Finland

II - Changes to the Budgetary Process

Budgetary process     
II.1

Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in Finland.

The Budgetary process in Finland is rather informal. It centers on the Government and in particular the Ministry of Finance, which plays a key role in the elaboration of policy.

The budget procedure starts with the formulation of the Government’s budget proposal in January after the Ministries have presented their spending limits proposals to the Ministry of Finance. These proposals are an important part of the multi-annual planning of the Ministries and government agencies. Central government spending limits for future years are then drawn up at the Ministry of Finance, and are endorsed by the Government in March. The formulation of the budget then continues in the ministries on the basis of the decision on spending limits and on procedural guidelines issued by the Ministry of Finance. The Ministries issue their guidelines to the agencies, which draw up draft budgets during the spring. Thereafter, the Ministries formulate a draft budget for their whole branch of government and hand it to the Ministry of Finance in May. The Ministries propose changes to the decision on spending limits, based on reasoned adjustments, and the proposed changes are submitted to the Government for consideration with the budget proposal. The drafts of the Ministries are processed at the Ministry of Finance during the spring and the summer. The Minister of Finance then formulates a position paper on the budget proposal which is made public in the late summer and hands the proposed budget to the other Ministries.

Based on this position paper of the Ministry of Finance, there are negotiations between the Ministry of Finance and Ministries about the spending limits. After these negotiations, the whole Government considers the draft budget prepared by the Ministry of Finance in the Government budget session and the Government substantively endorses the content of the budget proposal. After the Ministry of Finance has finalized the proposal, it is presented to the Government and submitted to the Parliament at the start of its autumn session. In the Parliament, the Finance Committee presents its report on the proposal, after which the budget is adopted in a plenary session of Parliament. If essential needs to revise the adopted Budget arise, as often is the case, supplementary budget proposals are presented to the Parliament. The same procedures are applied in drawing up supplementary budget proposals. (More information is provided at http://www.vm.fi/vm/en/09_national_finances/index.jsp.)

General change
II.2
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?

In principle, the annual budget is prepared much as it was before the crisis. This can actually be considered to constitute a problem, since the preparation of the budget in Finland is close to a cameralistic (Kameralismus) process and reflects more budget politics than genuine financial politics.

However, there might be a growing interest in the financial and fiscal policy involving an interest in the macro level care of the public finance and the relevant structure effects. The European Union based obligations are not the only quarters that require more refined argumentation. The two-pack legislation has provoked more interest in the control of public finance as a whole, not only at state level economy but also at its sub-levels, which enjoy from a high degree of autonomy in Finland. Still, it is unclear how the autonomy of municipalities and current Treaty obligations are balanced. The two-pack was not seen to affect the drawing up of the annual preliminary budget plans, since it did not contain an obligation to amend the budget proposal, if the Commission or the Euro Group would require it.

Institutional change          
II.3
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?

The Act bringing into force the provisions of legislative nature of the Fiscal Compact (Act No 869/2012) introduced the correction mechanism which is build on duties of reporting and informing by the Government to the Parliament, including a plan for how the deviations will be corrected by the end of the year following the observation of the deviation (see question IX.2). According to the same Act, the duty to monitor the implementation of the Act falls under the responsibility of the National Audit Office (see question IX.2).

Change of time-line  
II.4

How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?

The time line has not yet changed but some amendments might be forthcoming. In the autumn of 2013 a working group under the Ministry of Finance planned the possible changes (see Memorandum, Ministry of Finance, December 2013, Budjettikehysdirektiivin ja budjettisuunnitelmien ennakkovalvonta-asetuksen kansallinen täytäntöönpano, Ministry of Finance publications 29/2013) According to the working group, legislation and control mechanisms in Finland relating to the different sectors of general government finances contain many of the elements referred to by the on budgetary frameworks. The working group concluded that the management of general government finances as a whole required by the directive is not sufficient nor on the level required by the directive, and that it would be justified to anchor the implementation of the directive in the existing procedures and legislation. It was proposed that the Government prepares in future a general government finances plan in the beginning of the parliamentary term, which would be revised annually for the following four-year period. Provisions on the procedure for the general government finances plan would be included in a Government decree.

Miscellaneous
II.5
What other information is relevant with regard to Finland and changes to the budgetary process?

Not applicable.