Government budget proposal for 2023 secures purchasing power, compensates price hike in electricity and strengthens conditions for sustainable growth

The budget proposal for 2023 of Prime Minister Sanna Marin’s Government builds sustainable growth for the future, secures purchasing power and assists people with the hike in electricity prices. The budget proposal responds to the effects of Russia’s war of aggression and inflation, improves safety and security, security of supply, and energy self-sufficiency, and provides further investment in research and development and in the green transition.

The budget proposal includes significant measures to improve people’s purchasing power. In its budget session, the Government decided to reduce early childhood education and care fees, to pay an additional child benefit towards the end of the year and to raise the level of several benefits for a fixed period. 

The Government also outlined a number of measures to compensate households for the sharp rise in electricity prices. The value-added tax rate on electricity will be lowered to 10 per cent between December and April. A fixed-term tax credit for electricity and a new fixed-term financial support for electricity for households will also be introduced. 

The security environment in Finland and Europe has changed as a result of Russia’s war of aggression. Finland continues to provide direct support to Ukraine and is prepared to receive and integrate Ukrainians fleeing the war to Finland.

The budget proposal includes policies for shoring up the vitality of Eastern Finland.

The economic outlook has deteriorated since the spring. The Russian war of aggression against Ukraine and rising inflation have the greatest impact on economic performance. Despite this, the employment situation remains good. The Government considers it important to continue making investments in research and development, education, and knowledge and competence.

The budget proposal for 2023 totals EUR 80.5 billion. The proposed budget appropriations level for 2023 is EUR 15.6 billion higher than in the 2022 Budget. This increase in expenditure is explained above all by the health and social services reform. The reform will permanently increase the level of on-budget expenditure by around EUR 13.9 billion. However, the impact will be smaller in 2023, approximately EUR 12.1 billion, as the funding for the wellbeing services counties for January 2023 will be paid as early as December 2022.

The Government decided on the expenditure within the framework of the central government spending limits adopted last spring.

Government proposes several measures to boost purchasing power 

The Government proposes a number of measures to boost people's purchasing power. It is proposed that early childhood education fees be reduced permanently by EUR 70 million. In addition, an increase of EUR 100 is proposed for the private childcare allowance. The effects on local government would be compensated through apportioned share of corporation tax revenue to local government.

It is proposed that the child increase in unemployment security be raised by 20 per cent and the basic social assistance for children under 18 years of age be raised by 10 per cent for 2023. In addition, an increase of EUR 10 per month is proposed for the family provider increment to the study grant and EUR 5 per month for the single-parent increment to the child benefit for 2023. Approximately EUR 49 million is reserved for these measures. The Government also proposes that no index increase be made to the annual maximum limit on out-of-pocket prescription costs in 2023. A one-year trial related to the exempt amount in debt enforcement will also be launched. The objective is to raise the exempt amount in debt enforcement to a level that matches the guarantee pension. 

The Government proposes that the value-added tax on passenger transport be dropped to zero between January and April 2023. This would reduce the value-added tax revenue of the central government by an estimated EUR 52 million.

The increase in the deduction for commuting expenses will continue; in 2023 the deduction will be thirty cents per kilometre. The earned income deduction for people over 60 years of age will be increased in stages.

In addition, the supplementary budget proposal for the autumn will propose that an additional month of child benefit be paid towards the end of 2022 without it affecting the level of income support. The effect of this measure on expenditure is estimated at about EUR 112 million.

Impact of high electricity prices to be mitigated

Russia’s invasion of Ukraine has brought radical changes not only to the security environment in Finland and Europe but also to the economy and economic prospects. For the first time in a long time Europe is at risk of scarcity that affects our basic needs – heating, food or consumer goods – and leads to rising prices. Russia’s aggression against Ukraine will have indirect effects on purchasing power and will make it necessary to save electricity and more energy efficiency.

The costs of household electricity and heating electricity can be taken into account in social assistance, and the Social Insurance Institution of Finland (Kela) has instructed that the rising electricity prices should be taken into account when assessing acceptable costs. 

