Orpo Government: Uncertain times call for measures to build confidence and boost growth

Prime Minister Petteri Orpo’s Government has agreed on the General Government Fiscal Plan for 2027–2030. Both the global economy and Finland’s finances are facing challenges. In its spending limits session, the Government focused on new targeted measures to strengthen people’s confidence in the future and improve the conditions for growth and employment.

Among other things, the Government has agreed on significant measures for the construction and housing sectors, as well as transport investments in various parts of Finland.

One growth measure that the Government has agreed is fixing the pension insurance system for self-employed persons (YEL). The goal of the reform is to remedy shortcomings in the YEL system, improve the conditions for entrepreneurship and strengthen the position of low-income and middle-income earners and sole entrepreneurs in particular.

The Government will continue to pursue responsible fiscal policy and adhere to the spending limits. The savings already agreed on will be implemented. The Government will continue to adjust general government finances gradually in order to rectify Finland’s excessive deficit as required by the Council of the European Union. The Government is monitoring the situation and will assess the need for additional measures in autumn 2026.

The total amount of previously decided expenditure savings will grow by about EUR 1.3 billion this year and by another EUR 0.8 billion in 2027. The tax cuts decided on in the mid-term policy review will continue to support growth and strengthen domestic demand.  Substantial new spending cuts would delay economic recovery. The Ministry of Finance estimates that the Government's decisions will strengthen general government finances by about EUR 10 billion in the long term, when the increase in defence expenditure is not taken into account.

Purchasing power in Finland has improved during the parliamentary term, but global uncertainties continue to curb household consumption. Among other measures, the Government decided in its spending limits session to increase the tax credit for household expenses so that more households would be encouraged to purchase cleaning or care services or pay for renovations. The maximum amount of the tax credit for household expenses will be increased to EUR 2,100, and the percentage of the tax credit will be increased from 35 per cent to 40 per cent. These changes are scheduled to enter into force this year.

The situation in the Middle East has impacted fuel prices. The Government will support commuters by lowering the threshold for the commuting expenses deduction to EUR 800 for 2026.

The Government is taking steps to make it easier to purchase a first home more quickly. For example, the self-financing requirement for home savers’ bonus (ASP) loans will be lowered from 10 to 5 per cent.

Despite a relatively strong employment rate, unemployment continues to be high. In its spending limits session, the Government focused especially on measures to alleviate the situation of young people and long-term unemployed people. Higher unemployment is reflected in the growth of the number of applicants for summer jobs. As a small form of relief, the government decided to hire 500 new summer employees or trainees. The Government hopes that this decision will encourage businesses to increase their hiring of summer employees. 
The Government has already taken a number of measures to boost growth. In addition to the growth measures outlined in the Government Programme, the Government has introduced two growth packages to improve the ability of businesses to invest, grow and create jobs. The corporate tax rate will fall to 18 per cent next year. These reforms will help the economy recover from recession.

In its spending limits session, the Government decided, among other measures, to promote the construction of additional nuclear power, improve the prospects of business to attract skilled labour, support the competitiveness of Finnish industry by implementing a professional diesel system for heavy transport and alleviate the situation in agriculture by temporarily increasing the energy tax refund.

The Government will continue to ensure the security of Finland and its people. Russia’s war of aggression against Ukraine is having spillover effects in Finland’s neighbouring areas and in Finland itself. The Government is boosting investments in defence, such as in counter-drone capabilities.

The decisions made in the spending limits session are described in more detail below.

Government to reallocate savings

In the spending limits session, the Government decided on savings measures that will grow to about EUR 540 million at the 2030 level. These new savings replace, in other words reallocate, certain previously decided savings allocated to healthcare and social welfare as well as measures affecting incomes. The new measures to strengthen general government finances will also fund investments and growth measures decided in the session.

The most significant savings will be allocated to central government operating expenditure. The level of expenditure will be lowered and a gradually increasing reduction of appropriations will be implemented to encourage productivity starting in 2027. This will generate savings of EUR 60 million in 2027 that will grow to EUR 166.5 million in 2030.

