Impacts of COVID-19 support on companies and the economy to be extensively assessed

The Ministry of Economic Affairs and Employment will launch an independent assessment of the business subsidies made available to companies to address the liquidity problems they were experiencing due to the coronavirus crisis. The purpose of the assessment is to analyse the short and long-term impacts of the subsidies, and to provide information to political decision-makers for future crises. An audit on the use of business subsidies will also be conducted. The assessment will be conducted in stages during 2020–2023.

“Over the spring and summer, new business subsidies were introduced and the coverage of existing ones was expanded in a short timescale to prevent bankruptcies, unemployment and financial crisis in the context of the COVID-19 crisis.  We now want to assess the impacts of the subsidies for future reference. The assessment will increase the transparency of central government activities, and it allows us to use research-based information in future decision-making,” says Ilona Lundström, Director-General of the Ministry of Economic Affairs and Employment.

The assessment is conducted by multiple organisations, in several parts and over a longer term. Competitive tendering and independent expert organisations will be used in the implementation of subprojects. 

The total amount of COVID-19 financial support provided by the central government in March–June 2020 was approximately EUR 22 billion, with market-based financing, i.e. loans (the State Pension Fund and the Bank of Finland), Finnvera’s loan guarantee authorisations, and Finnish Industry Investment’s capital investment programmes representing EUR 10.2 billion, direct subsidies EUR 10.4 billion and a reduction in pension contributions EUR 1.5 billion. Some of the assessments address all support financing, others focus on specific forms of support.

Short and long-term impacts of COVID-19 subsidies to be reviewed separately

The first stage involves assessing the short-term effects of the COVID-19 subsidies. Areas under special scrutiny include the allocation of subsidies, their ability to prevent bankruptcies, and their impact on reinvention and productivity. The Research Division on Business Subsidies, an independent body operating under the auspices of the Ministry of Economic Affairs and Employment, is responsible for the project. The Division conducts its own assessments independently and selects organisations to perform background research through competitive tendering. Competitive tendering for background research is currently underway, and first results are expected to be available within six months.

Two separate reviews of the long-term effects of COVID-19 financial support will be conducted in 2021–2023. The Research Division on Business Subsidies will carry out a policy review of the various support forms to establish whether the selected support forms were fit for purpose, to assess the overall role of market-based financing, and to identify which policy measures are suitable for different types of economic crises and specific needs.

“Independent research into the COVID-19 financial support is very important due to the scale of the support scheme and its exceptional importance for society. Assessment of business subsidies falls quite naturally to the Research Division, but there is plenty of work for other researchers, too. The Division will publish the results of these reviews in its forthcoming reports, drawing on both its own analyses and the results of commissioned research,” says Seija Ilmakunnas, Chair of the Research Division on Business Subsidies.

The COVID-19 financial support impact assessment focuses on the effectiveness of certain forms of support when compared against the objectives set for them, long-term productivity, structural reform of the economy, and economic growth. Other impacts will also be examined. The Ministry of Economic Affairs and Employment will select an organisation to carry out this assessment through competitive tendering.

Audit on the use of government funds improves transparency

This autumn, the Internal Inspection and Audit division of the Ministry of Economic Affairs and Employment will organise external audits on the appropriate use of central government funds. These audits will focus on the COVID-19 support provided by Business Finland and the centres for economic development, transport and the environment (ELY Centre), support for sole entrepreneurs and self-employed persons granted by municipalities, and support for businesses in the food and beverage service sector granted by the Development and Administration Centre for Centres for Economic Development, Transport and the Environment (ELY) and Employment and Development (TE) Offices (KEHA Centre).

The audit covers the whole process from application to granting, payment, use and supervision. An assessment of the funding provided by Business Finland has already been completed, covering the application process and needs assessment. This time the assessment will focus on monitoring, payment and use of the financial support provided.

Inquiries:

Ilona Lundström, Director General, Ministry of Economic Affairs and Employment, tel. +358 29 504 7186
Anne Rothovius, Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 506 3532
Antti Joensuu, Director, Ministry of Economic Affairs and Employment, tel. +358 29 506 3697 (internal inspection and audit)
Seija Ilmakunnas, Chair of the Research Division on Business Subsidies, tel. +358 50 362 9270 (assessments conducted by the Research Division)