Finland has a sparse population and distances are long, and the rising electricity prices can still risk the livelihoods of low- and middle-income households especially in single-family houses and terraced houses with electric heating. Although the Government cannot compensate for all increases in electricity prices, it will adopt targeted measures to avoid unfair situations. The measures to promote purchasing power will focus in particular on low-income families with children. 

As an income tax measure, the Government will prepare and implement a fixed-term tax credit for electricity. In addition, the Government will prepare and implement a fixed-term financial support for electricity that will be available to households which cannot make full use of the tax credit.

The fixed-term tax credit for electricity will be in force for four months, and it will be prepared in such a way that its estimated impact on tax revenue is EUR 300 million. More detailed criteria for the tax credit will be determined in further preparations. The aim is allocate the tax credit to taxpayers other than those with the highest income.

The Government will also prepare and introduce a separate financial support for electricity that will be available to households which are unable to make full use of the fixed-term tax credit. A variable appropriation of EUR 300 million will be reserved for the purpose.

To mitigate the impact of high electricity prices, the Government proposes that the value-added tax rate on electricity be lowered to 10 per cent for the period from December to April. This would decrease the value-added tax revenue of the central government by an estimated EUR 209 million. 

Based on the Government’s decision, regulation on a windfall profit tax on electricity producers will be prepared.  The windfall tax must be designed in a way that will safeguard the potential for investment in clean energy. The tax will not affect companies operating according to the ‘Mankala principle’.

Amendments will also be made to the expenditure norm of the heating category for the general housing allowance and to the expenditure norm of the maintenance category for single-family houses. The expenditure norm of the heating category for the housing allowance for pensioners will be raised as of 1 January 2023 under existing legislation. The increase that the rising energy prices is expected to generate is estimated at 57 per cent. The expenditure norm of the heating category for the general housing allowance and the expenditure norm of the maintenance category for single-family houses will be raised by a corresponding percentage as of 1 January 2023. The additional costs for 2023 are estimated at approximately EUR 6.3 million.

The Government recommends that energy companies take the exceptional circumstances of the energy crisis into account by granting longer payment times in line with good debt collection practices for consumer customers who end up with large electricity bills.

The Government’s measures in response to the high electricity prices are described in more detail in the minutes of the government budget session appended to this press release.

Impact of Russia’s invasion of Ukraine

Appropriations of around EUR 2.1 billion are proposed for 2023 for expenditure arising from Russia’s invasion of Ukraine. The Government decided on most of these appropriations already in April 2022 in connection with the government spending limits discussion, making an exception to the spending limits for them. The expenditure under the exception clause will be covered as expenditure outside the spending limits.

The security environment in Finland and Europe has changed as a result of Russia’s invasion of Ukraine, and this requires measures to bolster defence capability. The Government proposes that in 2023 the appropriation for the Ministry of Defence’s administrative branch be approximately EUR 1.0 billion higher than in 2022. This means that compared to the 2022 Budget, there will be an increase of around EUR 137 million for the Defence Forces’ operating expenditure and an increase of around EUR 765 million for defence materiel procurement.  The appropriations will be used to raise the Defence Forces’ personnel capacity, to procure defence materiel, to improve the conscripts’ financial position and to increase refresher training, for example. The allowance for women in voluntary military service will be raised, too.

Altogether EUR 48 million is proposed for the Border Guard for developing resilience and key capabilities and EUR 163 million for procuring new surveillance aircraft. 

Approximately EUR 59 million is proposed to improve cyber security preparedness. The proposals will be allocated to several administrative branches and numerous government agencies. 
Persons who have fled Ukraine had submitted approximately 37,000 applications for temporary protection in Finland by 28 August 2022. Altogether EUR 791 million is proposed for migration-related expenditure under the exception clause. The need for these appropriations is subject to great uncertainty as it will depend, among other things, on the number arrivals and on how well they find employment. As part of the package, it is proposed that municipalities and wellbeing services counties be paid an integration reimbursement for those beneficiaries of temporary protection who have been granted a municipality of residence. For this purpose, an increase of approximately EUR 122 million is proposed for 2023 for integration reimbursement and an increase of just under EUR 2 million for the Centres for Economic Development, Transport and the Environment. 

