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Budget session of Prime Minister Orpo's Government: Returning Finland to a sustainable growth track

Government Communications DepartmentMinistry for Foreign AffairsMinistry of Agriculture and ForestryMinistry of DefenceMinistry of Economic Affairs and EmploymentMinistry of Education and CultureMinistry of FinanceMinistry of JusticeMinistry of Social Affairs and HealthMinistry of Transport and CommunicationsMinistry of the EnvironmentMinistry of the Interior
Publication date 19.9.2023 21.19 | Published in English on 20.9.2023 at 16.32
Press release
Sari Essayah, Riikka Purra, Petteri Orpo and Anna-Maja Henriksson

In its first budget session, the Government of Prime Minister Petteri Orpo decided on solutions that will return Finland to a sustainable growth track. The Government will launch structural reforms to boost employment and growth, which will have positive impacts on general government finances in the next few years. In addition, the Government decided on consolidation measures.

In its budget session, the Government agreed on the budget proposal for 2024 and the General Government Fiscal Plan for 2024–2027. The Government also reached an agreement on the second supplementary budget proposal for 2023.

“Finland’s economic situation is grave. For this reason, the Government Programme set out the measures for reversing the trend of general government finances, and now we are getting down to work. We have to make painful cuts. At the same time, however, we can invest in the future: for example, in education, research and development, and clean energy,” says Prime Minister Petteri Orpo.

Based on new forecasts, the state of general government finances is worrying. The Government estimates that the agreed adjustments and productivity measures combined with employment and growth measures will stop the growth of the general government debt-to-GDP ratio. Indebtedness threatens the financing base of welfare services. For this reason, the Government will monitor the implementation of the reforms and adjustments agreed in the Government Programme and, if necessary, take additional measures to ensure that the objective of curbing the growth of the general government debt ratio does not slip away. The Government will assess the state of general government finances and the need for any further measures in the mid-term policy review session.

The Government is beginning to reduce the general government deficit in challenging circumstances. According to the Ministry of Finance's updated forecast, tax revenue will be EUR 1.4 billion lower next year than projected by the Ministry in its budget proposal in August. The deficit will be widened by permanent expenditure increases implemented by the previous Government through additional borrowing. According to the updated estimate, the expenditure of the wellbeing services counties will clearly exceed the level estimated by the previous Government in the ex-post review of 2025. Higher interest rates, on the other hand, will increase central government debt servicing expenditure by more than EUR 2.5 billion from 2022.

Expenditure will also grow due to necessary increases in defence and security and the Government's investment in research and development. 

“If not for this Government’s decisions, the central government on-budget expenditure would be nearly EUR 1 billion higher next year and the deficit would be EUR 2.5 billion larger at the 2027 level. No better time will come to make decisions that are necessary for Finland and the Finnish people. We must put Finland on a path of sustainable growth so that we can safeguard our welfare society and its services for future generations,” Orpo says.

Economic growth will be weak this year. According to forecasts, growth will pick up slightly next year.

In its budget session, the Government decided on measures to address the difficult cyclical conditions in the construction sector. Through the measures, the Government aims to prevent long-term disruptions to housing production or the housing market. The Government will monitor the effects that the downturn in the construction sector has on other sectors.

Private consumption will start to grow next year. Households’ disposable income will increase as inflation slows and earnings rise. The Government will strengthen households’ purchasing power by reducing the taxation of work across all income categories.  A reduction in unemployment insurance contributions will be made in accordance with the proposal of the Employment Fund.
Taxation of wage earners will be eased by nearly EUR 400 million next year when taking into account the reduction of unemployment insurance contributions. The Government’s tax decisions will take into account Finland’s need for more high-competence jobs and experts. In line with its policy, the Government will shift the focus in taxation from labour towards consumption and harmful goods and services. The purchasing power of Finns will also be supported by reducing the excise duty on fuels.

The Government’s investment in research and development (R&D) will be record high. R&D funding will increase by EUR 1 billion during the parliamentary term. Next year, R&D funding will grow by around EUR 280 million compared to this year. The Government decided to fund the development of a quantum computer, among other things.

The Government will permanently increase the level of funding for comprehensive schools by EUR 200 million over the entire government term. In 2024, funding for comprehensive school education would be increased by EUR 50 million.

The Government will invest in internal security. For example, the Government will start raising the number of police officers towards 8,000 person-years, which is the target outlined in the Government Programme. The Government will invest in the prevention of youth and gang crime. Rescue worker training will be strengthened.

The Government will accelerate the transition to clean energy with EUR 160 million. Funds from the EU’s Recovery and Resilience Facility will be channelled towards more flexible permit processes to boost investment in clean energy.

The Government will foster biodiversity and prevent biodiversity loss by continuing and improving the METSO Forest Biodiversity Programme for Southern Finland, the Helmi Habitats Programme and the NOUSU Migratory Fish Programme. The state of the Archipelago Sea will be improved.

In the Government Programme, the Government agreed on an investment programme of EUR 4 billion to support growth. As part of the investment programme, the Government will improve Finnish people’s health and wellbeing. The Government will shorten the waiting times for access to healthcare by increasing reimbursements payable by the Social Insurance Institution of Finland (Kela) for private healthcare services. The Government will allocate an extra EUR 355 million for Kela reimbursements during the parliamentary term. The total scale of the changes to Kela reimbursements is about EUR 500 million. For example, Kela reimbursements for appointments with general practitioners and medical specialists, psychotherapy and dental care will be raised.

The Government also agreed on a rapid advancement of transport investments included in the infrastructure package. Several transport projects, particularly those concerning the main rail line, will be launched. Planning will also begin on new projects. Measures to boost the vitality of Eastern Finland will be launched. The Government is allocating significant resources to reduce the backlog in repairs of the road network.

In its budget session, the Government decided to safeguard the appropriations for agriculture and security of supply.

The Government is committed to promoting equality, gender equality and non-discrimination in accordance with the Government Programme and the statement to Parliament adopted earlier this autumn. In addition to allocating funding for achieving the objectives set out in the Government Programme, the Government will allocate EUR 6 million for promoting equality, gender equality and non-discrimination during 2024–2027.

Key decisions made in the government budget session are explained in more detail here.

Inquiries: Mikko Martikkala, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 16001, Jussi Lindgren, Special Adviser to the Minister of Finance in Economic Affairs, tel. +358 295 530 514, Laura Ollila, Special Adviser to the Minister of Education, tel. +358 295 330 130, Marjo Loponen, Special Adviser to the Minister of Agriculture and Forestry, tel. +358 50 308 5411