The level of the index brake applied to central government transfers to local government for basic public services will be increased to 2.8 percentage points for 2027. This will generate savings of EUR 60 million.

The Act on Research and Development Funding will be amended so that the increase in central government funding required to meet the R&D funding target will be updated annually based on the economic forecast prepared by the Ministry of Finance for the budget proposal. It is estimated that this will reduce the need for central government funding by EUR 20 million in 2027. In addition, EUR 20 million of EU funding will be counted as part of the central government’s R&D investments. At the same time, the Government will uphold the parliamentary agreement to raise the central government's R&D funding to 1.2 per cent of GDP by 2030.

The funding for development policy loans and investments will be permanently reduced by EUR 35 million.

Funding for basic transport infrastructure management will be gradually reduced so that the savings will be EUR 30 million at the 2027 level and EUR 38.5 million in 2028.

The specified government transfer for professional specialisation education for healthcare and social welfare personnel will be reduced. The fixed-term saving decided earlier for 2027 will be increased and will be made permanent (EUR 25 million).

A non-recurring saving of EUR 4 million allocated to so-called deferrable items will be made to the specified government transfer for student healthcare for higher education students in 2027.

Discretionary government grants to associations and foundations to promote health and social wellbeing will be permanently reduced by EUR 50 million. At the same time, EUR 25 million will be transferred to wellbeing services counties to be distributed to associations and foundations to promote health and social wellbeing.

Conditional reimbursements for medicines will be increased to correspond to actual reimbursements, which will generate savings of EUR 15 million.

New customer charges will be enacted for services organised by wellbeing services counties and some customer charges will be increased. These changes will increase income from charges by a total of EUR 88 million in 2027 and by about EUR 106 million as of 2028. Customer charges will also be increased as part of the reform of social welfare services.

Employment measures directed to young people and long-term unemployed people

The Government especially wants to improve young people’s opportunities to enter working life. The Government will increase the funding of the employment voucher for young people by EUR 20 million. In the Government budget session last autumn, EUR 30 million was allocated to the employment voucher.

Pilot projects to reduce youth unemployment will be implemented in cities with high youth unemployment and in neighbourhoods and districts of the six largest cities in 2026–2027. The pilots will make extensive use of the private and third sectors and will develop new effective ways to reach and support young people who are not in employment or education and who are in a weak labour market position. Altogether EUR 15 million will be reserved for the pilots.

The Government also decided on other measures related to young people. A regional trial of the whole-day school model will be implemented, youth entrepreneurship education and financial competence will be promoted in primary, lower secondary and secondary education, and an action plan to intervene in school absenteeism will be drawn up. The Government will also look into a lighter form of company for 15–25-year-olds to promote of entrepreneurial activity among young people.

The Government will overhaul student financial aid to make it more incentivising and improve the position of students with families. The student loan compensation will be changed into a two-tier model and made more incentivising. The number of children in the family will in future affect the family provider increment to study grants. An increase of EUR 30 will be added to the current increment for each subsequent child. The Government proposal will be submitted as a finance act to Parliament in autumn 2026. The reform is scheduled to enter into force on 1 August 2027.

A competence voucher for continuing professional development will be introduced to help long-term unemployed persons re-enter the labour market. The Government will allocate EUR 20 million for this purpose. In addition, the Government will implement a new employment policy subsidy for the third sector and allocate EUR 13 million to it. The goal is to enable activities that long-term unemployed people and people in a weak labour market position could participate in to improve their chances of finding work.

Targeted measures to support housing and construction

The Government will boost momentum and employment in the construction sector. The Government decided on a temporary renovation grant for residential buildings. The grant can be used for measures to improve energy efficiency. Renovation construction will be supported by improving central government guarantees for renovation loans to housing companies and increasing the residential building provision. A total of EUR 110 million will be allocated to these measures for the period 2026–2027.

Efforts will be made to launch public investments more quickly. Construction projects planned by Senate Properties will be moved forward within the framework of existing budget authorities. The decisions to build these projects can be made within the next 12 months.

