Fiscal policy
Fiscal policy is part of the Government’s economic policy. Fiscal policy objectives, namely how the public economy collects and allocates funds, are agreed in the Government Programme. Decisions on taxation, social security benefits, pensions and their funding change economic structures and accordingly shape opportunities for citizens, households and businesses. Fiscal policy decisions are therefore part of social structural policy and they affect the economy far into the future. The General Government Fiscal Plan (including central government spending limits) and the Budget are the instruments by which the Government implements its fiscal policy.
The Orpo Government's fiscal policy
The economic and fiscal policy of Prime Minister Orpo’s Government is based on safeguarding the welfare society for future generations.
The Government’s fiscal policy aims to strengthen general government finances and reverse the trend of Finland’s indebtedness. The objective is for the budgetary position of general government finances to improve so that the general government deficit will be a maximum of -1% of GDP during the parliamentary term (by 2027).
To achieve this, the Government commits during the parliamentary term to strengthen general government finances permanently through a set of measures that will improve general government finances by a net EUR 6 billion at the 2027 level.
The Government will actively monitor the implementation of the set of measures within government budget and spending limits sessions and react with corrective measures should the set of measures threaten to fall short of the targeted level of EUR 6 billion.
The central government spending limits system is a key instrument of the Government’s fiscal policy steering and the foundation of a credible economic policy. The Government commits to the spending limits procedure for central government expenditure. The entries and other measures of the Government Programme will be implemented within the restrictions of the parliamentary term spending limits and the Government commits to prioritising the implementation of initiatives, if necessary.
General government expenditure will be adjusted by an estimated net EUR 4 billion at the 2027 level through measures that will generate permanent savings or increase fee revenue.
As part of adjustment measures, the Government has outlined structural policy measures that seek to strengthen public finances in a manner that stabilises the debt ratio by EUR 2 billion at the 2027 level. Growth in employment targeting 100,000 new people in work would strengthen public finances by more than EUR 2 billion. The structural measures divide into an unemployment benefit package, other social security and taxation, labour market reforms, and other reforms to boost employment. The Government will monitor achievement of the employment goal based on Ministry of Finance evaluations over the parliamentary term, and is prepared to issue additional decisions by no later than the mid-term policy review session if the goal of strengthening public finances is jeopardised.
Over the course of the parliamentary term, the Government will implement a fixed-term investment programme of EUR 4 billion to create conditions for sustainable growth. The programme will consist of significant investments in transport infrastructure projects that are important for the mobility of labour and for export-driven industry and business life. Investments will also be made in reducing the repair backlog and in promoting rail projects throughout Finland. The programme will be financed through revenue generated by the sale of government assets, which means that the investment expenditure will not increase the central government borrowing requirement during the government term. The Government has outlined a separate spending limits provision of no more than EUR 4 billion for the investment programme.
Government taxation policy will seek to boost the purchasing power of households, improve incentives for working, and strengthen conditions for economic growth. Taxation policy will encourage work and self-employment, and support domestic ownership. The Government will avoid discretionary measures that increase the overall tax rate.
The Government takes seriously the risks to central government finances associated with guarantee commitments. The process of evaluating and granting central government guarantees will be developed to take risk more comprehensively into account and, as a rule, an appropriate guarantee fee will always be charged for guarantees.
The Government’s fiscal and structural policy objectives and measures are decided and reported on annually in the General Government Fiscal Plan and in budget proposals, which are based on the independent economic forecast of the Economics Department. The General Government Fiscal Plan also includes the Stability Programme to be submitted to the European Commission. In addition, the Government’s budget proposal is reported to the European Commission. The European Commission examines in advance and monitors Member States’ fiscal policies within the framework of the European Semester.
Contact information
Senior Ministerial Adviser
Annika Klimenko
02955 30180
annika.klimenko(at)gov.fi