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Proposed seventh supplementary budget includes further COVID-19 support for local government

Ministry of Finance 23.10.2020 16.44
Press release

The Government’s proposed seventh supplementary budget for 2020 includes financial support totalling EUR 750 million for the municipalities and EUR 200 million for the country’s hospital districts, to cover costs arising from the coronavirus (COVID-19) pandemic. The aims of this are to safeguard the municipalities’ basic public services, help expand services essential for tackling the pandemic, and ensure the success of the Government's hybrid strategy.

The support was agreed by the Government at its 2021 budget session. The Government has already allocated a substantial local government support package of EUR 1.4 billion in its previous supplementary budgets this year, with the aim of safeguarding basic public services.

EUR 355 million proposed for implementing hybrid strategy

A one-off increase of EUR 350 million in central government transfers to local government for basic public services is proposed for the direct costs incurred by municipalities in coronavirus testing and tracing. EUR 5 million is proposed for the corresponding costs in Åland.

The purpose of this support is to enable municipalities to take the steps required under the hybrid strategy for dealing with the pandemic. This includes maintaining measures necessary for increased testing, greater testing capacity, tracing, quarantine and patient care. The appropriation is also intended to compensate municipalities for the invoicing by hospital districts for COVID-19 costs.

The basis for apportioning the increase in central government transfers for implementing the hybrid strategy will be the testing volumes per hospital district. Within each hospital district, the support will be allocated to the district’s member municipalities on an equal per capita basis. Distributing the support in the form of an increase in central government transfers for basic public services was decided because this was found in the preparation process to be administratively the simplest and quickest way.

EUR 400 million proposed in central government transfers for basic public services

A one-off increase of EUR 400 million is also proposed in central government transfers to local government for basic public services. The increase would be apportioned in the same way as the support allocated in the fourth supplementary budget: one third would be allocated equally to municipalities on a per capita basis, and two thirds on the basis of the local income tax apportionment applied this year. However, EUR 4.3 million of the increase in central government transfers would be apportioned on the basis of the number of children aged 13–15 in order to compensate for the costs of purchasing masks for school children. 

Support of EUR 200 million for hospital districts

Support of EUR 200 million is proposed for hospital districts, which would be distributed as discretionary government grants. This would be for covering the costs of treating COVID-19 patients and preparing for the pandemic, and any financial deficits experienced by hospital districts due to COVID-19. 

The discretionary government grants would be apportioned on the same basis as the equivalent support allocated in the fourth supplementary budget: four fifths would be on a per capita basis, and one fifth on the basis of tests, days in intensive care and hospitalisation days.

Local government support to continue in 2021

In 2021, central government transfers to local government for basic public services will be increased on a one-off basis by EUR 280 million, and a discretionary increase of EUR 20 million in central government transfers will also be made. The increase in local government’s apportioned share of corporation tax revenue will be continued in 2021, which will strengthen local government finances by EUR 550 million. In addition, the Government is committed to fully compensating municipalities for the testing and tracing costs arising from implementation of the hybrid strategy.

Inquiries:

Minna Salminen, Special Adviser to the Minister of Local Government, tel. +358 50 445 5350, minna.salminen(at)vm.fi
Tanja Rantanen, Senior Ministerial Adviser (central government transfers), tel. +358 02955 30338, tanja.rantanen(at)vm.fi
Minna-Marja Jokinen, Senior Ministerial Adviser (hospital district support), tel. +358 2955 30018, minna-marja.jokinen(at)vm.fi