How is the state budget approved?

Along with its legislative role, exercising budgetary power is one of Parliament’s basic tasks. Parliament exercises this power by approving the state budget, which outlines revenue and expenditure during the following year. Expenditure is broken down by sector and then by chapter and article. Revenue consists mainly of taxes and is divided into sections.

Budget framework in the spring

Each spring Parliament discusses the budget framework on the basis of spending limits approved by the Government. Agencies and ministries draft their own budgets within this framework during the spring. The Ministry of Finance conducts negotiations with each of the other ministries and in the summer the Government works out final details in its budget session.

Referral to the Finance Committee

According to the Constitution, the Government’s budget proposal and related bills must be submitted to Parliament well in advance. The Government submits its budget proposal to Parliament in mid-September and parliamentary handling of the budget takes about three months.

Handling begins with a preliminary debate in plenary session. This is one of the most important debates in Parliament. The first person to take the floor is generally the Minister of Finance, who presents the budget’s main points. At the end of the preliminary debate, the proposal is referred to the Finance Committee.

Members’ initiatives

After the Government has submitted its budget proposal, Members can submit budgetary initiatives within a period of ten days. In a budgetary initiative a Member can propose that an appropriation in the Government’s budget proposal be increased or reduced or that a new appropriation be added for a specific purpose.

For Parliament to vote on a proposed amendment it must be presented again when the plenary session discusses the budget in December. In recent years between 900 and 1,500 budgetary initiatives have been submitted each year.

Budget bills handled by committees

In connection with the budget proposal the Government submits a number of budget bills. These are bills whose content determines the level of spending in one or more parts of the budget. For instance, the Child Allowance Act determines how much family benefit will be paid each month in the form of child allowance and how long it will be paid.

Budget bills are referred to the appropriate committees. The Child Allowance Act, which is prepared by the Ministry of Social Affairs and Health, is referred to the Social Affairs and Health Committee, for example. A large portion of expenditure is finalized when the budget bills are approved by Parliament after the committee stage.

The committees can also influence the budget by issuing a statement to the Ministry of Finance on the budget proposal in their own sector. This must be done within 30 days of the referral of the budget proposal to the Ministry of Finance.

Role of the Finance Committee

The Finance Committee is mainly responsible for handling the budget proposal and for this purpose it has eight sub-committees. Each of these handles the part of the budget that is in its own sector. The Subcommittee for Tax Affairs deals with the revenue side of the budget as well as tax laws, while the other subcommittees focus on expenditure.

The subcommittees work along the same lines as committees. They hear experts up until mid-November. Then they conduct a final debate to decide how the Government’s proposal should be changed. Changes are generally quite small in money terms.

The subcommittees complete their reports around the beginning of December and then the Finance Committee approves the budget article by article. Numerous votes are conducted at this point but very few changes are made to the reports prepared by the subcommittees. At this point opposition MPs usually file protests to the Finance Committee’s report.

Approval by the plenary session

After the committee stage the budget proposal returns to the plenary session, where the Finance Committee’s report serves as the basis for discussion. Parliament handles the budget in a single reading. This includes a thorough debate on each sector and votes on Members’ initiatives, which must be submitted to the Central Office in advance. Handling the budget in plenary session takes several days and includes hundreds of votes.

Most often the plenary session approves the Finance Committee’s report without changes. The budget is ready for implementation once it has been approved by Parliament and published in the Statutes of Finland.

The Government also submits one or more supplementary budgets to Parliament each year. These are used to make changes in the budget.

Not everything is covered by the budget

The state budget covers only part of revenue and expenditure in the public sector. Local authorities pay for most basic services and they also collect their own taxes.

Off-budget funds include the Housing Fund of Finland and the Agricultural Development Fund, for example. The budget does not cover state enterprises. The Social Insurance Institution, through which large amounts of benefits are paid to citizens, is also outside the state budget as far as financing goes.