Economic Policy
Ministry of Finance publications – 2019:5
 
Budget review 2019
January 2019
Table of Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2 Economic outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 Government economic policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 Sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Budget 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7 Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8 Reading instructions and printable version . . . . . . . . . . . . . . . . . . . . . . 26
2
1 Introduction
General government finances in Finland con-
sist of central government, local government
and social security funds. Central government
finances consist of on-budget activities and
off-budget activities (the off-budget activities
are discussed in chapter 9 ”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. It examines the Government’s
2019 budget, which was approved by Parlia-
ment in December 2018. The purpose is to
provide a concise description of the main the-
mes of the budget with the help of diagrams
and tables as well as to guide the reader to
explore the themes in more detail via Inter-
net links. The background materials for bud-
geting include the independent economic fo-
recasts produced by the Economics Depart-
ment 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-
mation, see http://vm.fi/en/central-govern-
ment-spending-limits.
3
The 2019 budget amounts to EUR 55.5 billi-
on. Most of the appropriations will be spent
on social security. Revenue will be primari-
ly collected in taxes based on turnover, such
as value-added tax, and income taxes, inclu-
ding earned income and capital income tax.
The central government on-budget deficit is
predicted to amount to EUR 1.7 billion and
central government debt is expected to rise
to approximately EUR 107 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 examines the budget
from a sustainable development perspective.
Chapter 5 includes the 2019 budget’s reve-
nue and expenditure estimates, deficit and
debt. Local government and regional finan-
ces are also discussed from the viewpoint of
the on-budget activities. Chapter 6 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
In the global economy the fastest growth
phase of the current cycle has already passed,
and so growth will slow down over the coming
years. In 2019, the growth in Finland’s econ-
omy will slow to 1.5%. The slowdown will be
broad-based, but growth will be particularly
affected by a decline in housing investment.
Export growth in 2019 will be impeded by
the erection of further trade barriers. Never-
theless, net exports, aided by an increase in
capacity in the forest industry, will continue
to support GDP growth. The rapid rise in
households’ disposable income will continue
as the growth in earnings gathers pace. In
2019, real income will grow significantly and
household consumption growth will quicken
in comparison with the previous year, despite
rising inflation. Although GDP will be slow-
ing, the emergence of only a moderate rise
in real wages and salaries will ensure that
the demand for labour is maintained in 2019.
The unemployment rate is projected to fall
to 6.9% and the employment rate to rise
to 72.4% in 2019. Key forecast figures for
2016–2019 have been compiled in Table 1.
General government finances
The growth in the economy and the measures
to curb rising expenditure are strengthening
general government finances. Still consider-
ably in deficit just a few years ago, Finland’s
general government finances will be in bal-
ance at the end of the present decade. The
government-debt-to-GDP ratio will also fall
in the coming years.
General government finances will neverthe-
less begin to gradually weaken in the early
part of the 2020s when GDP growth slows
and the annual consolidation measures being
made in the current government term come
to an end. The ageing of the population will
weaken general government finances, as this
will increase the expenditure on pensions and
health and care services year by year. Indeed,
the ageing of the population will create con-
siderable pressure on general government fi-
nances in the long term. Table 2 presents key
5
indicators for general government finances for
2016–2019.
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 2016.
Most of general government expenditure con-
sists of expenditure on social security bene-
fits, as shown in Diagram 3. This expendi-
ture includes pensions, unemployment ben-
efits, benefits aimed at families as well as
housing allowance, allowances during illness
and allowances 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. The table reveals, for example, that
the costs per student of vocational educa-
tion and training were the highest compared
with other forms of education in 2016.
6
3 Government economic policy
Prime Minister Sipilä’s Government de-
cided on 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 for 
the increase in general government debt 
ratio to GDP to level off by t he e nd o f the 
parliamentary term and to bring living on 
debt to an end in 2021.
In addition to fiscal p olicy o bjectives, the 
Government has set as targets that the em-
ployment rate will rise to 72% and the num-
ber of people in employment by 110,000 dur-
ing the parliamentary term. In the light of 
current forecasts, these employment targets 
are being met. The achievement of the ob-
jectives has been facilitated by the good eco-
nomic climate. The rapid growth in em-
ployment has increased tax revenue and the 
decline in unemployment has reduced unem-
ployment expenditure.
The Government has supported the sustain-
able growth of the economy and employment 
through structural reforms. Efforts have been 
made to increase demand for labour with the 
Competitiveness Pact, which entered into ef-
fect in 2017 and has improved the compet-
itiveness of Finnish businesses. Supply of 
labour, on the other hand, has been boosted 
by, for example, removing incentive traps, in-
creasing labour mobility and reforming the 
unemployment benefit s ystem a nd employ-
ment services. At the same time, the Gov-
ernment has adhered to the Government Pro-
gramme policy of not increasing the taxation
of wage earners.
A cornerstone of the Government’s economic
policy is bridging the sustainability gap. At
the beginning of the parliamentary term, the
sustainability gap was estimated to be ap-
proximately EUR 10 billion at 2019 prices.
