Prime Minister Juha Sipilä's speech in Parliament on the strategic Government Programme
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The new Government is now announcing its programme to Parliament as a Government statement as required by the Finnish Constitution. The Government Programme and its appendices contain all that was agreed in the Government formation talks between the three participating parties. The Programme is a strategic programme of reform. In contrast to what has been the custom, we have not included everything in the Programme, as the development projects of many administrative branches will continue unchanged. The overriding objective of the Programme is to raise the employment rate to 72 per cent through a number of measures promoting employment and entrepreneurship.
In addition to the strategic Government Programme, we have also drawn up an unusually detailed economic programme, which covers the entire government term. However, nothing will happen without work and investment. For this reason, we are still working on action plan investments that concern the key projects in the Government Programme, which we will submit to Parliament later in the autumn.
When reform is neglected for a long period, cuts become unavoidable. We must now focus both on saving money and fully implementing major reforms. Finland has only two alternatives. Either we carry out these reforms ourselves or someone else will carry them out on our behalf. Finland, once Europe’s economic wunderkind, is now in danger of becoming subject to the excessive deficit procedure and the budgetary supervision of Brussels. We want to keep our matters in our own hands and take the decisions that must be taken ourselves.
Finland’s GDP is now roughly at the level it was eight years ago or in political terms, two parliamentary terms ago. Yet until very recently, public expenditure has kept growing at almost the same pace as it did during the years of robust growth at the beginning of this millennium. We have covered the gap between our income and expenditure by borrowing.
We can no longer carry on this way. If recovery through borrowing was really the answer, the Finnish economy ought to be in perfect shape by now. For many consecutive years we’ve borrowed to cover our expenses at a rate of seven, eight billion euros per year. Yet we have high unemployment and withering growth. Exports are faltering. Our competitiveness has deteriorated 10–15 per cent in comparison to that of our principal competitor countries.
But economic development is not something politicians alone can decide. At best, governments can only create favourable conditions for work and entrepreneurship. At worst, actions taken by governments may weaken economic activity. Unfortunately, this is what has happened in Finland over the years. We have lost our agility through excessive regulation and administration. Society must be built more on trust than on regulation and control.
We will begin our reforms with the Government Programme and our ways of working. Strategic leadership is the norm in almost all other spheres of life and it is high time to implement it in government too.
Our strategy is based on a resolve, which we will seek to attain within the next ten years. It is a vision which we have specified in the form of five separate goals, from which we have derived our objectives for the term of this Government. Finally, we have defined key projects which will ensure that these goals are met.
The first chapter of the Government Programme talks about what we want Finland to be like ten years from now. We want to build a bridge that we can cross to get over the difficulties that lie ahead as a nation intact. It is our goal that in 2025, Finland will be an inventive, caring and safe country where we all can feel important and that our society is based on trust.
We have chosen five principal objectives that must be met to attain this common vision. These five objectives are as follows:
- improving employment and competitiveness
- reforming competence and education
- promoting wellbeing and health
- facilitating the bioeconomy and clean solutions
- and fifthly, reforming ways of working through digitalisation, experimentation and deregulation.
We have established goals for these five sectors for the government term and will devise indicators to monitor their attainment. Finally, we have decided on a total of 26 key projects, which we will implement during the government term.
I will give you a few examples from each of the five sectors:
We will reform employment services to better promote employment.
We will dismantle incentive traps that hinder acceptance of work and reduce structural unemployment.
We will increase housing construction.
We will promote the creation of new learning environments and introduce digital materials to comprehensive schools.
We will expand the ‘Schools on the Move’ project across the country to ensure one hour of physical activity each day in comprehensive schools.
We will implement reform in vocational upper secondary education and develop the youth guarantee system towards a community guarantee.
We will improve home care for older people and enhance informal care.
We will enact a programme to address reform in child and family services.
We will promote the cost-efficient transfer to carbon-free, clean and renewable energy. We will stop using coal in energy production and halve the use of imported oil for the country’s needs during the 2020s.
We will streamline legislation to reduce the burden from regulation.
We will digitalise public services. We will improve leadership and adopt a culture of experimentation.
We will implement significant structural reforms.
We will implement pension reform on a tripartite basis under the agreement reached in the previous government term.
We will complete the social welfare and health care reform by continuing the process from where it was left a few months ago. Of the alternatives provided by the Constitutional Law Committee of Parliament, we chose reform based on autonomous areas larger than a municipality. To safeguard democracy, these SOTE areas will be managed by elected councils. We have also defined the outlines for financing the reform and a parliamentary monitoring group will be established for the project.
