Strengthening the economy calls for value judgements
A strong economy is built on, in particular, high and growing employment. During the coming government term, we want employment in Finland to rise toward the Nordic level of 80 percent and then toward full employment.
We also need revenues in the central government. The main purpose of taxation is to fund the services and benefits of the welfare state. For example high-quality education, research, care and healthcare, and also, for example, security and investments required by sustainable economy are funded by taxes. The financial basis of public services and benefits must, inevitably, be strengthened also through taxation in the coming years.
When looking at a longer timespan, there is a sustainability problem in public finances that has been generated over several parliamentary terms. Securing the financial basis of the welfare state requires that a program spanning over several parliamentary terms is started in the coming term to reverse the debt trend.
The value judgement is clear for the Social democrats. We want to boost ecologically and socially sustainable economic growth with structural reforms, that is, to improve productivity, raise employment, and increase labour immigration. These are actions required in the longer term and, in addition to them, we will also need revenue and expenditure adjustment in the coming years.
The adjustment calls for value judgements. SDP’s value judgement is that the adjustment is done on a long-term basis so that the welfare state is safeguarded and the most vulnerable people are taken care of. The state also has the duty to ensure the security and wellbeing of its citizens so that possible crises and economic conditions can be responded to rapidly.
The Nordic welfare state has managed to combine a strong economy and high employment with tax-funded public services and benefits to safeguard living. Funding a welfare state of equal opportunities requires sufficient tax revenues. We do not want that the income taxation of ordinary wage earners, low-income entrepreneurs, or pensioners is increased. It is therefore our value judgement that tax revenues are increased by strengthening capital tax bases, intervening in tax evasion and cutting ineffective tax subsidies. More tax revenues should be collected, above all, from those who can afford to pay more and whose taxation is currently lower than that of others with the same income. Tax reductions for low and middle-income earners may be made if sufficient tax revenues are available from other sources.
Strong public finances are part of resilience
The Nordic welfare state and strong public finances are part of resilience. In the crises of recent years, the significance of the public sector has been underlined again. It has been possible to use a lot less public money in specific COVID-19-related support in Finland than in other Western countries, as here social security and public services, for their part, helped people and companies to survive the crises.
Also an active financial policy has proven its significance. Reacting to crises requires strong enough public finances so that there is enough financial leeway to respond to sudden spending needs. However, strong public finances alone are not enough: political will and the ability to act are also required. Outdated rules of and attitudes toward economic policy may, in the worst case, prevent reasonable responses to crises. It must also be noted that Finland is a part of the global economy and the banking union, so the Finnish economy must be considered in relation to others and the global economy.
Unlike in the financial and euro crises a decade ago, Finland has now done better by means of broader sustainability thinking. In the last decade, as a consequence of some value judgements, cuts were made in services and conditions for growth by targeting adjustments at education, research and people’s wellbeing. This resulted in low employment and slow growth. Now, having made different choices, we are in a better situation, employment has increased and investments have been made in wellbeing. Broader sustainability thinking will be needed also in the future so that concentrating only on the sustainability of public finances will not lead to policies that are unsustainable socially, ecologically or for the overall economy.