Economic Policy
Ministry of Finance publications – 2c/2018
Budget review 2018
January 2018
Table of Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2 Economic outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 Government economic policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 Budget 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6 Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7 Reading instructions and printable version . . . . . . . . . . . . . . . . . . . . . . 19
2
1 Introduction
General government finances in Finland con-
sists of central government, local government
and social security funds. Central government
finances include the central government bud-
get economy i.e. the on-budget activities and
off-budget activities (the off-budget activities
are discussed in chapter 8 ”Extra-budgetary
central government finances” of the budget).
The position of central government on-bud-
get activities in central government finances
and general government finances is illustrated
by Diagram 1. This publication is mainly con-
cerned with the central government on-bud-
get activities. The central government bud-
get for 2018, which was approved by Parlia-
ment in December 2017, is the topic of exa-
mination. The purpose is to provide a con-
cise description of the main themes of the
budget with the help of diagrams and tab-
les as well as to guide the reader to explore
the themes in more detail via Internet links.
The background materials for budgeting inc-
lude the independent economic forecasts pro-
duced by the Economics Department at the
Ministry of Finance, which are presented in
the Economic Survey.
The central government budget is a plan con-
cerned with the central government’s finan-
ces and financial management prepared on
the basis of the General Government Fiscal
Plan published in the spring. In practice, the
budget evaluates the extent and allocation of
central government revenue and expenditure
for the following year. The Government nego-
tiates on the budget proposal in the budget
session.
In Finland, the Parliament has the prime de-
cision-making authority on the use of central
government resources. The Parliament pri-
marily exercises its power in two ways: by
enacting laws and approving budgets. The
majority of the content of the budget is
bound by law and, indeed, laws are often
amended before making decisions on the bud-
get. The Parliament approves the budget for
the following budget year before the end of
the previous budget year.
The Government Programme defines the Go-
vernment’s main economic policies, which
serve as the basis for preparing the budget.
At the beginning of the parliamentary term,
the Government also decides on the spen-
ding limits for the parliamentary term, i.e.
the central government’s expenditure ceiling,
and the rules for the spending limits procedu-
re. At the same time, the spending limits set
the outline for the entire expenditure during
the four-year parliamentary term. The spen-
ding limits’ allocation for each administrative
branch is reviewed within the parliamentary
term spending limits in April as part of the
General Government Fiscal Plan, and upda-
tes the spending limits to correspond to chan-
ges to the level of costs, prices and spending
limit expenditure structure. For more infor-
3
mation, see http://vm.fi/en/central-govern-
ment-spending-limits1.
The final sum of the budget for 2018 is EUR
55.8 billion. Most of the appropriations will
be spent on social security, and business and
industry. Revenue will be primarily collected
in taxes based on turnover, such as value-ad-
ded tax, and income taxes, including earned
income and capital income tax. The central
government on-budget deficit is predicted to
amount to EUR 3.1 billion and central go-
vernment debt is expected to rise to appro-
ximately EUR 109 billion.
The following chapter includes an overview
of the economic outlook in the areas of real
economy and general government finances.
Chapter 3 is concerned with the Govern-
ment’s economic policy goals and their imp-
lementation. Chapter 4 includes revenue and
expenditure estimates, deficit and debt in the
budget. Local government and regional finan-
ces are also discussed from the viewpoint of
the on-budget activities. Chapter 5 includes
a summary of the review.
4
2 Economic outlook
The economic review of the Ministry of Fi-
nance deals with the economic outlook at 
the national and international level as well 
as economic policy and general government 
finance.
Real economy
The growth in the Finnish economy will slow 
to 2.4% in 2018. The favourable signs 
that the upswing will continue have grown 
stronger, and the growth will be underpinned 
especially by domestic demand and foreign 
trade. Supporting the growth in private 
consumption will be a rise in the earnings 
level and an increase in employment. How-
ever, growth in the real disposable income of 
households will slow as inflation gathers pace 
to 1.4%, which will curb the rise in private 
consumption. Investment will increase and 
the growth in housing construction will con-
tinue at a brisk pace. GDP growth will main-
tain the demand for labour, and employment 
growth will pick up further. The unemploy-
ment rate is predicted to edge downwards to 
8.1%, while the employment rate is expected 
to rise to 70.3% in 2018. Key forecast figures 
for 2015–2018 have been compiled in Table
1.