The government budget session decided to propose EUR 30 million to support Ukraine. EUR 10 million of this sum would be covered by the existing appropriations for the administrative branch of the Ministry for Foreign Affairs. 

Green transition will continue to strengthen energy self-sufficiency and sustainable growth

An appropriation of approximately EUR 241 million is proposed for the package concerning security of supply, energy self-sufficiency and clean technologies. These measures include energy investments by rural companies (biogas), hydrogen projects, energy aid schemes, financial support for housing companies to provide charging infrastructure for electric cars, and subsidies for phasing out oil and gas heating in residential buildings to switch to other forms of heating. Subsidies for private roads, in turn, aim to ensure the availability of domestic wood. In addition, the package includes EUR 225 million in budget authorities for 2023 with respect to energy aid schemes, hydrogen projects and the National Battery Strategy. These authorities will have an impact on appropriations for several years. The direct financial support from the security of supply package for agriculture is part of the 2022 budget, and most of it will be paid during the autumn.

The Sustainable Growth Programme for Finland supports growth that is ecologically, socially and economically sustainable. The programme's financial resources will remain high in 2023 and include about EUR 574 million in expenditure from the Recovery and Resilience Plan of the EU. Significant additional resources will be targeted, for example, to support new energy investments and finance research, development and innovation activities, and to implement the maximum waiting times for access to care and clear the backlog in care. 

EUR 2.8 million is proposed to support municipalities in drawing up climate plans.

Strengthening the vitality of eastern Finland  

Measures will be taken to strengthen the vitality of eastern Finland that are based on the proposals of the working group of State Secretaries. The proposals are divided into five themes: accessibility, tourism, competence building, regional development, and energy self-sufficiency and the green transition.

The working group of State Secretaries proposed measures to be taken in both the shorter and longer term. Increases in appropriations totalling approximately EUR 56 million are proposed for the 2023 budget proposal.

Projects under the investment plan for the Karelian railway and Savo railway will be promoted. EUR 31.1 million will be allocated to the project to improve the Karelian railway as part of basic transport infrastructure management.

In this connection, a EUR 13 million project to repair the railway bridge in Syrjäsalmi will also be implemented in 2023. In addition, regional financial support for transport will be expanded and a study will be launched concerning the introduction of new temporary financial support focused on raw material transport.

To respond to the shortage of skilled labour and to raise the level of competence and education, the number of student places in the most popular disciplines will be increased in the universities located in eastern Finland. In addition, research infrastructure will be strengthened, for example by increasing funding for research and development activities. A total of EUR 10 million in funding is proposed for the packages of measures listed above. In addition, EUR 1 million is proposed to support youth work. 

The labour market participation of people with partial work capacity will be facilitated by expanding the operations of Työkanava Ltd, which started its operations this year, into Eastern Finland. EUR 5 million in capital funding is proposed for this purpose.

To improve the availability of skilled labour, a provision will be made in the budget to pilot a regional student loan compensation scheme.

Efforts will be made to promote tourism by improving the conditions and services for hiking and nature tourism, among other measures. For example, EUR 2 million will be allocated to the promotion of hiking areas and fishing tourism, while EUR 2 million will be allocated to the development and restoration of nature conservation areas and national parks. These appropriations will be used to support a number of projects in different parts of eastern Finland. EUR 2 million will be reserved for strengthening and marketing Finland’s country brand through the Visit Finland project. In addition, EUR 0.5 million in further funding from the EU’s regional development funds will be allocated to the Visit Saimaa project.

An investment authority of EUR 12.5 million will be allocated to the Kutila Canal project. In addition, plans are in place to accelerate the Erämuseo (museum for game and hunting, recreational fisheries and wilderness culture) investment project.

