The Government Programme directs the implementation of economic policy. The economic policy of Prime Minister Juha Sipilä’s Government Programme is to raise the Finnish economy on to a path of sustainable growth and rising employment, and to secure the funding of public services and social security.
Rebalancing of public finances will start immediately. The Government will implement structural reforms, which will promote employment, entrepreneurship and economic growth. To achieve sustainable public finances, the Government will decide on and implement an economic policy package that will include the following measures:
– a tax policy supporting work and employment
– the strengthening of entrepreneurship and ownership as well as financing for business
– growth-promoting investments
– expenditure savings and structural reforms to strengthen public finances rapidly
– longer-term reforms to secure the sustainability of public finances
– employment-boosting reforms
A sustainability gap arises when public expenditure is projected in the long term to exceed public revenue. The sustainability gap shows how much public finances should be adjusted up so that public finances would be in balance in the long-term without the tax ratio being raised, services weakened or indebtedness increased in the future.
The Government’s economic policy framework and the rules to be observed during the parliamentary term are decided in the Government Programme and in the first General Government Fiscal Plan of the parliamentary term.
Finland’s economic policy is also determined by EU legislation, which obliges Member States to keep public finances in balance and to avoid excessive deficits and indebtedness, so that public finances are on a sustainable basis also in the long term.
The EU’s fiscal rules have been tightened through the “Six-Pack” legislative package adopted in 2011 (including the Budgetary Framework Directive), the Fiscal Compact agreed in 2012, and the “Two-Pack” regulations adopted in 2013. The Budgetary Framework Directive and the Fiscal Compact require that Member States put in place on a national level fiscal policy rules as well as monitoring procedures leading to compliance with EU requirements. Under the Fiscal Compact, Member States’ legislation must also prescribe a correction mechanism relating to the achievement of the objective set for the structural budgetary position. The Budgetary Framework Directive also requires the preparation of a fiscal plan covering the whole of general government finances. The Two-Pack regulations relate, among other things, to advance monitoring of Member States’ budgetary plans.
The Fiscal Compact and partly also the Budgetary Framework Directive have been implemented in Finland through the Fiscal Policy Act (869/2012), which came into force at the beginning of 2013. The parts of the Budgetary Framework Directive relating to the fiscal plan have been implemented by the Government Decree on the General Government Fiscal Plan (120/2014).
Johanna von Knorring