General government finances
Table 2 presents key indicators for general
government finances for 2015–2018. The ta-
ble reveals that the deficit of general gov-
ernment finances has been gradually reduc-
ing. General government finances have been
strengthened by the consolidation measures
imposed by the Government as well as the
economic growth that has begun. Regard-
less of the economic upturn, general govern-
ment finances will remain in deficit in 2018.
The favourable trend in the economy cannot
by itself eliminate the structural imbalance in
the general government finances, as the rev-
enues are not sufficient to cover expenditure.
Moreover, the changing age structure of the
population has begun to increase the level of
pension expenditure in particular.
The public debt-to-GDP ratio began to de-
crease in 2016, and the rapid growth in GDP
will further reduce the debt ratio. When GDP
growth starts to slow while the rise in age-
related expenditure continues in the coming
decade, there is a risk that the debt ratio will
begin to rise again.
5
In addition to economic cycles, the structures
of general government finances are also re-
flected on the revenue contributions to gen-
eral government and the allocation of expen-
diture. Diagram 2 illustrates that the major-
ity of general government revenue was col-
lected as income or wealth tax, and as indi-
rect tax, in 2015.
Most of the general government expenditure
is comprised of social security benefit expen-
diture as illustrated by Diagram 3. This ex-
penditure includes pensions, unemployment
benefits, benefits aimed at families as well
as housing allowance during illness and al-
lowances preventing social exclusion.
Table 3 illustrates the average extent of the
costs resulting from education and culture as
well as social welfare and health care ser-
vices. For example, the table reveals that
the costs per student of vocational education
and training for general government finances
were the highest compared to other forms of
education in 2015.
6
3 Government economic policy
Prime Minister Sipilä’s Government de-
termines its economic policy in the 
Government Programme (http://val-
tioneuvosto.fi/en/sipila/government-pro-
gramme). The Government’s objective is 
to raise Finland’s economy on to a path of 
sustainable growth and rising employment, 
and to secure the funding of public services 
and social security. The objective is to bring 
living on debt to an end in 2021, increase the 
employment rate to 72% and the number of 
people in employment by 110,000.
The Government aims to cover the EUR 10 
billion sustainability gap through actions in-
stantly enhancing the general government fi-
nances, measures supporting growth and em-
ployment, and reforms strengthening general 
government finances. T he i mmediate con-
solidation measures in accordance with the 
Government Programme have been recorded 
in the central government spending limits and 
are included in the budget for 2018. The 
budget also includes new measures for pro-
moting employment in addition to the previ-
ously determined actions. The Government 
supports employment, e.g. by removing in-
centive traps, continuing the development of 
employment services and unemployment se-
curity as well as ensuring that taxation on 
earned income will not be increased. The 
focus of taxation will be shifted from taxing 
labour and entrepreneurship towards environ-
mentally and health motivated taxation.
In addition to the debt target, the Govern-
ment has set targets for the general gov-
ernment budgetary position related, on one 
hand, to the budgetary position of central
government, local government and the so-
cial security funds during the parliamentary
term and, on the other hand, to the com-
bined structural budgetary position of gen-
eral government in the medium term. Table 
4 describes these objectives and rules that 
guide Finland’s fiscal policy, and compares 
them with the forecast by the Ministry of Fi-
nance. The table illustrates that we are yet 
far from the goal when it comes to central 
government finances. Social security funds 
are close to their target and it appears that 
the objective set for the financial standing of 
the local government will be met.
Finland’s general government fiscal targets
are also governed by EU regulations, most
significant of which is the Stability and
Growth Pact, which requires that Member
States maintain structural balance in gen-
eral government finances and avoid excessive
debt.
7
4 Budget 2018
Central government revenue and expenditure
are examined in the general rationale of the
budget in chapters 4 and 5 as well as in
the detailed rationale (www.budjetti.vm.fi, in
Finnish or Swedish). The revenue estimates
are presented by department and the appro-
priation estimates by administrative branch.
