Budget proposal for 2020 and General Government Fiscal Plan for 2020–2023
Government’s budget focuses on building a socially, economically and ecologically sustainable Finland
The 2020 budget proposal of Prime Minister Antti Rinne's Government focuses on building a socially, economically and ecologically sustainable society and increasing competence and inclusiveness throughout Finland. The budget proposal includes significant future-oriented investments in education, employment, growth, people’s wellbeing and their safety and security, nature conservation and the fight against climate change.
The Government will strengthen social justice through measures such as improving the position of families, enhancing basic social security and raising the lowest pensions. The Government will also cut taxes on low and middle incomes by a total of EUR 200 million in 2020. The benefit reduction element of the jobseeker activation scheme will be removed. Thanks to the measures decided by the Government, the budget proposal will reduce income inequalities.
With a financing package of EUR 256 million for all levels of education, the Government will invest significantly in knowledge and education. The Government's aim is to make education more equitable and improve its quality, and to raise the level of skills and competence. The proposal will reduce social exclusion, boost Finland’s international competitiveness and create favourable conditions for increasing employment sustainably. The quality of early childhood education and comprehensive school education will be improved and preparations for extending compulsory education will continue. The increases in core financing under the Government Programme for universities and universities of applied sciences will be implemented in full in 2020. Children’s and young people’s opportunities for leisure activities free of charge during the school day will be increased. Investment in education and resources for continuous learning will help reach the Government’s employment goal.
The Government is committed to attaining an employment rate of 75% under normal international and related domestic economic circumstances. The Government’s employment measures seek to increase the total number of people employed by at least 60,000.
The Government has taken decisions on the first measures to boost employment in the 2020 budget.
In the Government’s employment package, services will be tailored for individual needs in order to shorten periods of unemployment, facilitate the matching of jobseekers and employers and provide companies with easier access to skilled labour. In addition, the measures are designed to reduce the bureaucracy associated with labour migration and education-based migration and to speed up the recruitment of foreign labour.
The Government will accelerate productive investments, improve the business environment and encourage companies to go international. Investments will be promoted by increasing Business Finland’s grant authorisations. Funding will be allocated for purposes such as promoting growth in specific sectors and supporting the sustainable growth and vitality of regions throughout Finland.
The Government will protect Finnish nature by increasing the appropriations for nature conservation by EUR 100 million next year, part of which will be regular annual expenditure and the rest a one-off expenditure. The objective is to halt the decline in biodiversity by 2030. The Government will work to ensure that Finland is carbon neutral by 2035 and carbon negative soon after that. To combat climate change, investments will be made in low-emission transport, the circular economy, and measures to reduce the emissions from housing and energy production. This objective will also be furthered through changes in taxation. In addition, funding will be allocated to the climate programme for the land use sector in order to strengthen carbon sinks and reduce emissions from the sector.
The safety and security of people living in Finland will be improved by increasing the number of police officers, by allocating funding for crime prevention, by increasing the appropriations of the Defence Forces and by strengthening the technical preconditions for border control. During the budget planning period, a total of EUR 4.5 billion will be allocated to the procurement of multi-role fighter aircraft for the Finnish Air Force.
In line with the Government Programme, the total amount of the 2020 budget proposal is EUR 57.6 billion.
Finland as a sustainable economy
The objective of the economic policy of Prime Minister Rinne's Government is to increase wellbeing. This means ecologically and socially sustainable economic growth, high employment and sustainable general government finances.
The objective of the Government’s economic and employment policy is, in normal international and related domestic economic conditions, to balance general government finances by 2023, to reduce the public debt-to-GDP ratio, and to raise the employment rate to 75%. This higher employment rate is the most important individual element in the Government's revenue base.
With its actions, the Government aims to increase the number of people employed by at least 60,000 by the end of 2023. The Government is committed to completing the preparations for at least half of the required employment measures by the budget session in August 2020. The Government’s decisions will reduce inequalities.
The Government will implement an active and responsible fiscal policy that is scaled in accordance with the economic conditions. The scale of fiscal policy will drive positive development in employment.
Economic policy will be aligned with Finland’s target of becoming carbon neutral by 2035, and Finland’s objectives and commitments with respect to the EU and global climate policy. In addition to the measures decided in its budget session, the Government will draw up a roadmap on sustainable taxation, the first phase of which will be completed by the 2020 discussion on spending limits.
Economic growth in Finland is primarily generated by productivity growth. Therefore, the Government will invest in key factors boosting productivity: competence and innovation.
Employment package putting Finland on a Nordic path
To achieve these goals, the Government adopted an employment package under which it will take decisions during 2020 that will shorten periods of unemployment, facilitate the matching of jobseekers and employers and provide companies with easier access to skilled labour.
The Government will invest in education and skills at different levels of education to address labour shortages in enterprises. It will also promote continuous learning for employed people and education and training for unemployed people.
