The government has formerly unveiled their 2021 budget proposals after two-and-a-half days of negotiations between ministers, and party leaders separately, in Helsinki.
All the budget decisions are set against the backdrop of the coronavirus crisis which has impacted the economy and employment, and the government has already pumped money into the economy to support businesses and different sectors like arts, sport and healthcare.
The 2021 budget will see more debt to push forward with the government’s policy programme and continue to offset the financial hit that Finland takes because of the coronavirus. There will be a €10.7 billion budget deficit next year and the ratio of public debt to GDP will rise to more than 70%.
So what are the biggest areas of budget spends for next year?
One of the biggest challenges is to get more people working, and raise the employment level. The government has put together its own version of the ‘activation model’ first introduced by the previous Centre Party, National Coalition Party and Finns Party government, and then dismantled by this administration. There’s a plan to raise employment levels by up to 36,000 jobs using a Nordic model of employment services to improve employment among young people, boost education opportunities, and improve labour market conditions for people over 55.
Money for municipalities
The government will sent aside €1.45 billion for municipalities to safeguard basic services for citizens. The coronavirus crisis has significantly weakened their financial situation including through reduced tax revenues. There’s already a support package agreed in the last supplementary budget but there will be extra money during 2021.
The money will also target municipal healthcare and education.
Covering coronavirus costs
There’s €1.4 billion in the budget reserved to cover the direct costs related to the coronavirus pandemic. These include Covid-19 testing, quarantine costs, patient care, and vaccines which will all be covered by the state.
There’s also €30 million set aside to support investments in testing technology; €30 million for additional health security costs at border crossings; and €200 million for direct costs that healthcare districts incur apart from testing.
Making up shortfall from gambling revenue
Revenues from Finland’s state gambling monopoly Veikkaus are falling, and it’s hitting arts, culture, science, sport and crucial third sector charities which rely on the windfall funding to keep operating. The shortfall will be covered by a €347 million fund which will come from several different ministries.
Investing in the environment
As part of its pledge to make Finland carbon neutral by 2035 the government has been under pressure to take concrete steps to reach it. The electricity tax will be redued to the EU minimum level; a system of refunding the energy tax for industry will be phased out over the next four years; and current subsidies will be used to support industry transition to emission-free technology during the transition period.
The tax on heating fuels is going up by net €105 million, this includes tax on peat which has been one of the sticking points inside the coalition government with the Greens eager to phase out the use of peat as a fuel source, while the Centre Party have been against any move to tax it our otherwise discourage its use. The aim is to cut peat use by 50% before 2030. EU funds will be used to wean Finland off of peat, and help business owners and workers in the peat industry who would otherwise lose their jobs.
More money for education
The government wants to increase education opportunities in Finland by raising the compulsory age of education to 18 and ensuring that secondary school is free of charge. The costs here will be reimbursed through municipalities and education providers with €22 million earmarked next year for extending compulsory education – rising to €129 million by 2024. The money will help ensure that teaching materials and tools needed for learning are free of charge to families, and that there’s support too for school trips.
The fees for early childhood education are also being reduced by €70 million next year – but municipalities are being compensated for this through increasing their community tax dividend.
Next year there’s also an increase of €150 million for vocational education to hire more teachers and supervisors.