Transferring basic social assistance to the Social Insurance Institution of Finland: The significance of assessing the effects of implementation in the law-drafting process

As the amendments to the social assistance legislation were being drafted, an expert group identified major risks in the reform. These risks were not adequately considered in the Government proposal and, according to the audit findings, they have been partially realised during the first 2.5 years since the entry into force of the amendment. Partially as a result, the costs of processing basic social assistance at Kela are now significantly higher than originally anticipated.

Under a legislative amendment that entered into force on 1 January 2017, the processing of the applications for basic social assistance and the granting and payment of the assistance were transferred from municipalities to the Social Insurance Institution of Finland (Kela). On the same date, some of the expenditure included in supplementary social assistance was made part of basic social assistance. The administration of supplementary and preventive social assistance remained a local government responsibility.

The National Audit Office of Finland audited the preparations of the transfer to Kela in the Ministry of Social Affairs and Health and the impacts of the changes on the social assistance scheme and the authorities dealing with social assistance clients. The audit was carried out in a situation where the Government is preparing a comprehensive reform of the Finnish social security system, and the information produced in the audit may be useful in the preparation of the reform. The aim of the comprehensive social security reform is to achieve better integration of benefits and services.

The purpose of the transfer of basic social assistance to Kela was to enhance equality, make the administration of social assistance more efficient and to ensure that more individuals entitled to social assistance also apply for it. More individuals entitled to basic social assistance now submit applications, and the applicants are also treated more equally than in the past. However, from the perspective of central government finances, the main observation is that the reform has failed to produce any efficiency improvements in the administration of the assistance and that the direct costs arising from it are significantly higher than originally estimated. According to the audit findings, this is because, despite the risks highlighted by the expert group during the drafting of the legislative amendment, basic social assistance remained as the last-resort support requiring means-testing of the individual applicants. As a result, more personnel are needed in the administration of basic social assistance than originally anticipated.

In addition to increasing Kela’s workload, the reform has also meant more work for other authorities, which has indirectly increased the costs arising from the changes. During the drafting of the amendment, the impacts on authorities were only cursorily assessed, and the effects of the reform on the authorities dealing with social assistance clients were not adequately identified. The transfer of basic social assistance to Kela also weakened the link between social work and the financial assistance because social work is carried out in municipalities and the related basic social assistance is now administered at a national level. As a result, it has become more difficult to prevent individuals from becoming long-term social assistance clients.