€55.1b budget proposed for next year

Finance Minister Petteri Orpo on Wednesday placed a proposal of EUR 55.1 billion budget for next year which is one billion less than the last budget.

The tight budget proposal is aimed at sustaining economic growth by improving employment.

The Ministry of Finance estimated in June that the strong growth of Finland’s economy will continue this year, after which economic growth is expected to slow down.

In the next few years, the economy will be supported by foreign trade and domestic demand, said an official press release.

In the budget proposal, strict spending discipline has been adhered to. In addition, the total sum is reduced by, among other things, consolidation measures in accordance with the Government Programme, the ending of key government projects, and a decline in unemployment benefit expenditure.

The level of appropriations is increased by, among other things, a growth in pension expenditure, statutory and agreement-based price increases, and additional investments decided upon.

The budget proposal is EUR 1.7 billion in deficit, which is the same as budgeted for this year.

When the government began its term, the budget deficit for 2014 was EUR 6.6 billion.

This year’s budget deficit is reduced by the fact that Finnish Export Credit Ltd will pay back prematurely refinancing credits it has received. Without these premature repayments, this year’s budget deficit would have been estimated at EUR 3.2 billion.

The central government’s revenue is estimated at EUR 53.4 billion, of which EUR 45.7 billion is tax revenue. The ministry estimated in its June forecast that tax revenue would grow by approximately three per cent from the figure budgeted for this year.

The central government’s debt will rise next year to an estimated EUR 109 billion. The general government indebtedness has levelled off, and it is expected to fall below 60 per cent of the GDP.

Unemployment benefit expenditure is expected to decline by EUR 308 million, because employment will grow and unemployment will fall.

The budget proposal promotes the realisation of the right to earnings-related unemployment benefit for family members of entrepreneurs. If a family member of an entrepreneur has mistakenly insured him/herself in an employee fund, he/she may in future transfer membership retrospectively to an unemployment fund that insures entrepreneurs. It is proposed that EUR 10 million be allocated for this.

A sum of EUR 20 million is proposed for improving incentives to accept work.

An increase of EUR 10.3 million is proposed for the operating expenditure of Employment and Economic Development Centres to support active job-seeking and improve services for jobseekers.

An appropriation of EUR 10 million will be allocated to promoting equality and participation in early childhood education. This assistance is aimed at reducing group sizes and at hiring additional personnel for day-care centres operating in challenging areas. The trial of free early childhood education for five year-olds will be continued and an appropriation of EUR 5 million allocated to this.

The implementation of the reform of vocational education and training will be continued, and it will be further supported by additional funding of EUR 15 million.

To promote educational equality, a learning materials allowance for upper secondary education students will be introduced. The allowance is EUR 46.80 per month and it will be directed at vocational education or general upper secondary education students under 20 from low-income families.

Next year, the operational activities as well as the number of police will be maintained at the current level, i.e., approximately 7,200 police (excluding the Finnish Security Intelligence Service). The proposal includes additional funding of EUR 18 million for this purpose.

In the budget proposal, additional funding of EUR 10 million is allocated to implementation of civilian intelligence legislation, provided that the legislative reform enters into force next year. In addition, the Finnish Security Intelligence Service will receive EUR 2.5 million in additional funding to safeguard its core operations and functional capacity.

An increase of EUR 1.85 million is proposed for the operating expenditure of the Border Guard, because external border traffic at Helsinki-Vantaa Airport has grown more quickly than was anticipated.

Ancillary sanctions for conditional imprisonment will be enhanced, and EUR 1.1 million allocated to this. An increase of EUR 670,000 will be allocated to assessing the recidivism risk of those convicted for violence as well as for reviewing the imposition of parole supervision.

Planning will be launched for construction of new prisons in Oulu and Vaala.

The minimum daily allowances and guaranteed pension will be increased to curb inequality. A total of EUR 30 million will be allocated for this.

A total of EUR eight million will be allocated to improving the position of over-indebted people. This will be directed at, among other things, financial and debt counselling, counselling of debtors in connection with enforcement, and to accelerate court proceedings.

The status of adoptive and multiple-birth families will be improved. A sum of EUR 300,000 is proposed for adjusting the adoption grant for families adopting from abroad. Fathers of multiple-birth families will be granted an extended paternity allowance. Mothers caring for a child alone will be granted the right to parental allowance days corresponding to the paternity allowance, and the paternity allowance period for adoptive parents will be extended.

The influenza vaccine programme will be developed and expanded so that the vaccine is offered in future to children from six months to six years old. An increase of EUR one million is proposed to acquire the vaccines.

Timetable change has been taken into account in funding of health, social services and regional government reform

An appropriation of EUR 213 million has been proposed for preparation of the health, social services and regional government reform. The amount will become clearer when the ministries review the effects of the timetable change in their bilateral negotiations. These appropriations are intended for the launch of the counties’ administration, the establishment of service centres and support for ICT changes.

The municipalities’ central government transfer for basic public services will be EUR 8.4 billion next year. Of the central government transfer, EUR 40 million will be allocated to promote the digitalisation of the municipalities. In addition, EUR 10 million will be allocated to discretionary increase of the municipalities’ central government transfer.

A sum of EUR 50 million from National Housing Fund resources can be used for the capitalisation of A-Kruunu Oy, which will facilitate an increase in construction within the Helsinki region.

Tobacco tax higher, car tax lower

Led by the Ministry of Finance, tax measures will be prepared by the time of the government’s budget session. Among these, steps will be taken to ensure that taxation on labour is not tightened. The measures will be implemented neutrally in terms of the budget. In connection with the budget session, it is also intended to decide on the introduction of investment savings accounts.

Next year, the gradual entry into force of changes according to the Government Programme will continue: the tobacco tax will be tightened, the car tax will be eased, and the deduction for interest paid on housing loans will be reduced. In accordance with the Government Programme, an index adjustment will be made to earned-income tax criteria at all income levels.

Deduction for temporary quarters will be reformed so that it better supports migration for the sake of employment. The maximum amount of the deduction will be raised from the present EUR 250 to EUR 450.

The maximum amount of tax-free kilometre allowance payable to volunteer workers will be increased from the current EUR 2,000 to EUR 3,000 per calendar year. The area of application will be expanded to cover compensation received from public bodies.

The restriction of companies’ right to deduct interest will be tightened when Finland implements the EU’s Tax Evasion Directive.

Tax subsidy for combined electricity and heat production will be changed so that the halving of the carbon dioxide tax is replaced by a reduction in the energy content tax. In addition, the taxation on heating fuels will be changed: the carbon dioxide tax will take into account the life-cycle emissions of the fuel. The change will be made so that the taxation on heating fuels on average is not tightened. Electricity taxation will be adjusted to ensure that the double electricity taxation on large batteries is avoided.

The government will consider the budget proposal in its budget session on 28-29 August. The government’s proposal will be published after the government’s consideration on 17 September.