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Working group: Placing gambling proceeds within the Budget and beneficiaries under the spending limits procedure

Ministry of Agriculture and ForestryMinistry of Education and CultureMinistry of FinanceMinistry of Social Affairs and HealthMinistry of the Interior
26.2.2021 10.46
Press release
Working group (from left) Osmo Soininvaara, Liisa Hyssälä, Erkki Liikanen, Ulla-Maj Wideroos and Kalevi Kivistö. Photo: Päivi Onnela/Ministry of Education and Culture

A study on the effects of diminished proceeds from gambling activities has been completed. The study examines four options for developing the Finnish gambling system. The working group sets as its primary option a comprehensive overhaul that would place gambling proceeds within the scope of universal coverage in central government revenue and existing beneficiaries would be under the spending limits procedure. The report was published on 26 February.

Background

The harmful effects of gambling are considered severe in terms of the wellbeing of society. For this reason, it was deemed necessary to intervene by legislative means and to introduce more measures to make gambling more accountable. Moreover, due to the COVID-19 epidemic, slot machines have been kept closed.

The Finnish National Lottery, Veikkaus Oy, estimates that the annual central government proceeds from gambling services will fall by around EUR 300 million as a result of these measures. As the harmful effects of gambling are being reduced, it also means that the funding received by beneficiaries from gambling proceeds will diminish. 

This puts the present system in a challenging situation where we ought to be able to both curb the harmful effects of gambling and safeguard the future of civil society and other beneficiaries.

Four options for the Finnish gambling system

The working group proposes four different options for the future of the Finnish gambling system: 

  1. Keep the current system and hope that it is sufficient;
  2. A one-off solution where the transfer to a universal budget takes place in one go and all earmarking is removed;
  3. A comprehensive overhaul starting in early 2024, carefully preparing the transfer of revenue to universal coverage and placing expenditure within the scope of spending limits budgeting;
  4. A partial reform, where part of the expenditure is gradually transferred to universal coverage and part remains earmarked and covered by gambling proceeds.

In the first scenario, the level of funding for the existing beneficiaries would stay in line with future gambling proceeds (Veikkaus Oy's estimate being under EUR 700 million annually). Every year, the need to offset the fall in gambling proceeds and possible additional funding requirements would need to be addressed.

In the second option, Veikkaus Oy's revenue would be fully converted into universal coverage, while expenditure would be covered through the ordinary budget procedure; in other words, funding for the beneficiaries would be transferred to the spending limits procedure in one go. Although this solution is clear-cut from the budgetary point of view, it would generate significant and sharp adaptation issues.

In the third option, preparatory work would be initiated with the aim of transferring the gambling proceeds to a universal budget and, correspondingly, resources of at least the same magnitude would be included in the spending limits. The preparation work would be initiated immediately with regard to the required legislative amendments. We would also launch preparations for those activities that are financed by Veikkaus Oy's proceeds to be transferred within the scope of the spending limits procedure. With regard to the timetable, the primary option would be to complete the reform during the current Parliament, which would make it possible to implement it from the beginning of 2024.

In the fourth option, some of the current beneficiaries would receive funding from gambling proceeds and some would be transferred to receive funding through the Budget. In this option, the Government would have to decide separately which items of expenditure would be transferred to a universal budget. This could also lead to a situation where amendments would have to be made to the act on the criteria for the distribution of gambling proceeds at every transition stage. Distribution ratios would have to be reconsidered if beneficiaries were to be transferred in uneven ratios within the scope of the ordinary budget under the responsibility of different ministries governing the beneficiaries.

The working group sets as its primary option a comprehensive overhaul that would place gambling proceeds within the scope of universal coverage in central government revenue and existing beneficiaries would be under the spending limits procedure. 

Converting to universal coverage presents challenges too. Understandably, transferring beneficiaries within the scope of central government spending limits would mean that funding for civil society funding would no longer be dependent on uncertain gambling proceeds. On the other hand, it would make the funding dependent on political decisions and uncertainty. Careful preparation and planning are needed to measure, enhance and evaluate the funding for beneficiaries and non-governmental organisations. In principle, spending limits funding should aim to finance existing beneficiaries and non-governmental organisations in such a way that their activities do not become exposed to unreasonable financial uncertainty and instability. Funding for beneficiaries must not be beyond the reach of democracy; instead, it must be protected from abrupt political cycles.

Better financial stability for beneficiaries and civil society could be ensured if the magnitude of funding could be determined for a period that is longer than one parliamentary term. 

Tulevaisuuden vaihtoehtoja (The Finnish gambling system is changing) Future options

Inquiries: 
Erkki Liikanen, Working group chair, [email protected]
Teemu Pekkarinen, Working group secretary, [email protected]

Preparations are being made for a fall in gambling proceeds – A working group appointed (Ministry of Agriculture and Forestry, Ministry of Education and Culture, Ministry of Social Affairs and Health and Ministry of Finance Bulletin of 25 November 2020) (in Finnish and Swedish)