The Government will reduce local government costs by EUR 1 billion by cutting their statutory duties and the obligations guiding their implementation. This will require reform of the principles of the regulative policy that steers local government.
I believe that in addition to the resolve for 2025, the strategic outlines I have spoken about can be approved by a wide majority in this Parliament. However, I expect that the financial decisions taken in the Government Programme will generate some debate.
The Government’s basic premise is that living beyond our means must be brought to an end by 2021. We must also find ways of covering the EUR 10 billion sustainability gap in public finances.
In rough terms, we have divided this 10 billion euro task into two parts. One part will be covered through cost savings and the rest through the structural reforms I mentioned earlier.
We have decided on a total of EUR 4 billion in cost savings in public finances during this parliamentary term. These measures are explained in great detail in an appendix to the Government Programme.
We openly accept that these cuts will be painful for a number of population groups. It is our absolute intention to carry them out as fairly as we can. Wherever possible, we will achieve the savings from areas that do not directly affect the income transfers and services that people need.
We will not touch the level of child benefit and we actually propose a small increase in guaranteed pensions. The wellbeing of informal carers will be supported through a 75 million euro investment.
These cost savings will not endanger the Finnish welfare state. However, were we not to cut costs, our welfare state would be endangered within a few years.
We are currently taxed more than ever before. Our competitiveness cannot survive a higher tax rate; increasing taxation is not an option. On the other hand, it is not possible to ease it either. We will retain the solidarity tax imposed on those with high incomes but will lighten the tax burden on those with middle and low incomes. We will strengthen the tax base to make room for incentives to entrepreneurship and risk-taking.
Higher taxes will not lead to Finland’s recovery, but neither will cost savings alone. This is why we also propose a 1.6 billion euro investment in growth to reduce the backlog of repairs and to implement the strategic goals for the government term discussed already. Of this sum, 600 million euros will be invested in reducing the repair debt of the transport network. These investments will be funded mainly through property income. In addition, we will utilise the EU’s Strategic Investment Fund and European Investment Bank instruments. While we must reduce the funding provided by Tekes, we will improve the availability of equity financing to promote business growth.
Getting Finland back on track will demand bold decisions and broad cooperation. The proposed savings will be easiest on the working population. To this end we propose a social contract to reduce unit labour costs by at least 5%. The contract includes better change security for employees and an associated training model. We will discuss this package with the social partners and the Government will finalise its proposal on the social contract by the end of July. We will wait for an answer from the social partners by early autumn. If the answer is positive, as hoped for, the social partners would have until March 2017 to implement these solutions in collective agreements. To support the social contract and pay settlements, the Government is prepared to significantly reduce income taxes. These solutions are to strengthen the balance in public finances by an amount corresponding to half a percentage point of GDP.
We have also been open about the alternative to the social contract. Without it, balancing the public finances will require a total of 1.5 billion euros in expenditure cuts and higher taxes.
This is not a threat or blackmail, but simply a frank and open statement. This Government will not shirk from its duty and base its programme on wishful thinking instead of reality. It will shoulder its responsibilities no matter what alternative is chosen.
We appeal to all stakeholders in the name of the common good. The more of us share the burden, the lighter it will be for everyone. I see no reason to make the finalised proposal for the social contract at the end of July if leading groups in society do not commit to moderation, which is something that the President of the Republic, too, has called for,
In conclusion, I will briefly discuss the foreign and security policies in the Government Programme, on which there is wide-reaching agreement in Finland.
The security situation in Europe and the Baltic Sea region has deteriorated, primarily due to the Ukraine crisis. We will respond to this through active foreign policy, strengthening our defence capability and internal security and by engaging in closer security and defence policy cooperation on the international stage.
EU membership is a political choice that connects Finland to the Western community of values. In Finland’s EU policy, our priority is the promotion of economic growth and jobs. The Union must create conditions for developing Europe into a pioneer of clean technology and the bio- and circular economy.
The European Union must focus on the most essential issues. Indeed, it is not necessary to deepen integration in all policy areas. The Government will assess all EU regulation from the perspective of economic growth, competitiveness and jobs, and will also require a corresponding approach by EU institutions. Finland seeks less regulation, but also better and lighter regulation, than at present.
The next four years will be difficult. This is now the last chance for Finland to take a new course. We will succeed, as we have in the past. But now, we must all discover the reformer within us.
English translation of the speech published on 2 June 2015 at 18:59.