76.6 billion.  The EUR 12.2 billion deficit will be financed with debt. Without the measures decided by the Government, about EUR 4 billion more debt would be needed in 2025.  
In the Government Programme, the Government outlined measures to strengthen central government finances by EUR 6 billion. The Government decided on additional adjustments totalling EUR 3 billion in the spring government session on spending limits. These decisions are now being implemented. No new adjustment measures were decided in the 2024 government budget session.

The Government will actively monitor the implementation of the EUR 9 billion package of measures and will take corrective measures if the package threatens to fall short of the target. 

From the perspective of the sustainability of central government finances, it is essential to halt the growth of expenditures by the wellbeing services counties. The Government will support and guide the wellbeing services counties in finding ways to safeguard services and ensure the sufficiency of funding and personnel.

The Finnish economy is recovering from recession. There are some positive growth signals that must be put to good use. The Government is taking action to accelerate growth. The Government is fixing the foundation of the economy by reforming the labour market, social security and taxation. The Government will streamline permit procedures, dismantle bureaucracy, promote fair competition in the markets, safeguard the availability to clean and affordable energy, and invest in research and development. Accessibility will be improved throughout Finland by investing in rail and the road network and reducing the repair backlog.

In the spring government session on spending limits, the Government decided on new measures to boost growth. These include a tax credit for large-scale industrial investments, the recapitalisation of Finnish Industry Investment Ltd with EUR 100 million in 2025 and the recapitalisation of Fingrid and Gasgrid to ensure that Finland's energy grids can enable large investments anywhere in the country. The Government is taking an open-mined approach to finding new measures to accelerate growth by the mid-term policy review of spring 2025.

Despite the challenging economic situation, the Government will safeguard the security of Finland and its people. The resources of the Finnish Border Guard and the police will be further strengthened. Finland will fulfil its NATO obligations.

The focus is also on children and young people. For example, the Government is implementing a maximum waiting time for access to therapy for young people and is proposing funding to improve the availability of low-threshold mental health services and to develop a hybrid model for child welfare.  

Budget proposal for 2025

Impact of measures to strengthen central government finances will grow

The implementation of the savings measures decided in the Government Programme and in the spring government session on spending limits has proceeded as planned. The impact assessments and targeting of the measures have been refined to some extent.

The impact of many of the savings decided in the Government Programme will grow in 2025. These include the changes to social security to boost employment and the savings related to business, transport and housing. Index-linked savings packages include the freezing of index increases and the implementation of index increases only partially. Index increases to benefits linked to the national pension index and the consumer price index will be frozen for the period 2024–2027, excluding social assistance, pensions, front-line veterans’ supplements, disability benefits, the annual maximum limit on out-of-pocket costs for medicines, and child maintenance allowance.

The savings in discretionary government grants decided in the spring of 2024 will also increase in 2025. The most significant of these savings are a EUR 80 million reduction of discretionary government grants to associations and foundations for the promotion of health and wellbeing in the Ministry of the Ministry of Social Affairs and Health’s branch of government. In the Ministry of Education and Culture's branch of government, EUR 17.4 million of the savings to discretionary government grants will be allocated to funding for arts and culture, EUR 9.7 million to construction of sports facilities and EUR 4 million to grants for youth work. In the Ministry of Agriculture and Forestry’s branch of government, EUR 8.5 million in savings will be allocated to discretionary government grants.

The implementation of the central government productivity programme decided in the Government Programme and the savings decided in the spring 2024 government session on spending limits are proceeding according to plan. The savings incorporated in the 2025 draft budget have been allocated on the basis of the ministries' own preparation. The draft budget includes approximately EUR 274 million of such savings compared to the actual 2024 Budget. The ministries have prepared productivity programmes for their branches of government. These programmes detail measures to achieve savings. The productivity programmes for each branch of government will be finalised after the decisions of the government budget session and be published on 23 September 2024. 

Selected savings to be implemented in various branches of government
Central government finances will be strengthened by cutting back the functions and obligations of the wellbeing services counties. Changes include changing the maximum waiting time for access to care to three months (EUR 121 million) and reducing the minimum staffing level for 24-hour care for older people to 0.6 (EUR 45 million). In addition, increasing client fees for healthcare services will increase the income of wellbeing services counties and reduce central government funding for wellbeing services counties by EUR 150 million.