4.1 Revenue, expenditure, deficit and
debt
Revenue
In 2018, central government on-budget rev-
enue (excluding net borrowing) is estimated
to be approximately EUR 52.7 billion, with
tax revenue accounting for approximately
83%, i.e. EUR 44.0 billion. Tax revenue
is estimated to grow by 4.4% in 2018. Di-
agram 4 examines only the development of
tax revenue between 2004 and 2018. The
diagram demonstrates that, during the pre-
vious decade, the focus of central govern-
ment taxation has been shifting increasingly
towards indirect taxes and that e.g. certain
excise taxes and energy taxation have been
increased on several occasions. On the other
hand, the impacts of tax criteria changes on
the tax revenue have been dampened by the
modestly developed tax base.
Expenditure
The allocation of appropriations, i.e. central
government expenditure, to different pur-
poses depends on political decisions, eco-
nomic structures and economic cycles. In
2018, a significant share of the appropriations
of the central government budget will be al-
located to social security (36%). Diagram 5
illustrates where Finland will allocate its ap-
propriations in 2018.
Compared to the previous budget, there will
8
be expenditure growth of around 0.6% in
2018. Among the largest expenditure items,
based on the expenditure categories pre-
sented in Diagrams 5 and 6, there will be
an increase in the expenditure on social pro-
tection, defence, health care and public order
and security. Despite the decrease in unem-
ployment-related expenses, social security ex-
penditure will grow by almost 2%, which is
also illustrated by Diagram 6. Factors con-
tributing to this development include the ex-
pansion of the general housing allowance as
well as the continuation of rapid growth in
costs resulting from the Health Insurance Act
and pension expenditure. The transferral of
students to within the scope of the general
housing allowance will reduce expenditure on
education and transfer it to expenditure on
social security in the context of this review.
The reduction of health insurance contribu-
tions by employers in connection with the
Competitiveness Pact will raise central gov-
ernment expenditure arising from the Health
Insurance Act. The growth in health care ex-
penditure can be explained by the increase
in resources related to the preparation and
implementation of the health, social services
and regional government reform, which in
this category is technically defined as part of
health care expenditure.
The sharpest increase among the expendi-
ture categories presented in Diagram 6 is in
the smallest category, namely expenditure on
housing and community amenities. However,
the Diagrams show only the expenditure of
the budget. Most of the expenditure to sup-
port housing production is funded from the
off-budget Housing Fund. In addition, direct
housing allowance is included in social secu-
rity expenditure. This means that the bud-
get expenditure on housing and community
amenities is only 0.2% of the total expendi-
ture. More significant factors reducing the
total expenditure include the decline in re-
sources allocated to the promotion of busi-
ness and industry despite the fact that more
funds are spent on, for example, the devel-
opment and maintenance of transport infra-
structure compared to the previous year.
Part of the revenue in the central govern-
ment budget are obtained from the Euro-
pean Union, while, on the other hand, Fin-
land also makes contributions to the EU. At
central government level, Finland is expected
to contribute around EUR 1.9 billion to the
EU budget and the European Development
Fund in 2018. Finland’s contributions will be
EUR 19 million less than the contributions
in the 2017 Budget. Finland is expected to
receive approximately EUR 1.2 billion from
the EU budget, which is EUR 98 million less
than the projected figure for 2017. The re-
lationship between EU revenue and expen-
diture in the central government finances is
illustrated in Table 5. In accordance with the
budget of the EU for 2018, EU funding will
be allocated to addressing challenges related
to migration and the situation with refugees,
improving the security of the citizens of EU
Member States, and additional contributions
related to strategic investments and sustain-
able growth.
9
Deficit
The budget for 2018 shows a deficit of ap-
proximately EUR 3.1 billion, which will be
covered by increased borrowing. The deficit
will decrease compared with the figure bud-
geted for 2017 (taking into account already
approved supplementary budgets). In na-
tional accounting terms, the central govern-
ment deficit for 2018 is expected to be ap-
proximately 2.1% in ratio to GDP. Central
government on-budget activities have shown
a deficit since 2009. The situation is illus-
trated in Diagram 7.
Debt
At the end of 2018, central government debt
(including debt of off-budget entities) is ex-
pected to be approximately EUR 109 billion,
which is approximately 46% in ratio to GDP.
Diagram 8 illustrates that central govern-
ment debt has more or less doubled during
the previous ten years.