The maximum amount of home savers’ bonus system (ASP) loans will be increased to 95 per cent of the purchase price of the home. The maximum repayment period for ASP loans will be harmonised with the regulation of other housing loans at 40 years.

A person taking out a housing loan will be able to purchase a central government deficiency guarantee for their loan. The Government will increase the maximum amount of housing loans guaranteed by the central government from 85 per cent to 90 per cent of the purchase price of the home and will harmonise the maximum duration of the guarantee with other regulation of housing loans at 40 years. Deficiency guarantees make it possible to buy a home when the buyer does not have sufficient savings or assets.

Amendments to pension scheme for self-employed persons

Reforming the pension scheme for self-employed persons will improve the environment for entrepreneurship and give entrepreneurs room to grow their businesses. It will make going into business more attractive.

From 2028 onwards, self-employed people would be able choose either taxable earned income from self-employment or the current imputed confirmed income model as the basis for their pension contributions. However, after a transition period, confirmed income would have to be at least 50 per cent of an entrepreneur's taxable earned income. A self-employed person’s earned income would include only earned income, not for example, earned income dividends. The reform would make it possible to pause contributions for the duration that sickness allowance is paid, and the current flexibility in contributions would be increased to 25 per cent. This flexibility would replace the reduction in the pension contributions granted to newly self-employed persons.

Based on a preliminary estimate by the Finnish Centre for Pensions and the Ministry of Finance, at the 2033 level, contributions will drop for nearly 40 per cent of self-employed persons, remain the same for over 40 per cent and increase for 20 per cent compared to the current model. The reform will increase the central government's share of the payment of self-employed persons' pensions by about EUR 80 million.

Other growth measures outlined by the Government in its spending limits session

The Government will continue to promote the further construction of nuclear power plants, for example by enabling investment aid for small-scale nuclear power plants and by commencing preparations for the implementation of risk-sharing mechanisms or similar solutions for new nuclear power plants. The Government will promote the competitiveness of large-scale nuclear power by including energy companies critical to security of supply within the scope of the interest deductibility exemption.

The Government will support the competitiveness of Finnish industry by implementing a professional diesel system for heavy transport for at least ten years. The net impact of the professional diesel system on general government finances will be EUR 40 million.

The situation in agriculture will be alleviated by temporarily increasing the additional energy tax refund to the maximum allowed by the Energy Taxation Directive with respect to the refunds for 2025 and 2026. The refund will be increased by four cents per litre.

The budget authority for interest subsidies for rural livelihoods will be altered so that starting in 2027, interest subsidies can be approved for loans with a maximum capital of EUR 200 million.

The Government will restructure the taxation of incentive stock options so that it improves the opportunities of growth companies to attract skilled employees. With respect to unlisted companies, the time when the incentive stock options are taxed will be moved from the time the option is exercised to the time of sale of the underlying asset. In addition, directed share issues to employees will be revamped so that employees working in subsidiary companies may be issued shares in the group’s parent company.

The Government will explore ways to lighten banking regulation so that business growth would not be limited by the availability of financing.

A total of EUR 40 million will be reserved for development programmes in the healthcare and social welfare sector in 2027.
The tax credit for household expenses will be increased for 2026 and 2027. The maximum amount of the tax credit will be increased from EUR 1,600 to EUR 2,100, and the percentages of the tax credit will be increased from 35 per cent to 40 per cent (services bought from a company) and from 13 per cent to 15 per cent (paid wages).

Vehicle tax will be lowered by EUR 10 million as of 2028. This reduction will be allocated in the same way as the reduction carried out earlier in the government term.

The tax deductions applicable to donations will be broadened to include healthcare and social welfare organisations. This way healthcare and social welfare organisations will be able to raise funds for themselves.

The value of employee benefit vouchers will be adjusted to align with inflation (an impact of around EUR 6 million) and the scope of the voucher will be expanded to cover hunting and fishing.

The Government will improve the environment for entrepreneurship among self-employed persons, agricultural and forestry entrepreneurs and shareholders in business partnerships by raising the tax deduction for entrepreneurs from 5 per cent to 5.5 per cent.

