The government concluded its negotiations on the 2021 budget last week. The five-party coalition agreed on total spending amounting to €64.2 billion. The budget deficit will be €10.8 billion, about €3.8 billion more than initially proposed by the Ministry of Finance.
The government’s decisions in the budget session aim to support the prevention and management of the coronavirus pandemic, strengthen the finances of municipalities, hospital districts, dismantle the backlog in treatment and services and increase employment and equality.
The government also decided to extend the duration of compulsory education, allocate funding for continuous learning and lower fees for early childhood education and care.
Funding was also allocated for nature conservation, circular economy and housing construction.
We publish the highlights of the budget plan in detail.
The job seeker is expected to apply for 0–4 jobs per month depending on the labor market situation in the region and the job seeker’s workability. Sanctions on unemployment benefits that relate to job search and services will be staggered by introducing a warning. After receiving a warning, if job seekers again fail to fulfill the obligations of the employment plan, they will be sanctioned to lose the benefits for five days and, if this happens again, for 10 days. After a warning and two periods of sanctions, the failure to apply for a job will result in a duty to work. The government also decided to boost the resources of the TE Offices by €70 million. The reform aims to employ 9,500 additional people and is intended to take effect at the beginning of 2022.
The government will allocate a total of about €2 billion to the Ministry of Social Affairs and Health and its branch of government for managing the Covid-19 crisis. Most of this amount will be allocated to municipalities and hospital districts.
The government undertakes to dismantle the backlog in treatment and services through a €450 million package of measures in 2021–2023. Since the proceeds from gambling will decrease, the government will compensate this by reducing the lottery tax and by making use of the non-distributed proceeds in 2021.
The budget proposal reserves a total of €1.4 billion for coronavirus testing; €355 million will be reserved for this in the autumn 2020 supplementary budget proposal. With this funding, the goal is to make testing faster and more comprehensive than before.
The government is committed to reimbursing municipalities and hospital districts for any costs arising from the pandemic, such as expenditure related to testing and the expansion of testing capacity, tracing of transmission chains, quarantines, treatment of patients, health security of those traveling and a vaccine against the virus.
Such costs will be reimbursed in full from outside the spending limits framework as long as the pandemical situation and the implementation of the hybrid strategy so require.
The government will reserve €30 million for supporting investment connected with testing technology. The government also proposes an additional €30 million for 2021 to reimburse municipalities and hospital districts for additional costs related to the strengthening of health security at border crossing points, excluding costs related to coronavirus testing.
Municipalities and hospital districts
The government proposes that €200 million be allocated for supporting municipalities and hospital districts. Municipalities and hospital districts can use these funds to cover any direct costs arising from the coronavirus pandemic, excluding costs related to testing.
The Ministry of Social Affairs and Health and the Ministry of Finance will prepare a package of financial aid schemes for municipalities and hospital districts in a way that the incentives for cost-effective activities are kept unchanged.
Due to the coronavirus pandemic, health care is facing a backlog in treatment and social welfare a backlog in services. The government undertakes to dismantle the backlog in treatment and services by introducing a financing package of €450 million between 2021 and 2023. At the same time, a steering mechanism will be introduced to ensure that the resources within this package will genuinely reduce the backlog in treatment and services.
Organizations, associations and foundations
The government proposes a total of €347 million in compensation to organizations, associations and foundations for securing their funding. The need for this compensation is due to the decrease in the proceeds of the state-owned company Veikkaus Oy. The proceeds from gambling will remain lower than forecast in the actual budget proposal for 2021.
As regards the Ministry of Social Affairs and Health, the decrease in the proceeds of Veikkaus will be compensated with €34.4 million received from reducing the lottery tax and with €114.8 million received from the non-distributed proceeds from gambling. The non-distributed proceeds were produced when the gambling operators merged in 2017. The total appropriation to be allocated for grants awarded by the Funding Centre for Social Welfare and Health Organizations (STEA) is €362.4 million.
Compulsory education will be raised to the age of 18 and free-of-charge upper secondary education will be implemented at the same time. These changes will be adopted gradually from autumn 2021 onwards, one age group at a time.
The costs will be reimbursed in full to local authorities and other education providers and, in the case of school journeys, to the students. €22 million has been reserved for 2021 for extending compulsory education, and the level will rise to €129 million by 2024.
Early childhood education
A three-tier support model suited to early childhood education and care will be developed. €15 million is reserved for developing and implementing the model. This is a new structural measure to strengthen quality and equality in early childhood education and care.
As part of employment measures, the government also outlined that €70 million will be allocated towards lowering fees for early childhood education and care.
Lower fees will raise the participation rate in early childhood education and care, as incentives for accepting work will improve. The employment impact of this measure is estimated to be between 2,500 and 3,700 jobs.
Altogether €150 million will be allocated by 2022 for recruiting teachers and instructors in vocational education and training.
The additional resources will help increase the amount of contact teaching to ensure learning is of high quality. A program for quality will be launched to improve the quality of general upper secondary education, with €15 million being allocated for this purpose. €40 million will be allocated for promoting continuous learning, to develop the skills of people of working age, improve the skills of those who have poor basic skills and facilitating the employment of older people, in particular.
The government decided to propose that the increase in the maximum price for student meals introduced on August 1 2020 will be offset by an increased appropriation of €4.2 million, which will raise the meal allowance by €0.36. The level of the meal allowance will be €2.30 per meal as of January 1 2021.
The government budget session confirmed that funding for nature conservation will stay at a record high level. Next year the funding targeted to nature conservation will be €100 million higher than in the beginning of the government term.
Preliminary decisions were made to allocate €27 million to purchasing forest sites under the Forest Biodiversity Programme for Southern Finland and the related compensations, and at least €12 million to mire conservation under the Helmi habitats program (the habitats protection, restoration and management program). The total budget of the Helmi habitats program is €46 million.
In the budget item of the Ministry of the Environment, €0.7 million is reserved for implementing the program to promote a circular economy, but the total budget funds allocated to promoting a circular economy are higher. The implementation of the Plastics Roadmap will continue. €1.25 million in total is reserved for the development and upkeep of a monitoring system for the waste sector and product information and the related reporting.
Energy subsidies for residential buildings will continue by €40 million. The climate work of municipalities and regions is promoted and the scientific base of the climate policy secured by the funds allocated to the Finnish Climate Panel.
To increase state-subsidized rental housing production, temporary start-up subsidies will be granted to municipalities covered by the land use, housing and transport agreements up to €39 million.
The authorization for interest-rate subsidies to state-subsidized social housing production is €1.8 billion, and €285 million is allocated to loan guarantees and €100 million to state guarantees for the renovation loans of housing companies. Most of the state-subsidized housing production will be targeted to major growth centers, especially the Helsinki region.
The creation of a digital register and data platform will continue utilizing an appropriation of €7.3 million. This will be used to support the development of digital built environments in municipalities and connecting these to the national structures.
Besides interest-rate subsidy loans, building and renovation of housing for special groups is supported by investment subsidies up to the total of €90 million. These subsidies will primarily be targeted to promoting housing production for the most vulnerable groups. In the budget and from the Housing Fund of Finland, a total of €33.5 million is allocated to renovation subsidies, mainly targeted to retrofitting of lifts and support for renovating apartments for older and disabled people.