Ministry of Economic Affairs and Employment 2019 budget proposal: further investment in innovation financing, employment and energy subsidies

The total appropriations of the Ministry of Economic Affairs and Employment in the 2019 budget proposal amount to MEUR 2,533. Operations will prioritise a growth policy promoting government targets for employment and economic growth.

“The Finnish economy is growing briskly, and we must continue ensuring that businesses have an adequate supply of skilled labour now and in future. The budget proposal will establish good conditions for this,” explains Mika Lintilä, the Minister for Economic Affairs.

“The employment rate has risen to approach the government’s target of 72 per cent. This continued strong economic growth is a splendid outcome, with government decisions successfully supporting favourable employment trends,” continues Minister of Employment Jari Lindström.

Increases for Business Finland and innovation financing

A decision emerged from the government budget session underwriting an increase of EUR 69 million in grants issued by Business Finland, bringing its total available grant funding to EUR 344 million in 2019. This is nearly EUR 74 million more than the limit imposed in the final budget for 2018.

“We were seeking a substantial increase in R&D investment, and I am pleased to report that this was agreed. Finland has clearly been falling behind competing economies when it comes to investing in innovation, and it was necessary for the government to address this concern. These decisions will boost exports and lay the foundations for future growth,” Minister Lintilä explains.

The government also decided to increase the appropriation for Business Finland operating costs by EUR 8 million. This additional funding will strengthen the international network of Business Finland and continue its proven programme work in support of business growth. An additional appropriation of EUR 7 million proposed by the government will also reinforce the strategic research work of VTT Technical Research Centre of Finland Ltd.

“An increase in operating outlays by Business Finland will ensure the continuation of its most successful growth programmes and procurement of additional resources for working internationally where industrious people are needed most,” Minister Lintilä continues.

Increased pay subsidies and the national working capacity programme

“I am pleased to announce an additional appropriation of EUR 10 million in the pay subsidy programme that has proved an effective means of boosting employment. We are increasing the maximum capacity of the 100 per cent pay subsidy programme for organisations to 4,000 person-years, while expediting and simplifying the process of disbursing enterprise pay subsidies,” Minister Lindström explains.

A system of rewards will also be deployed for businesses that regularise temporary employment during the pay subsidy period, or that hire eligible jobseekers directly into regular staff positions.

The government will establish a national Working Capacity Programme to enhance the working and functional capacity of long-term unemployed jobseekers and identification of individual rehabilitation needs using a multidisciplinary client service network. The aim is to rehabilitate jobseekers for return to the labour market while recognising that some people can no longer access the open labour market and also deserve a humane alternative. Part of this work will formulate a new employment exchange service concept applying the findings of working bank trials and other studies.

Additional resources will also be allocated to employment and economic development offices in line with previous decisions, with a productivity reward introduced at these offices on an interim basis to promote the employment of long-term unemployed jobseekers.

Employment support proposals from senior public servants

A working group of permanent secretaries, including Martti Hetemäki (Ministry of Finance), Jari Gustafsson (Ministry of Economic Affairs and Employment) and Anita Lehikoinen (Ministry of Education and Culture), has been preparing new measures for the government budget session to ensure the availability of labour and promote the employment of long-term unemployed jobseekers. The government will increase access to rapid impact, short-term vocational education and training and higher education programmes, such as those targeting qualification modules. An additional appropriation of EUR 20 million will be allocated for this purpose in the form of reallocations between items in the autumn 2018 supplementary budget.

Another reallocation of this kind will make EUR 10 million available for easing the transition of immigrants into the labour market through increased language training and orientation to society and the world of work.

The government is seeking to ensure a flexible transition from employment trials to growth service pilot projects, applying the alliance model and other approaches to bring the best practices from these trials into the pilot projects.

Further investment to promote new energy technology

Additional funds have been budgeted to subsidise restructuring in the energy sector. Taxation decisions are already in place supporting a transition from fossil fuels to renewables. The government is seeking to reduce vehicle emissions by promoting the use of electricity and biogas in road transport. The infrastructure subsidy programme to be deployed this year will be extended for the following year.

An appropriation of EUR 80 million is proposed for underwriting energy subsidies, exceeding the current budget by EUR 25 million. The increase is based on the national energy and climate strategy.

“The additional energy subsidies are a component in achieving the energy and climate objectives of Finland and the European Union. The aim is to channel additional investment primarily into new energy technology demonstration projects. We are also preparing to support investment in manufacturing renewable transport fuels. These investments will promote implementation of the national Agenda 2030 programme, and achievement of a carbon-neutral, resource-wise and competent Finland in particular,” explains Minister of the Environment, Energy and Housing Kimmo Tiilikainen.

Subsidies for generating electric power based on renewables will fall by nearly EUR 50 million due to a rise in the prices of emission rights and electricity. Technology-neutral competitive tendering will be arranged following a recent amendment to the Feed-in Tariff Act. The new arrangement will incur costs from 2020 onwards.

“Future production subsidies will only be paid for the most cost-effective and competitive investments. Compared to the current feed-in tariff system, this is a considerably more budget-conscious way for the taxpayer to support renewable electric power generating, and it will enable us to provide even more affordable and clean energy in future years,” Minister Tiilikainen continues.

Bridge agreement model expands into other labour shortage regions

The government is also expanding the bridge agreement model for Southwest Finland into other regions most affected by labour shortages. The bridge agreements will be drawn up by the end of this year and implemented within the framework. The government is also investing EUR 3 million in rapid deployment regional projects to boost the availability of skilled labour in regional cities, with financing commitments from local authorities and businesses in the region.

“Problems in securing skilled labour may throttle rapid economic growth around the country. The bridge agreement model improves collaboration between central government and the regions with a view to eliminating labour bottlenecks. A bridge agreement also provides a format for collaborating with regional cities,” Minister Lintilä explains.

The government has assigned an additional EUR 1 million for regional transport subsidies, with a total of EUR 6 million to be allocated for this purpose next year. Transport subsidies seek to maintain and improve operating conditions for small and medium-sized firms in sparsely populated areas by easing the cost burdens of long-haul product transportation.

“This is an important decision, as transport subsidies are a concrete way of ensuring the vitality of sparsely populated areas and business competitiveness,” Minister Lintilä observes.

All figures are subject to change, and will be finalised after the government plenary session on 17 September 2018.

Annex: Government employment measures and results achieved (in Finnish)

Government press release: Skills, employment, growth and food are key elements of the 2019 budget proposal

For further details please contact:
Mr Jukka Ihanus, Special Adviser to the Minister of Economic Affairs, tel. +358 50 463 9929
Mr Juha Halttunen, Special Adviser to the Minister of Employment, tel. +358 50 574 0236
Ms Taru Savolainen, Special Adviser to the Minister for Housing, Energy and the Environment , tel. +358 40 535 8622
Mr Jari Gustafsson, Permanent Secretary of the Ministry of Economic Affairs and Employment, tel. +358 29 504 7400
Mr Mika Niemelä, Director of Finance at the Ministry of Economic Affairs and Employment, tel. +358 29 506 2135