The immediate consolidation measures in ac-
cordance with the Government Programme
have been recorded in the central government
spending limits and are for 2019 included in
the budget. The immediate consolidation
measures account for approximately EUR 4
billion of the EUR 10 billion package of mea-
sures, although there remains uncertainty as-
sociated with the impact of measures depen-
dent on decisions by municipalities and with
the impact assessments of certain measures.
The regional government, health and social
services reform as well as other measures to
reform public administration may, if success-
ful, strengthen general government finances
by EUR 4 billion in the long term.
In addition to the debt target, the Govern-
ment has set targets for the general govern-
ment budgetary position related, on the 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 targets, and com-
pares them with the forecast by the Min-
istry of Finance. In the light of the forecast,
7
the sector-specific budgetary objectives for
general government finances will be broadly
achieved. Local government and the social
security funds will achieve the objectives set
for them, and central government will more
or less reach the objective set for it.
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.
8
4 Sustainable development
The global 2030 Agenda for Sustainable De-
velopment was adopted at the UN Summit
in 2015. It sets common goals for sustai-
nable development for all UN member sta-
tes. The Government has prepared a report
on the implementation of the 2030 Agenda,
outlining the key focus areas and actions for
enhancing sustainable development in Fin-
land economically, socially and environmen-
tally. The Government’s national implemen-
tation of the 2030 Agenda is based on two
focus areas: A carbon-neutral and resource-
wise Finland and A non-discriminating, equ-
al and competent Finland. Chapter 6 of the
budget’s general strategy and outlook focu-
ses on sustainable development.
4.1 Appropriations
In connection with the preparation of the
2019 budget, the appropriations included in
the budget that promote the goals of the fo-
cus area A carbon-neutral and resource-wise
Finland have been identified. The said app-
ropriations are presented in Tables 5-7 and
they are broken down according to the key
actions of the above-mentioned report. The
identified appropriations will promote, among
other things, biodiversity and the wellbeing
of the environment and nature, reduce emis-
sions, advance bioeconomy solutions and de-
velop Finland towards a low-carbon society.
The identified appropriations can be found,
in particular, in the administrative branches
of the Ministry of Economic Affairs and Emp-
loyment, the Ministry of Agriculture and Fo-
restry, the Ministry of Transport and Com-
munications, the Ministry of the Environment
and the Ministry for Foreign Affairs.
9
The goals of the carbon-neutral and resour-
ce-wise Finland focus area will be promoted
with a total of approximately EUR 1.7 billion
in the 2019 budget. This represents a decre-
ase of approximately EUR 126 million from
2018, mainly due to the termination of Go-
vernment key projects at the end of 2018.
In addition, the amount of support for rene-
wable energy has been reduced as a result
of the higher than expected market price of
electricity and the increased tax on peat. The
Government that takes office after the 2019
parliamentary elections will decide on possib-
le changes in the appropriation levels.
The largest package of measures is the crea-
tion of bioeconomy and cleantech solutions,
presented in Table 6, for which EUR 702.6
million is allocated for 2019. Of this, the lar-
gest share, EUR 290.7 million, consists of en-
vironmental compensation, organic producti-
on, advice and non-productive investments.
In addition, a significant package of measu-
res, presented in Table 5, is the implementa-
tion of the energy and climate strategy and
the medium-term climate policy, for which a
total of EUR 458.7 million is allocated. Of
this sum, EUR 214.5 million is allocated to
the production subsidy for renewable energy.
Other significant individual appropriation
items include the purchase and development
of public transport services (EUR 87.5 milli-
on), funding for regional and local rural deve-
lopment (EUR 107 million), greening support
(EUR 157.5 million), support for sustainable
development research, development and in-
novation (EUR 121.2 million) and develop-
ment cooperation projects, which will promo-
te, for example, food security and sustainable
use of natural resources (EUR 159 million).
4.2 Taxes
The 2019 budget includes a number of ta-
xes that may be considered as promoting the
carbon-neutral and resource-wise Finland fo-
cus area. These include, in particular, energy
taxes, motor vehicle tax, car tax, excise du-
ty on certain beverage packagings and waste
tax. Although these taxes may be regarded as
meeting sustainable development objectives,
they may also include individual tax struc-
tures that are both in accordance with and
contrary to the objectives.
Energy taxes are collected on transport fu-
els, off-road work machine and heating fuels,
and electricity. In addition to the tax revenue
10
they raise, energy taxes boost incentives for
energy-efficiency and lower-emission energy
production. Diagram 5 illustrates the deve-
lopment of the tax levels of various fuels and
electricity from 2009 to 2018. The diagram
shows that the tax levels of fuels and elect-
ricity have risen gradually since 2011, exclu-
ding the tax on peat, which has risen and
fallen during the period. In 2011, the natio-
nal energy tax system was reformed such that
the litre- or weight-based excise duty on fuel
was changed to an energy content tax, ba-
sed on the energy content of a fuel, and to
a carbon dioxide tax, based on the specific
emissions of carbon dioxide arising from the
combustion of a fuel. Local emissions arising
from the combustion of fuels also began to
be taken into account in the calculation cri-
teria for the tax.