In the Ministry of Social Affairs and Health's branch of government, changes to the housing allowance for pensioners will reduce expenditure by EUR 6.3 million and changes to the general housing allowance by EUR 7.5 million. Excluding students from the scope of the general housing allowance and reinstating separate student housing assistance will result in savings of about EUR 20 million.

In addition, benefits under the National Pensions Act will no longer be paid abroad (EUR 35 million in savings), changes to the sickness allowance system will seek to achieve net savings of about EUR 60 million in central government finances, the increment components of unemployment security will be abolished and the means testing for labour market support will be tightened (total savings of about EUR 22 million). The child maintenance allowance system will be reformed, which will lead to EUR 1 million in savings. Savings of EUR 59.6 million are proposed to reimbursements for medicine expenses.

In the Ministry for Foreign Affairs’ branch of government, the appropriations under the ODA budget item will be reduced by EUR 135 million.

In the Ministry of the Interior’s branch of Government, improvements to the efficiency and quality of the asylum system and to the efficiency of the appeal process in cases concerning international protection will save EUR 15.7 million. In addition, the reduction of the allowance for asylum-seekers will decrease the need for appropriations by EUR 9.2 million.

In the Ministry of Education and Culture's branch of government, funding of vocational education and training will be reduced by EUR 120 million, of which a EUR 62.6 million reduction will be allocated to central government funding. No savings will be allocated to vocational upper secondary education for young people. Savings allocated to learning materials for adults will be replaced by savings totalling EUR 6 million allocated to project funding for upper secondary education and to strategy funding for vocational education and training. The right to subsidies for school journeys will be limited to students in education provided free of charge (EUR 4 million in savings).  In addition, EUR 5 million will be reduced from the compensation for private copying.

In the Ministry of Agriculture and Forestry's branch of government, central government finances will be strengthened by EUR 11 million in revenue recognised from Metsähallitus.

In the Ministry of Transport and Communications’ branch of government, the appropriations for developing the transport network will be reduced by EUR 100 million. In addition, fairway dues will be again collected in full (EUR 34 million).

In the Ministry of Economic Affairs and Employment's branch of government, EUR 58 million in savings is being proposed to reimbursements to municipalities and wellbeing services counties for the cost of social assistance during integration.  Changes to integration services will be implemented in a way that does not weaken employment opportunities or services for children and young people. In addition, EUR 3.1 million in savings will be allocated to interpretation costs. Funding for the promotion of tourism will be reduced by EUR 2 million. In addition, business subsidies will be reduced, for example, by reducing regional financial support for transport by EUR 1 million and the budget authority for research, development and innovation other than R&D activities by EUR 20 million. 

In addition, voluntary membership fees and national funding contributions for international organisations will be reduced in various branches of government by EUR 5 million.

Conditions for economic growth to be strengthened with R&D investments, capitalisation of growth companies and accelerated investments in the clean transition

Accelerating economic and employment growth is the most important means of stabilising general government finances. The Government Programme includes several decisions that strengthen the conditions for economic growth, for example, to improve investment permit procedures, reform the labour market, strengthen the supply of skilled labour and support exports of high value added products.

In addition, the Government will support the conditions for economic and productivity growth by enhancing market competitiveness, boosting skills and competence, and increasing research and development (R&D) investments in the national economy.

The Government is committed to the national target of increasing Finland’s R&D expenditure to four per cent of GDP by 2030. Under the current Act on Research and Development Funding, the Government will increase central government funding for R&D activities to 1.2 per cent of GDP by 2030, provided that private sector investments increase to 2.8 per cent. In terms of the Act on Research and Development Funding, this will be an increase of EUR 280 million in 2025 compared to 2024.

Central government investments in R&D activities will be allocated in accordance with the goals set in the Act on Research and Development Funding and the multi-year plan for R&D funding. The Government will increase Business Finland’s budget authority for R&D funding by EUR 94 million. Funding will be allocated especially to support R&D activities in companies and to encourage collaboration between companies and researchers. As a new initiative, EUR 9 million of Business Finland’s budget authority will be allocated to support research and development in the creative industries. The Government will also begin the preparation of a growth strategy for the creative industries in accordance with the Government Programme.

