Editorial | Welfare areas are haunted by the budget crisis

TThe government’s budget meeting starting on Tuesday will be held in a delicate situation. The change in direction of economic policy initiated by Petteri Orpo’s (kok) government – which is supported by next year’s budget – is exceptionally large. In addition, the change comes at a sensitive point in terms of Finland’s economic cycle: you should save, but you shouldn’t.

But if you relate the budget task and its sensitivities to the mood of the government, what is special is that the tumult seems to be unanimous and easy. Not so much because of the lack of economic challenges, but because no government party dares to rock the boat in a sensitive situation.

The government’s public finance savings contract is reflected in the creation of next year’s budget. In the government program, the government said it would cut spending by a net amount of six billion euros. Since then, three billion more worth of balancing methods have been invented.

The ghost of the budget crisis is the lack of welfare areas. When the government enjoyed savings and balances, the welfare areas played a big role. It was hoped that they would balance their spending to the level of their income fairly quickly. This has not happened, and it will not happen. The deficits clearly exceed expectations, and the state has to support the regions more than expected. According to the most recent forecast, the welfare regions will make a deficit of EUR 1.45 billion this year. The cornerstone of the government’s austerity contract has already failed.

The small consolation in the outlook, however, is that some of the welfare areas have only just started their savings project. Some were already in balancing work earlier. In any case, the growth of regional deficits is unlikely to continue on the same curve from year to year. Savings measures will only start to bite in the coming years.

The financial problem of welfare regions is still the legacy they had to carry when they took over tasks and infrastructure from municipalities and municipal associations. The regions’ true ability to balance will only become clear after next year, when expenses and income may already be better balanced. Or at least the growth of deficits has stopped.

Thowever, this budget crisis cannot escape the current situation. If the growth of deficits in welfare areas has to be corrected now, the government may have a great temptation to develop more savings.

However, increasing savings would be poison for the economy in this situation. Statistics Finland told on Friday that the gross national product increased in the second quarter of the year compared to the previous quarter. Tax collections are also better than expected. The companies believe that sales will pick up at the end of the year.

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We’re already getting up from the bottom. Slowly, but nevertheless.

Judging by the upswing in housing sales, the consumer is starting to take a peek at his potter. Confidence in the future is still not fading, but we dare to lift our heads higher if the European Central Bank gives additional momentum to the decline in market interest rates. Mortgages are finally being raised at a brisk pace.

There’s no point in waiting for a happy upswing on these screens, but we’re already rising from the bottom. Slowly, but nevertheless.

However, there are plenty of counter-forces to the consumer-led recovery this autumn. Unemployment security is weakening, housing subsidies are shrinking, and the austerity-making public sector is telling people to let go. The general value added tax rate rises and weakens purchasing power.

OFin a unique situation, the government should stay and monitor how the translation of the economic policy goes and how the economy matures. Big, new and fast-biting savings should not be invented now.

There could be things to do in areas that can help the economy in the future, but are not actual savings. Work-based immigration should be promoted and the licensing of green investments should be streamlined.

The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the journal principle line.