The Finnish government has outlined substantial changes to several benefits provided by Kela, the Social Insurance Institution of Finland. To grasp the magnitude of these changes, it's crucial to examine the current distribution of benefits and the impending cuts or increases as outlined in the government program.
According to statistical data, Kela's expenditure on benefits has remained relatively stable, hovering between €15 billion and €16 billion annually from 2012 to 2022.
The years 2020 and 2021 saw a temporary increase in benefit spending due to the COVID-19 pandemic, followed by a decrease in 2022. In 2012, approximately €15 billion was allocated to benefits, whereas in 2022, this figure reached €16.3 billion.
In 2022, Kela's highest expenditure was on healthcare benefits, totaling €5 billion, which includes medication reimbursements, sickness allowances, and parental allowances. Pension benefits amounted to €2.5 billion, while family benefits such as child allowances and childcare support reached €1.9 billion.
A closer look at the data reveals that healthcare benefits accounted for just under one-third of Kela's total benefits spending. Sickness allowances represented 35%, sickness day allowances 24%, parental allowances 22%, reimbursements for private healthcare services, dental care, examinations, and travel accounted for 10%, and other benefits made up 9%.
Over the past decade, the proportion of benefits allocated to different categories has experienced some fluctuations.
"Unemployment benefits, for instance, tend to mirror changes in employment levels. During the early 2010s and the COVID-19 period, expenditures on unemployment benefits increased. However, in 2022, spending on unemployment benefits decreased by 20% compared to the previous year," explained research manager Signe Jauhiainen.
Conversely, housing support payments more than doubled between 2012 and 2021 due to changes in the support system, but they experienced a real decrease from 2021 to 2022.
When considering all social security expenses, it's important to note that Kela's benefits make up only about one-fifth of Finland's total social security spending, which was estimated at €79.4 billion in 2022. Other entities, such as pension funds, unemployment funds, and welfare regions, also provide social benefits. For instance, pension benefits amounted to €31.4 billion in 2022.
Aim to Trim Housing Support and Unemployment Benefits in Government Program
The government's program, led by Prime Minister Petteri Orpo, seeks annual savings of approximately €1.2 billion from social security expenses and benefits in the long term. Some of these savings will be achieved through reductions in Kela's benefits, while others will affect earnings-related unemployment benefits.
Additionally, the government aims to achieve nearly €0.4 billion in annual savings through benefit index freezes in the long term.
"In the context of Kela's overall spending, the savings outlined in the government program may not seem significant. However, when examining changes like those in housing support or the removal of child supplements for unemployment benefits, the impact on an individual's finances can be quite substantial," noted Jauhiainen.
In terms of proportional reduction from the total benefit pool, the most substantial cuts are aimed at housing support. The government program targets annual savings of €363 million, with changes including a reduction in the support percentage from 80% to 70%, the elimination of income protection, and the complete discontinuation of owner-occupier support. These changes will not affect all recipients equally.
The government program also outlines measures to achieve approximately €570 million in annual long-term savings from unemployment benefits, affecting both basic social security provided by Kela and earnings-related unemployment allowances.
Regarding income support, the government aims to achieve €100 million in annual long-term savings. Not all proposed changes will take effect immediately, as the government intends to undertake a comprehensive overhaul of income support. However, a proposal to tighten the housing allowance norms is already in the public consultation phase.
"In estimates, cuts to unemployment benefits and housing support may slightly increase income support spending. Income support's share of income is likely to grow for households that already receive it, and there may be some new recipients," Jauhiainen predicted.
Additional Funding for Child Benefits and Temporary Increase in Kela Reimbursements
In addition to budget cuts, the government also plans to increase some Kela benefits. Child benefits are set to receive targeted increases, with an annual allocation of €70 million. Starting from April 1, 2024, higher child allowances will be provided for children under three years old.
The government program also outlines a temporary increase in Kela reimbursements for private healthcare. A budget of €335 million has been allocated for this purpose over the electoral term.
"The allocation of additional funds to Kela reimbursements differs from previous changes, as Kela reimbursements have previously been subject to cuts. These changes aim to redirect funds to benefit recipients," concluded Jauhiainen.
HT