4.2 Excerpts from tax and allocation
decisions in budget for 2018
TAX CRITERIA CHANGE
In 2018, the Government will continue to
reduce taxation to compensate on the in-
crease in wage and salary earners’ contribu-
tions. Taxation of labour will be reduced by
EUR 300 million. Earned income tax criteria
will also be alleviated to correspond with the
change in the consumer price index in 2018.
The validity of the fixed-term reduction of
the minimum level of the solidarity tax will
be continued. The fixed-term child deduction
will expire at the end of 2017. The reduction
in the deductible proportion of mortgage in-
terest will be continued in accordance with
the Government Programme. The structure
10
of the public broadcasting tax will be changed
based on a proposal by a parliamentary work-
ing party so that those on the lowest incomes
will be exempt from the tax.
The tax on alcohol will be raised by EU 100
million. The energy taxes on transport fuels
and heating and power plant fuel are raised
by EUR 45 million net.
The tobacco tax will continue to be raised
in stages in 2018 and 2019. In 2018, the tax
will be raised by EUR 68 million. Vehicle tax-
ation will be reduced in total by some EUR
182 million in years 2016–2019. The suspen-
sion of the rail goods transport tax and the
halving of fairway dues will be continued until
the end of 2018.
The central government will compensate mu-
nicipalities for the detrimental impact on lo-
cal government finances of the reduction
of early childhood education and care costs
by increasing central government transfers
to municipalities for basic public services by
EUR 25 million and by raising the municipal-
ities’ proportion of corporation tax revenue
by EUR 60 million.
GENERAL PUBLIC SERVICES
EUR 6.8 million is allocated to the Prime
Minister’s Office in 2018 for costs incurred
as a result of the forthcoming Presidency of
the Council of the European Union. Finland
will hold the Presidency of the Council of the
European Union from 1 July to 31 December
2019.
EUR 0.6 million is allocated for the arrange-
ments for the year of remembrance of the
Finnish Civil War 1918 and the preparations
and coordination of the centenary of the flag
of Finland (29 May 2018). The Finland 100
project will be utilised in preparing and car-
rying out the celebrations.
EUR 1 million is allocated for the develop-
ment of electronic service channels for finan-
cial and debt counselling in 2018.
For the preparation of the health, social ser-
vices and regional government reform, an ap-
propriation of EUR 181 million is allocated for
the launch of county government, establish-
ment of service centres, and support for ICT
changes. EUR 100 million is allocated for the
implementation of the freedom of choice pi-
lots of the health and social services reform
in 2018. For more information, see 4.3.2.
An additional EUR 15.9 million for election
expenditure is allocated for the preparations
to the county elections in October 2018.
DEFENCE
An additional EUR 50 million is allocated for
the operating costs of the Finnish Defence
Forces for the purpose of improving prepared-
ness required by changes in the security en-
vironment and EUR 2 million for hiring con-
tractual military personnel.
EUR 13.5 million more is allocated to military
crisis management compared to the actual
budget for 2017. The addition is primarily
due to the continuation of the training opera-
11
tion in Iraq and Finland’s participation in the
Lebanon operation with a larger force than
previously determined.
PUBLIC ORDER AND SAFETY
An increase of EUR 52.5 million is allocated
for police appropriations for purposes such
as safeguarding operations, increasing equip-
ment and gear, enhancing operative perfor-
mance and capacity to prevent cybercrimes,
more effective asylum-seeker returns and pre-
ventive work against terrorism. The police
are also granted additional funds of EUR 0.47
million for purposes such as surveillance of
the street trade in drugs, surveillance of for-
eigners for the purpose of locating missing
persons, and to safeguard and develop the
school-related police work of police depart-
ments.
An additional EUR 9.2 million is allocated
for the Finnish Security Intelligence Service
for the purpose of enhancing capacity due to
new threats and changes in the operating en-
vironment.
An increase of approximately EUR 14 million
is proposed to the Border Guard appropria-
tions for purposes such as improving internal
security, equipment procurement and checks
performed at external borders, for instance
due to the increase in external border traffic
at Helsinki Airport.
An additional EUR 0.4 million is allocated
to the Emergency Response Centre Admin-
istration to address its staffing shortfall. An
additional appropriation of EUR 0.3 million
is allocated to the Emergency Services Col-
lege for increasing the education volume for
emergency response centre operators.