An increase of EUR 3 million will be allocated to the budget authority for business development projects to support projects by SMEs operating in South Karelia and Kymenlaakso. At the moment, South Karelia and Kymenlaakso have significantly lower appropriations for business development than the rest of eastern Finland.

Government decides on measures to ensure availability of skilled personnel

The Government has decided on a number of different measures to ensure the sufficiency and availability of healthcare and social welfare personnel. A total of EUR 2 million will be reserved for the measures proposed by the cross-sectoral working group led by the Ministry of Social Affairs and Health.

The Government also proposes increases to training for care assistants. An increase of approximately EUR 10.8 million is proposed for care assistant training funded by the Service Centre for Continuous learning and Employment (Jotpa). The goal is to use this appropriation to train 1,500 new care assistants in 2023–2025. An increase of EUR 7.8 million is proposed for labour market training funded by central government transfers with a view to training 1,000 new care assistants in 2023–2025. In addition, the appropriation needs for the training of care assistants will be assessed as part of the preparation of the autumn supplementary budget proposal.

An increase of EUR 5.5 million is also proposed for the operating expenses of the Service Centre for Continuous Learning and Employment to be used for education and training targeted at Ukrainians.

In addition, EUR 12 million is proposed for traineeship compensation connected to Bachelor’s degrees in healthcare and social welfare. In future, compensation would be paid to traineeship organisers from state funds based on imputed criteria, whereas previously it was paid by universities of applied sciences.

The conditions for employment of people who have fled the war in Ukraine will be improved by allowing those applying for temporary protection or other residence permits to take part in local government trials on boosting employment before they have received their right of residence.

Investments in research, development and education to continue

The Government will continue to strengthen long-term funding for research and development. Finland aims to increase research and development expenditure to 4 per cent of GDP by 2030.

The total amount of state R&D funding is estimated to total EUR 2.4 billion in 2023. This sum includes significant investments in universities, universities of applied sciences and the Academy of Finland that were decided on earlier in the government term. The budget proposal includes a budget authority of EUR 10 million for EuroHPC counterpart financing, a budget authority of EUR 60 million for Business Finland’s financing for leading companies, EUR 12 million for R&D projects related to nutrient cycling, a budget authority of EUR 10 million for regional R&D activities, EUR 5 million for improving the R&D activities of universities of applied sciences, and EUR 7.5 million for the financing of CSC’s research infrastructure.

In addition, research funding for national sectoral research institutes will be increased by EUR 1.5 million for the Natural Resources Institute Finland and by EUR 1 million for the Finnish Environment Institute. The Government also decided earlier that an R&D tax incentive based on an extra deduction would be introduced as part of the R&D funding package as of 2023.

As stated above, EUR 10 million will be allocated to eastern Finland in 2023 for more student intake in higher education institutions, boosting research infrastructures and helping higher education institutions to attract international students.

The Government will also continue to invest in other forms of education and training. The quality of vocational education and training will be improved in line with earlier decisions by increasing its permanent funding by EUR 50 million. The national binding model whereby school communities work collaboratively designed for preventing school absenteeism will become an established system and permanent funding of EUR 8 million is proposed for it. The gradual implementation of the extension of compulsory education and upper secondary education free of charge will continue, and EUR 102 million will be allocated towards these next year. To support the studies of Ukrainians fleeing the war, EUR 60 million will be allocated to early childhood education and care and EUR 120 million to preparatory education for primary and lower secondary education.

Funding for primary and lower secondary education, including an index increase, will grow by EUR 37 million from 2022 to 2023, funding for vocational education and training by EUR 22 million and funding for general upper secondary education by EUR 53.5 million.

Budget proposal appropriations total EUR 80.5 billion

Proposed appropriations for the budget proposal amount to EUR 80.5 billion, which is EUR 15.6 billion more than in the 2022 Budget. The increase in expenditure is explained above all by the health and social services reform, whereby expenditure from local government is transferred to the budget of central government. As a result, on-budget expenditure will rise at the annual level by approximately EUR 14 billion a year. However, when comparing 2022 and 2023, it should be noted that approximately EUR 1.9 billion of the funding for the wellbeing services counties for 2023 will be paid as early as December 2022. 

