Mr. Lintilä, the new Finnish Minister of Finance (see above photo) government has just published the government’s first proposal for the 2020 Budget. It is definitely not very ambitious.
Europe is poised for an economic slowdown and you would think that sensible governments would start to invest in necessary infrastructure to stimulate the economy. This is especially true when it “pays” to borrow. “Paying to borrow” may seem strange to readers, but that is exactly what is possible today. When the Finnish government borrows money for ten years or more they get paid by investors or pay no interest at all!
After the financial crisis of 2007/2008, there has been a dramatic, and apparently long-term, fall in interest rates. This has been followed by the policy of “Quantitive Easing” by the big Central Banks in the US, Europe and Japan have purchased many trillions of government bonds. This policy forced long-term interest rates of the best investment grade bonds to fall to near zero and below, as well as keeping short-term rates at close to zero and below.
The results of this situation is great for investment banks, issuers and borrowers, but poison for investors and depositors. But we are talking about the government here. They can borrow well below long-term inflation rates and basically without any interest rate costs. It is quite possible to build new railways lines, roads and harbours that can result in big positive economic impacts for the economy. The calculations and assumptions are rather simple to perform. When made you are left with choosing the best projects without damaging the country’s rating. Even though most governments are not good at this because politicians and the industry lobby are seldom pushing forward the right projects, an open review will normally end with a good decision in countries Finland.
Now is no better time to start such projects. Fast train lines will cut fossil fuel traffic for passengers and cargo. Cost efficient shipping will benefit from better cargo harbours and some roads and railways will open up a few areas where there is cheaper housing a higher demands for labor.
Now is also the time to ensure that SME’s (small- and medium-size companies) receive support for employing more staff. Smaller companies employ more and faster than the big companies.
The big companies are generally the one letting staff go when the markets go south! Smaller companies need support for training and taking on apprentices. More rigorous demands on younger and older unemployed folk to get professional training should be encouraged so that they find new jobs in new sectors. It only take 1 to 2 years to get somebody ready for many new types of tasks at the office or workshop.
The government’s major policy objective is to achieve an employment rate of 75%. This simply means that at least 75% of all those people in the labor market between 15 and 64 years. The rate is currently 72% and this target should not be difficult to achieve because some of our closest neighbours have higher rates. We are a small country and we should be able to get more women and more young people working with the right “carrots and sticks”. The government should consider allowing men to take paternity leave, women get to taken 12 months and more while men only get around 1 month. The Swedish model is good – 18 months is allowed at a maximum and the parents get to choose who stays at home – men use this opportunity while allowing women to remain focused on their careers.
Investing in useful infrastructure will increase employment, as will strong support to help SME’s find workers and train the unemployed for unfilled jobs…
The last government saw a big boost in the employment rate because economic activity in Europe picked up but a falling or flat economy in Europe does not mean that we will suffer here. Finland is small and agile – exports can be supported to new markets if those in power in the companies and in the public sector stay awake and work hard to find and support these new export markets.
But back to the budget – there was very little else to get excited about or be disappointed with. Sin taxes will be increased and there will be small tax reductions for low income folk. Income tax may be increase for higher incomes, but the impact is minimal.
It is unfortunate that grants and subsidies for the big companies are not being cut. The senior management of these companies are paying themselves huge bonuses which are equal to these grants and subsidies – that is not smart and unfair for taxpayers. These companies do not need any public grants especially if they are profitable.
The rightwing parties and their lobby groups are already complaining about increased debts, the lack of infrastructure investments and tax increases. But these are mainly the same folk who have been doing this in previous governments, so their arguments can be discounted.
The present budget does very little, if anything to combat climate change. Money is still going to the forest companies that use our forests for low value-added pulp and traffic fuels!
There was a small but welcome 6 cent increase in fuel tax but we still have relatively low cost petrol and diesel at the pump.
Companies like Finnair and the partner Finavia, Finland’s airport owner and operator are still planning huge increases in passengers. Mass tourism from Asia is a real threat to climate change and we need to stop such crazy expansion. Just visit Sydney, Barcelona, New York, Venice, Paris, Berlin, Kyoto – to name but a few major tourist sites – they are overrun by Asian tourists in large groups… this is not sustainable an easily contained by building less capacity at the airports.
We need to set a climate change budget for ordinary folk and another for companies – it is not that difficult! Using taxation to change habits is fine so long as people have freedom of choice. Freedom of choice has never meant that we are free to destroy the planet