The Government will promote the recruiting of international talents in many ways. Among other measures, it will reform permit practices and create a model for international recruiting to facilitate more productive recruitment processes that take into account fair rules in working life.
In order to promote labour mobility, the Government will submit to Parliament a proposal providing for half of the removal costs paid by the employer to be exempt from tax.
The Government aims to increase the use of the pay subsidy by simplifying and speeding up the pay subsidy process, by reducing employer bureaucracy and by linking other services more closely to the pay subsidy scheme. The third sector’s pay subsidy will be reformed to better support the moving to the open labour market.
The Government aims to encourage sole traders and micro-enterprises to hire new employees by lowering their employment threshold and reducing associated risks.
The Government will prepare legislation to support individual job searching for people who are unemployed. The unemployment benefit system and services for the unemployed will be reformed so that services and job search obligations will be based on personal employment plans.
A central means of attaining the employment goal is to safeguard the operating conditions of enterprises and to boost their growth and internationalisation.
The Government will create an entrepreneurship strategy to diversify business structures and to encourage growth, particularly among SMEs, so that the number of growth-driven SMEs increase in all parts of the country and that enterprises in all sectors grow in profitable ways and thereby create jobs and prosperity across Finland.
The goal of the employment package is to put Finland’s employment rate on a Nordic path and to systematically boost employment by investing in employment services, emulating practice in its neighbouring countries.
Investment boost following proposals by State Secretary Hetemäki
Finland is lagging behind its main competitors in terms of productive investment. Productivity growth has stagnated for the last ten years. The Government aims to boost productivity and private productive investment. The Government wants to encourage companies to invest in both intangible and tangible assets. The climate of mounting uncertainty highlights the importance of a sustainable economic policy that builds trust.
The Government will urgently prepare a government proposal on allowing double depreciation for a fixed term of four years to encourage investment in machinery and equipment. This would amount to a tax deferral for businesses, but would not permanently undermine the balance in general government finances. The Government is aiming for the new rules to be adopted by 2020.
The Government will urgently initiate a study on the possibility of submitting a proposal for a temporary incentive for research cooperation aimed at encouraging intangible investment. Companies could be granted an additional tax deduction of, say, 50% for a period of four years for their financing of research and innovation projects run by businesses, higher education institutions and research institutes. The study will rely extensively on previous studies and reports on these topics. The new arrangements should be adopted by 2020.
To enhance skills and competence, the Government will implement new legislation on the remuneration of staff in unlisted growth companies as of 1 July 2020.
Promoting competence, digitalisation and better use of data strengthens the prospects for investment. The Government decided on investment-related expenditure for providing access to public data and making use of it, and for promoting digitalisation, and on funding for the deployment of artificial intelligence applications in 2020–2022.
The viability of streamlining the authorisation procedure for investment projects by limiting its duration to a maximum of one year will be investigated.
The Government will launch enhanced monitoring of price competitiveness and productivity development. The Information Committee on Cost and Income Developments will brief the Economic Council on developments in price competitiveness, and the National Productivity Board (consisting of experts from the Ministry of Finance and research institutions) will report to the Economic Council on productivity developments.
Budget proposal and General Government Fiscal Plan: steps forward in implementing Government Programme
Permanent measures under the Government Programme will increase central government expenditure by approximately EUR 1.1 billion in 2020. This will rise to approximately EUR 1.4 billion in 2023.
To finance regular annual expenditure, the Government has taken decisions on the reallocation referred to in the Government Programme. Initially, business subsidies will be reduced by phasing out the tax break for paraffinic diesel to the tune of EUR 120 million. Subsequently, the focus will be on significantly reducing business subsidies with adverse environmental and climate impacts. New decisions will be made in autumn 2020 based on the work done on these cuts, while also taking into account their impacts on employment, social justice and regional economic perspectives. Work on a reform of energy taxation, which includes resolving the question of how to tax peat, will start in spring 2020. The energy use of peat will be cut by at least half by 2030. As part of the overhaul of energy taxation, we will assess the necessary changes to the taxation of peat so that we can achieve our 2030 peat targets. The future of offsets in emissions trading will be determined by the end of 2020, taking into account the issues raised in conjunction with the energy tax reform.
In accordance with the Government Programme, the financing base of Finland’s welfare state will be strengthened through taxation. Tax solutions will also be used to make progress towards achieving climate goals. In 2020, the Government will strengthen the tax base and increase indirect taxes. To compensate for the changes in indirect taxes, the earned income taxation on low and middle incomes will be reduced by a total of EUR 200 million.
Future-oriented investments
The Government has decided on its first future-oriented investments to strengthen skills and competence and boost sustainable growth.
At this stage, funding of approximately EUR 1.37 billion in total will be allocated to the future-oriented investments. For the future-oriented investments determined now, about EUR 750 million is scheduled for 2020. One-off expenditure on future-oriented investments is to be financed mainly through central government property income, which will be decided on later.
