Government submits supplementary budget proposal to Parliament

The Government submitted the first supplementary budget proposal for 2022 to Parliament on Thursday 3 February. The supplementary budget aims to respond to the direct and essential needs arising from COVID-19 and to safeguard the preparations for the launch of wellbeing services counties.

The supplementary budget proposal includes appropriations for compensation to businesses and to operators in the cultural, sports and physical activity sectors, and for other essential expenditure needs arising from the worsened COVID-19 situation. The increase in appropriations in the supplementary budget proposal for 2022 is EUR 547 million, which will increase the central government’s net borrowing requirement by the same amount.

Compensation for the direct and necessary costs arising from COVID-19 restrictions 

The COVID-19 situation has deteriorated significantly due to the easily transmissible Omicron variant. In December 2021, the Government activated the emergency brake mechanism and introduced new restrictive measures to help manage the situation. 

To mitigate the costs of the restrictive measures, an increase in appropriations of EUR 200 million is proposed for closure compensation and to implement the sixth round of support for business costs. The purpose of closure compensation is to compensate businesses whose premises have been closed by a provision of an act or by order of an authority in order to manage the epidemic. Support for business costs, for its part, compensates businesses for the costs incurred due to restrictive measures, either directly or through the businesses’ primary customers.

An additional appropriation of approximately EUR 28 million is proposed for the Ministry of Education and Culture so that it may issue COVID-19 support grants to cultural and art institutions and to organisations in the cultural sector.  In issuing grants, consideration will be given to how the restrictive measures and their prolonged duration have affected different operators and their activities.

An additional appropriation of approximately EUR 34 million is proposed for the Arts Promotion Centre to mitigate the impact of COVID-19 on individuals, sole entrepreneurs and persons operating under company names in the field of arts and culture, taking into account the duration of the restrictions on their activities.  

Efforts have been made to ensure that the support for costs incurred due to restrictive measures is allocated appropriately, i.e. that it corresponds optimally to the need for support arising from the restrictive measures. However, in view of possible future states of emergency, the Government is looking into how a transfer-based support system could be implemented to compensate for the loss of income experienced by professionals in the field of culture.

An additional appropriation of EUR 5.5 million is proposed to support sporting events and to safeguard the activities of high-level sports leagues.

An appropriation of approximately EUR 30 million is proposed to extend the coverage of unemployment benefits to include the waiting period and for the continuation of the right of entrepreneurs and self-employed persons to labour market support from 1 January to 28 February 2022.

While these changes are in effect, there will be no five-day waiting period at the start of unemployment, meaning that unemployment benefit can be paid starting from the first day of unemployment. A person employed full-time through self-employment is, as a rule, entitled to unemployment benefit if their business is closed down. Temporary derogations have been made to this requirement during the pandemic, and these have now been reintroduced. The legislative amendments related to the derogation are already in force.

An additional appropriation of EUR 1 million is proposed for the costs of proposed temporary amendments to the conditions for granting communicable disease allowance. The cost impact of the changes is estimated at approximately EUR 20 million, most of which will be financed by insurance contributions from employers, employees and self-employed persons.

Under the amendment, a person who has contracted a communicable disease would be entitled to communicable disease allowance if that person has been reliably diagnosed with COVID-19 and is therefore prevented from engaging in their gainful employment. A reliable certificate could be issued by an occupational health doctor, for example. Currently, the requirement for receiving communicable disease allowance is that the person has been placed in quarantine or isolation. A legislative proposal on the matter has already been submitted to Parliament.
An additional appropriation of EUR 70.5 million is proposed to prepare for the procurement of new COVID-19 vaccines and possible booster doses. To promote health security in schools and educational institutions, EUR 10 million is proposed for purchasing and distributing home tests for COVID-19. In addition, EUR 14 million is proposed in provisions to prepare for the procurement of COVID-19 medicines. 

The Government has decided that the compensation paid to operators for the period of COVID-19 restrictions imposed under public law and the temporary changes to unemployment security will be covered as expenditure outside the spending limits in 2022, as will the costs arising from the restrictive measures and compensation for such measures. Based on an earlier decision by the Government, the direct health security costs related to COVID-19 will continue to be covered as expenditure outside the spending limits in 2022 and 2023.

Assessing other measures related to the COVID-19 situation

In line with the earlier decision of the Ministerial Working Group on Coordinating COVID-19 Response, the need for appropriations in 2022 to compensate municipalities, joint municipal authorities and the Åland Islands for direct costs related to COVID-19 (including testing, vaccination and treatment) will be assessed before the next supplementary budget proposal is submitted to Parliament in May. 

Preparations for a model for activities to be compensated and activity-specific compensation in 2022 are currently under way. The use and effectiveness of the additional appropriations to support children and young people, which were decided on earlier, will also be assessed by the May proposal. Based on the assessment, new proposals may be made to close learning gaps and support children and young people in other ways in order to alleviate the effects of the epidemic. The details will be assessed based on existing needs and on the needs identified during the spring, while also taking into account earlier measures. 

In addition, the ministerial working group will assess the adequacy of support for public transport and cargo and passenger shipping companies with a view to securing connections needed to ensure security of supply, for example. Compensation for direct costs incurred by the authorities due to COVID-19 will also be taken into account in the May supplementary budget proposal.

Safeguarding the preparations for wellbeing services counties

An increase of EUR 155.7 million will be allocated to cover the costs of changes to ICT systems in connection with the health and social services reform, other preparatory funding for the wellbeing services counties, and to support the activities of the county council groups.
 In part, this will involve bringing forward the funding for changes to ICT systems set aside for 2023. This funding decision aims to safeguard the systematic preparations for the launch of the wellbeing services counties (incl. Helsinki and the Hospital District of Helsinki and Uusimaa) and to ensure a safe and secure transfer of the responsibility for organising services from the beginning of 2023.

The Government proposes allocating EUR 5.7 million of this additional appropriation to help support the activities of county council groups.  

Once the Government has submitted its supplementary budget proposal, it will begin preparing updated criteria for the allocation of funding under the direction of the Ministry of Finance so that the preparatory funding can be disbursed as soon as possible after Parliament’s decision on the supplementary budget, especially in areas with urgent financing needs for the cost of changes to ICT systems. In this context, a proposal for amending the relevant Government Decree (664/2021) will be prepared without delay.

In the next phase, before the General Government Fiscal Plan for 2023–2026 to be completed in April 2022 and the next supplementary budget proposal for 2022 to be submitted to Parliament in May 2022, the Government will conduct a more comprehensive assessment of the total costs arising from ICT changes and the timing of funding needs, taking into account earlier allocations for 2024−2025 in the General Government Fiscal Plan for 2022−2025, additional funding in the first supplementary budget proposal and other possible instruments.

Other changes included in the supplementary budget proposal

Due to the sudden drop in the profitability and liquidity of the agricultural sector, the Government proposes transferring an appropriation of EUR 8 million to the Development Fund of Agriculture and Forestry to prepare for an increase in the guarantee liabilities on state guarantees granted from the Fund, and for an increase in guarantee losses. 

Impact on central government debt and the balance of central government finances

Taking into account the increase of EUR 547 million in appropriations, the first supplementary budget proposal for 2022 will increase the central government’s net borrowing requirement by the corresponding amount.

Net borrowing in 2022 is expected to total about EUR 7.6 billion. The amount of Government debt at the end of 2022 is estimated to be approximately EUR 136 billion, which is around 52 per cent of gross domestic product (GDP).

Inquiries: Joonas Rahkola, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 160 998, and Ann-Mari Kemell, Special Adviser to the Minister of Finance in Economic Affairs, tel. +358 295 530 330