The Government’s cutback policy continues next year: belt-tightening prolongs weak economic performance, operations of government agencies are endangered

The new cutbacks planned by the Finnish Government impede economic growth and threaten the operations of central government agencies.

The Government is going to cut state spending by a further one billion euros in the budget session next week. The latest spending cuts are going to impact for example central government agencies, which have already sustained heavy cutbacks.

The new demands for cost cutting would lead into terminations of employees and endanger the operations of the agencies, reminds the Trade Union for the Public and Welfare Sectors JHL. One of the organisations facing proposed cutbacks is THL, the Finnish Institute for Health and Welfare.

– According to THL’s recently published calculations, the ruthless spending cuts of the Finnish Government push almost 30,000 children into poverty. Now the Government is going to cut THL’s funding again. Of course that can be a coincidence, but cutting from THL looks bad, comments the President of Trade Union JHL Håkan Ekström.

The Finnish economy is struggling to gain momentum, and just cutting spending is not going to stimulate the economy into a growth track. Constant austerity measures reduce demand and unnecessarily prolong the period of weak economic performance.

– The Government could boost economic growth for example by bringing back the earnings disregard in unemployment benefits. This would incentivise people to take part-time work during unemployment, says Ekström.

Funding of public services is already insufficient, and people in Finland have noticed that. JHL published a public services barometer in March 2025. According to the barometer, as many as 69% of people in Finland think that public services have deteriorated in the recent years.

Additional cutbacks would further dilapidate the services, reminds JHL’s Special Advisor Samuli Sinisalo.

– The draft budget of the Ministry of Finance contained large additional cuts for example in central government transfers to local government, funding of social welfare and health care sector NGOs, development cooperation, and integration services. If the planned spending cuts are carried out, the future and quality of public services will suffer even more, Sinisalo stresses.

Trade Union JHL is also concerned about what will happen to state-subsidised housing construction. Subsidised construction helps construction companies especially during housing market downturns.

– The Government plans to merge the National Housing Fund into the central government budget and cut the amount of funding. That would be a heavy blow both for people who need affordable homes and for the construction industry, because a large part of market-based construction projects is not progressing at the moment. We should now rather support the construction industry, which would support the economy as a whole, in order to overcome the recession, Sinisalo emphasises. 

The Government has made a number of changes in the labour market during its term, and these changes have consistently favoured the employers. The budget draft prepared for the budget session does not include any labour market reforms. This would, however, be the right time to abandon the plan to remove the right to deduct trade union membership fees in taxation. Such step towards finding a middle ground would be a small concession financially, but it would help to bring back some trust in labour market relations.

More information:

President of Trade Union JHL Håkan Ekström 040 828 2865
Special Advisor Samuli Sinisalo 040 7050 398