A spending limits provision amounting to about EUR 1.7 billion has been made for the remaining part the programme of future-oriented investments. Decisions on the programme’s implementation will be taken in the autumn 2020 government budget session as part of the Government Programme’s employment measures and assessment of expenditure increases.
Key themes
Carbon neutral Finland that protects biodiversity
Government to combat climate change and strengthen biodiversity
An increase of approximately EUR 100 million will be allocated to nature conservation in line with the Government Programme from the beginning of 2020.
The additional nature conservation funding will be used to rehabilitate migratory fish stocks, implement a water protection programme, increase funding for the METSO voluntary forest protection programme, protect the areas designated under the complementary mire conservation programme, expand the restoration of mires in and outside of protected areas, restore bird waters and wetlands, improve the status of aquatic and coastal nature, and take inventory of and restore semi-natural grasslands, such as meadows, heaths and forest pastures. A portion of the funding will also be used to reduce the repair debt of Metsähallitus and to improve the conditions for nature tourism by boosting the core funding for Natural Heritage Services and restoring the route networks in hiking areas and national parks.
The land use sector will receive an increase of EUR 10 million in funding for the natural resource economy with the goal of strengthening carbon sinks and reducing sector emissions. This increase in regular annual expenditure will rise to EUR 14.5 million from 2021. In addition, a one-off increase totalling around EUR 50 million is proposed for 2020–2022.
Approximately EUR 2 million in regular annual funding is proposed for the operating expenses of the Ministry of Economic Affairs and Employment and the Ministry of the Environment in order to promote the sustainable use of natural resources through the circular economy. Further, a total of EUR 48 million in fixed-term circular economy innovation and investment support is proposed for 2020–2021.
An increase of EUR 90 million to the approval authority for energy subsidies is proposed for the budget planning period to support investments in energy technologies to replace coal. The guiding effect of fuel taxes will be maintained by raising fuel taxes in line with the increase in the consumer price index.
In addition, EUR 10 million in one-off funding will be allocated to the biogas programme in 2020–2021. Properties are encouraged to switch from oil to other forms of heating, and EUR 10 million will be allocated for this purpose on a one-off basis. EUR 4 million in annual funding will be allocated for 2020–2021 to continue the subsidies for building charging infrastructure for electric cars and to increase the amount of the subsidies granted. A total of EUR 21 million is proposed for the promotion of walking and cycling in 2020, covering funding for central government locations and discretionary government transfers to municipalities.
The Government has commissioned studies based on which it will create a roadmap towards a carbon neutral Finland in 2035. Once the studies are complete, the Government will decide on the additional actions needed to bring Finland’s emissions reduction path in line with the goal of achieving carbon neutrality by 2035.
Globally influential Finland
Finland will work actively to promote peace and development in the world
Labour migration of skilled labour will be increased and the processing times for work-based residence permits will be shortened by allocating EUR 2.5 million for strengthening the resources of Finland’s missions abroad.
Our diplomatic and consular missions abroad help shape the conditions in which Finland’s security, wellbeing and visibility can be maintained. In 2020, an increase of EUR 1 million is proposed for the operating expenses of the Ministry for Foreign Affairs to strengthen the network of Finland’s missions abroad. In 2020–2022, the network will be expanded by opening four new missions.
By participating in the prevention of conflicts, mediation and peacebuilding Finland assumes a share of the responsibility for maintaining international peace and security and strengthens the capabilities and preparedness of its Defence Forces. The strength of Finland’s civilian crisis management force will also be increased. It is proposed that the administrative branches of the Ministry for Foreign Affairs and the Ministry of the Interior be granted an increase in regular annual funding totalling EUR 1.5 million in 2020, to be raised to EUR 4.5 million in 2023. This will ensure the employment of 150 specialists as stated in the Government Programme. In 2020, a one-off additional allocation of EUR 1.5 million will be allocated to improve the capacity for participating in conflict prevention, mediation and peacebuilding.
In 2020, the ODA administered by the Ministry of Foreign Affairs will be raised by approximately EUR 100 million compared with the level in 2019. EUR 71.7 million of the increase will be covered from the additional regular annual expenditure in accordance with the Government Programme; this additional funding will be raised to EUR 79.8 million in 2023. One-off funding totalling EUR 10 million will be allocated for 2020–2021. In the budget planning period, the average level of development cooperation appropriations will be approximately 0.42% of GNI.
Safe and secure Finland built on the rule of law
Government to increase number of police officers and invest in people's safety and security
To improve people’s safety and security, the Government proposes additional appropriations for the police in order to increase the number of police officers gradually to a level of 7,500 person-years by 2022. The budget increase proposed for this purpose is EUR 7.5 million in 2020, reaching EUR 18 million in 2023.
An appropriation of EUR 15 million is proposed for reforming the Border Guard’s technical surveillance system for land and sea borders in 2020.