Following the general rise in interest rates, interest expenditure on central government debt is expected to grow by approximately EUR 1 billion from the 2022 Budget. The expenditure level for 2023 will also rise due to statutory and contractual index increases. On the other hand, on-budget expenditure will decrease in 2023, among other things because expenditure related to the COVID-19 pandemic will diminish and because many of the temporary spending increases decided by the Government (incl. future-oriented investments) will come to an end.

The extensive economic repercussions of Russia’s war of aggression, such as investments in national defence and security of supply, and temporary measures to mitigate the effects of high inflation will have a significant impact on central government revenue and expenditure in 2023.

The budget proposal for 2023 shows a deficit of EUR 8.1 billion, which will be covered by increased borrowing. The budget-based central government debt will rise to an estimated EUR 146 billion next year.

Tax decisions continue the implementation of the Government Programme

The implementation of the tax policies outlined in the Government Programme will continue in 2023. An index adjustment will be made to the bases for earned income tax at all income levels, which will reduce central government tax revenue by EUR 637 million on an annual basis. The aim of the index adjustment is to avoid an increase in the tax burden as a result of the progressive tax system and general increase in the income level.

The most significant tax base change affecting tax revenue in 2023 is the health and social services reform. All in all, local government tax revenue will decrease by around EUR 14.8 billion as a result of the reform, and central government tax revenue will increase by around EUR 14.5 billion (at 2023 levels). To prevent an increase in the taxation of earned income on individual citizens as a result of the health and social services tax reform, taxation of earned income will be lowered as a whole by approximately EUR 0.3 billion. Tax deductions based on degree of disability will be eliminated in connection with the healthcare and social welfare tax reform.

The Government proposes a staggered increase to the earned income deduction for those aged 60 or over, which will reduce central government tax revenue by an estimated EUR 73 million. The fixed-term increase to the travel expenses deduction is proposed to be continued on current terms and conditions in 2023, and the deductible for commuting expenses paid by those returning from family leave will be reduced. As part of the R&D funding package, an R&D tax incentive based on an additional deduction will be introduced, which will have an impact of approximately EUR 80 million on central government tax revenue next year. The infrastructure exemption from the interest limitation provision will be expanded, while at the same time the balance exemption from the limitation on deductions for interest expenses will be reformed to limit the use of large deductions in profit shifting to low-tax countries.

The Government will also safeguard Finland’s tax base and prevent tax avoidance through a number of other measures, which will enter into force next year. An exit tax for natural persons from increased value will be introduced at the beginning of next year. This tax will prevent tax evasion and broaden the Finnish tax base, because capital gains on the sale of assets accumulated in Finland will be taxed in Finland even when assets are relinquished while living abroad.

The tax base will be expanded to cover income earned in Finland by foreign real estate investors, for example, in situations where real estate ownership has been chained through a holding company structure. Furthermore, hidden dividends will be taxed entirely as earned income.

The concept of ‘economic employer’ will be introduced in 2023. This will enable Finland to levy taxes on work performed in Finland in situations where tax treaties allow Finland to levy taxes, but which are currently not levied due to inadequate national legislation. The Government is also preparing a mine tax. Of the mine tax revenue, 60 per cent are planned to be directed to the municipalities where the mines are located.

The gradual phasing out of tax refunds for energy-intensive companies and the biannual increases in the excise duty on tobacco products will continue in 2023. In addition, the tax on waste will be increased and the tax relief on the use of biogas for heating will be moderately reduced by imposing on it an energy content tax equivalent to the EU minimum tax in order to improve the predictability of the operating environment and legal certainty. In addition, the halving of fairway dues and the fixed-term reduction in the lottery tax will be continued.

The Government’s budget session also outlined new tax measures to mitigate, among other things, the effect of high electricity prices on citizens (see above for more details).