The 2019 budget makes changes to energy
taxes that can be considered as contributing
to the objectives of the carbon-neutral and
resource-wise Finland focus area. The emissi-
ons steering of combined electricity and heat
production will be increased. Taxation of off-
road work machine and heating fuels will be
increased and changed such that, in calcu-
lating the carbon dioxide tax of a fuel, ot-
her greenhouse gas emissions arising during
the fuel’s life cycle will also be taken into ac-
count in addition to the greenhouse gas emis-
sions arising from the combustion of the fuel.
Details of the 2019 tax changes are not yet
known in all respects, but the tax level will
rise from 2018.
Motor vehicle tax and car tax are determined
partly on an emissions basis, so they increase
the cost of acquiring and running larger-emis-
sion vehicles and therefore encourage a shift
towards lower-emission transport. The excise
duty on certain beverage packagings encou-
rages recycling of beverage packagings. The
waste tax, on the other hand, is a steering
environmental tax aimed at reducing landfill
processing of waste and increasing recycling.
The car tax emission scale has been steepe-
ned during this parliamentary term and the
latest tax reduction for low-emission cars en-
tered into force at the beginning of 2019.
The reduction of the motor vehicle tax for
tax days beyond the start of 2020 will reduce
motor vehicle tax receipts already in 2019.
The tax reduction also brings a slight tigh-
tening of the motor vehicle tax emission sca-
le, but the emissions-increasing impact of the
lower tax may in fact be exacerbated by the
tax reduction’s cost-cutting effect on car use.
The overall impact on carbon dioxide emissi-
ons from transport will, however, be minor.
4.3 Environmentally harmful subsidies
Environmentally harmful subsidies refer to
subsidies that result in an increase in the
utilisation of natural resources and the en-
vironmental burden in the subsidised enterp-
rise or the subsidised sector. The introducti-
on of these subsidies is generally justified on
non-environmental grounds, as they may also
have positive effects on other policy objecti-
ves such as food production, regional econo-
my, employment and growth. These positive
impacts should be taken into account in eva-
11
luating the subsidies.
The 2019 budget includes environmentally
harmful subsidies, which can be identified
particularly in the tax system but also in
appropriations. The environmentally harmful
subsidies discussed in this context are based
on studies conducted earlier. (Environmental
impact of subsidies in the sector of the Mi-
nistry of Agriculture and Forestry, 2012; En-
vironmentally harmful subsidies, 2013; Pre-
paration of the structural policy programme,
2013; Subsidies harmful to biodiversity, 2015.
[All in Finnish])
The tax system includes tax subsidies, i.e.
exemptions from the normal tax structure.
The largest environmentally harmful tax sub-
sidies are in the field of energy taxation, na-
mely the lower than normal tax rates for die-
sel, off-road work machines, peat, industry
and greenhouses, the tax refund for energy-
intensive companies and the energy tax re-
fund for agriculture. In the appropriations,
compensation for indirect costs of emissions
trading and certain agricultural subsidies, for
example, can be classified as environmentally
harmful subsidies.
Based on the above-mentioned studies, the
environmentally harmful subsidies in the 2019
budget are estimated to amount to approxi-
mately EUR 3.5 billion, which mainly con-
sist of various tax subsidies. Environmentally
harmful subsidies are mainly directed at th-
ree sectors: energy, transport and agriculture.
The transport sector is the largest of these,
estimated at approximately EUR 1.4 billion,
but the subsidy levels of the sectors are quite
close to each other. In both the energy and
agriculture sectors, the subsidies amount to
slightly over EUR 1 billion.
The largest single environmental harmful
subsidy consists of the lower electricity tax
rate for industry and greenhouses, and it is
estimated to amount to approximately EUR
600 million in 2019. In the transport sector,
the subsidy levels of the lower tax rate on die-
sel, the commuting expenses deduction and
the lower tax rate on light fuel oil used in off-
road work machines are all close to approxi-
mately EUR 400 million. In the agriculture
sector, the largest single subsidy consists of
the payments for least favoured areas, which
balances the effects of differences in natu-
ral conditions and amounts to approximately
EUR 548 million.
12
5 Budget 2019
Central government revenue and expenditure
are examined in the budget’s general general
strategy and outlook in chapters 4 and 5 as
well as in the detailed rationale (www.bud-
jetti.vm.fi, in Finnish or Swedish). The rev-
enue estimates are presented by department
and the appropriation estimates by adminis-
trative branch.
5.1 Revenue, expenditure, deficit and
debt
Revenue
In 2019, central government on-budget rev-
enue (excluding net borrowing) is estimated
to be approximately EUR 53.8 billion, with
tax revenue accounting for approximately
85%, i.e. EUR 45.8 billion. Tax revenue is
expected to grow by 3.7% in 2019.
Diagram 6 examines the development of tax
revenue between 2005 and 2019. The recov-
ery in economic growth that began in 2016
has boosted growth in tax revenue. Value-
added tax is the central government’s largest
single source of revenue. During the current
economic upswing, corporate tax revenue has
grown most strongly. Growth in energy tax
receipts, on the other hand, has remained
subdued despite an increase in taxation.