Additional funding of EUR 5.3 million will be allocated to the prosecution service, the courts, legal aid and the Criminal Sanctions Agency. To reduce over-indebtedness and related problems, the Government proposes that the funding for financial and debt counselling be increased by EUR 1 million in 2020 and 2021 and by EUR 1.45 million in 2022 and 2023. It is proposed that EUR 200,000 be permanently allocated for updating the national language strategy.
Furthermore, the Government proposes a one-off sum of EUR 7.5 million for crime prevention measures over the years 2020–2022 and a one-off increase of EUR 4.5 million in 2020 and 2021 for centralising the taking of evidence into district courts.
An increase of EUR 5.5 million is proposed for the Defence Forces' operating expenditure appropriations in 2020 to increase the number of personnel and tasks, the number of refresher exercises and to establish a new operating model for voluntary defence training. The increase will rise to EUR 10 million by 2023.
Preparations will be made for allocating funds for the Navy's Squadron 2020 project. During the budget planning period, a total of EUR 4.5 billion will be allocated to the procurement of multi-role fighter aircraft for the Finnish Air Force. These projects will replace ageing sections of Navy and Air Force fleets and ensure future defence capabilities.
The coordination of cyber security will be strengthened under the leadership of the Ministry of Transport and Communications; an allocation of EUR 2 million is proposed for 2020. It is also proposed that the National Cyber Security Centre receive EUR 1.2 million for 2020 and approximately EUR 3.5 million for 2021–2023.
In an effort to ensure better legislation, the Government will invest in more detailed impact assessments and stronger expertise in constitutional law and other public law.
In order to help the most vulnerable refugees, the refugee quota will be raised annually by one hundred people to 850. In this context, a total increase of EUR 0.9 million is proposed for the administrative branches of the Ministry of Economic Affairs and Employment and the Ministry of the Interior for 2020. By 2023, the proposed increase will rise to EUR 4.2 million. Most of the increase will be directed to integration compensation. A sum of EUR 13 million is proposed for the Finnish Immigration Service for 2020 and again for 2021 to ensure high-quality and smooth operations and to reduce the backlog in asylum applications. Clearing the backlog will reduce the reception costs.
An increase of EUR 2 million will be allocated to increasing the number of shelters and developing their activities. A total of EUR 200,000 will be allocated for establishing a post for an independent rapporteur on violence against women.
Finland as a sustainable economy
Creating a favourable environment for entrepreneurs and vitality throughout Finland
To encourage the creation of new business ecosystems and innovation in Finland, an increase of EUR 33 million for the period 2020–2022 and EUR 43 million in 2023 is proposed in the grant authorisations of Business Finland. Creative Business Finland will be financed with an annual one-off investment of EUR 1 million in 2020–2021 to promote the growth of the creative economy. A production incentive of EUR 12 million for the audiovisual industries is intended to attract both domestic and foreign film productions to Finland.
An appropriation of EUR 13 million will be reserved for the international growth programme in 2020, and the sum will be gradually raised to EUR 29 million in 2023.
The Government will invest EUR 46 million in 2020 to promote digitalisation. The detailed allocation of investments in different projects will be decided by the Ministry of Finance.
Increases of EUR 55 million in 2020 and EUR 45 million in 2021 are proposed in Business Finland’s grant authorisations for the fixed-term business-driven R&D&I package. Furthermore, EUR 8.5 million per year would be allocated to the sector-specific growth package in 2020 and 2021. An allocation of EUR 20 million in 2020 and EUR 10 million in 2021 to support sustainable growth and vitality in the regions is also proposed.
To ensure relevant skills and competence, and to secure sufficient resources for higher education, full index increases will be made for universities and for universities of applied sciences, and full increases in core financing under the Government Programme will be implemented in 2020.
In order to improve both the operating environment of businesses and transport connections throughout the country, appropriations are proposed for a number of infrastructure projects. An increase of EUR 300 million in regular annual funding is proposed for basic transport infrastructure management in order to reduce the road, rail and waterway repair backlog and stop it from growing. Together with other increases, the funding for the basic transport infrastructure management will grow by EUR 362 million in 2020. For removing dangerous level crossings, a total of EUR 22 million is proposed for 2020–2021.
By recapitalising the Nordic Railways Ltd by EUR 15.7 million, the Government is making provision for plans to implement the one-hour Helsinki-Turku fast rail link and the fast Finland Railway line. The State is prepared to finance the planning by a total of EUR 115 million. Rail connections to the main line will be improved between Tampere and Pori, Tampere and Jyväskylä, and Seinäjoki and Vaasa. The Tampere-Pori rail service will be improved and speeded up by allocating EUR 40 million in basic infrastructure management funds for the removal of level crossings. An authorisation of EUR 18 million will be allocated to planning faster services and improved capacity on the Tampere-Jyväskylä line. An authorisation of EUR 3 million will be allocated to planning faster services and improved capacity on the Seinäjoki-Vaasa line.