Provisions have also been made to replace the EuroHPC LUMI supercomputer in Kajaani with a new supercomputer. The Research Council of Finland’s budget authority for research projects will be increased by a total of EUR 55 million. This will include additional investments totalling EUR 18 million for improving research and productivity in the health and social services sector. 
A temporary post-doc programme for research institutes will also be launched in 2025. National match funding for R&D projects financed by the EU will be raised by EUR 15 million. The implementation of the research infrastructure of the Geological Survey of Finland’s Mintec pilot plant will begin in Outokumpu.

To strengthen the capital markets for growth companies, Finnish Industry Investment Ltd will be provided with a capital injection of EUR 300 million during the parliamentary term, of which EUR 100 million will be allocated in 2025. The additional capital will ensure that the company can advance the implementation of potential key projects for industrial policy by also promoting the channelling of private capital to the projects.

The Government will continue preparations for a tax credit for large-scale industrial investments to accelerate the clean transition, as decided in the spring session on spending limits. The aim is for the tax subsidy to enter into force as soon as possible, with the target being 1 January 2025. The scope of application of the tax credit will be as broad as possible within the limits of the EU’s Temporary Crisis and Transition Framework and the restrictions agreed in the government session on spending limits. The objective of the tax credit is to increase the number of large-scale industrial investments that use electricity while also supporting the construction of a clean transition industry in Finland.

Strategically significant investments will also be boosted by direct aid for investment projects aiming to accelerate decarbonisation and the transition to a net-zero economy.

As agreed in the spending limits session, the Government will ensure the investment capacity required by Fingrid and Gasgrid so that energy networks do not create bottlenecks for investments anywhere in Finland. The Government will pay particular attention to opportunities to implement energy-intensive investments in eastern Finland. 

Transport projects to be launched under investment programme will promote sustainable growth in all of Finland

The Government will launch new transport projects within the framework of a fixed-term investment programme of EUR 4 billion to be implemented during the parliamentary term. The programme will be financed using central government property income and revenue generated by the Housing Fund of Finland. Thus, the investment expenditure will not increase the central government borrowing requirement during the government term.

In the budget proposal, a total of EUR 891 million in budget authorities and appropriations is proposed for the investment programme outlined in the Government Programme. Appropriations allocated to 2025 amount to EUR 325 million of that total.

Under the investment programme, an increase of EUR 200 million will be allocated in 2025 to reducing the repair backlog. In addition, an appropriation of EUR 6.5 million is proposed for paving main road 8 and repairing its structures between Tjöck and Ömossa. An appropriation of EUR 2 million is proposed for implementing a new road connection between Länsiväylä and Västergäran in Pietarsaari (Fäbodantie).

The Government proposes funding for the following projects under the investment programme:

• A budget authority of EUR 15 million and an appropriation of EUR 1 million for the Äänekoski bridge on highway 642. 
• A EUR 50 million revision of the budget authority and an appropriation of EUR 17 million for the coastal railway development project. 
• A budget authority of EUR 122 million and an appropriation of EUR 1 million for main road 15 between Rantahaka (Kotka) and Kouvola. 
• A budget authority of EUR 30 million and an appropriation of EUR 1 million for main road 21 between Palojoensuu and Maunu. 
• A budget authority of EUR 14 million and an appropriation of EUR 1 million for main road 23 in Karvio. 
• An appropriation of EUR 11 million for main road 5 between Leppävirta and Kuopio in 2025. 
• A budget authority of EUR 92 million and an appropriation of EUR 1 million for main road 12 between Mankala and Tillola. The appropriation may be used only if the agreement on land use, housing and transport (MAL) for the Lahti region has been signed.
• An authorisation of EUR 13 million and an appropriation of EUR 1 million for implementing phase 1 of the project to improve the main road 8 in Kokkola. 
• An appropriation of EUR 0.4 million for preparing a road engineering plan for main road 8 between Bäckliden and Brännbacken. 
• An appropriation of EUR 0.5 million for the preparation of the road engineering plan for the Vaasa Port road. 
• A budget authority of EUR 90 million and an appropriation of EUR 10.5 million for the development of the Karelian rail line.
• A budget authority of EUR 31 million for the first phase of developing a connecting road between main road 8 and Vaasa (regional road 724).
• A budget authority of EUR 15 million and an appropriation of EUR 1 million for the planning and partial implementation of the Suupohja rail line between Seinäjoki and Kaskinen.

