The Finnish Government's budget proposal for 2023

The economic outlook has weakened since the spring. The war in Ukraine adds to the uncertainty. The very fast inflation, rising interest rates and uncertainty in the energy market, will slow down economic growth both late this year and early next year. In 2023, growth in gross domestic product (GDP) will remain subdued, and there is an increased risk of a recession. The rapid growth in employment will slowing down, and the evolution of household purchasing power will depend on a slowdown in inflation and on wage increases. The households' confidence in their own finances has fallen to the lowest level in the history of measurement.

For the first time in a long time, Europe is threatened by scarcity that affects the basic needs – heating, food and consumer goods – and leads to rising prices. The necessary to save electricity and more energy efficiency arises. Although the Government is not able to compensate for all increases in electricity prices, it will take targeted measures to avoid unfair situations. The measures to promote purchasing power will focus in particular on low-income families with children.

The budget proposal includes significant measures to strengthen people’s purchasing power. The Government has decided, among other things, to reduce early childhood education and care fees, to pay an additional child benefit towards the end of the year and to increase temporary the level of several benefits.

The Government also outlined a number of measures aimed to compensate households for the sharp increase in electricity prices. The value-added tax rate on electricity will be reduced to 10 % between December and April (The VAT on electricity is currently 24%). In addition to this, a fixed-term tax credit for electricity and temporary financial support for electricity for households will also be introduced. The Government also recommends that energy companies take into account the exceptional circumstances of the energy crisis by granting longer than usual payment times for consumer customers who end up with large electricity bills. In accordance with the Government's decision, regulation on a windfall profit tax on electricity producers will also be prepared.

Despite weakened economic outlook, the employment situation remains good. The Government considers it important to continue investing in research, development and innovation activities, as well as in education and knowledge. The Government will continue to strengthen long-term financing for research and development activities. Finland's goal is to increase research and development expenditure to 4 % of GDP by 2030. The total amount of state R&D funding is estimated to total EUR 2.4 billion in 2023.

The Government also continues to invest in education. The quality of vocational education will be strengthened in accordance with earlier decisions by increasing its permanent funding by EUR 50 million. The gradual implementation of the extension of compulsory education and upper secondary education free of charge will continue, and EUR 102 million will be allocated towards the next year. To support the studies of Ukrainians fleeing the war, EUR 60 million will be allocated to early childhood education and care and EUR 120 million to preparatory education for primary and lower secondary education.

In order to bolster the Finland defence capabilities, the Government proposes that in 2023 the appropriation for the Ministry of Defence’s administrative branch be approximately EUR 1.0 billion higher than in 2022. Thus, there will be an increase of around EUR 137 million for the Defence Forces’ operating expenditure and an increase of around EUR 765 million for defence materiel procurement, compared to the 2022 Budget. EUR 163 million is proposed for the Border Guard for procuring new surveillance aircraft. Approximately EUR 59 million is proposed to improve cyber security preparedness.

Persons who have fled Ukraine had submitted approximately 37 000 applications for temporary protection in Finland by 28 August 2022. In total, it is proposed to allocate 791 million euros for migration-related expenditure. The government budget session decided to propose EUR 30 million to support Ukraine.

In 2023, the funding of wellbeing services counties will increase by around EUR 274 million in net terms compared to 2022 due to the new and broader tasks in health care and social welfare. One of the most important reforms is accelerating access to primary healthcare. The maximum waiting times for access to primary healthcare will be gradually tightened so that from 1 September 2023 access to non-urgent care must be provided within14 days and from 1 November 2024 in a week. Access to non-urgent oral healthcare must be provided within 3 months of the assessment of the need for treatment.

The budget proposal for 2023 totals EUR 80.5 billion. The proposed budget appropriations level for 2023 is EUR 15.6 billion higher than in the 2022 Budget. The budget proposal for 2023 has a deficit of EUR 8.1 billion, which will be covered by increased borrowing. According to the budget, the central government debt will rise to an estimated EUR 146 billion at the end of 2023. Following the general rise in interest rates, interest expenditure on central government debt is expected to grow by approximately EUR 1 billion compared to the 2022 Budget. The Central government revenue for 2023 is estimated at EUR 72.5 billion, of which EUR 64.5 billion are tax revenue.

The Government Budget proposal 2023 includes, among others, also the following:

• the private day care supplement (in Finnish, yksityisen hoidon tuen hoitolisä) be increased of EUR 100;
• the child increase in unemployment security (in Finnish, työttömyysturvan lapsikorotus) be raised by 20 %;
• the basic social assistance for children under 18 years of age (in Finnish, toimeentulotuki alle 18-vuotiaiden lasten perusosa) be raised by 10% for 2023;
• an increase of EUR 10 per month is proposed for the provider supplement to the study grant (in Finnish, opintorahan huoltajakorotus);
• an increase of EUR 5 per month for the single-parent increment to the child benefit (in Finnish, lapsilisä yksinhuoltajakorotus) for 2023;
• the value-added tax on passenger transport (in Finnish, henkilökuljetusten arvonlisävero) be dropped to zero between January and April 2023;
• the increase in the deduction for commuting expenses (in Finnish, työmatkavähennyksen korotus) will be continued, in 2023 the deduction will be 30 cents per kilometre;
• the earned income deduction (in Finnish, työtulovähennys) for people over 60 years of age will be increased in stages;
• Finland's refugee quota for 2023 is 1 050 persons;
• appropriations will be allocated for the urgent handling of offences against children and the strengthening of restraining orders;
• the appropriation for the police will be increased to EUR 854.3 million for the year 2023, which is EUR 30.9 million more than that budgeted for 2022;
• expenses arising from the NATO membership process will be estimated in connection with the amendment to the Budget in November;
• EUR 20 million has decided to be reserved for paying the share capital of the Drug Development Centre (Lääkekehityskeskus Oy). The Centre promotes competitive drug development in Finland;
• an increase the instruction of the second compulsory language, the B1 language, by adding one weekly lesson (1 hour per week) in the language programme for primary and lower secondary education. A total of EUR 1 million will be reserved for implementing the core curriculum in 2023;
• the student meal allowance (in Finnish, opiskelijoiden ateriatuki) will be raised by EUR 0.25 per meal;
• EUR 58.5 million will be allocated for promoting employment and extending working careers among people over 55 years of age.

The full information and the source text can be found at Finnish Ministry of Education and Culture website.