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.
Fiscal policy of Prime Minister Orpo’s Government
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 committed in the Government Programme to permanently strengthen general government finances through a set of measures that will improve general government finances by a net EUR 6 billion at the 2027 level. As part of this set of measures, general government expenditure will be adjusted through the Government’s decisions by an estimated net EUR 4 billion at the 2027 level. In addition, the structural policy measures outlined in the Government Programme aim at strengthening general government finances by approximately EUR 2 billion at the 2027 level. Growth in employment reaching the targeted 100,000 new people in work would strengthen public finances by more than EUR 2 billion. The structural measures are divided into an unemployment benefit package, other social security and taxation, labour market reforms, and other reforms to boost employment.
In the spring of 2024, the Government decided on a new set of measures that will further strengthen general government finances by approximately EUR 3 billion starting in 2025. The expenditure savings included in the set of measures account for approximately EUR 1.6 billion at the 2028 level. The gross static effect of the tax measures will be to strengthen general government finances by approximately EUR 1.8 billion at the 2028 level.
The Government will actively monitor the implementation of these two sets of measures in government budget and spending limits sessions and react with corrective measures should these sets of measures threaten to fall short of the targeted level of EUR 9 billion.
The central government spending limits system is a key instrument for steering Government fiscal policy and is the foundation of a credible economic policy. The Government is committed to the spending limits system concerning central government expenditure. The entries and other measures of the Government Programme will be implemented within the restrictions of the spending limits for the parliamentary term, and the Government is committed to prioritising the implementation of initiatives, if necessary.
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 with central government property income, by liquidating overcapitalisation of unlisted state-owned companies and by making revenue recognitions from the National Housing Fund without jeopardising the Fund’s current level of activity. Thus, the expenditure under the investment programme will not increase the central government borrowing requirement during the government term.
Government taxation policy will seek to boost the purchasing power of households, improve incentives for working, and strengthen conditions for economic growth. The Government’s taxation policy will encourage work and self-employment, and support domestic ownership. The total tax rate will not be increased by Government decisions.
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 Ministry of Finance's Economics Department. The Government's fiscal and structural policy objectives and measures are also reported to the European Commission. The first fiscal-structural plan under the EU’s reformed fiscal rules will be prepared in the autumn of 2024 and subsequently at the beginning of every government term. 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