Expenditure
The appropriations of the budget amount
to EUR 55.5 billion, which is approximately
EUR 0.3 billion less than in the actual 2018
budget. The expenditure level is reduced by
the ending of fixed-term key projects, the
consolidation measures in accordance with
Annex 6 of the Government Programme, and
lower unemployment benefit expenditure due
to the improved employment situation. The
savings impact of a number of consolidation
measures, such as measures related to ba-
sic transport infrastructure, regional develop-
ment of specialised medical care and operat-
ing expenditure, will grow in 2019. The im-
pact of consolidation measures in accordance
with Annex 6 of the Government Programme
will reduce central government expenditure
by approximately EUR 0.3 billion from 2018.
In addition, the freezing of index adjustments
is a factor that improves the budget balance.
The expenditure level is raised by, among
13
other things, statutory and contractual in-
creases, such as pay rises in accordance with
the central government collective agreement
concluded in the spring, and certain auto-
matic factors, such as growth in age-related
central government pension 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
2019, a significant share of the budget ap-
propriations will be allocated to social secu-
rity (36%). Diagram 7 illustrates where the
Finnish State will allocate its appropriations
in 2019.
Part of the revenue in the central govern-
ment budget is received from the European
Union, while Finland also pays contributions
to the EU. At central government level, Fin-
land is projected to contribute approximately
EUR 2.1 billion to the EU budget and the
European Development Fund in 2019. Fin-
land’s contributions will be EUR 205 million
higher than the figure budgeted for 2018.
Finland is expected to receive revenue of ap-
proximately EUR 1.2 billion from the EU bud-
get, which is EUR 187 million more than the
projected figure for 2018. The relationship
between EU revenue and expenditure in the
central government finances is illustrated in
Table 8. In accordance with the budget pro-
posal of the EU for 2019, 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.
Deficit
The 2019 budget shows a deficit of approxi-
mately EUR 1.7 billion, which will be covered
by increased borrowing. The deficit will in-
crease slightly compared with the figure bud-
geted for 2018, taking into account the ap-
proved supplementary budgets. The budget
deficit for 2018 will be reduced by early repay-
ment to the central government of refinanc-
ing credits. Without these premature repay-
ments, the budget deficit for 2018 would be
an estimated EUR 2.7 billion.
In national accounting terms, the central
government deficit for 2019 is expected to be
approximately 0.7% in ratio to GDP. Central
government on-budget activities have shown
a deficit since 2009. The situation is illus-
trated in Diagram 8.
14
Debt
At the end of 2019, central government debt
(including debt of off-budget entities) is es-
timated to be approximately EUR 107 bil-
lion, which is approximately 44% of GDP.
The lower than budgeted net borrowing in
2018 had the effect of reducing the level of
debt. Diagram 9 illustrates that central gov-
ernment debt has more or less doubled over
the last ten years.
5.2 Excerpts from tax and allocation
decisions in the 2019 budget
TAX CRITERIA CHANGE
Most of the tax criteria changes under the
Government Programme have already been
implemented in 2016–2018. Key measures
have been a reduction in taxation on labour
and an increase in excise duty and real-estate
tax taxation.
In 2019, the gradual entry into force of
changes according to the Government Pro-
gramme will continue: the tobacco tax will
be tightened, the car tax will be eased and
the deduction for interest paid on housing
loans will be reduced.
The taxation of earned income will be re-
duced, with the emphasis on low-income
earners, by raising the low-income allowance,
the earned income deduction and the pension
income allowances in central and local taxa-
tion. The combined effect of this annually,
covering all tax recipients, will be EUR 130
million. In addition, an index adjustment will
be made to the earned income taxation crite-
ria to ensure that there is no increase in tax-
ation arising from movements in the general
earnings level. The existence of a reduced
lower limit at which the so-called solidarity
tax is paid will continue in 2019.
The maximum amount of the deduction for
temporary quarters will be raised so it better
supports moving for the sake of work. The
tax exempt mileage allowance payable to vol-
untary workers will be broadened. In accor-
dance with the Government Programme, mu-
nicipalities will be compensated for the rev-
enue impact of changes in tax criteria. The
restriction of companies’ right to deduct in-
terest will be tightened when Finland imple-
ments the EU’s Tax Evasion Directive.
Excise duties will be increased to compensate
for the tax revenue losses resulting from the
easing of earned income taxation. The excise
duty on alcohol will be increased by an annual
EUR 30 million and the excise duty on soft
drinks by an annual EUR 25 million. Taxa-
tion of heating fuels will be changed so that
15
the calculation of a fuel’s carbon dioxide tax
will take into account the average life cycle
emissions of the fuel. In addition, the tax on
peat will be increased and the tax subsidy for
combined electricity and heat production will
be changed so that the halving of the carbon
dioxide tax is replaced by a reduction in the
energy content tax. As a result, tax revenue
from peat and other heating fuels will rise in
gross terms by EUR 38 million. The motor
vehicle tax will be reduced by EUR 50 million
for tax days beyond the start of 2020, which
will reduce tax receipts already in 2019.
GENERAL PUBLIC SERVICES incl.
