Government to provide more than EUR 1 billion to support municipalities during coronavirus crisis

The Government, in its discussion on spending limits, has decided to provide more than EUR 1 billion to support the country’s municipalities as a consequence of the coronavirus crisis. The Government is monitoring local government finances and is ready to add to the support package later this year if necessary.

“With this billion-euro support package, we want the municipalities to know that we are providing considerable support during the coronavirus crisis. The provision of healthcare and social welfare, education and early childhood education and care is the responsibility of the municipalities. The Government’s aim is to ensure that the provision of all key basic services remains possible during the crisis but also after it, when a lot of additional help will be needed for people suffering from the impact of the crisis,” says Minister of Local Government Sirpa Paatero.

The support package of at least EUR 1 billion decided in the government spending limits discussion is for 2020 and is to be implemented via the forthcoming third supplementary budget. The details of the support package will become clearer as the supplementary budget draws closer. The package consists of mutually complementary elements that take into account the needs of different municipalities during the crisis:

• Central government will use discretionary government grants to reimburse hospital districts directly for the extra costs, such as spending on intensive care, caused by the coronavirus crisis.
• The municipalities’ share of corporation tax revenue will be increased for a fixed period to the end of 2020.
• Central government transfers to municipalities for statutory basic public services will be increased for a fixed period to the end of 2020.
• Discretionary central government transfers will be increased.

The Government already made an earlier decision to compensate the municipalities for temporary 2020 tax losses arising from its decisions regarding tax payment arrangements for businesses. This will help municipalities temporarily, as the tax payments deferred through the arrangements will be correspondingly deducted from central government transfers to municipalities in 2021.

Government will also support municipalities later if necessary

The impact of the coronavirus crisis on general government finances and local government finances is considerable. The crisis means increased municipal expenditure, on healthcare for example, while at the same time municipalities’ tax revenues and fee income have fallen.

According to the Ministry of Finance's initial estimate, the coronavirus crisis will weaken local government finances this year by EUR 1.6–2.0 billion. This is a preliminary estimate, however, as the effects will depend on the extent and duration of the epidemic, and there is not yet any certainty over this. Moreover, there are different types of municipalities and the impacts vary accordingly. Consequently, the Ministry of Finance is following developments very closely.

In coming supplementary budgets and in the August government budget session, the Government will make an assessment of the effects of the coronavirus crisis on the municipalities and is committed to augmenting, as necessary, the package of measures targeted at municipalities as the details of the estimated impacts become clearer. Measures for 2021 will be decided as part of the process for preparing the 2021 budget.

Situation updates are prepared in collaboration with the municipalities, ensuring that account is taken of their different situations and the various impacts of the crisis on the activities of local government. The epidemic’s effects on local government finances will be taken into account by the Ministry of Finance when it considers the need to initiate the procedure for municipalities in crisis, based on the 2020 financial statements, and when it assesses the municipalities’ deficit coverage obligation.

Besides the immediate crisis support measures, the Government will review the outlook for the future of local government finances before the 2020 government budget session. At the same time, the tasks and obligations of the municipalities will be examined.

Inquiries:

Sirpa Paatero, Minister of Local Government, tel. +358 50 512 1602, sirpa.paatero(at)vm.fi
Minna Salminen, Special Adviser to the Minister of Local Government, tel.  +358 50 445 5350, minna.salminen(at)vm.fi
Jani Pitkäniemi, Director General, tel. +358 2955 30494, jani.pitkaniemi(at)vm.fi