Fiscal policy is part of the Government’s economic policy. Fiscal policy objectives, namely how the public economy collects and allocates funds, are agreed in the Government Programme. Decisions on taxation, social security benefits, pensions and their funding change economic structures and accordingly shape opportunities for citizens, households and businesses. Fiscal policy decisions are therefore part of social structural policy and they affect the economy far into the future. The General Government Fiscal Plan (including central government spending limits) and the Budget are the instruments by which the Government implements its fiscal policy.
The Sipilä Government's fiscal policy
According to Prime Minister Juha Sipilä’s Government Programme, balancing of public finances will begin immediately. Under the Government’s economic programme, the GDP-to-debt ratio will level off by the end of the government term and living on debt will be brought to an end in 2021. The total tax rate will not rise
The Government is committed to making during the government term the decisions relating to the savings and structural reforms necessary to cover the entire EUR 10 billion sustainability gap.
The Government has agreed on a consolidation programme, which will strengthen public finances. In addition to measures to reduce public spending, re-allocations will be made which in net terms will strengthen general government finances by around EUR 4 billion at 2019 prices.
The Government will seek to build a comprehensive social contract to support decisions aimed at boosting Finland’s economic recovery and improving employment. Without these results, pressure to adjust public finances will be much greater whereby, in addition to the EUR 4 billion consolidation decisions, additional expenditure savings and tax increases amounting to around EUR 1.5 billion will be made.
The Government is committed to the central government spending limits procedure. The spending rule ensures a responsible, long-term central government spending policy that promotes economic growth.
The Government will launch a reform programme to achieve the strategic objectives of the government term. The strategic objectives are health and wellbeing, employment, competitiveness and growth, training and skills, the bioeconomy and clean technologies as well as changing operating practices, for example by promoting digitalisation and removing unnecessary regulation and bureaucracy. By the end of 2018, EUR 1.6 billion will be invested on a one-off basis in key government projects and to reduce the repair debt.
In spring 2013, the EU’s Stability Programme set as Finland’s medium-term objective a budgetary balance of -0.5% of GDP. This deficit fulfils the minimum requirements of the EU’s Stability and Growth Pact and Finland’s national legislation. Under the legislation, the Government will initiate corrective measures if it considers that the medium-term objective for the general government structural budgetary position will not be achieved.
The economic outlook and the Government’s fiscal and structural policy objectives and measures are decided and reported on annually in the General Government Fiscal Plan, which also serves as Finland’s Stability Programme, and also in budget proposals decided on during the year. The European Commission examines in advance and monitors Member States’ fiscal policies within the framework of the European Semester.
Johanna von Knorring