A discretionary government transfer of EUR 20 million will be allocated to private roads for 2020. A new project will be set up for the electrification of the Hanko–Hyvinkää rail section (authorisation of EUR 62 million). It is also proposed that from 2020 onwards, an increase of EUR 20 million be allocated to public transport subsidies. EUR 21 million will be allocated to promoting walking and cycling in 2020.
The Government will strengthen the vitality of the Savonlinna region. For example, the number of student places at the universities of applied sciences in Savonlinna will be increased by 150 from 2020, and preparations will be started to open the international border crossing point in Parikkala in 2024. In addition, the Government will promote the nomination of the Saimaa ringed seal habitat as a UNESCO World Heritage Site.
A total of EUR 2.0 million is proposed for the administrative branches of the Ministry of Agriculture and Forestry and the Ministry for Foreign Affairs for promoting food exports in 2020, while EUR 2.7–3.0 million is proposed for 2021–2023. EUR 5 million is proposed for the financing of new organic commitments in agriculture in 2020, along with EUR 7 million annually for 2021–2023. A one-off sum of EUR 130 million will be allocated for environment and natural constraint payments in 2020.
In addition, one-off funding totalling EUR 7.5 million will be allocated for investments in biogas and manure treatment in agriculture in 2020 and 2021, EUR 4 million for rural development in sparsely populated areas (HAMA measures) in 2020 and EUR 1 million for the development of the food supply chain (implementing a sustainable food system and combating food loss) in 2020. The Agrifood Research and Development Fund will be granted EUR 31 million in additional capital on a one-off basis in 2020. In addition, EUR 3 million will be allocated to the programme to enhance the effectiveness of water protection in 2020 and EUR 6.3 million will be allocated to the key project on nutrient recycling in 2020–2022.
Finland built on trust and labour market equality
Government to promote employment with a versatile package of measures
To increase the use of pay subsidies by businesses, the Government proposes an increase of EUR 10 million for public employment services in 2020. By 2023, the proposed increase will amount to EUR 16 million. In addition, EUR 3 million a year in 2020 and 2021 and EUR 2 million a year in 2022 and 2023 would be allocated to pay subsidy payments and digital services.
It is proposed that the operating expenditure of the Employment and Economic Development Offices receive EUR 5 million in 2020 and EUR 9–10 million in 2021–2023 for implementing regular interviews with unemployed jobseekers and for promoting the youth guarantee. EUR 5 million per year is proposed for developing public employment services in 2020–2022. A total of EUR 10 million is proposed for the completion of the digitalisation project in the Employment and Economic Development Offices in 2020.
The Government proposes to fund the working capacity programme for people with partial working capacity through the allocation of EUR 10 million in 2020, EUR 12 million in 2021 and EUR 11.2 million in 2022. A total of EUR 0.5 million per year is proposed for the Action Plan for Gender Equality and the Equal Pay Programme.
The benefit reduction element of the jobseeker activation scheme will be removed as of 1 January 2020. The Government will prepare and decide on measures for balancing the employment impact of the scheme, and in such a way that the employment impact of research institutions is taken into account.
To improve the availability of labour, the Government will make it easier for foreign researchers, students and graduates in higher education and their families to stay in Finland by reforming permit practices, speeding up processes for work-based residence permits and reinforcing connections between higher education and working life. The aim is to achieve a swift and smooth processing of work-based residence permits within one month during the government term. Students would be granted a residence permit for the full period of their studies, and after graduation it would be extended for a period of two years. In addition, the Government will create a model for international recruiting to facilitate more productive recruitment processes that take into account a fair set of rule for working life.
Proposals related to company-level agreement will be submitted to the Government for its discussion on spending limits in spring 2020.
An annual appropriation increase of EUR 11 million is proposed for integrating migrants and promoting their employment.
Fair, equal and inclusive Finland
Government to support families and improve basic public services and position of people on low incomes
The position of families with children will be improved by increasing the single parent increment to the child benefit. Child benefits for the fourth and each additional child will also be raised by EUR 10. The child maintenance allowance will be increased by EUR 7. An appropriation increase totalling EUR 36.3 million is proposed for these reforms. An increase of EUR 25 per month is proposed for the family provider increment to student financial aid. An additional EUR 23 million for 2020–2022 is proposed for the development of child and family services and to continue the programme addressing child and family services. A supplementary annual appropriation of EUR 2 million is proposed for the preparation of a cross-sectoral strategy for children between 2020 and 2022. It is proposed that EUR 1.5 million per year be allocated in 2020 and 2021 to improve the services of mothers using drugs.
Altogether, a net figure of EUR 183 million is proposed to be spent on increasing the lowest pensions. The increase is designed for those whose pension is below about EUR 1,300 per month. The full national pension will be raised by about EUR 34 and the full guarantee pension by EUR 50 per month. An increase of EUR 20 is proposed for basic social security (minimum rehabilitation allowance, sickness and parental allowance, basic unemployment allowance and labour market support). The effect of this on central government expenditure is approximately EUR 40 million.