Foreign Service
An appropriation of EUR 60 million is allo-
cated to the Prime Minister’s Office in 2019
for the preparation and implementation of
the Presidency of the Council of the Euro-
pean Union. Finland will hold the Presidency
of the Council of the European Union from 1
July to 31 December 2019.
A sum of EUR 860,000 is allocated in 2019
for the Healthy Premises 2028 Programme.
The programme aims to make public build-
ings healthy and improve healthcare and re-
habilitation for those suffering from poor in-
door air quality.
An appropriation of EUR 1.5 million is allo-
cated for the Sami truth and reconciliation
process.
An increase of EUR 7 million in election ex-
penditure is allocated for the holding of the
2019 county elections in connection with the
European Parliament elections.
A total of EUR 17.6 million is allocated for
the Foreign Service’s construction projects,
of which EUR 7 million is for temporary
premises for the secretariat of the Embassy
of Finland in Beijing and EUR 4.3 million for
renovation of the premises of the Embassy of
Finland in Moscow. In addition, an increase
of EUR 1.2 million is allocated for the Foreign
Service for the reopening of the diplomatic
mission in Baghdad.
An increase is made in the budget author-
ity for commitment to replacing European
Investment Bank capital, allowing Finland’s
share of the EIB’s subscribed capital to be
raised by EUR 595 million to a total of EUR
3.694 billion, from the present EUR 3.099 bil-
lion, due to the United Kingdom’s withdrawal
from the European Union.
An appropriation of EUR 211 million is allo-
cated for the preparation of the regional gov-
ernment, health and social services reform,
i.e. for county and interim administration
costs, change management, the development
and modification of information systems and
information management, and the establish-
ment and operation of the counties’ joint ser-
vice centres.
Of the central government transfer to local
government for basic public services, EUR
30 million will be allocated to promote dig-
italisation in local government. In addition,
EUR 10 million will be allocated to the discre-
tionary increase in central government trans-
fers to local government.
16
DEFENCE
A EUR 9.8 million increase is allocated in De-
fence Forces appropriations for additional ex-
penditure resulting from the implementation
of the Military Intelligence Act and an ad-
ditional EUR 5.8 million for increasing the
number of personnel.
A sum of EUR 260 million is allocated for de-
fence materiel procurement for the first year’s
financial contribution to the Squadron 2020
Project.
An additional EUR 1.5 million is allocated for
military crisis management, materiel and ad-
ministration expenditure compared to the ac-
tual budget for 2018. The increase is mainly
due to the planned continuation of the Iraq
OIR and Afghanistan RS operations.
PUBLIC ORDER AND SAFETY
An increase of approximately EUR 18 million
is made in Police appropriations to safeguard
core operations. The aim of the funding is,
among other things, to maintain the num-
ber of police at the current level, namely ap-
proximately 7,200. In addition, an increase of
EUR 2.5 million is made for community police
activities, EUR 2.2 million is allocated for the
costs of establishing a reserve police system,
and EUR 3.3 million to increase the number
of police in sparsely settled areas in partic-
ular. The police are also allocated other in-
creases, for example for the Government ICT
Centre’s TUVE service costs and for moni-
toring of aliens.
An additional appropriation of EUR 10 mil-
lion is allocated to the Finnish Security Intel-
ligence Service for expenditure arising from
civilian intelligence legislation, provided that
the legislation enters into force in 2019. In
addition, the Finnish Security Intelligence
Service is allocated additional funding of EUR
2.5 million to secure its core activities and
operational capacity, and EUR 1.6 million for
premises project costs.
A total of approximately EUR 2 million is al-
located to the police, the Ministry of the Inte-
rior, the Regional State Administrative Agen-
cies and others for the costs related to the
legislation that has come into force on the
monitoring of money laundering.
An additional appropriation of EUR 2.8 mil-
lion is allocated in Border Guard appropria-
tions for increased resource needs resulting
from the growth of external border traffic at
Helsinki-Vantaa Airport, and an increase of
EUR 2 million is allocated to secure core op-
erations.
Rescue services are allocated an additional
EUR 0.9 million, of which EUR 0.5 million is
for the training of emergency response centre
operators.
Expenditure relating to asylum seekers will
decline from 2018 by EUR 25 million. An
estimate of 4,000 asylum seekers per year
has been used as the assumption for immi-
gration expenditure. Approximately 10,500
people are estimated to be within the scope
of reception. The number of quota refugees
will remain unchanged at 750 people.
Financial and debt counselling duties will be
transferred to the state legal aid offices from
the beginning of 2019. A total of EUR 8
million will be allocated to improving the po-
sition of over-indebted individuals. This will
be directed at, among other things, financial
and debt counselling, counselling of indebted
individuals in connection with debt enforce-
ment, and speeding up court proceedings.
Additional funding totalling EUR 1.8 mil-
17
lion is allocated for the Criminal Sanctions
Agency to enhance sanctions ancillary to con-
ditional imprisonment and to reduce the re-
cidivism risk of those convicted of violent of-
fences.
ISSUES RELATED TO BUSINESS
AND INDUSTRY
An increase of EUR 10.3 million is allocated
for Employment and Economic Development
Offices to support active job seeking and im-
prove services for jobseekers, and an addi-
tional EUR 10 million to arrange regular in-
terviews.