An increase of EUR 0.4 million is allocated
for improving the operating conditions of
the prosecution service in preventing terrorist
crimes and implementing criminal justice.
An additional EUR 0.4 million is allocated
to the Criminal Sanctions Agency for the
purpose of preventing violent radicalisation
and activities by fundamentalist movements
in prisons.
To enable faster processing of appeals on asy-
lum decisions and getting rid of long wait-
ing times for the processing of the appeals,
an additional EUR 1.49 million is allocated
for the supreme administrative court and an
additional EUR 2.2 million for other courts
of law. Additional funding of approximately
EUR 0.5 million is granted for legal aid for
asylum seekers.
It is estimated that in 2018 there will be
4,000 asylum-seekers. Immigration-related
expenditure is expected to decrease by ap-
proximately EUR 150 million overall, in com-
parison with the actual budget for 2017.
ISSUES RELATED TO BUSINESS
AND INDUSTRY
An additional EUR 25 million is allocated for
the employment services for the implemen-
tation of an activation model for unemploy-
12
ment security.
An additional EUR 5 million is allocated for
the Ohjaamo one-stop guidance activities re-
lated to the Youth Guarantee and EUR 3
million for constructing psychosocial support
services for young people in connection to the
Ohjaamo service points.
Business Finland, which will begin its opera-
tions at the beginning of 2018, will join the
services related to innovation funding, ex-
port, investments and tourism promotion of
Tekes and Finpro under one roof.
A new capital loan of EUR 30 million is al-
located for industrial renewal and the devel-
opment of company-driven business ecosys-
tems. Capital loans will be granted for
growth-oriented business start-ups whose im-
pact is in the form of a broad-based increase
in the potential for using innovations and as
business renewals.
An addition of EUR 20 million is made in au-
thorisation for energy subsidies. The appro-
priation reserved for renewable energy pro-
duction subsidies will increase by EUR 40.7
million. A Government proposal on ban-
ning the use of black coal in energy recovery
will be prepared in 2018. Additional appro-
priation totalling EUR 7 million is allocated
for circular economy investments, developing
growth ecosystems and promoting innovative
procurement.
EUR 5 million is allocated for the payment of
regional transport subsidy.
EUR 8 million is allocated for the renewal of
the vehicle stock and the promotion of low-
emission traffic through the continuation of
the scrapping incentive programme. An ad-
ditional annual allocation of EUR 6 million
is granted to support the acquisition of ve-
hicles that operate solely on electricity and
the conversion of gas and flexfuel vehicles.
The construction of a recharging and distri-
bution network, the process of electrification
for logistics in built-up areas and public pas-
senger transport in urban regions will also be
supported.
The appropriation for rural development is to
increase by approximately EUR 43 million pri-
marily due to the progress of the implemen-
tation of the Rural Development Programme
as well as the appropriation reserved for in-
terest subsidy expenditure.
In total, EUR 8 million in additional fund-
ing is allocated for the implementation of
the Tourism 4.0 key project. The purpose
is to allocate funding to tourism marketing,
improvement of digital competence in travel
companies and development of the availabil-
ity of services around the year. In addition,
an increase of EUR 0.9 million is allocated
for developing nature services.
Approximately EUR 33 million in appropri-
ations is reserved in 2018 for new trans-
port infrastructure projects, including the
Ring Road I at Laajalahti, the Vuosaari and
Kokkola fairways, the feeder traffic arrange-
ments on the Western Metro extension, the
Kirri-Tikkakoski section of main road 4 and
the Hailuoto fixed link. A further EUR 2 mil-
lion will be spent on improving level crossings
and EUR 11.8 million on basic transport in-
frastructure management, in addition to the
key project funding.
ENVIRONMENTAL PROTECTION
An additional appropriation of EUR 8 million
is allocated for the protection of old forests
(Forest Biodiversity Programme for Southern
Finland, METSO).
13
EUR 2 million is allocated to wood construc-
tion.
An increase of EUR 0.85 million is allocated
for reviving migratory and endangered fish
stocks (fish passages).
EDUCATION
Early childhood education and care fees will
be reduced by EUR 70 million beginning on
1 January 2018. In 2018–2019, an extensive
pilot project will be launched on free early
childhood education and care for five-year-
olds. EUR 5 million of funding is allocated
for the project.
