Government submits supplementary budget proposal to Parliament
The Government submitted the first supplementary budget proposal for 2021 to Parliament on Thursday 25 February. The supplementary budget makes special provisions for needs arising from the COVID-19 situation.
The first supplementary budget proposal for 2021 proposes appropriations to secure additional COVID-19 vaccine procurements and safeguard critical transport connections, security of supply and the transport of Finland’s foreign trade as the pandemic continues. Additional appropriations are also proposed to support the arts and culture sector and for children, young people and families. An increase in appropriations is also proposed to ensure that the municipal elections can be carried out safely.
Changes arising from COVID-19
An increase of EUR 70 million is proposed for COVID-19 vaccine procurement. The increase is targeted at the procurement of additional batches of COVID-19 vaccines and the advance payments needed to secure them.
A total increase of approximately EUR 61 million is proposed for the central government’s share of the earnings-related component of the unemployment benefit and job alternation compensation, and for its share of the basic security component of the unemployment benefit. The need for an additional appropriation arises from a proposal to extend the temporary legislative amendments currently in force in unemployment security by three months, i.e. until the end of June 2021, due to the ongoing pandemic. The increase in costs is due to the continuation of the increased exempt amount of the employment benefit and the right of entrepreneurs to receive labour support, among other factors.
An allocation of EUR 23.2 million is proposed to support the operation of cargo and passenger vessel shipping companies. The goal of this additional appropriation is to safeguard Finland’s essential transport connections, security of supply and transport of foreign trade as the coronavirus pandemic continues and to guarantee regular freight and passenger transport between Southwest Finland, Åland and Sweden, between Helsinki and Estonia and between Vaasa and Umeå.
An additional appropriation of EUR 15 million is proposed for the operating costs of the Arts Promotion Centre. The additional appropriation aims to mitigate the effects of COVID-19 on individuals and others in the arts and culture sector. The appropriation will be allocated in the form of grants. In addition to these, the Government proposes an additional appropriation of EUR 5 million for film production companies to help manage the financial losses caused by COVID-19. The package will be financed by reallocating support for business costs.
An increase of EUR 17.6 million is proposed for the operating costs of courts, public legal aid and guardianship districts, the enforcement service and bankruptcy supervision, the Consumer Dispute Board, the National Prosecution Authority and the Criminal Sanctions Agency to cover the costs arising from the COVID-19 situation. An increase of EUR 1.3 million is proposed to ensure that the municipal elections can be carried out safely under the exceptional circumstances caused by the pandemic.
Several additional appropriations are proposed to support children, young people and families. A total of EUR 2.5 million is proposed for increasing and developing young people’s recreational and summer activities and to support summer entrepreneurship and working life skills among young people. EUR 17.5 million is proposed for measures to support vocational education and training. These support measures aim to prevent students from dropping out of their studies, improve student wellbeing and to reduce disparities in students’ skills. A further allocation of EUR 17.5 million is proposed for the development of municipal healthcare and social service structures to better support children, young people and families during and after the COVID-19 pandemic.
The supplementary budget proposal proposes amendments to support for the management of young forest stands and the collection of small-diameter wood under the Act on the Financing of Sustainable Forestry and to the related tasks of the Finnish Forest Centre. An increase of EUR 4.0 million is proposed for increasing the use of small-diameter wood in energy production.
An increase of EUR 10 million is proposed for phasing out oil heating.
The supplementary budget proposal proposes increasing the budget authority for items under the EU’s regional and structural policy and other cohesion policy programmes by EUR 295 million and increasing the appropriation by EUR 130 million. These increases are due to the REACT-EU funding allocated to Finland’s Structural Funds Programme “Sustainable growth and jobs 2014-2020” for 2021–2023 as part of the EU recovery instrument.
Changes in revenue estimates
The Government proposes increasing the tax revenue estimate by EUR 415 million based on tax receipt data and the macroeconomic forecast updated in December. Economic activity is expected to develop more favourably than previously predicted. Earned income tax and capital income tax revenue is expected to grow by EUR 207 million more than previously anticipated. Based on the most recent trends, the estimate for inheritance and gift tax revenue has been increased by EUR 138 million. Based on tax receipt data, revenue from the asset transfer tax is also expected to increase by EUR 70 million more than previously projected.
Impact on central government debt and the balance of central government finances
Taking into account the increase of EUR 415 million in actual revenues and the increase of EUR 394 million in appropriations, the first supplementary budget proposal for 2021 reduces the central government’s net borrowing requirement by EUR 21 million. The central government’s net borrowing in 2021 is estimated to be EUR 11.7 billion. The amount of Government debt at the end of 2021 is estimated to be approximately EUR 137 billion, which is around 56 per cent of gross domestic product (GDP).
Inquiries: Joonas Rahkola, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 160 998, Tuomas Vanhanen, Special Adviser to the Minister of Finance in Economic Affairs, tel. +358 295 530 417, Henri Purje, Special Adviser to the Minister of Education, tel. +358 295 330 017, Heikki Sairanen, Special Adviser to the Minister of the Interior, tel. +358 50 456 4662, Silja Borgarsdóttir Sandelin, Special Adviser to the Minister of Justice, tel. +358 295 150 116