Social partners mainly satisfied with government Budget

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The Finnish Government's Budget for 1999, which aims to balance public finances and start paying off the national debt, was published in August 1998. The social partners are mostly satisfied with the government guidelines.

The Finnish Government's proposal for the 1999 state Budget was issued after a period of rapid preparation in August 1998. The main goal is to achieve a balanced Budget and thus cut debt. In general, the Budget has been greeted positively, because now - for the first time in the 1990s - it will be possible to stabilise state finances through a Budget that shows a surplus.

Even though parliamentary elections will be held in spring 1999, the Budget is not seen as an "election budget" on the part of the "rainbow" coalition Government, increasing public expenditure in order to win voters. Indeed, it seems that the time of a "sharing" policy is past and Finland has moved on to a new era marked by a tightly controlled public economy. The Prime Minister, Paavo Lipponen, is satisfied with the new Budget, stating that through it Finland will come to be "among the strongest countries in Europe". Further signs of a new era could be interpreted from his statement that "debt is an enemy of the poor" (quoted in the Helsingin Sanomat newspaper, 14 August 1998).

During 1999, the country will stop running up new debts and the state can begin to pay back its loans with an instalment of FIM 200 million, as a start towards paying off a national debt amounting to FIM 400 billion. Through the new budget proposal, the Government is endeavouring to ensure solid economic growth and an improvement of the employment situation. According to government estimates, economic growth will continue in 1999 at a level of 4%, compared with 5.5% in 1998. The Government anticipates that this economic growth will produce a marked improvement in the employment rate. It is estimated that unemployment will decrease to 10.5% in 1998 and fall further to 9% in 1999.

Budget issues

The key provisions of the 1999 Budget with employment relevance include the following.

• An extension of the tax allowance on travel expenses for work-related trips, and an improvement of labour market training. In order to prevent overheating in the building sector, the Government proposes postponement of its own housing construction projects - and those with a state share or state subsidy - in 1999.

• The labour administration will support labour mobility by creating closer contacts between employment agencies and unemployed people. Moreover, in addition to the regular interviews for unemployed people that are part of the current labour market policy reform (FI9805161F), job opportunities will be mapped once a month on average.

• The length of labour market training and its content will be tailored to meet the needs of both unemployed people and employers. The training will be directed toward those unemployed people whose chances of getting any other kind of education are uncertain. Subsidised employment and start-up grants for entrepreneurs will be geared towards unemployed people in order to improve their chances of getting work.

Views of the social partners

The chair of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), Lauri Ihalainen, considers the government Budget as being appropriate to the current economical situation. However, he directed criticism toward the cuts in financing of house-building. "The shortage of rental apartments in growth centres is hindering labour mobility, the filling of job vacancies and economic growth, and creating pressure to increase the rent and price level," Mr Ihalainen says. According to him, combating the housing shortage presupposes increased financing of housing instead of the cuts that are now being made. The authorisation of housing loans and interest-subsidy loans should be reconsidered so that the supply of rental housing in growth centres can be increased substantially. Further irritation has been aroused by the fact that the Government has been unable to decide on any kind of fiscal measures to prevent stock exchange speculation and overheating of capital markets, even though - in the views of some commentators - now would appear to be the time for these.

Mr Ihalainen views positively the increased tax allowance on travel expenses for work-related trips, because this will facilitate mobility of labour and also take-up of short-term jobs. A favourable reception is given to the proposal that those municipalities in a difficult situation will be assisted by increasing discretionary subsidies. "The budgetary measures to improve employment, and promote the professional mobility which that requires, are insufficient. Training of the work force and its focusing must be improved," says Mr Ihalainen.

The chair of the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Esa Swanljung, thinks that the budget proposal holds out good prospects for the current beneficial results of the incomes policy for white-collar workers to continue. According to Mr Swanljung, Parliament should reserve enough resources for active labour policy measures when deciding on the Budget (quoted in the Kansan Uutiset newspaper, 14 August 1998)

The chair of the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA), Mikko Viitasalo, considers that the budget proposal is quite successful, in view of economic fluctuations. "The state economy has been stabilised, and the incomes policy agreement made last autumn has contributed to this," says Mr Viitasalo (Kansan Uutiset, 14 August 1998).

According to the chair of the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT), Johannes Koroma, public finances should be kept in balance or preferably in surplus. "The basis of next year's Budget is a step in the right direction, but because of the nearness of the elections it is still an unnecessarily short one," he says. Concerning the mobility and training of the labour force, Mr Koroma states: "The measures that have been launched in the budget proposal in order to promote geographical and professional mobility are very well justified. Improving the quality of further vocational training and labour market training, and their better focusing, are praiseworthy solutions. Improving the efficiency of labour administration by many different means will also help toward filling job vacancies."

Commentary

The new budget proposal can be considered as exceptional in the 1990s. For the first time, it is possible to begin paying off the state debt. Stabilising the Finnish economy has been a common goal for the Government and the social partners after the severe depression of the early 1990s. The 1998-2000 incomes policy agreement can be seen as one cornerstone in this process (FI9801145F). Despite the forthcoming elections in spring 1999, it has been possible to cut state expenditure. Measures to "activate" unemployed people will continue even more effectively after this budget proposal. The number of new jobs is increasing now that economic growth is rapid. Against this background, these measures can be considered as justified in order to bring employers and unemployed people into appropriate contact. All in all, the budget proposal has been welcomed quite positively, which indicates good mutual understanding between the social partners and the Government. It will be difficult for the political opposition to reject this Budget, particularly as it will not increase state expenditure. (Juha Hietanen, Ministry of Labour)