Finance Minister Katainen wants to prevent overheating
Income tax cuts and spending hikes to wait until second half of term
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Minister of Finance Jyrki Katainen (Nat. Coalition Party) says that no decisions on income tax cuts are in store for this year. He says that they will not be forthcoming until the second half of the four-year Parliamentary term. Most of the increases in state spending will also have to wait until then.
"Of the most urgent needs a few will be chosen for implementation first", Katainen says.
One of the measures likely to be implemented in the early stage will be a promised rise in student grants.
On Wednesday the government will meet in a session aimed at agreeing on the economic policy lines for next year, and on a spending ceiling for the whole electoral term.
In the government formation talks, the parties of the coalition agreed that EUR 3.2 billion should be set as the government's wiggle room. The figure would include all costs, tax cuts, and redirection of costs.
For the same reason that the tax cuts were postponed, the government is implementing new environmental taxes already in the first years of the Parliamentary term. The government's policy programme includes an increase of EUR 300 million in energy and environmental taxation.
Katainen says that the aim of the postponement of income tax cuts and spending hikes, and bringing forward increases in environmental and energy taxes is to avert the risk of overheating of the economy, which he sees as a "realistic" prospect.
"Now we need responsible financial policy", he says.
Katainen looked back at 1989, when Finland's recession was beginning. At present the ratio of housing prices to buying power, and the level of household indebtedness have broken records, bypassing the levels at which they were during the recession.
Katainen sees no reason for panic, but notes that "responsible concern" is warranted.
The prospect of overheating is especially apparent in the construction sector, Katainen notes. For instance, new builders will have to be sought for the Helsinki Music Centre, because the first tenders for the contract have been too expensive.
Katainen notes that the only thing that the government can do on the matter is to desist from launching new construction projects.
For this reason, the construction of a promised rail connection to Helsinki-Vantaa Airport might be postponed.
The matter arose when Trade and Industry Minister Mauri Pekkarinen (Centre) had reportedly promised that the money that had been earmarked for the rail connection for projects in his own home region.
Katainen emphasised that the reason for a possible delay in the project is the overheating problem, rather than any need to channel the money elsewhere. He emphasised that there is no intention to redirect the airport rail link funding to projects in Central Finland.
Many of Katainen's concerns are identical to those of previous ministers of finance: there is a labour shortage, while at the same time, there are many who are unemployed.
Housing in the Helsinki region is often too expensive for ordinary wage earners, which exacerbates the labour shortage. The population is growing older, and low-income jobs are not seen as worth doing.
At least two working groups are dealing with the issues raised by these problems.
Katainen says that the incentive trap issue - the question of whether or not low-paying work is worth the trouble - will be discussed by a committee which is expected to put draw up a bill for Parliament to consider a year from next autumn. Another working group will consider ways to make it easier for jobs and workers to mesh, and a housing policy working group has already been set up.
Before the Parliamentary elections, the National Coalition Party, which was in opposition at the time, criticised the "tricks" that the government had used to boost employment.
Now Katainen says that the government is not abolishing the old means of creating jobs. He notes that more volume will be added to the most efficient programmes. Funding for employment and education will be redirected to the tune of EUR 100 million.
He is calling for increases and improvements in vocational training and apprenticeships.
Katainen says that the National Coalition Party is serious about promoting gender equality in wages. Although the issue has broad-based support, Katainen senses that many are hoping that his party will fail in the matter.
Katainen said that increased pay for nurses and other highly trained, low-paying predominantly female professions could be achieved by increasing state contributions to municipal finances, if it can be assured that the subsidies will actually be used for the purpose.
Helsingin Sanomat
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| 22.5.2007 - TODAY |
 Finance Minister Katainen wants to prevent overheating |
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