Government’s Budget Proposal Increases Funding for Climate Measures and Raises Taxes on Tobacco
Minister of Finance Mika Lintilä’s draft budget for 2020 will strengthen the confidence felt in the future by individuals and businesses at a time when uncertainty about the global economy is growing.
The proposals in the draft budget total of 57 billion euros and are based on the Government Program.
The budget proposals and the General Government Fiscal Plan are being prepared in a situation where Finland’s economic growth is slowing—in the current year and in the next few years. Uncertainty has grown about which way the economy is headed.
Growth in the global economy is slackening, and the euro area and developing economies, in particular, are experiencing slower growth in 2019. The Ministry of Finance estimated in June that consumption will continue growing steadily in Finland, but that growth in investments and exports is threatening to slow. Employment is also rising more slowly than before.
“In this situation, it is vital that we keep the Finnish economy in good shape and take steps to increase employment and investment. We will also strengthen people’s confidence in the future by ensuring fairness and taking care of the environment,” said Minister Lintilä in a statement.
We will also strengthen people’s confidence in the future by ensuring fairness and taking care of the environment.Mika Lintilä, the minister of finance
The aim in making decisions on expenditure and tax is that, given normal global economic circumstances, Finland’s general government finances will be in balance in 2023 and the public debt-to-GDP ratio will decrease.
The objective of the government’s economic and employment policy is that the employment rate will reach a level of 75 percent in the 15–64 age group in 2023, given normal global and related domestic economic circumstances.
The employment rate will determine whether the objective of balancing general government finances is attained. The first proposals for measures to improve employment are expected from the working groups set up by the Ministry of Economic Affairs and Employment by the start of September. In its budget session, the government will evaluate the entire package and ensure the sufficiency of the measures.
The Ministry of Finance’s draft budget for 2020 totals 57.0 billion euros, which is approximately 1.5 billion euros more than the current year’s budget.
Boost for employment
To enhance skills, it is proposed that core funding for universities will be increased by 10 million euros and for universities of applied sciences by five million euros in 2020.
To attain the employment goal, a supplementary appropriation of around 15 million euros is proposed for TE services. This will ensure the resources are in place for enabling jobseekers to attend periodic interviews and will help implement the youth guarantee. In addition, work permit processes will be streamlined and international recruitment facilitated. These measures aim to respond to labor shortages.
Work permit processes will be streamlined and international recruitment facilitated.
To increase the use of the pay subsidies in companies, an increase of 10 million euros is proposed for public employment services. An additional 33 million euros in Business Finland grant authorizations is proposed as support for the creation of new billion-euro ecosystems and innovations in Finland.
The entry to Finland of foreign talent sought by companies will be facilitated by making the so-called key personnel act permanent. At the same time, a moderate lowering of the 35 percent withholding tax for key personnel is proposed within the cost frame of the Government Program.
Improvements for families, students and older people
An appropriation is proposed for municipalities to reduce the group sizes in early childhood education and care and extend the right to early childhood education and care. An increase of 25 euros per month is proposed for the family provider increment to the study grant. The single-parent increment for child benefits will rise by 10 euros per month and the income of multi-child families will be improved by raising the child benefits paid for the fourth child and each additional child.
Students’ income will be secured by index-linking the study grant starting from August 1, 2020. It is proposed that basic security be raised by 20 euros per month, and the lowest pensions will be increased.
The draft budget also includes measures to increase people’s everyday security. Measures would begin for increasing the human resources of the police to 7,500 person-years by 2022. Two million euros is proposed as an additional appropriation to increase the number of shelters and to develop this service.
Increased funding for climate
Funding for nature conservation is suggested to be increased by a total of 25 million euros in 2020. The funding will be divided between the Ministry of Agriculture and Forestry and the Ministry of the Environment.
The additional funding would be allocated to the voluntary METSO program, in particular, which is a program that aims to safeguard forest biodiversity. The funds would also be used by the natural heritage services of the state-owned forest enterprise Metsähallitus to improve recreational opportunities and strengthen the conditions for nature tourism.
Progress will be made towards the climate targets by investing in renewable energy sources, promoting resource efficiency and increasing the share of renewable energy relative to all energy use.
Measures will also be taken to accelerate the achievement of climate policy targets in the land-use sector. An increase of 30 million euros in the approval authority for energy subsidies is proposed to support investments in energy technologies to replace coal.
An additional 300 million euros is proposed for the management of basic transport infrastructure, including roads, railways and waterways. It is also proposed that subsidies for private roads be kept at the current level during the government term. In addition, the level of funding for public passenger transport would be increased by 20 million euros, and this is intended for climate-related measures.
Tax on tobacco raised
Tobacco tax increases will continue in stages during the government’s term of office. The increase for next year will be 50 million euros. The tax on soft drinks will be raised by 25 million euros in 2020, with the focus on sugar-rich drinks.
As agreed in the Government Program, taxation on transport fuels will be raised by 250 million euros in line with the forecast rise in consumer prices. The increase would come into force in August 2020.
Benefit increases in basic social security and reductions in the taxation of earned income will compensate for the rise in fuel taxation for low-income earners. Other tax changes concerning energy taxation in the Government Program will not yet be introduced next year.