An additional appropriation of EUR 25 mil-
lion is allocated for enhancing equality in
comprehensive schools. EUR 5 million is al-
located for strengthening the instruction in
natural sciences and mathematics.
Additional funding of EUR 15 million is allo-
cated for the implementation of the reform of
vocational education and training. The pro-
vision of vocational training will be increased
by 1,000 student-years in order to ease youth
unemployment and to address skills needs.
The increase in appropriations allocated for
this is EUR 9.4 million.
Students transferred to within the scope of
the general housing allowance on 1 August
2017.
A parent supplement will be introduced to
the financial aid for students taking care of a
child under 18 years of age. This will result
in a need for additional appropriation of EUR
10 million.
SOCIAL SECURITY INCL. 
EARNINGSRELATED PENSIONS 
Due to the growing volume of pension ex-
penditure and related index adjustments, an 
addition of EUR 117 million is allocated for 
the pensions and compensation paid for by 
the central government.
It is expected that unemployment benefit ex-
penditure will decline by EUR 153 million, 
e.g. as the unemployment rate is projected
to fall. The activation model for unemploy-
ment security is expected to reduce the ex-
penditure on unemployment security by EUR
9.5 million in 2018. On the other hand, the
Unemployment Security Act will be amended
so that people on unemployment security will
be able to launch business activities. The
intention is also to make it easier to use un-
employment security for short-term studying.
Additional appropriations of EUR 10 million
and EUR 3.5 million are allocated for these
purposes.
An increase of approximately EUR 14 million 
is allocated for pay subsidies in 2018. Young 
people will also be directed from the Employ-
ment and Economic Development Offices to 
services offered by, for instance, private ser-
vice providers. Service providers will be paid
14
on a results basis, which means payment will
be based on the extent to which young people
progress towards training or work. The tar-
get for this performance-based procurement
is set at 10,000 young people below the age
of 30, which will bring the estimated costs to
EUR 15 million.
EUR 8 million a year is allocated for raising
minimum allowances, i.e. sickness allowance,
parental allowance, rehabilitation allowance
and special care allowance.
An appropriation of EUR 9.5 million is allo-
cated for raising the amount of the single-
parent supplement of the child benefit. EUR
1.7 million is allocated for the purpose of rais-
ing maternity grant.
Adjusting housing costs based on the cost-
of-living index instead of the rent index has
been taken into account in the housing al-
lowance. Maximum housing costs will also
be frozen. These reforms will reduce hous-
ing allowance expenditure by around EUR 24
million next year. At the same time, basic
subsistence expenditure will increase by EUR
10 million.
EUR 18 million is allocated for increasing the
guarantee pension and EUR 10 million is al-
located for increasing the basic rate of the
care allowance for pensioners in 2018.
An additional appropriation of EUR 4 million
is allocated to ensure the availability of shel-
ter places.
Next year, it is proposed that new central
government compensation for municipalities
be introduced for the urgent social welfare
costs of individuals living in the country ille-
gally. An appropriation of around EUR 5.3
million is reserved for this purpose.
EUR 1 million will be allocated for the pre-
vention of economic problems of people living 
in rental housing.
4.3 Local government finances and
the regional government reform
The central government funds the opera-
tions of municipalities with central govern-
ment transfers and discretionary government 
transfers provided through the government 
aid system. Central government cannot di-
rectly influence t he e xpenditure i n munici-
palities; instead, this is governed by legis-
lation set by the Parliament and the deci-
sions made by the municipalities. The local 
government finances programme and chapter 
7 of the general rationale of the budget de-
scribe the state of local government finances 
and the impact of central government mea-
sures on local government finances in further 
detail.
4.3.1 Local government finances:
revenue, expenditure and financial
standing
In 2018, the revenue of municipalities is ex-
pected to comprise of tax revenue (53%), 
operating income (22%), central government 
transfers (20%) and other revenue (4%). It is 
estimated that 48% of municipalities’ expen-
diture will be allocated to wages and salary, 
33% to procurement of services and mate-
rials, 11% to investments and 8% to other 
expenditure. Distribution of municipalities’ 
revenue and expenditure is illustrated in 
DIagram 9.