A total of EUR 80 million is proposed for the development of health and social services in 2020, EUR 130 million in 2021 and EUR 150 million in 2022. The objective of the development projects is to improve the availability, accessibility, effectiveness and quality of basic services. Under the Government Programme, personal budgets for people with intellectual disabilities will be tested, in addition to a reform of the legislation on services for people with disabilities. A supplementary annual appropriation of EUR 2.5 million is proposed for the testing in 2020 and 2021.
Additional annual funds of EUR 5 million in 2020–2022 are proposed for the preparation of a programme to promote the wellbeing and health of older people. An ombudsperson on older people’s rights will be established. A further EUR 2 million per year is proposed for the same period for a project to enhance home care.
The Government pledges to significantly improve services for older people during this government term by introducing a statutory binding minimum staffing level of 0.7 for care personnel in units providing 24-hour care for older people.
Care workload will be used as the main criterion for determining staffing levels, and the division of work in support services will be reviewed. The expert working group updating the Act on Care Services for Older Persons will present its proposal by the end of September on how this Government Programme objective can be achieved. Following the consultation round and consideration by the Council of Regulatory Impact Analysis, a government proposal will be submitted to Parliament during the autumn session. The Government is committed to implementing the Government Programme entry concerning a binding minimum staffing level of 0.7 for care personnel in units providing 24-hour care for older people, and will be reserving financial resources for it in the General Government Fiscal Plan and budget proposals.
It is proposed that a supplementary appropriation of EUR 10 million be allocated for trialling free contraceptives for everyone under the age of 25 in 2021–2022.
The Government will implement a treatment time guarantee. The aim is to ensure that, in non-urgent situations, people have access to treatment within seven days of the assessment of the need for treatment. EUR 60 million will be reserved for this purpose next year. EUR 160 million has been reserved for 2020–2022 for improving the treatment time guarantee, and EUR 50 million in regular annual expenditure has been reserved for 2023 onwards for central government transfers concerning basic services.
EUR 60 million has been reserved for the preparation of a national mental health strategy and for improving access to mental health services in 2020–2022, and EUR 18 million in regular annual expenditure has been reserved for 2023 onwards for central government transfers concerning basic services.
In order to accelerate research and innovation in the health sector and promote individualised healthcare, national centres of expertise are being set up in Finland, such as Cancer Centres and the Drug Development Centre. The growth strategy for the health and social services sector will be supported with additional funds totalling EUR 3 million in 2020 and 2021. The Government will allocate EUR 1 million for the implementation of extensive emergency care services at Vaasa Central Hospital. A total of EUR 1 million will be reserved for 2020 in order to launch a development programme for work and wellbeing at work. A total of EUR 0.6 million is proposed for translating the Current Care Guidelines into Swedish in 2020.
In line with the Government Programme, it is proposed that the ‘Consideration for farmers’ project be continued. To this end, altogether EUR 4 million will be allocated for 2021 and 2022, with a view to preventing farmers from experiencing burnout. An additional one-off investment of EUR 3 million in 2020 is proposed for making changes to the ICT system for farm relief services.
Finland that promotes competence, education, culture and innovation
Employment and equality through investment in education
The Government sees investment in knowledge and education as key to strengthening Finland’s wellbeing, employment and international competitiveness. The Government will allocate a total of EUR 256 million for education and skills in 2020, with the aim of raising the level of skills and competence across society, creating the right conditions for sustainably increasing the employment rate, and providing equal opportunities for children and young people to get an education. Investments will be made at all levels of education.
In order to improve learning outcomes and reduce inequalities in wellbeing, the Government will launch projects to make early childhood education and care (ECEC) and comprehensive school education more equitable and improve their quality. For 2020–2022, a total of EUR 180 million will be reserved for an action plan for quality and gender equality in comprehensive school education, and EUR 125 million for an action plan for quality and gender equality in early childhood education and care.
The restrictions on the subjective right to early childhood education and care will be abolished and the maximum size of groups in early childhood education and care will be reduced as of 1 August 2020. Following these changes, the educator-to-child ratio for children over 3 years of age will improve to one to seven in early childhood education and care. Consequently, it is proposed that central government transfers for basic public services be increased by EUR 13.8 million in 2020. At the annual level, the changes will increase expenditure by a total of EUR 33 million. Within the ECEC project, two-year pre-primary education will be piloted and the trialling of free ECEC for five-year-olds will be expanded.
To foster opportunities for recreational activities free of charge in connection with the school day, a sum of EUR 5 million is proposed for 2020 with a view to creating an ‘Icelandic model’ in Finland. The Government is also preparing to increase the funding for before-school and after-school activities and for leisure activities in connection with the school day by EUR 14.5 million from 2021 onwards.