In addition to the investment programme, the Government proposes an appropriation of EUR 2.7 million for basic transport infrastructure management for small transport projects in eastern Finland, such as improving the most critical parts of the Joensuu–Nurmes rail section.

The Government will secure the operating conditions of the Enontekiö airport by allocating EUR 240,000 to the airport's operations.  The deepening of the Loviisa fairway is one of Government’s urgent  planning projects.

In the administrative branch of the Ministry of Economic Affairs and Employment, the Government proposes an authorisation of EUR 140 million for key clean energy projects within the framework of the investment programme. The authorisation will be allocated to technological sinks. In addition, in the administrative branch of the Ministry of Social Affairs and Health, EUR 70 million will be allocated to reimbursements paid by the Social Insurance Institution (KELA).

Economy picking up after recession

Finland’s economy grew in the first half of 2024, and the recovery is expected to gain pace towards the end of the year. Fuelled by rising consumption and investment, economic growth will accelerate in 2025, although the measures needed to reduce the general government deficit will curb the growth in demand to some extent.

The slowing of inflation and the downward turn in interest rates, coupled with fairly good development of household income, will increase households’ disposable income and consumption. Investments will perk up as construction recovers from its sharp decline and investments related to the energy transition and security increase.

The global economic outlook remains stable. In 2025, growth is expected to pick up especially in Finland’s key export markets in Europe. Finland’s cost competitiveness has remained quite strong, which will support Finnish exports as market demand recovers.

Employment will continue to decline in 2024 but will return to growth in 2025 once the economy recovers. The Government’s employment measures and the growth of immigration in recent years will boost employment.

The Government proposes EUR 1.8 million to facilitate easy entry and registration of foreign specialists and growth entrepreneurs through a strong identification service for the activation of public administration and banking services.

The Government will allocate EUR 1 million to agreement-based international recruitment partnerships with cities to attract 1,000 new employers into international recruitment services. During its term, the Government will prepare to secure sufficient appropriations for the licensing of healthcare and social welfare professionals and for the upgrading of their qualifications.
In addition, the conditions for labour migration will be improved by amending the Income Tax Act to extend the tax exemption for the costs of relocation paid by the employer. Efforts to speed up the processing of permits will be continued despite the adjustment measures of the central government productivity programme. The appropriations for the operating expenses of the Finnish Immigration Service will be kept at the level agreed in the Government Programme by ensuring the Service access to the EUR 20 million deferred from its appropriations last year.

Selected items

Education and training

Support for learning will be strengthened in primary and lower secondary education, general upper secondary education and vocational education and training. The minimum number of lessons in primary and lower secondary education will be increased by three weekly lessons per year without expanding the curriculum.

The Government will launch a development programme for early childhood education and care personnel, aiming to develop and pilot a model for commissioned education. The objective is to train municipal employees in the field of early childhood education and care as teachers or social pedagogues in early childhood education and care. Annual funding of EUR 6 million is proposed for the programme for the period 2025–2027.

The Government proposes an appropriation of EUR 10 million to the Service Centre for

Continuous Learning and Employment for carrying out a development and pilot project on studying alongside work. The project will strengthen the role of employers in the continuous learning of employees and develop the activities of education providers. The objective is to enable continuous learning so that employed persons can continue working while developing their competence. 

An additional EUR 700,000 will be allocated to a literacy project and EUR 200,000 to the operating conditions of summer universities. Learning material in Finland-Swedish Sign Language will be produced for pre-primary education and grades 1–4 in primary and lower secondary education with a total of EUR 150,000. The Government will increase the municipality of residence reimbursement for private schools to 100 per cent as of 1 August 2025.

The Government is proposing EUR 3.8 million for increasing the number of available student places in higher education institutions as of 2026.

Young people and children

The Government is proposing a total of EUR 6.5 million for addressing the situation of young people acting out through violence and substance abuse, for preventing drug-related deaths among young people and for developing a hybrid model for child welfare. In addition, a total of EUR 2.5 million is being proposed for increasing the availability of low-threshold mental health services and assistance and for low-threshold mental health chat services. The Government also proposes that the level of funding for shelters be raised.

The Government will allocate EUR 350,000 to ‘Lukulahja lapselle’ book donations, which promote reading among children.