Central government revenue in 2023 is estimated at EUR 72.5 billion, of which tax revenue will account for EUR 64.5 billion. The revenue estimate is based on the Ministry of Finance’s forecast published in September. Most of the increase in revenue is due to the reform of social welfare and healthcare, which involves a transfer of a significant amount of earned income tax and corporate income tax revenue to the central government. Without the social welfare and healthcare reform, tax revenue would grow by approximately 5 per cent. This growth is explained by, for example, the employment trend and rise in the value of private consumption.

Finances of the wellbeing services counties

The responsibility for organising health, social and rescue services will be transferred to wellbeing services counties in 2023. The universal central government funding of the wellbeing services counties will total approximately EUR 22.5 billion in 2023. Of this funding, approximately EUR 1.9 billion will be paid in December 2022.

The wellbeing services counties will fund their operations mainly with central government funding, and they will not have the right to levy taxes. The most significant part of the funding of the wellbeing services counties in 2023 will consist of the transfer of municipal tax revenue to the central government. In addition, funding will be transferred to the wellbeing services counties from central government transfers to local government for basic public services and from compensation to municipalities for tax revenue losses.

In 2023, the funding of wellbeing services counties will increase by approximately EUR 274 million in net terms compared to 2022 due to the new and broader tasks in healthcare and social welfare.

One of the key reforms is accelerating access to primary healthcare. The maximum waiting times for access to primary healthcare will be gradually tightened so that from 1 September 2023 access to non-urgent care must be provided in 14 days and from 1 November 2024 in a week. Access to non-urgent oral healthcare must be provided within 3 months of the assessment of need for treatment.

Local government finances

Local government finances will decrease in 2023 as a result of the social welfare and healthcare reform. The level of central government transfers will fall because 70 per cent of central government transfers to local government for basic public services and compensation to municipalities for tax revenue losses will be transferred to the funding of wellbeing services counties and because discretionary government grants for social welfare and healthcare will largely be transferred from municipalities to wellbeing services counties. Total central government transfers to local government finances will amount to some EUR 5.4 billion in 2023, of which EUR 2.7 billion is a central government transfer for basic public services. In 2023, the index increase in central government transfers to local government for basic public services will be 3.8 per cent, which will result in an increase of approximately EUR 90 million in central government transfers. 

Central government has made discretionary decisions to increase local government expenditure by a total of EUR 0.6 billion at the 2023 level from the beginning of the parliamentary term. The decisions have increased net municipal revenue by around EUR 0.5 billion at the 2023 level. In 2023, the net effect of central government measures on local government finances will be close to neutral compared with the 2022 Budget. The increases in duties and obligations under the Government Programme have mainly been made in previous years, and some of the fixed-term increases to discretionary government grants will end at the end of 2022.