The maximum number of people on the
wage subsidy payable to for example asso-
ciations and foundations is raised from 3,000
to 4,000.
The Ministry of Economic Affairs and Em-
ployment is allocated approval authority of
EUR 23 million for the recompense payable
on employment provision results during the
period 2020−2024. This allows commitment
to the employment impact investment fund
project aimed at reducing long-term unem-
ployment. Performance-based remuneration
is based on the effectiveness of actions, which
is ascertained by comparing the project par-
ticipants with an equivalent control group of
other unemployed people.
Business Finland’s authorisation to make
grants amounts to EUR 344.4 million, which
is EUR 73.6 million more than in the actual
budget for 2018. An increase of EUR 8 mil-
lion is allocated for the operating expendi-
ture of Business Finland innovation funding
agency, to be allocated to programme activ-
ities and to strengthen operations abroad.
An additional EUR 1 million is allocated for
the Geological Survey of Finland to explore
battery mineral reserves and the potential
for strengthening the domestic battery clus-
ter. Funding for the VTT Technical Research
Centre of Finland is increased by a total of
EUR 10.4 million for the costs of the de-
commissioning of the FiR1 research reactor
and the refurbishment of the Otakaari 3 hot
cell facilities, and EUR 7 million for boosting
strategic research.
EUR 3 million is allocated for rapidly imple-
mentable projects supporting the availability
of skilled labour in regional cities, where the
surrounding municipalities and businesses are
also willing to make a contribution to financ-
ing the projects.
The authority to grant energy subsidies is in-
creased by EUR 25 million.
A further EUR 10 million is allocated for ship-
building innovation support, which will en-
able the shipbuilding industry to invest in in-
novation and in enhancing its global compet-
itiveness.
The scrapping premium and support for the
purchase of electric cars as well as gas and
ethanol conversions of cars will be continued,
and a total of EUR 6 million is allocated for
this purpose.
An increase of EUR 40.3 million will be allo-
cated to basic transport infrastructure man-
agement, for example to reduce the repair
defecit and improve transport safety. In ad-
dition, an increase of EUR 4 million is allo-
cated to grants for the maintenance of im-
provement of private roads.
A sum of EUR 3.5 million is allocated to the
discretionary government transfers for pro-
moting walking and cycling and for public
transport projects in local government.
18
A number of appropriation increases are
made for supporting agriculture, to ease the
profitability problems of agriculture due to for
example drought in the 2018 growing season.
A EUR 27.5 million increase is allocated in
2019 for payments to least favoured areas.
An increase of EUR 22.5 million is allocated
for safeguarding the operating conditions for
agriculture. In addition, an increase of EUR 4
million is allocated to national aid for agricul-
ture and horticulture, for use in meeting the
need to adjust aid and support levels in situ-
ations where the use of aid has exceeded the
projected level. In 2019 EUR 20 million will
be paid with regard to the raised refund of
energy taxes on agriculture paid in 2018. A
sum of EUR 3 million will be allocated to the
Farmers’ Pension Institute (MELA) for 2019–
2020 to continue the Välitä viljelijästä (Con-
sideration for farmers) project. Additional in-
vestments are also to be made, for example
to promote bioeconomy innovation, for food
exports and to improve farm structure.
ENVIRONMENTAL PROTECTION
A sum of EUR 15 million is allocated for the
implementation of a new waterways protec-
tion enhancement programme.
For companies committed to the Green
Deal agreement currently being prepared, oil
waste charges on restoration and develop-
ment projects related to oil waste manage-
ment will apply on a temporary basis.
The implementation of the Forest Biodi-
versity Programme for Southern Finland
(METSO) will continue. In addition, EUR
0.2 million is allocated for updated invento-
ries of traditional rural biotopes. Closure ac-
tivities in the area of the Hitura mine, located
in Nivala, will continue and EUR 16.3 million
is allocated for this purpose.
An additional EUR 3.7 million is allocated to
Metsähallitus, for instance for developing na-
tional parks and nature conservation areas.
HOUSING AND COMMUNITY SER-
VICES
A sum of EUR 50 million from National Hous-
ing Fund resources can be used for the cap-
italisation of A-Kruunu Oy, which will facili-
tate an increase in construction.
EUR 400,000 is allocated to the Housing Fi-
nance and Development Centre of Finland for
the launch of an experimentation project on
living in housing cooperatives.
HEALTHCARE
An increase of EUR 8.8 million will be made
in central government funding for university-
level research in healthcare units.
The influenza vaccine programme will be de-
veloped and expanded so that the vaccine is
offered in the future to children aged from
six months to six years. An increase of EUR
1 million is allocated to acquire the vaccines.
EUR 1.2 million is allocated for the continua-
19
tion and expansion of the pilot schemes con-
cerning the development of national quality
registers for healthcare.
RECREATION AND CULTURE
The Schools on the Move programme will be
extended to upper secondary school students,
for which a total of EUR 2.8 million is allo-
cated in 2019.