The Government will allocate EUR 200,000 to the promotion of youth work, primarily to local leisure activities for children and young people and to support for day camp activities during school holidays.

The Government will allocate EUR 262,000 to putting the ‘You are not alone' service on a permanent footing in the sports sector and expand it to the youth sector.

Nature conservation

The Government will allocate approximately EUR 1.8 million to enhancing voluntary nature conservation (METSO, HELMI) and to increasing privately funded nature restoration work. The funding will be used to meet the needs arising from the entry into force of the Regulation on Nature Restoration and to increase the protection of valuable forests, for example old-growth forests.

The Government will allocate EUR 200,000 to the measures required by the expansion of the Tiilikkajärvi National Park. EUR 100,000 will be allocated to promoting the Baltic Sea and water protection programme. An allocation of EUR 235,000 will be made for the Keep the Archipelago Tidy Association.

Agriculture

The Government will secure operating conditions for agriculture and will not allocate savings to agricultural food production. Savings to the equine industry will be made more reasonable through bridge financing. The funding of 4H activities will be secured at the current level. 
The Government will invest in the growth, competitiveness and profitability of the bioeconomy sector by allocating EUR 10 million to promoting value chains in the food export, security of supply and forest sectors.

The ‘Consideration for farmers’ operating framework will be put on a permanent footing by making it a statutory duty of the Farmers' Social Insurance Institution (Mela) from the beginning of 2025. An annual appropriation of EUR 2 million will be allocated to Mela for this purpose.

Labour market

The Government will make local collective bargaining equally possible in all workplaces. The possibilities for local bargaining will be expanded especially to sectors in which companies currently comply with a generally applicable collective bargaining agreement and in which the occupational safety and health authorities monitor compliance with labour legislation and the provision of minimum benefits guaranteed under the collective bargaining agreement. As the possibilities for local bargaining expand, the Government will strengthen the occupational safety and health authorities’ monitoring resources by EUR 200,000.

Sport

The Government will implement the replacement of the lighting of the Kontiolahti biathlon stadium to meet the requirements of championship competitions.

Other items

The Government is proposing EUR 800,000 for the development of the Paimio Sanatorium. 
A total of EUR 270,000 will be allocated to the National Archives in Vaasa for the digitisation of materials.

EUR 425,000 will be allocated to the activities of Victim Support Finland and other organisations providing victim support services. EUR 50,000 will be allocated to Women’s Line in Finland.

To promote exports and internationalisation EUR 400,000 will be allocated to the Finnish-Swedish Chamber of Commerce and EUR 260,000 to Viexpo.

An appropriation of EUR 1 million will be allocated to organisational activities relating to discretionary government grants, foreign and security policy and international commitments.

Safety and security will be strengthened by increasing resources for the police and administration of justice, stepping up cyber preparedness and investing in NATO membership

In line with the Government Programme, police resources will be increased to make it possible to increase the number of police officers to 8,000 by the end of the government term. To this end, the Government is proposing an additional EUR 17.5 million in accordance with its decision on spending limits. In its spending limits decision, the Government reserved EUR 2 million for combating juvenile and gang crime. A further EUR 5 million is now being proposed to supplement the earlier decision. Additional resources will also be allocated to tackling the shadow economy and to boosting the school liaison activities of the police. Due to the increase in the number of inmates, the Government is proposing to allocate of EUR 6.5 million to the Prison and Probation Service to improve security technology in prisons. EUR 1.9 million is being proposed for enforcing the ban on using mediation in domestic violence cases.

EUR 6 million is being proposed for the Border Guard for procuring essential material and equipment. These resources will also strengthen the cyber preparedness of the Border Guard. The Border Guard’s Air Patrol Squadron will continue operations at the Turku Airport.

Appropriations for the defence administration will rise to nearly EUR 6.5 billion in 2025, showing an increase of more than EUR 488 million on this year’s Budget. The most significant factor raising the level of appropriations is a change in the timeline of the procurement authority for the multi-role fighter procurement, amounting to EUR 251 million. Index and cost-level adjustments, which reflect the effects of the general rise in costs, are also increasing the level of appropriations. The appropriations for the operating expenses of the Defence Forces will be increased by EUR 115 million from this year’s Budget. The number of personnel in the Defence Forces is expected to increase by around 140.