Selected items 

• Under the budget proposal, Finland's refugee quota for 2023 is 1,050 persons. A total increase of EUR 1.4 million is proposed for integration reimbursements and integration training.
• The Government proposes a total of EUR 1.9 million for reforming the legislation on sexual offences. In addition, appropriations will be allocated for the urgent handling of offences against children and for enhancing the monitoring of restraining orders.
• Maintaining the operational level of the police at least at the 2022 level will be ensured. The appropriation for the police will be increased to EUR 854.3 million for 2023, which is EUR 30.9 million more than that budgeted for 2022.
• The Government will allocate EUR 0.68 million to the Emergency Services Academy Finland for planning an increase in the intake for training as firefighters. The Ministry of the Interior’s Department for Rescue Services will receive an additional EUR 0.88 million in funding.
• An increase of EUR 0.5 million is proposed for the operating expenses of the Foreign Service to handle export authorisations and sanctions.
• The personnel costs and other expenses arising from the NATO membership process will be estimated in connection with the amendment to the Budget in November.
• To compensate for the direct impacts of higher costs, EUR 50 million in additional funding is proposed for basic transport infrastructure management. The EUR 15 million cut in basic transport infrastructure management agreed on in the General Government Fiscal Plan last spring has also been cancelled. The rise in the cost level will also affect the total costs of ongoing transport projects, which is why the need for an increase in budget authorisations will be assessed in connection with the autumn supplementary budget proposal and the amendment to the proposal.
• In addition to the Karelian railway, the following new projects will be launched: In accordance with the land use, housing and transport (MAL) agreement for the Greater Helsinki area, a budget authority of EUR 105 million is proposed for building the light rail line on Vihdintie road. A total of EUR 30 million is proposed for the Poikkimaantie road project in Oulu, which requires Stora Enso’s decision to invest in a factory, and EUR 2.6 million is proposed for the Hyryntie motorway project in Kuhmo. Altogether EUR 3.5 million will be allocated for continuing the intensified maintenance of the Seinäjoki–Kaskinen railway in 2023.
• To promote forest conservation and the implementation of the Government Resolution on the Forest Biodiversity Programme for Southern Finland (METSO), additional funding totalling approximately EUR 14 million is proposed for the administrative branches of the Ministry of the Environment and the Ministry of Agriculture and Forestry. An increase of about EUR 3 million is proposed for the administrative branch of the Ministry of Agriculture and Forestry for the measures of the HELMI Habitats Programme. It is estimated that, in total, an average annual increase of approximately EUR 107 million has been allocated for nature conservation during this parliamentary term.
• Altogether EUR 12 million is reserved in the administrative branch of the Ministry of the Environment for the programme to enhance the effectiveness of water protection. The funds will also be used to finance the Archipelago Sea Programme. Funding will also be allocated in the administrative branch of the Ministry of Agriculture and Forestry towards the protection of the Archipelago Sea.
• The budget proposal includes an allocation of EUR 2.5 million for supporting the cybersecurity of water supply and sewerage.
• The Government decided to reserve EUR 20 million for paying the share capital and other equity of the Drug Development Centre. The Centre promotes competitive drug development in Finland. It serves higher education institutions and research institutes, operators in clinical drug research and companies in the sector throughout the country.
• A discretionary government grant of EUR 1.1 million will be allocated to the Finnish Centre for Client and Patient Safety in the wellbeing services county of Ostrobothnia.
• To safeguard funding, a total of EUR 4.7 million will be allocated to the cultural sector, EUR 3.1 million to sports and EUR 1.1 million to youth work. 
• The Government has decided to increase the instruction of the second compulsory language, the B1 language, by adding one weekly lesson per year in the language programme for primary and lower secondary education. A total of EUR 1 million will be reserved for developing the core curriculum in 2023.
• The meal allowance for students will be raised by EUR 0.25 per meal.
• Altogether EUR 2 million will be allocated for continuing the Välitä viljelijästä (Consideration for farmers) project.
• The budget authority for the Housing Finance and Development Centre to award investment grants to special groups will be increased by EUR 30 million to EUR 120 million. Grants awarded to areas where the population is shrinking will be increased by EUR 5 million for the purpose of renovating state-subsidised (ARAVA) and interest subsidy rental dwellings suitable for older people. In addition, renovation subsidies for residential buildings and dwellings granted from the funds of the Housing Finance and Development Centre will be increased by EUR 5.4 million.
• A total of EUR 10.1 million is proposed for making social lending available across the nation in 2023. Of this, EUR 9.5 million is capital reserved for social lending in the supplementary budget.Social lending aims to prevent economic exclusion and excessive debt and to help people cope independently. Arranging social lending would become a statutory duty of the wellbeing services counties.  
• Altogether EUR 0.5 million is proposed for establishing a National Child Strategy function. The Child Strategy strengthens child rights-based governance and decision-making in line with the Government Programme. 
• The resources of the Regional State Administrative Agencies will be strengthened by approximately EUR 7.6 million. This way it will be possible to strengthen the resources of supervision related to healthcare and social welfare once the wellbeing services counties start operating. In addition, funding will be reserved for the Regional State Administrative Agencies for their additional tasks, such as the preparedness of rescue services.
• The resources of the Digital and Population Data Services Agency will be strengthened. Next year, EUR 5.75 million will be allocated for the legal protection programme that aims to speed up the introduction of electronic services. This will help reduce the backlog in certain services and prevent new ones from emerging. Additional funding totalling approximately EUR 4.7 million will be allocated to the Agency for implementing the digital identity project and the redesign of the personal identity code system. Furthermore, additional funding of EUR 1.3 million will be allocated to the Digital and Population Data Services Agency to provide digital support to citizens, and a total of around EUR 3.7 million for other new tasks, such as registration of Ukrainian migrants and tasks related to the health and social services reform.
• Funding for the implementation of automated decision-making will be ensured by allocating a total of approximately EUR 7.1 million in additional funding to different administrative branches. Automated decision-making means that decisions are made in an information system as a result of a predetermined chain of reasoning. The proposal enables the automation of decision-making in public administration.
• Identification of prior learning, guidance and other services that promote the integration and employment of migrants require sufficient resources. For this reason, EUR 3.5 million will be allocated to make sure that the activities of the low-threshold multidisciplinary centres of expertise in municipalities and the guidance and counselling services for migrants can continue. 
• Altogether EUR 58.5 million will be allocated for promoting employment and extending working careers among people over 55 years of age. From 2023, training to prepare for protection in the event of restructuring will be introduced, together with an employment subsidy for those aged 55 or over.
• The production incentive for the audiovisual sector will be extended to 2023.
• An increase of EUR 12 million is proposed for safeguarding the administration of justice, divided between different authorities in the administrative branch of the Ministry of Justice.
• An additional EUR 8.5 million is proposed for conducting elections. Both parliamentary elections and elections to the Sámi Parliament will be held in 2023. Approximately EUR 3.3 million is proposed for reforming the Election Information System as part of the cyber security package.

