This report presents the main messages of the National Audit Office of Finland (NAOF) to support the preparation of the Government Programme for the new parliamentary term. The messages relate to such key topics in economic and administrative policy that will be relevant to the achievement of balanced general and central government finances and to sustainable management of central government finances in the coming years. The main messages are based on the key findings and conclusions of the NAOF's fiscal policy monitoring as well as the audits and their follow-ups published by the NAOF during the parliamentary term 2019–2023.
The NAOF’s viewpoints briefly
1. A planned fiscal policy strengthens public finances
To be able to select the best measures to strengthen public finances, it is important to proceed systematically according to plan on the basis of comprehensive and reliable information and to consider both public expenditure and revenue in the selection. It is necessary to adapt decisions to the prevailing business cycle and to implement the employment measures decided regardless of fluctuations in the employment rate. It is also important to safeguard the prerequisites for future economic growth. Systematic planning, predictability and commitment to existing steering instruments are needed in fiscal policy making.
Strengthening public finances: Drawing up a systematic plan, of the same type as the sustainability roadmap, to achieve the debt ratio targets. Utilizing in the decision-making the most comprehensive surveys available on the structures and impacts of public expenditure and revenue. Strengthening public finances by both expenditure and tax measures.
Integrating a sustainability perspective with fiscal planning: Supplementing legislation with an obligation to provide estimates in the General Government Fiscal Plan of how the sustainability of public finances will develop over several different time periods. This ensures that long-term debt development is systematically taken into account in the Government’s decision-making and in the information provided to Parliament.
Predictability of fiscal policy: Adjusting fiscal policy decisions to the business cycle and avoiding taking such unplanned revenue and expenditure decisions that strengthen the prevailing business cycle. Ensuring that fiscal policy is planned and predictable.
Improving employment: Setting targets even in the future for the so-called discretionary number of new employed, thus supporting the implementation of employment measures regardless of fluctuations in the employment rate. Improving the employment of older people as well and assessing whether the indicators related to the employment rate target should also take into account people between 65 and 74 years. Selecting employment measures that support public finances and linking the objective of strengthening public finances to the employment target.
Future economic growth: Ensuring the prerequisites for future economic growth, such as an adequate level of education of the population, the adequacy of working-age population and employment. If the business cycle so requires, prioritising expenditure so that the necessary investments can be made. Increasing work-based immigration.
Steering of fiscal policy: Giving the objective set for the general government fiscal position a greater role in the steering of fiscal policy. Committing to the spending limits system as a tool for planning central government finances and adhering to its proven strengths when developing it. Updating national legislation promptly in line with the changes taking place in the EU. Aligning the steering of fiscal policy based on legislation and included in the Government Programme with the EU’s economic governance. Strengthening the role of national independent fiscal institutions in both the national and the EU-level fiscal framework.
The viewpoints presented in chapter 1 are based on the conclusions drawn by the fiscal policy monitoring and audit function for the parliamentary term ended.
2. A clear division of responsibilities and established cooperation practices between public authorities provide support in the event of crises and disruptions
Responding to an external crisis is facilitated by the existence of predefined mechanisms and practices, which the central government and public authorities follow at the time of the crisis. In view of future crises, efforts are needed to improve the cooperation of public authorities as well as preparedness planning. A national support mechanism is also needed to target the financial support paid to trade and industry at those sectors which are in need of support and at the economic impacts of exceptional circumstances. Preparedness for crises should be transparent and coordinated.
Crisis management: Promoting the overall reform of the Emergency Powers Act and other legislation steering the management of serious crises and disruptions.
Security of supply: Safeguarding the role of the National Emergency Supply Fund in funding acute situations and preparedness. Ensuring the procurement capacity of the National Emergency Supply Agency and cross-sectoral cooperation in contractual preparedness.
Permanent support mechanism and cost monitoring: Predefining a national support mechanism, of the same type as the business cost support, for exceptional circumstances. Improving legislation and defining operating methods for targeting national support at those sectors which are in need of support and at the economic impacts of a crisis. Including in the mechanism sufficient supervision and operating methods for the production of up-to-date information to support the decision-making.
Activities of public authorities: Improving public authorities’ access to information and cooperation across organisational and sectoral boundaries by means of legislation. Ensuring, through legislation, the authorities’ resource and preparedness planning, internal control and risk and continuity management.
Strategic projects of the Finnish Defence Forces: Ensuring that the costs of the strategic projects of the Finnish Defence Forces are transparent even after the procurement phase. Arranging external quality assurance for corresponding future projects.