Compulsory education will be extended to the upper secondary level and the minimum school leaving age to 18 years. At the same time, upper secondary education will become completely free of charge. The reform will start with extensive research and will respond to the increase in skills requirements brought about by technological development. The reform aims at achieving a systemic change, requiring society to keep every young person engaged in their studies until they complete an upper secondary qualification. The reform of compulsory education is due to enter into force in 2021. EUR 22 million will be reserved in 2021, EUR 65 million in 2022 and EUR 107 million in 2023 for extending compulsory education and for making upper secondary education free of charge for students. In addition, EUR 10 million will be allocated in 2021, EUR 20 million in 2022 and EUR 29 million in 2023 to improve student welfare in comprehensive school education and upper secondary education.
In line with the Government Programme, an increase of EUR 7.5 million is proposed for student-specific financing for general upper secondary education, which, taking into account the municipalities’ self-financing proportion, will increase the level of financing for general upper secondary education by EUR 18 million. For next year, a supplementary appropriation of EUR 80 million is proposed for the recruitment of teachers and instructors and for support measures in teaching and instruction in vocational education and training, and funding of EUR 2.5 million for increasing workplace instructors.
From 2020 onwards, the core financing for universities will be increased by EUR 40 million and the core financing for universities of applied sciences by EUR 20 million. In addition, index increases will be implemented in full.
For reforming the system of central government transfers for performing arts, an increase of EUR 1 million is proposed in 2020, and EUR 1.5 million will be allocated for this purpose in 2021, EUR 7 million in 2022 and EUR 10 million in 2023. It is also proposed that discretionary government transfers to culture be increased by a total of EUR 5.1 million in 2020, EUR 7.5 million in 2021 and EUR 1.5 million annually in 2022–2023. The proposed increase in the level of artist grants is EUR 1.4 million in 2020 and 2021, and EUR 1.8 million in 2022 and 2023. It is proposed that additional financing totalling EUR 200,000 be allocated to Svenska Finlands Folktinget.
A total of EUR 50 million is allocated for the renovation of the National Theatre, of which EUR 40 million derives from undistributed betting and lottery profits.
An appropriation of EUR 6 million is proposed for the cross-administrative physical activity programme and EUR 2 million for the construction of sports facilities in 2020. An increase of EUR 4.8 million is proposed for promoting sports, physical activity and elite sports in 2020. EUR 6.2 million will be reserved in 2021, and EUR 4.5 million in 2022 and 2023, for the implementation of the Report on Sports Policy.
An increase of EUR 1.5 million is proposed for supporting young people’s workshop activities in 2020 and EUR 1.8–2.0 million will be allocated for this purpose annually between 2021 and 2023. A total of EUR 1.2 million is proposed for developing a national digital system for outreach youth work in 2020.
Tax cuts for low-income and middle-income earners
As agreed in the Government Programme, tax on earned income will be reduced by a total of EUR 200 million. This measure concerns employees, pensioners and benefit recipients who are in the low and middle-income bands. A solidarity tax will continue to be levied until the end of the Government’s term of office. Earned income taxation will be subject to an index adjustment to keep pace with earnings growth.
The cap on tax deductions for mortgage interest payments will continue to be reduced gradually during the Government’s term of office. Next year, 15% of mortgage interest payments will be tax deductible. As set out in the Government Programme, there will be a moderate reduction in the maximum tax credit for domestic help, from EUR 2,400 to EUR 2,250. The domestic help credit will decrease from 50% to 40% of payments for labour or service, and from 20% to 15% of wages paid.
The taxes levied on tobacco products will be increased, raising tobacco tax revenue by EUR 50 million in 2020. The taxes on soft drinks will be increased next year, raising this tax revenue by EUR 25 million, with the focus on sugar-rich drinks. As agreed in the Government Programme, the tax on transport fuels will be increased, raising the revenue by EUR 250 million, in line with the forecast rise in consumer prices. This measure is intended to take effect in August 2020. For low-income earners, higher basic social security benefits and lower tax on earned income will offset the rise in fuel tax. The other changes in energy taxation outlined in the Government Programme will not be carried out yet in 2020.
The tax policies set out in the Government Programme will be implemented gradually over the electoral term. As part of the tax reform for sustainable development, the energy tax refund mechanism for energy-intensive industries will be abolished, and category II electricity tax will be reduced towards the minimum rate allowed by the European Union. These measures will strengthen the impact of taxation on emissions from energy generation. These changes in tax bases are expected to be carried out in 2021–2022. In addition, taxes on heating fuels and fuels used in non-road mobile machinery will increase by a total of EUR 100 million between 2021 and 2023. The taxes levied on alcohol will also be increased, raising this revenue by EUR 50 million. The intention is to further increase the tobacco tax annually by EUR 50 million. Elimination of the tax exemption for low-value goods imported from outside the EU is expected to increase tax revenue by about EUR 40 million in 2021.
