The government is continuing to borrow at almost the same rate as its predecessor did at the end of its term.
Minister of Finance Riikka Purra (PS) pointed out at the news conference that without the 1.8 billion euros worth of spending cuts and 1.4 billion euros worth of tax hikes the government has agreed on, the budget would show a deficit of roughly 16 billion euros.
The government, she re-affirmed, remains committed to stopping the debt ratio from rising by 2027, a goal that will require fiscal adjustments worth altogether roughly nine billion euros.
Purra viewed that no additional cost-saving measures will be required to avoid triggering the excessive deficit procedure of the EU.
“At the moment it’s looking like we’re in the clear. But of course all of these things are moving and a lot will depend on what kind of growth we can generate, how our own export market develops and how estimates of tax revenue develop,” she analysed in response to a question from the media.
“But the government is making sure that this is our fiscal policy stance. If it’s looking like we aren’t meeting the government goal of stabilising the debt ratio, we’ll take further action. At the moment there’s no need for additional cost savings or negotiations about them.”
Questions, though, are continuing to swirl especially over the ability of well-being services counties to rein in their costs – with the latest data pointing instead to a greater-than-expected jump in costs – and the effects of measures to boost employment – with data pointing instead to an up-tick in unemployment.
The most significant tax hikes concern the value-added tax scheme. The general value-added tax rate was raised from 24 to 25.5 per cent at the beginning of the month, putting inflationary pressure on the prices of commodities and services such as cars, clothing, electricity, alcohol and tobacco, and hairdresser’s services.
The reduced value-added tax rate, meanwhile, will be hiked from 10 to 14 per cent at the turn of the year, potentially affecting the consumer prices of books, medications, sports services and culture and entertainment events.
The government confirmed yesterday that it is adjusting the responsibilities and customer fees of well-being services counties to generate cost savings of roughly 290 million euros. The adjustments include relaxing the care guarantee and raising customer fees in health care to the tune of 150 million euros.
The operating costs of the state administration will be reduced by 274 million euros – for example, by way of staff cuts at state agencies. Budget appropriations for development co-operation will be cut by 135 million euros, transport infrastructure development by 100 million euros and vocational education by almost 63 million euros.
Reimbursements for medication expenses will be reduced by 60 million euros and integration compensation by 58 million euros.
State subsidies for associations and foundations in the social and health care sector will be slashed by roughly 80 million euros, and subsidies in domain of education and culture by 31 million euros – with 17.4 million euros targeted at arts and culture, 9.7 million euros at sports facility development and 4 million euros at youth outreach work.
An additional 35 million euros will be saved by discontinuing the payment of national pensions abroad.
The spending increases, meanwhile, focus especially on security and research and development.
An additional 280 million euros will be allocated to research and development activities by ramping up the authorisations of Business Finland and the Academy of Finland. Finnish Industry Investment (Tesi), in turn, will receive a capital injection of 100 million euros.
The government said it has earmarked 67 million euros for strengthening the presence of Nato in Finland. Budget appropriations for law enforcement will be raised by 17.5 million euros to make a total force of 8,000 police officers possible by the end of the electoral term.
The appropriation for the defence administration will rise to nearly 6.5 billion euros, representing an almost 500-million-euro increase from this year’s budget.
The minimum number of lessons in primary and lower secondary education will be raised by three weekly lessons, with a focus on reading, writing and numeracy. Overall the expanded responsibilities and obligations will require additional investments of 63 million euros.
The government also decided to allocate 350 million euros of an investment programme funded with capital gains for next year, 200 million euros for tackling the maintenance backlog and 70 million euros for raising reimbursements for using private health care services.
Aleksi Teivainen – HT