The Government will continue its deregulation efforts. At the spending limits discussion, the Government decided to look into dismantling altogether 50 norms. For example, the Government wants to make it easier to open bank accounts for children and young people and to streamline the permit and license system.

The Government also decided to expand its fixed-term investment programme by about EUR 0.2 billion to EUR 4.7 billion. About EUR 4.4 billion of the programme is funded mainly by income from assets. Owing to the spending limits decision for 2027–2030, the decided authorities and appropriations of the investment programme will rise to a total of approximately EUR 4.7 billion when taking into account the increases that are intended to be included in the second supplementary budget proposal of 2026. The appropriations for the 2027–2030 spending limits period amount to about EUR 2.2 billion.

Transport investments

The Government has agreed on additional or new funding for the following projects:

• Deepening the Loviisa fairway
• Main road 51, Kela junction
• Junction arrangement on main road 9 in the centre of Suonenjoki 
• Deepening the Vaasa port fairway
• Electrification of the Vaasa port railway
• Main road 8 Ytterjeppo interchange
• Widening of main road 8 between Bäckliden and Brännbacken
• Satamatie junction and additional funding for the Tähtelä junction in Inkoo
• Vuohimäki interchange in Kirkkonummi
• Karelian railway (Extension of the double track rail line between Luumäki and Joutseno (Lappeenranta–Lauritsala) and Poiksilta by-pass rail between Imatra and Joensuu)
• Continuation of the Karelian railway in the north, Joensuu–Nurmes (measures to improve functionality and capacity, including electrification planning for the Joensuu–Uimaharju section), electrification of the Vuokatti–Kontiomäki rail line
• Main road 2 in Pori
• Lepplax interchange 
• Tolosenmäki junction
• Main road 9 in Ylämylly (budget authority)
• Improvement of highway 749 between highway 7494 (Furuholmsvägen) and Risöhällvägen in Luoto
• Improvement of main road 23 between Rantala and Lajunlahti in Heinävesi
• Improvement of main road 506 at the Karjalankatu junction in Juuka

The Government is committed to launching infrastructure projects vital to national defence and to making provisions for the funding necessary for these projects in two stages. In the first stage, projects totalling EUR 112 million will be launched in various parts of Finland. These projects will involve, for example, reinforcing bridges, continued planning of a European track gauge rail connection from Tornio to Kemi and to the north, improving critical road connections and planning of transport routes. The Government will prepare funding for the second stage projects by the autumn budget session.

Other investment items

• The freedom of choice pilot for reimbursements from the health insurance fund for persons aged 65 and over will be extended by one year and will be expanded within the scope of resources in the Government Programme reserved for reimbursements for medical expenses paid by Kela. The list of eligible medical procedures included in the pilot will be expanded (e.g. X-rays) and the number of annual doctor's appointments will be increased to improve the continuity of treatment. To support everyday functional capacity among older people, physiotherapy appointments will be included in the pilot.
• As part of the implementation of the programme for eastern Finland set out in the Government Programme, the Government will begin preparing a temporary legislative trial concerning special economic zones.
• Altogether EUR 5 million a year will be allocated to promoting nutrient recycling through subsidies for nutrient recycling.
• EUR 0.8 million per year will be allocated towards the costs of preparatory education for programmes leading to an upper secondary qualification organised in youth rehabilitation centres.
• In healthcare services for prisoners, altogether EUR 0.3 million will be allocated annually to reinforce psychiatric medical care, neuropsychiatric assessments and substance abuse services.
• Provision will be made for an annual funding increase of about EUR 2.7 million for the organisation of investigations of sexual and assault offences against children as of 2027.
• The Government will make a provision for funding to draw up Current Care Guidelines for endometriosis (EUR 90,000)
• The Government will promote the application for and organisation of the 2030 European Athletics Championships and support the application process with EUR 2 million in 2027.  

