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Draft Budget of Ministry of Economic Affairs and Employment for 2021: building new growth pathways

Ministry of Economic Affairs and Employment
Publication date 13.8.2020 9.22 | Published in English on 13.8.2020 at 14.19
Press release

The draft budget of the Ministry of Economic Affairs and Employment for 2021 prioritises a growth policy that will promote sustainable economic growth.

– The ministry's draft budget is aimed at the period following the coronavirus crisis. Our objective is to achieve sustainable growth after the epidemic, even though the coronavirus crisis has undermined economic prospects. We want to make an effective investment in good employment, skills and innovation, and in a low-carbon future, Minister of Employment Tuula Haatainen and Minister of Economic Affairs Mika Lintilä say about their first joint draft budget.

The Ministry of Economic Affairs and Employment proposes total appropriations of EUR 3.882 billion, representing an increase of over EUR 1 billion on the budget for 2020. The increase in appropriations is mainly due to measures taken in spring 2020 as a result of the coronavirus crisis, the expenditure impact of which will be felt in 2021.

Compared to the budget for the current year, the level of expenditure in the main title will be increased in particular by capital funding of Finnish Minerals Group (+ EUR 300 million), the payment of Business Finland's aids and loans (+ EUR 370 million), compensating for Finnvera's losses (+ EUR 156 million) and the payment of business development aid (+ EUR 77 million).

Investing in boosting Finland’s battery industry

The draft budget of the Ministry of Economic Affairs and Employment includes an appropriation totalling EUR 300 million to Finnish Minerals Group. Capital funding was decided on in conjunction with the fourth supplementary budget for 2020 through a budget authority procedure. With the help of additional funding, Finnish Minerals Group aims to establish joint ventures with private operators to produce the precursor and cathode-active materials required by the battery industry. These are intermediate products needed in the production of lithium-ion batteries for electric cars. Private investors would also participate in the investments.

– Our objective is to increase the added value of Finnish minerals, thus helping to create a new sector of high-tech expertise in Finland, and to profile Finland as a global frontrunner in sustainable electric transport, Minister Haatainen concludes.

The growing popularity of electric cars, among other things, creates significant global business opportunities for the battery industry.

The Ministry of Employment and the Economy has launched the drafting of a national battery strategy. Through the strategy, Finland wants to strengthen its role as a leader in sustainable battery production and the recycling of batteries. With the investments, the Government aims to create a responsible value chain in the Finnish battery industry. Its competitive advantage would stem from the ability to produce environmentally friendly, ethical and recyclable materials.

– We want to be involved in the construction of a sustainable European battery industry. In this way we can offer solutions to climate change, Minister of Economic Affairs Lintilä says.

Additional investments in innovation and skills

The Ministry of Employment and the Economy proposes significant additional investments in research, development and innovation.

– We must continue to be able to invest in knowledge and innovation. These are key elements of reconstruction and growth in the post-coronavirus crisis period, says Minister Lintilä.

It is proposed that the grants for Business Finland's research, development and innovation activities (RDI) be granted a mandate of just over EUR 467 million, which is nearly EUR 140 million more than in the actual budget for 2020. The increase paves the way for the 4% GDP target for the RDI funding included in the Government Programme. The increase means, among other things, that the business campaign for large, leading companies and the production incentive for the audio-visual sector will be continued.

It is proposed that Business Finland be given a mandate to grant capital loans for EUR 30 million, which is EUR 26 million more than in this year’s budget. Capital loans will accelerate the development of platforms needed in business ecosystems, thus enabling an increase in innovation activity.

Employment appropriations on the increase

A total of EUR 299 million is proposed for public employment and business services appropriations. This is EUR 26 million more than in the 2020 budget.

– As a result of the coronavirus pandemic, new measures will be needed to achieve the employment target recorded in the Government Programme. As part of the preparation of the sustainability road map for public finances, the Government will decide on setting the bar high for the employment target at the government budget session, says Minister Haatainen.

According to the Government Programme, the aim is to increase the use of pay subsidies in companies and to simplify the current pay subsidy scheme. Preparations for reforms will continue.

In 2021, local government trials on boosting employment will be launched, the Government proposal for which was submitted to Parliament during the spring session.

Transition towards fossil-free welfare society

By May 2029 at the latest, the use of coal for energy will be phased out in line with the decisions made. The Ministry of Economic Affairs and Employment will accelerate coal phase-out in particular by energy subsidies. It proposes a mandate of EUR 160 million for granting energy subsidies, which is EUR 50 million more than in this year’s budget. This includes an allocation of EUR 60 million to speed up investments in alternatives to coal. 

Crisis measures increase expenditure

The measures taken to manage the coronavirus crisis in spring 2020 will increase the expenditure of the main title of the Ministry of Economic Affairs and Employment in 2021.

The Government made a significant contribution to business financing in the spring 2020 supplementary budgets. Aid-based business financing was increased by EUR 2.1 billion and loan-based financing by EUR 300 million. In addition, Finnvera's guarantee authorisation was increased from EUR 4.2 billion to EUR 12 billion. As a result, these measures will increase the expenditure of the main title by EUR 535 million in 2021.

In addition, the coronavirus pandemic has affected, among other things, the price of electricity and emission allowances, which means that the costs to subsidise renewable energy production will increase by nearly EUR 58 million and the income acquired from emissions trading will decrease by EUR 79 million compared to the previous estimate.

Piia Rekilä, Special Adviser to the Minister of Employment, tel. +358 50 396 3574;
Antti Siika-aho, Special Adviser to the Minister of Economic Affairs, tel. +358 50 575 4118;
Mika Niemelä, Director of Finance, Ministry of Economic Affairs and Employment, tel. +358 29 506 2135

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