3. Effective benefits and public services help to secure the foundations of the welfare state
Public services should be reformed in order to operate sensibly from the perspective of customers, the executive authorities and the central government. Reforms should be planned and systems should be steered based on existing information, without forgetting impact assessments and the expertise of those responsible for the implementation. Therefore, it is important to ensure the comprehensiveness and reliability of the knowledge base. When legislative amendments are prepared, it is important to examine particularly the combined impacts that the changes planned to be made to various benefits would have on central government expenditure, the cooperation between public authorities or the possibilities of benefit customers to earn their livelihood by work.
Preparation of social security reforms: In legislative drafting, paying attention to the combined impacts that the changes planned to be made to various benefits would have on central government expenditure, the cooperation between public authorities or the possibilities of benefit customers to earn their livelihood through work. Outlining to what extent households with low earned income are supported through the housing allowance scheme and to what extent through other benefits. When unemployment, income, bureaucracy and information traps are removed, examining whether such other traps remain in legislation or its implementation that may hamper the achievement of the objectives. Commissioning impact assessments of the proposed amendments and utilising register and research data as widely as possible in the preparation, without forgetting the expertise of those responsible for the implementation. Improving the usability of the data collected in registers by adjusting the legislation on benefits and harmonising the income concepts.
Implementation of smooth and customer-oriented social security: When coordinating benefits and services, ensuring that their implementation is smooth from the perspective of both public authorities and different customer groups. Where possible, staggering the implementation of the most significant reforms in terms of time and geography, monitoring the impacts of the reforms, and making use of the lessons learned at a later stage of the implementation.
Management of the wellbeing services county reform: Finding out the reasons for the deficit in the financial plans of the wellbeing services counties and looking into the effectiveness of measures to balance the finances. Improving the timeliness and reliability of the knowledge base collected on the costs and activities of health and social services. Carrying out an overall assessment of the financing and steering system of the wellbeing services counties. Ensuring the achievement of the national patient and customer safety objectives by reforming and clarifying legislation and systematically monitoring the implementation.
Labour market policy reforms: Assessing the impacts of the previous Government’s employment measures, particularly the Nordic labour market service model and the measures targeted at young people and people with partial work ability. Carefully preparing the transfer of public employment and business services to municipalities as well as the integration of employment services with the services provided by the wellbeing services counties.
Work-based immigration: Strengthening and consolidating the advisory, guidance, settling-in and integration services for work-based immigrants throughout the country. The National Audit Office supports the proposals for the funding, development and consolidation of qualification training for foreign workers presented in the Strategic Roadmap 2022–2027, prepared by the working group on the adequacy and availability of health and social services personnel.
Referral of immigrants to municipalities and their integration: Once the Integration Act has entered into force in 2025, starting to monitor the measures taken to promote integration. Assessing in this connection the overall functioning of the system of referring immigrants who have been granted a residence permit to municipalities.
4. External and internal changes challenge the central government to reform its operating practices
The central government will be better able to respond to the challenges caused by environmental changes, the ageing of the population and the revolution of work if it reforms its operating practices and ensures that it has competent and adequate personnel. The central government provides many electronic services, the development of which should be based more clearly on customer orientation and user needs. The preparation and implementation of administrative reforms involve risks that should be identified and prevented. Good preparation requires a clear understanding of the problems that the reform aims to address.
Central government’s HR policy: Ensuring adequate and competent personnel in the central government: strengthening the central government’s staff planning, foreseeing future competence needs and ways to replace the loss of competence, and looking into mobility targets.
Electronic services provided by the central government: Focusing increasingly on customer orientation in the development of services and utilizing customer interaction in the development work. Tightening the connection between the support for, the steering of and the operating and financing models of digital development.
Administrative reforms: Ensuring in the preparation that legislative amendments are the correct and effective way to remedy the problems identified. Reserving time for impact assessments and for the executors to adapt to the changes. Ensuring in major reforms that the steering responsibilities are clear and that the steering is based on comprehensive and high-quality information. Ensuring in information system reforms that the expectations are realistic and that there are no obstacles to the achievement of the objectives.
Steering of sustainable development: Implementing the sustainable development goals in all policy areas. Tying measures more strongly to operational, financial and investment planning. Developing models by which ministries can assess the realization of sustainable development in policy preparation. Drawing up a plan on how Finland will allocate international climate finance to support climate measures in developing countries.
State-owned special assignment companies: Before a special assignment company is established, examining what the social problem or need is that can be met through company-based activities. Carefully looking into alternatives to the establishment of a company. Forming an idea in the ownership steering of what the company should aim for and how it should to operate.
Transport networks: Preparing for long-term cost impacts of investments: Reconciling new investments and maintenance costs in the lifecycle management of transport networks. Presenting the maintenance costs during the lifecycle of investments in the fiscal planning. Preparing sensitivity calculations for investments already at the planning stage of programmes and projects.