Fiscal Policy Monitoring and Audit Report on the 2015–2018 Parliamentary Term

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The fiscal policy monitoring and audit report includes assessments on compliance with fis­cal policy rules, achievement of the Government’s objectives and the fiscal policy frame­work during the current parliamentary term. It also covers the overall steering of general government finances, the functionality of steering procedures and the progress of struc­tural reforms.

Due to the strong economic growth that started in 2016, a balance of the general govern­ment fiscal position has almost been reached at the end of the parliamentary term. Accord­ing to the forecasts, most of the objectives regarding the general government fiscal position and debt set by the Government at the beginning of the parliamentary term will be reached.

The long-term sustainability gap of general government finances has not been eradi­cated during the parliamentary term, but it has become smaller. This is mainly because the estimate for structural balance in the initial phase has experienced a major improvement. The National Audit Office considers continuing with the structural reforms aiming at a re­duction of the sustainability gap during the next parliamentary term important. The social welfare and health care reform offers an important opportunity to promote this objective.

The central government spending limits were followed during the parliamentary term, but the plausibility of the expenditure rule and transparency of the procedure have been challenged by, for example, the fact that funding of the Finnish Broadcasting Company is no longer included in the scope of the spending limits and the fact that some expenditure items outside the spending limits have not been clearly determined. The amount of tax ex­penditures also increased during the parliamentary term.

During the parliamentary term, Finland was in the preventive arm of the EU Stability and Growth Pact (SGP). The rules of this arm were followed in 2015–2017, and will also be followed in 2018 and 2019 according to the ex-ante assessment. According to the forecast, the medium-term objective will be reached in 2019 when examined in accordance with the rules. Similarly, the rules of the corrective arm of the Stability and Growth Pact were followed in 2015–2017. According to the ex-ante assessment, Finland will be in compliance with the deficit and debt criteria of the SGP corrective arm in 2018 and 2019. When setting the new medium-term objective, risks related to contingent liabilities on general govern­ment finances and existing fiscal buffers should be taken into account in addition to the EU rules and the assessment basis included in the Fiscal Compact.

The National Audit Office did not discover any significant deficiencies in compliance with the Fiscal Policy Act or the regulations based on it. Fiscal planning and governance in general improved during the parliamentary term, and related legislation was developed. The improved governance was partially due to the fact that governance of local govern­ment finances in its current form started. On the other hand, the governance does not take into account risks related to the contingent liabilities of central government entities, such as increased government guarantees, and the National Audit Office considers implemen­tation of a risk-based limit for the liabilities justified.

According to an assessment by the National Audit Office, the economic forecasts pro­duced by the Ministry of Finance forare at least as reliable as the economic forecasts pro­duced by the other compared principal forecasting institutes of the Finnish economy.