To strengthen prerequisites for top-level
sport, the central government will prepare
for the capitalisation of an Olympic Fund,
which will be established by transferring to
it a maximum of EUR 20 million of state-
owned share assets. The central government
capitalisation will be made in proportion to
private capital provided.
EUR 1 million is allocated for the launching
of pilot schemes promoting physical exercise
among children in early childhood education
and care.
The libraries’ digital project is allocated EUR
860,000 for personnel skills development and
for consolidating the AUTA Project operating
model.
EDUCATION
As part of Government measures to promote
skills, research and growth, the grant autho-
risations of the Academy of Finland for sci-
entific research is raised by EUR 25 million.
An additional appropriation of EUR 5 mil-
lion annually is allocated to strengthening the
R&D&I activities of the universities of ap-
plied sciences.
The Ministry of Education and Culture is
granted authority under which the central
government may transfer EUR 60 million in
listed shares to the basic capital of the re-
search-supporting foundation set up by the
central government, and EUR 80 million in
listed shares to the equity of the limited liabil-
ity company to be set up to promote educa-
tion exports and the development of learning
environments in vocational education.
A sum of EUR 10 million is allocated for the
implementation of the new Act on General
Upper Secondary Education and for devel-
opment of the quality of general upper sec-
ondary education. Implementation of the re-
form of upper secondary education will be
launched by removing restrictions on the re-
sitting of the matriculation examination, for
which EUR 0.4 million is allocated.
The implementation of the reform of voca-
tional education and training will continue
and will be further supported by funding of
EUR 15 million.
An additional EUR 2 million is allocated for
promoting educational equality and the qual-
ity of education in pre-primary and compre-
hensive school education. In addition, EUR 3
million is allocated to supporting traditional
club activities in schools.
Equality and raising the participation rate in
early childhood education will be enhanced
and an appropriation of EUR 10 million for
positive discrimination grants is allocated for
organisers of early childhood education.
The pilot project on free early childhood edu-
cation for five-year-olds will be expanded, and
an additional appropriation of EUR 5 million
is allocated for this purpose.
An increase of approximately EUR 8 million
is allocated in expenditure on financial aid for
students for extending the right to financial
aid for students to primary and lower sec-
20
ondary education students who have passed
the age of compulsory schooling, for a learn-
ing materials allowance for general upper sec-
ondary education and vocational education
students, and for extending the academic
year support period in general upper sec-
ondary education. From the start of 2019,
scholarships received by students will not be
counted as income. From 1 August 2019,
in the case of students aged less than 18,
study grants and housing supplement will not
be reduced on the basis of parental income.
To meet these changes, an additional EUR
930,000 is allocated to study grant expendi-
ture.
SOCIAL SECURITY incl. earnings-
related pensions
Due to the growing volume of pension ex-
penditure and related index adjustments, an
increase of EUR 115 million on the previous
year is allocated for pensions and compen-
sation paid by the central government. An
additional EUR 17.1 million is allocated for
the central government’s share of the expen-
diture on self-employed persons’ pensions, as
the amount of insurance contributions will be
below the level anticipated.
It is expected that unemployment benefit ex-
penditure will decline by approximately EUR
292 million, mainly due to a fall in the un-
employment rate. On the other hand, a total
increase of EUR 3.4 million is allocated for
unemployment security expenditure as a re-
sult of the shortening of the period without
benefit, from 90 to 60 days. Further efforts
will be made to boost employment by allocat-
ing EUR 20 million to improving incentives to
accept work. In addition, the realisation of
the right to earnings-related unemployment
benefit for family members of entrepreneurs
will be promoted, for which EUR 10 million
is allocated.
It is proposed that the scope of the pension
subsidy be expanded to cover new age co-
horts. People who have been unemployed for
over five years and are aged 60 or more could
receive the subsidy if they so wish. A net ap-
propriation of approximately EUR 3 million is
allocated for the pension subsidy.
An increase of just under EUR 15 million is
allocated for Kela’s social security funds, to
be allocated for instance to operating costs
arising from the implementation of the acti-
vation model for unemployment benefit and
from the work associated with decisions on
social assistance.
The status of adoptive and multiple-birth
families will be improved. A sum of EUR
300,000 is allocated for adjusting the adop-
tion grant for families adopting from abroad,
and the paternity allowance period for fathers
in multiple-birth families will be extended.
The levels of the smallest daily allowances
(sickness allowance, parental allowance, re-
habilitation allowance and special care al-
lowance) are raised to the same level as
labour market support, in which case the
allowances will increase by EUR 80.50 per
month. The cost impact of the increase for
the central government is approximately EUR
21
20 million on an annual basis. EUR 4.4 mil-
lion is allocated in net terms to cover the
costs of removing the 55-day qualifying pe-
riod for sickness allowance.
The criteria for young people’s vocational re-
habilitation will be eased to support the stud-
ies and employment of young people in a dif-
ficult position. In addition, a rehabilitation
allowance will be paid as participation income
to young people in vocational rehabilitation
for the entire period of the rehabilitation de-
cision. An additional appropriation of EUR
3.6 million is allocated in 2019 for the change.
