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Helsinki continues responsible financial management to ensure sustainable growth

Helsinki’s budget is being prepared during Finland’s recovery from a global pandemic. The country’s gross domestic product is expected to increase by 3.5% this year, and the economy is predicted to continue its recovery next year. The new budget proposal contains measures to secure Helsinki’s sustainable growth, a record-high level of investments, and efforts to boost recovery from the coronavirus pandemic by means of responsible financial management.

Helsinki has managed its finances responsibly, which is why the city has been able to continue investments in services and other areas, without the need to suddenly bring everything to a halt.

According to the profit and loss statement, the total of the City of Helsinki’s external operating expenses will increase by 5.7% in 2022, compared to the 2021 budget.

“In the joint City Strategy, we agree upon a variety of policies that are key to the City’s finances. We have opted to continue bravely on a path of growth and will be initiating structural changes to improve productivity and funnelling a great deal of resources towards recovery from the coronavirus pandemic,” Mayor Juhana Vartiainen says.

In its new City Strategy titled ‘Kasvun paikka’ (Place of Growth), Helsinki lays down clear responsibility principles for financial management. This means that Helsinki determines the rate at which expenditures increase. The base-level growth of operational expenses has now been bound to the changing level of costs, population increase and the productivity target Helsinki has set for itself. The total growth is also influenced by the coronavirus package outside the framework of the responsibility principle as well as any cost increases that are enabled by structural reforms.

A separate package for recovery from the coronavirus crisis

Recovery from the coronavirus pandemic requires determined efforts to reduce the resulting welfare deficit caused by the crisis. A total one-time appropriation of €70 million has been earmarked for coronavirus recovery in 2022 and 2023.

The coronavirus package is divided between divisions as follows: €45 million to the Social Services and Health Care Division, €17 million to the Education Division, and €8 million to the Culture and Leisure Division. The funds of the recovery package will be used to cover rebuilding costs resulting from the pandemic.

“At the outset of the crisis, Helsinki’s economy was strong, thanks to responsible financial management in previous years. Now, we must continue on this path of responsibility. At the same time, we need to acknowledge that our city has suffered from the pandemic more than the rest of Finland, and we have unfortunately racked up a welfare deficit in all areas. This is why rebuilding will take a long time and investments in it are an absolutely necessity,” Vartiainen explains.

Investment expenditures will increase next year

A growing city requires investments. As such, Helsinki will be continuing its strong investments in traffic infrastructure, housing production and the service network. In the coming year, Helsinki’s investments will total almost €1.1 billion, including municipal enterprises. This record-high investment level will enable the continued growth of the City’s population and economy in the 2020s.

The investments will fund numerous projects that are essential to local residents; they will enable ambitious housing production, building and repairing schools, and investments in streets, traffic lanes and parks.

The balanced development of areas will be secured through investments in urban renewal areas, diverse housing production, and the comfort and appeal of the areas. In terms of public transport investments, the implementation of the Jokeri Light Rail and Crown Bridges projects will continue. The budget proposal makes preparations for the construction of the Sörnäinen tunnel.

Due to the sizeable investments, Helsinki’s per-capita debt will increase during the council term, but the City’s economy is on a strong foundation thanks to swift financial growth thus far, which makes it possible to take considered risks. If the financial growth and tax revenue development do not reach the targeted levels, the City is prepared to take corrective action to balance its financial position.

Staff’s salary development programme to be continued

Efforts will also be made to bolster the City of Helsinki’s appeal as an employer and improve staff well-being in accordance with the strategy. The budget proposal will channel a total of €5 million towards the salary development programme in 2022.

The salary development programme will enable salaries to be increased across certain key professional groups for which the City has had trouble gaining skilled workers. The needs to increase salaries will be examined extensively.
In addition to this, a quality-oriented competitive bidding process will be organised to improve the availability of occupational health care services.

Municipal tax revenue expected to increase – tax rate to remain as before

The municipal tax rate of 18.0% remains the same in the 2022 budget proposal.

Municipal tax revenue in 2022 is expected to stand at €2,950 million. This is 3.5% higher than in the forecast for 2021. Corporate tax revenue in 2022 is estimated to be €520 million.

The accumulation of central government transfers in 2022 is estimated to stand at €365.5 million. In its 2022 budget, the Government cut central government transfers to municipal economies by a total of slightly more than €550 million throughout the country. This cut amounts to roughly €100 per resident, which means that it will reduce Helsinki’s funding from central government transfers by €65 million.

City Council to decide on the 2022 budget on 8 December

The Helsinki City Board will process the budget proposal on 8 and 15 November. The budget will be forwarded to the City Council for processing on 24 November.

Read more:

City of Helsinki Budget

Photo: Lauri Rotko