15
Based on the Government’s budgetary tar-
gets for local government finances, local gov-
ernment net lending (on a National Accounts
basis) may not exceed -0.5% in ratio to GDP
in 2019. Based on current forecasts, this goal
will be reached in 2019. In 2018, the deficit
of the local government sector is estimated
to be -0.2% relative to GDP and debt is pro-
jected to stand at 8.3%. The development of
deficit and debt is illustrated in diagram 10.
More information on this issue is available
in chapter 2.3 of the winter 2017 Economic
Survey of the Ministry of Finance.
Central government measures affect the rev-
enue and expenditure of municipalities. The
net impact of the central government mea-
sures will weaken local government by around
EUR 45.6 million in 2018. The weakening is
due above all to statutory adjustment to the
division of costs between the central govern-
ment and municipalities. The impacts are
transferred to municipalities as changes to
the tasks, operations and funding of the mu-
nicipalities decided by the Parliament. The
adjustment to the division of costs between
central government and municipalities as well
as the centralisation of specialised medical
care are the most significant measures. The
impact of central government measures on
municipalities has been analysed in further
detail in chapter 7.3 of the general rationale
of the budget and chapter 4.2 of the local
government finances programme.
4.3.2 Health, social services and re-
gional government reform
The preparation of the health, social services
and regional government reform will continue
in 2018. The aim is to establish counties
beginning on 1 June 2018, at which point
the temporary county government will be-
gin its work. The first county council elec-
tions will be held in October 2018 and the
county councils will begin their operations at
the latest in January 2019. The responsi-
bility for the provision of social welfare and
health care services and management of the
duties of other administrative branches will
be transferred to the counties beginning in
2020.
Approximately EUR 181 million in central
government budget financing is reserved for
the preparations for the implementation of
the reform in 2018. The financing will cover
the costs of advance preparations and the
temporary government, planning and imple-
mentation of national information systems,
and establishment of the counties’ joint ser-
vice centres. The financing will be used to
realise regional and national change manage-
ment as well as the preparations of the im-
plementation required by the reform also in
the Government.
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5 Summary
This publication examines the central govern-
ment budget for 2018.
The main objectives of the Government inc-
lude bridging the sustainability gap in gene-
ral government finances and increasing the
employment rate. The goal is to bring living
on debt to an end in 2021. The Government
Programme includes different consolidation
measures. The focus of taxation will be shif-
ted from taxing labour and entrepreneurship
towards environmentally and health motiva-
ted taxation.
The economy is expected to grow further in
2018. The unemployment rate is projected to
decline and the employment rate to increase.
Nevertheless, the employment situation will
recover moderately and there will be a consi-
derable sustainability gap, i.e. an imbalance
between revenue and expenditure, in general
government finances in the long term due to
the ageing of the population.
The total sum of the budget for 2018 exceeds
EUR 55.8 billion. The central government on-
budget deficit is predicted to amount to app-
roximately EUR 3.1 billion and central go-
vernment debt is expected to rise to appro-
ximately EUR 109 billion.
The budget for 2018 includes investments 
in, for instance, the support for employment, 
preparation of the health, social services and 
regional government reform, freedom of choi-
ce pilots in health services, the police and de-
fence as well as the promotion of business and 
industry. It is expected that unemployment 
benefit expenditure will decline as a  result of 
the improving employment situation.
The budget for 2018 will also be updated on 
the www.tutkibudjettia.fi website which al-
lows examining the budget visually from dif-
ferent viewpoints.
17
6 Inquiries
Budget Department
Director General
Hannu Mäkinen,
tel. +358 2955 30330
Deputy Head of Budget Department
Juha Majanen,
tel. +358 2955 30247
Ministry of Finance
Snellmaninkatu 1 A
PO BOX 28, 00023 GOVERNMENT 
Tel. +358 9 295 160 01
Fax +358 9 160 33123
Budget review 2018 – January 2018 
ISSN 1797-9714 (zine)
ISBN 978-952-251-925-2 (zine) 
Ministry of Finance publications 2c/2018
18
7 Reading instructions and printable version
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5-based publication also suitable for mobile
devices. This digital publication is readable
on all devices regardless of their operating
system or screen size (computers, tablets,
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When reading the publication on your com-
puter, you can easily move from one page
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