A total increase of EUR 1.5 million is allo-
cated for youth workshop activities and for
outreach youth work.
The guaranteed pension is increased by ap-
proximately EUR 9 per month, which in-
creases central government expenditure by
EUR 10 million on an annual basis.
New legislation will give front-line veterans
the right to the same services supporting liv-
ing at home to which disabled war veterans
are already entitled. A total sum of EUR 40
million be allocated to this in 2019.
EUR 1.2 million is allocated for developing
and organising food aid activities nationally
for people in need of special Support.
5.3 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. The central government can-
not influence the expenditure in municipal-
ities directly; this is governed by legislation
enacted by the Parliament and the munic-
ipalities’ own decisions. The local govern-
ment finances programme and chapter 8 of
the 2019 budget’s general strategy and out-
look describe the state of local government
finances and the impact of central govern-
ment measures on local government finances
in further detail.
5.3.1 Local government finances: rev-
enue, expenditure and financial posi-
tion
In 2019, the revenue of the municipalities is
expected to consist of tax revenue (55%),
operating income (22%), central government
transfers (20%) and other revenue (4%). It
is estimated that 47% of municipalities’ ex-
penditure will be allocated to personnel ex-
pences, 32% to procurement of services and
materials, 11% to investments and 9% to
other expenditure. The distribution of mu-
nicipalities’ revenue and expenditure is illus-
trated in Diagram 10.
Under the Government’s budgetary targets
for local government finances, local govern-
ment net lending (on a National Accounts
basis) may not exceed -0.5 per cent of GDP
in 2019. In the light of current forecasts, this
target will be achieved in 2019. The deficit
of the local government sector is estimated
to be -0.5% of GDP and debt to be 9.1% in
2019. The development of the deficit and
debt is illustrated in Diagram 11 and this
22
topic is discussed in more detail in Chapter
2.4 of the winter 2018 Economic Survey of
the Ministry of Finance.
Central government measures affect the rev-
enue and expenditure of municipalities. The
net impact of central government measures
will weaken local government finances by ap-
proximately EUR 254 million in 2019. The
weakening is due above all to statutory ad-
justment to the division of costs between the
central government and municipalities, and
the freezing of index adjustments under the
Government Programme. The impacts are
transferred to municipalities as changes, de-
cided by the Parliament, to the tasks, opera-
tions and funding of the municipalities. The
most significant measures are the adjustment
to the division of costs between central gov-
ernment and municipalities as well as mea-
sures reducing municipalities expenditure in
accordance with Annex 6 of the Government
Programme (e.g. centralisation of specialised
medical care, revising the quality recommen-
dation in services for the elderly, and devel-
opment of informal and family care). The
impact of central government measures on
municipalities has been analysed in more de-
tail in Chapter 8.3 of the general strategy
and outlook of the budget proposal and in
Chapter 2.2 of the local government finances
programme.
5.3.2 Health, social services and re-
gional government reform
The entry into force of the regional govern-
ment, health and social services reform is
postponed until the beginning of 2021. The
date of the first county elections will be deter-
mined after Parliament has made its decisions
on the legislation for the regional govern-
ment, health and social services reform. The
counties would be established immediately
after the legislation enters into force and the
county interim administrations would lead
the preparation of the counties’ administra-
tion and operations until the elected county
councils begin their term of office. The re-
sponsibility for the arrangement of health and
social services and management of the du-
ties of other administrative branches will be
transferred to the counties at the beginning
in 2021.
Approximately EUR 211 million in central
government budget financing is earmarked
for preparations for the implementation of
the reform in 2019. The financing will cover
the costs of advance preparations and the
interim administration, planning and imple-
mentation of national information systems,
and the establishment of the counties’ joint
service centres. The financing will be used
to realise regional and national change man-
agement as well as preparations for the im-
plementation required by the reform also in
the Government.
23
6 Summary
This publication examines the 2019 budget.
The publication has been expanded to inc-
lude an examination of sustainable develop-
ment appropriations.
The key 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.
Growth in the economy is expected to slow
down in 2019. The unemployment rate is pro-
jected to fall and the employment rate to ri-
se. Due to population ageing, however, the-
re is a considerable sustainability gap, i.e. an
imbalance between revenue and expenditure,
in general government finances in the long
term.
The 2019 budget totals approximately EUR
55.5 billion. The central government on-bud-
get deficit is projected to amount to appro-
ximately EUR 1.7 billion and central govern-
ment debt is expected to rise to approxima-
tely EUR 107 billion.
The budget for 2019 includes investments in 
supporting employment, skills and research, 
preventing inequality, preparing the reform of 
regional government, health and social servi-
ces, police and defence operations, agricultu-
re, waterways protection and early childhood 
education. Unemployment benefit expenditu-
re is expected to decline due to an improving 
employment situation.
The 2019 budget will also be updated on the 
www.tutkibudjettia.fi website which allows 
the budget to be examined visually from dif-
ferent perspectives.
24
7 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
Budget review 2019. January 2019 
Ministry of Finance publications 2019:5 
ISSN 1797-9714 (zine)
ISBN 978-952-251-986-3 (zine)
25
8 Reading instructions and printable version
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