Central government deficit of EUR 2.0 billion next year
Central government revenue in 2020 is estimated to be EUR 55.6 billion, of which tax revenue will account for EUR 47.1 billion. Central government tax revenue in 2020 is expected to be up by around 2.4%, or about EUR 1 billion, compared with the budgeted figure for 2019. Total on-budget revenue will increase by an annual average of 2.1% during the budget planning period. The slowdown in economic growth will be reflected in the tax bases, although the tax increases described above will go some way towards strengthening tax revenue. Tax revenue growth will average approximately 2.6% per year over the whole budget planning period.
The total amount of the budget proposal for 2020 is EUR 57.6 billion, representing an increase of approximately EUR 2.1 billion on the budget for 2019. The increase is mainly due to additional expenditure in line with the Government Programme of Prime Minister Rinne's Government. The increased expenditure in comparison with 2019 is also attributable to the full index increases and the need to offset the effects of tax base changes on the municipalities. On the other hand, interest expenditure on central government debt will decrease.
On-budget expenditure is expected to grow in the 2020–2023 budget planning period at an average annual nominal rate of approximately 3%.
The Government's budget proposal is EUR 2.0 billion in deficit. The deficit is expected to grow by around EUR 0.3 billion next year compared with the 2019 budget. Central government debt in 2020 is estimated to be about EUR 109 billion.
The on-budget deficit is expected to grow further to around EUR 4 billion during 2021–2023. This is partly due to the annual sum of EUR 1.5 billion reserved from 2021 onwards for the procurement of fighter aircraft.
Municipalities’ new duties and responsibilities to be fully funded through central government transfers
In 2020, government transfers and grants to municipalities will amount to EUR 11.4 billion, which is 9% more than in the current year. Central government transfers to local government will be EUR 285 million greater than in 2019 as a result of a decrease in the central government transfer reduction associated with the Competitiveness Pact.
In connection with an adjustment in the division of costs between central and local government, there will be an increase of EUR 124 million in central government transfers, and these transfers will be further boosted by about EUR 198 million as a result of an index increase (2.4%). Changes in population figures and in the calculation factors will increase central government transfers by just over EUR 18 million. The figure for central government transfers takes into account measures outlined in the Government Programme, such as the future increase in expenditure on early childhood education and care services. The central government transfers for these new duties and responsibilities of the municipalities amount to 100%.
The municipalities will also be compensated with a total of EUR 237 million on a non-recurrent basis in 2019 in order to avoid having to take twice into account the holiday bonus cut under the Competitiveness Pact in the adjustment to the distribution of cost liability. The Government will submit a supplementary budget proposal on this during the autumn of this year.
General Government Fiscal Plan and Finland’s Stability Programme for 2020–2023
The General Government Fiscal Plan incorporates Finland’s Stability Programme, which sets a medium-term budgetary objective (MTO) for general government finances in accordance with domestic and EU legislation. The objective for the structural budgetary position of general government finances is set at -0.5% of GDP.
The Plan also sets national budgetary objectives for central government finances, local government finances, employment pension funds and other social security funds up to 2023, and presents measures for achieving these.
The goal is that, given normal global economic circumstances, Finland’s general government finances will be in balance in 2023.
Achieving the objective of balancing general government finances requires reforms to improve employment and productivity as well as measures to increase productivity in public administration. As the population ages, the public finances will not be on a sustainable footing in the long term unless there are measures for strengthening these and for increasing competence and boosting employment.
Debate on 2020 budget proposal and General Government Fiscal Plan
The budget proposal and the General Government Fiscal Plan are being prepared in a situation where economic growth will level off over the next few years, after the end of the highest growth phase in the current cycle. When international trade is experiencing a weaker phase or downturn, growth will become reliant on domestic demand.
In 2018, the general government deficit was 0.8% of GDP, and general government debt fell slightly to below 60%. The slowdown in economic growth will gradually increase the general government deficit.
The estimates given above are preliminary. The Government will debate the budget proposal and the General Government Fiscal Plan on 7 October. The government proposal for the 2020 budget will then be published on the budjetti.vm.fi website.
Besides the budget proposal, the General Government Fiscal Plan and the Ministry of Finance’s Economic Survey will also be published on 7 October.
Annex: Additional notes on the budget negotiations (in Finnish)
Inquiries: Matti Hirvola, Special Adviser to the Prime Minister in Political Affairs, tel. +358 295 160 984, Joonas Rahkola, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 160 998, Markus Lahtinen, Special Adviser to the Minister of Finance, tel. +358 295 530 417, Henri Purje, Special Adviser to the Minister of Education, tel. +358 295 330 017, Jussi Pyykkönen, Special Adviser to the Minister of the Interior, tel. +358 50 477 8354 and Otto Andersson, Special Adviser to the Minister of Justice, tel. +358 295 150 121