Budget proposal with a deficit of over $12 billion – Pula: “Can’t be proud”

The state’s budget deficit for next year is significantly higher than it estimated in the spring. Ricapra The Ministry of Finance (MoF) has proposed a deficit of $12.2 billion for next year’s budget, the (ps.) said on Thursday.

Pra said the deficit in the budget proposal was “not something to be proud of”.

– Pula said that despite the government’s efforts, the deficit remains very serious.

Pula presented the main contents of the budget proposal at a press conference held at the State Council Castle.

The budget deficit will increase by 1.5 billion euros next year. Let’s compare An important reason for this is that the tax revenue forecast has been reduced by around €1 billion compared to the spring forecast.

– I have said many times that I myself have never received surprising numbers in the office. That day is still ahead, but maybe it will come at some point, says Pra.

The expected reduction in tax revenues next year is due to lower-than-expected tax revenues in the current year and the bringing forward of a tobacco tax increase to November. VM said the tobacco tax increase would shift around 450 million euros in tax revenues from next year to this year.

In addition, the government’s interest expenditure estimate increased by 360 million euros. According to current estimates, the government’s interest expenditure on the national debt will be 3.5 billion euros next year.

The economic and social security burden is heavy

According to the Ministry of Finance’s proposal, the total state budget for next year is 88.1 billion euros, slightly more than this year. This is also 500 million more than forecast in the spring.

Next year’s budget deficit will be around 600 million euros less than this year, including the second supplementary budget of the year approved by parliament in June. VM said that if the government does not take measures to strengthen public finances, the deficit next year will be just under 16 billion euros.

Mr Purra highlighted two main reasons why next year’s deficit would be only $600m smaller than this year’s. First, a prolonged period of economic weakness had slowed growth in tax revenues, and second, health and social care costs were rising despite savings.

Next year, state spending on health and social welfare will increase, including a 1.5 billion euro retrospective review of funding for the welfare sector, as the deficit in the welfare area in 2023 was larger than expected.

Government sticks to target

According to the budget proposal, the national debt is growing rapidly despite the government’s decision to make a substantial adjustment of 3 billion euros to the 6 billion euros of measures outlined in the government program during the spring budget crunch. Among other things, the general VAT rate will rise to 25.5% at the beginning of September as a result of Kehysriih’s decision.

The tax adjustment measures in the budget proposal are expected to increase state tax revenues by 1.2 billion euros. In total, there will be savings of nearly 2 billion euros compared to last year, reducing government spending.

Purra said the government will continue to stick to its goal of stabilizing the public finance debt ratio by 2027.

——Require that these actions can be fully implemented without major negative surprises.

The Church and Celiac Disease Are Cut

The Ministry of Finance’s budget proposal includes more than €100 million in new compensatory savings. Compensatory savings can be applied, for example, if, during the preparation phase of a previously decided matter, it becomes clear that the targeted savings cannot be achieved.

The compensatory savings consisted, inter alia, of a reduction in the state funds allocated to the social missions and church and religious activities of the Evangelical Lutheran Church. The amount of the savings was 20 million euros.

Coeliac disease benefits will be cut by €9 million, changes to housing support groups will see €2.7 million cuts and the hepatitis C elimination programme will see €3.7 million cuts. Metsähallitus will see revenues rise by €6 million.

In addition, the implementation of the reduction in the income support consolidation allowance will be improved to ensure that the decided savings of €58 million are fully realized.

VM’s budget proposal will be published in full online on Friday.

The government will decide how to spend government money next year during a budget summit in early September. The government can change its budget proposals during negotiations. For example, the fate of the Kouvola night shift is open.

Purra said some issues were moving forward based on proposals from the ministers responsible and some were under further consultation. Purra did not directly specify which issues might be difficult for the government.

– If I bring up an entity that I am particularly concerned about, then yes, they are related to the welfare field.

Finally, Parliament approves the budget in December.

Edit. 8.8. 19:29: Updated the entire story.