The Government will allocate an additional appropriation of EUR 67 million to cover new needs arising from Finland’s membership in NATO. These additional needs are mostly related to the strengthening of NATO’s presence in Finland. These include the Multi Corps Land Component Command (MCLCC) to be established in Finland and the presence of forward land forces (FLF) in Finland. An additional appropriation will be allocated to improving Finland’s capability to receive assistance from Allied countries. The purpose of these investments is to make full use of Finland’s membership in NATO as part of the development of national defence.

Draft budget for 2025 approximately EUR 12.2 billion in deficit

In the Budget for 2025, central government revenue amounts to EUR 76.6 billion and expenditure amounts to EUR 88.8 billion. The final sum is EUR 0.8 billion higher than the sum budgeted for 2024, including the second supplementary budget. The increase in appropriations compared to 2024 is largely due to the ex-post control of the funding for wellbeing services counties (EUR 1.4 billion) and statutory and agreement-based index adjustments to be made in 2025 (EUR 1.8 billion). At the same time, the reforms and cost savings outlined in the Programme of Prime Minister Orpo’s Government and in the spring 2024 General Government Fiscal Plan have reduced the level of expenditure by around EUR 1.8 billion.

Tax increases will increase tax revenue by around EUR 1.4 billion. However, the impact of tax revenue for 2025 will be weakened by the transfer of around EUR 0.4 billion of tax revenue to 2024 due to the increase in the excise duty on tobacco products taking place earlier than planned.
Since the measures to strengthen general government finances outlined in the Government Programme and in the spring spending limits session cover general government finances as a whole, the measures are not targeted only at on-budget entities.

The budget proposal shows a deficit of EUR 12.2 billion, which will be covered with increased borrowing. The estimated deficit is EUR 0.5 billion lower than the sum budgeted for 2024, including the second supplementary budget. According to the budget, central government debt will increase to around EUR 181 billion at the end of 2025 from EUR 169 billion in 2024.

These are preliminary figures that may be refined later.

Tax policy decisions encourage work and self-employment

The Government’s taxation policy encourages work and self-employment and supports domestic ownership. The central government is expected to accrue EUR 67.2 billion in tax revenue in the 2025 budget. Many of the tax measures set out in the Government Programme were already implemented in 2024. Given the serious situation facing general government finances, the Government decided in the spring 2024 spending limits session on more tax measures to bolster general government finances. The Government has chosen measures that treat people fairly and do as little harm as possible to economic growth.

In line with the Government Programme, an adjustment corresponding to the change in the Index of Wage and Salary Earnings will be made at all income levels, apart from the two highest income brackets of the central government income tax scale. Taxation of work will also be eased, with an emphasis on low and middle-income earners. Taxation of work for families with children will be eased by introducing an additional earned income deduction for each child.

The municipalities’ revenue base will be bolstered by abolishing the earned income allowance and increasing the earned income deduction by a corresponding amount. As part of general government adjustment measures, the pension income allowance will be scaled back, but in a way that will not increase taxation on the smallest pensions. The tax credit for household expenses will also be reduced. Central government income tax revenue will increase in 2025 due to changes in social security contributions related to the channelling of the savings generated by the Government’s measures to the Employment Fund in order to curb the growth in general government debt. A reform of the taxation of customer bonuses in the financial sector will begin in 2026.

The standard value-added tax rate and the rate of tax on certain insurance premiums was raised from 24 per cent to 25.5 per cent on 1 September 2024, which will also increase tax revenue in 2025. The value-added tax rate for sweets will also be raised from 14 per cent to the new standard value-added tax rate of 25.5 per cent in 2025. In addition, as decided in the Government Programme, commodities currently subject to a reduced value-added tax rate of 10 per cent will be moved to a 14 per cent value-added tax rate, with the exception of newspapers and periodicals. The value-added tax rate for the compensation that the Finnish Broadcasting Company receives from the State Television and Radio Fund is still being discussed by the parliamentary working group for the Finnish Broadcasting Company. The value-added tax rate for incontinence pads, menstruation pads and children's nappies, on the other hand, will be reduced to 14 per cent in line with the Government Programme. Tax revenue will also grow because the minimum threshold for relief in value added tax will be abolished. The minimum threshold for value added taxation of small-scale business will be raised from EUR 15,000 to EUR 20,000.