Tax measures

During its parliamentary term, the Government has adopted significant tax measures not only to boost economic growth and strengthen employment but also to adjust general government finances. To support the conditions in which companies operate, the corporate tax rate will be lowered by two percentage points in 2027. The tax credit supporting clean industrial investments will be extended to promote the clean transition. Labour taxation will be eased during the parliamentary term by altogether EUR 1.1 billion, and by lowering the highest marginal tax rates, the Government has improved the incentives for work. When examined over the parliamentary term, earned income taxation will be lighter at all income levels.

Consumption taxation has been the primary target of tax increases, and as a whole, the focus of taxation has shifted from income taxation to consumption taxation. At the end of the parliamentary term in 2027, the total tax ratio will be lower than it was in the last year of the previous parliamentary term in 2023.

As a new adjustment measure, the increases to environmentally and health-motivated taxes outlined in autumn 2025 have been allocated to the excise duty on tobacco and alcohol. The changes will come into force in 2027.

Additionally, the excise duty on tobacco products will also be increased in 2027 in line with prior decisions, and automatic index adjustments will be made to alcohol tax rates annually. The tax base for taxes on waste will be broadened from the beginning of 2027. In addition, the lottery tax rate will rise to 22 per cent in connection with the reform of the gambling games market.

The Government will continue drafting legislation for a regional tourist tax on a trial basis. Each municipality would decide whether to introduce the tax and the tax revenue would remain with the municipality. Municipalities could introduce the tax from the beginning of 2028.

Further investments are needed in defence and security due to changes in the operating environment 

In spring 2025, the Government decided that Finland will raise the level of defence appropriations to at least 3 per cent of GDP by 2029. Defence expenditure will be determined on a threat-informed and needs-driven basis that accounts for the security situation in Europe and the military threat posed by Russia. Finland is also committed to NATO’s defence investment commitment to allocate 3.5 per cent of GDP annually on core defence requirements by 2035.

Defence will be strengthened by allocating a total of EUR 1,130 million in additional appropriations for 2027–2030. Spending on core defence requirements will rise to 3.2% in ratio to GDP by 2030. Additional resources allocated to the Finnish Defence Forces’ operating expenditure will be earmarked for recruiting, refresher training, maintaining materiel and equipping troops. In addition, budget authorities for defence materiel procurement will enable the Finnish Defence Forces to strengthen its capabilities, for example, in terms of counter-drone systems and the efficiency of explosives production.

Appropriations will be reserved for investments in the healthcare preparedness and readiness of the Finnish Defence Forces to the amount of EUR 37.9 million in 2027, EUR 54.1 million in 2028 and 2029, respectively, and EUR 35.5 million in 2030. The total amount for the spending limits period will be EUR 181.6 million.

A total of EUR 18 million will be allocated to the UXV30 project of the Finnish Border Guard, including a national contribution of EUR 1.8 million. In the project, the Border Guard will procure unmanned aircraft, unmanned surface vessels and related surveillance systems. According to the European Commission’s funding decision, 90 per cent of the procurement will be funded under the Specific Action funding of the EU’s Border Management and Visa Instrument (BMVI).

Finland continues to support Ukraine militarily. Support totalling EUR 300 million will be allocated for the remainder of the parliamentary term. The goal is to begin industrial participation that will support both Ukraine’s defence and Finland's defence industry.

Funding of wellbeing services counties

The central government’s universal funding for the wellbeing services counties will be approximately EUR 27.5 billion in 2027. The level of funding will be about EUR 0.1 billion more than in the previous General Government Fiscal Plan. This increase is largely explained by an index adjustment (about EUR 0.7 billion) and a more exact ex-post control. With the rise in the cost trend having been significantly more moderate than anticipated in 2025, the volume of ex-post control to be taken into account in county funding will be reduced, with a two-year delay, by about EUR 0.4 billion in 2027 compared to 2026.

The funding will be approximately EUR 27.5 billion over the spending limits period and estimated at 2027 prices. The level of funding is affected, among other factors, by the growing need for services and the fact that the responsibility for funding prehospital emergency medical services has been transferred to the counties. The level of funding takes into account the government proposal for amending the Act on the Funding of Wellbeing Services Counties. The measures included in the proposal aimed at curbing mounting costs will gradually reduce the funding.