Economic outlook

Robust economic performance and a strong trend in employment have reduced the general government deficit, which the COVID-19 pandemic temporarily deepened. The deficit will begin to grow again next year as economic growth slows. General government finances will remain substantially in deficit in the coming years. The public debt-to-GDP ratio will decrease in 2021 and 2022, but the Ministry of Finance estimates that it will return to an upward trajectory in the near future. Due to the structural imbalance between general government revenues and expenditures, there is a large sustainability gap in general government finances.

The economic outlook has deteriorated since the spring. Russia’s ongoing war of aggression against Ukraine adds to the uncertainty. The energy transition is also accelerating, which will give rise to costs in the short term. The very rapid pace of inflation, combined with rising interest rates and uncertainty in the energy market, will slow down growth both late this year and early next year. Growth in gross domestic product (GDP) in 2023 will remain subdued, and there is an elevated risk of a recession. The rapid growth in employment will level off, and the evolution of household purchasing power will depend on a slowdown in inflation and on wage increases. The confidence of households in their own finances has fallen to the lowest level ever recorded, but business confidence has evolved more steadily. Confidence in the future is likely to gradually return. 

World economic output may begin to recover if the upward spiral in costs can be prevented. The recovery of output in export markets would also set the Finnish economy on a new growth path. If the outlook brightens, households and businesses will also become assured in their choices. 

Steps in preparing the 2023 budget proposal

The estimates given above are preliminary. The Government will deliberate the budget proposal on 19 September. The government proposal for the 2023 budget will then be published in its entirety on the budjetti.vm.fi website.

The Economic Survey by the Ministry of Finance will be published in connection with the budget proposal on 19 September.

Inquiries:
Tuulia Pitkänen, Special Adviser to Prime Minister in Political Affairs, tel. +358 295 160 231, Joonas Rahkola, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 160 998, Joel Kuuva, Special Adviser to the Minister of Finance (economic policy), tel. +358 50 414 6444 Heikki Sairanen, Special Adviser to the Minister of the Environment and Climate Change, tel. +358 50 456 4662, Ralf Sund, Special Adviser to the Minister of Education (eco +358 295 330 085, Silja Borgarsdóttir Sandelin, Special Adviser to the Minister of Justice (economic policy), tel. +358 295 150 116.