Tax revenue will also increase in 2025 due to the abolishment of the training deduction for employers, the restructuring of the tax treatment of rental income in agriculture, the increase in the excise duty on soft drinks and spirits, and the increase in the excise duty on tobacco products entering into force on 1 November 2024 and on 1 July 2025. The amendment to the Excise Duty Act extending the tax liability for distance sales of alcohol, which entered into force on 1 September 2024, will also contribute to the increase in tax revenue. In addition, fairway dues will again be collected in full.

As of 2026, the vehicle tax on electric vehicles and plug-in hybrid vehicles and the propelling force tax on camper vans will be raised, which will already increase tax revenue in 2025. The tax incentive for zero-emission company cars will be continued until 2029. The reduction in the basic tax on motor vehicles adopted earlier, which applies to the older stock of vehicles, will diminish tax revenue, as will the extension of the tax exemption for the costs of relocation paid for by the employer.

Central government on-budget revenue, expenditure and balance, EUR billion

Funding of wellbeing services counties to increase

Wellbeing services counties mainly rely on central government funding to finance their operations. Approximately EUR 26.2 billion is proposed for the universal funding of wellbeing services counties in 2025. Funding will increase by about EUR 1.6 billion compared to the 2024 Budget. The actual increase in funding will be approximately EUR 2.2 billion when taking into account the share of the funding for 2023, corresponding to about EUR 530 million, that was included in the 2024 Budget.

The increase in the funding of wellbeing services counties is explained particularly by an ex-post control based on the outturn data for 2023, which lead to approximately EUR 1.4 billion being added to the funding. In addition, an index increase will increase the funding of wellbeing services counties by around EUR 700 million, and the estimated cost of the increase in the need for health and social services is approximately EUR 240 million.

It is proposed that the measures outlined in the Government Programme and the additional measures included in the General Government Fiscal Plan for 2025–2028, such as maintaining the maximum waiting time for access to care at 14 days and then increasing it to three months, and reducing the minimum staffing level for 24-hour care for older people, be mainly included in the Budget. The combined impact of the Government Programme's measures and the additional measures will reduce funding by approximately EUR 290 million. It is estimated, however, that changes in duties will reduce both the costs and funding of wellbeing services counties equally, meaning that they will not strengthen or weaken the counties’ finances.

At the same time, the poor availability of personnel poses a challenge to wellbeing services counties in both operational and financial terms. The shortage of personnel has increased cost pressures and made it more difficult to organise services. When deciding on measures, one of the Government’s objectives is to make it easier to carry out statutory duties and to reduce the cost pressures related to the recruitment and procurement of additional personnel in the healthcare and social welfare sector. The Government considers it essential that the counties take rapid measures to balance their finances while renewing their operations in a sustainable manner.

The loan portfolio of the wellbeing services counties and HUS Group totalled EUR 5.8 billion based on the financial statements for 2023. The loan portfolio is expected to grow to approximately EUR 6.8 billion in 2024 based on the budgets of the wellbeing services counties and HUS Group. The investments of wellbeing services counties affect the operational expenditure, depreciations and interest on which the funding of wellbeing services counties is based, and they are therefore taken into account retrospectively at the level of central government funding. The working group appointed in spring 2024 to reinforce the guidance of investments is forging ahead with its work, and the changes concerning the approval procedure for investments will be introduced once the working group has completed its work.

Of the funding for research activities in support of the Government’s decision-making, EUR 1 million will be allocated to improving the situation picture concerning the operations of wellbeing services counties.

Central government measures to strengthen municipal finances

The Government is proposing approximately EUR 5.6 billion in government transfers and grants to municipalities in 2025. Of that amount, imputed central government transfers account for around EUR 4.7 billion, compensation to municipalities for tax revenue losses for around EUR 0.5 billion and other government grants for around EUR 0.4 billion.

Around EUR 3.4 billion is proposed for central government transfers to local government for basic public services, which represents a reduction of nearly EUR 900 million from the amount in the 2024 Budget. A permanent increase of EUR 277 million will be allocated to central government transfers to local government to alleviate the effects arising from the adjustment of such costs and funding that were transferred from municipalities to wellbeing services counties as part of the health and social services reform.