During the spending limits period, several changes will be made to the tasks of the counties and the client fees charged for them. These changes will take effect in stages from 2027 onwards. The previously decided service reform will be carried out in social welfare, and the estimated savings from this reform have been refined. Work to improve the effectiveness of the service system will continue, but the system-related provisional savings will not be implemented.

Municipal finances

Approximately EUR 5.9 billion will be allocated in discretionary government grants to municipalities in 2027. At the end of the spending limits period in 2030, discretionary government grants will grow to around EUR 6.1 billion at 2027 prices.

The level of the central government transfers to municipalities for basic public services takes into account the overall reform of integration services, which will increase the central government transfer by EUR 33.2 million in the form of transfers from the administrative branches of the Ministry of Education and Culture and the Ministry of Economic Affairs and Employment. The savings decisions outlined in the Government Programme and implemented in the government budget session in autumn 2025 to reform integration services will be carried out by reducing the imputed specified transfers paid to municipalities by EUR 30 million in 2027. The reduction in appropriations will decrease to EUR 8 million in 2030. Changes in the spring 2026 General Government Fiscal Plan will slightly weaken local government finances, mainly due to the increase to the index brake. However, the discretionary measures taken by the Government during the parliamentary term will strengthen local government finances in 2027–2030.

Status of Finland's economy and general government finances

Economic recovery will be delayed as a result of the crisis in the Middle East. The economy was on a growth path during the last months of 2025, and economic recovery was expected to continue in 2026. However, rising oil prices will substantially slow economic growth. This will weaken external demand and household purchasing power, which will dampen both exports and private consumption. Defence and energy transition projects will support investments, but housing construction will remain subdued. Economic output is below its potential level, which together with the subsequent fall in oil prices will support economic growth later in the spending limits period.

Adjustment measures will reinforce general government finances, but the general government deficit is high due to weak economic growth, among other things. The entry of the fighter jet procurement as expenditure will increase the general government deficit significantly. At the same time, the economic repercussions of the crisis in the Middle East will also be gradually felt in general government finances. Defence and interest-related expenditure are growing rapidly, while economic growth is sluggish. As a result, the deficit will only see limited improvement during the spending limits period.

On-budget revenue, expenditure and balance

Central government on-budget revenue, expenditure and balance, EUR billion

On-budget expenditure for 2027 is estimated to be EUR 92 billion, which is about EUR 1.2 billion more than in the 2026 Budget. The factors contributing to the increase in appropriations relative to 2026 include legislative and agreement-based index adjustments in 2027 (about EUR 1.4 billion). At the same time, expenditure will be reduced by the reforms and spending cuts outlined by Prime Minister Orpo’s Government (about EUR 0.8 billion).

Interest expenses on central government debt are estimated at EUR 3.2 billion in 2026, rising gradually to EUR 6.3 billion by 2030.

The central government on-budget deficit is expected to total EUR 13.2 billion in 2027, which is EUR 2.4 billion more than that budgeted for 2026 (including the first supplementary budget). Over the 2027–2030 period, the deficit will average EUR 16 billion a year.

Central government debt is projected to be about EUR 214 billion at the end of 2027 or about 71.2 per cent of GDP. The amount of central government debt is expected to grow by about EUR 63.5 billion between 2027 and 2030. Central government debt is estimated to be about EUR 264 billion at the end of 2030, which is about 78.5 per cent of GDP.

The General Government Fiscal Plan will be approved in a government plenary session on 30 April 2026, when it will also be published online.

Inquiries: Mikko Martikkala, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 161 171, Jussi Lindgren, Special Adviser to the Minister of Finance in Economic Affairs, tel. +358 295 530 514, Johanna Mantere, Special Adviser to the Minister of Education in Economic Affairs, tel. +358 295 330 330, Sonja Falk, Special Adviser to the Minister of Agriculture and Forestry in Economic Affairs, tel. +358 295 162 024

The email addresses of the Finnish Government are in the format [email protected].