At the beginning of 2025, municipalities will take over the responsibility for organising employment services from the central government. Municipalities will be allocated a full central government transfer for their new tasks. This reform also means that municipalities will have more responsibility for funding unemployment security and, correspondingly, the central government will have less. In a cross-sectional situation, an increase corresponding to the increase in the responsibility for funding will be made to central government transfers to municipalities for basic public services. Finally, the reform of the Integration Act will increase municipalities' responsibility for promoting integration. Due to these reforms, some EUR 870 million will be allocated to central government transfers to municipalities as transfers from other administrative branches.

In line with the Government Programme, three weekly lessons per year will be added to the primary and lower secondary education syllabus. Further, support for learning will be restructured and the position of immigrant mothers improved. These new and more extensive tasks and obligations will increase central government transfers to local government by EUR 63 million. However, the savings to be made in municipal functions and obligations will reduce central government transfers by EUR 58 million. In monetary terms, the biggest savings measures will be those directed at employment appropriations and at abolishing municipalities' employment obligation for unemployed jobseekers aged 57 or over.

To the extent that the reduction of functions and obligations did not achieve the EUR 100 million savings target outlined by the Government in the spring, an additional EUR 22.7 million reduction will be allocated to central government transfers to municipalities for basic public services. Deregulation will continue to increase municipalities' room for manoeuvre in accordance with the Government Programme and the decisions made in the government session on spending limits.

Compared with the 2024 Budget, the net impact of central government measures will strengthen municipal finances by some EUR 270 million.

Environment and climate

In its energy and climate strategy, the Government will continue to prepare and implement emission reductions and the strengthening of sinks. The Government will also be prepared to make decisions in its mid-term policy review session on ways to meet its climate targets.

The Government proposes allocating EUR 3.6 million to improving the predictability, speed, clarity and possibilities for exemptions in permitting procedures related to water impacts. 

The Government will introduce a flexibility mechanism for the distribution obligation that will enable fuel distributors to fulfil the distribution obligation by funding other emission reductions. The competence of the Energy Authority will be enhanced to enable the verification and approval of new, cost-effective emission reduction measures.

An act on offshore wind power in the exclusive economic zone is due to enter into force in January 2025. The Government will allocate resources to the preparation of decisions on area selection and to organising competitive tendering processes concerning selected areas.

The Government proposes allocating EUR 1.2 million per year to these measures. 

Finland to submit first medium-term fiscal structural plan to the EU this autumn

The Government discussed Finland’s medium-term fiscal structural plan for 2025–2028, a requirement of the EU’s new economic governance framework that entered into force on 30 April 2024. The plan sets out the net expenditure path for the development of public expenditure (i.e. the permitted growth rate of nominal net primary expenditure) and the Government’s economic and fiscal policy strategy for adhering to it. The draft plan will be published on 23 September 2024 and the finalised plan will be approved by the Government on 10 October 2024.

Third supplementary budget proposal for 2024

In its budget session, the Government decided that the following expenditure items will be included in the third supplementary budget proposal for 2024. Security-related expenditure items will include the reform of the Government situation picture system, an increase in appropriations for the mutual field operations system for authorities (the KEJO project), an increase in the security level of tax administration, the replacement of the access control system at the Office of the President of the Republic, technological border control by the Finnish Border Guard and coordination of military situation awareness systems.

The Government proposes that the third supplementary budget also include the expansion of the positive credit register to cover loans to housing companies, the development of a monitoring system for the greenhouse gas inventory in the land use sector and support for vessel acquisitions by the Finnish Maritime Search and Rescue Society. Appropriations will be allocated to the preparation of special legislation related to the expropriation of the Helsinki Halli indoor arena.

In addition, the Museum of Architecture and Design will be recapitalised so that the entire recapitalisation will take place in the autumn in line with the decision of the Ministerial Committee on Economic Policy.

Next steps in preparing the 2025 budget proposal

The Government will discuss the 2025 budget proposal in its plenary session on 23 September. The budget proposal will then be published online at budjetti.vm.fi. The Economic Survey by the Ministry of Finance will be published in connection with the budget proposal on 23 September.

Inquiries: Mikko Martikkala, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 16001, Jussi Lindgren, Special Adviser to the Minister of Finance in Economic Affairs, tel. +358 50 576 4611, Laura Ollila, Special Adviser to the Minister of Education in Economic Affairs, tel. +358 50 310 4990, Marjo Loponen, Special Adviser to the Minister of Agriculture and Forestry, tel. +358 50 308 5411