The Finnish Property Market 2012 - KTI

Photo: Skanska / Pauliina Munukka
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The Finnish Property Market 2012
potential means to increase the scale and productivity of local
service provision. The Minister of Public Administration and
Local Governement nominated a specialist working group to
discuss the municipal reform, which in its report, published in
February 2012, suggested that the number of municipalities
should be decreased to ca. 70.. The working group’s proposals
are based on the need for a municipal structure that is robust
and efficient and can better safeguard the provision of basic
public services. They should also better match the scope and
nature of people’s daily lives than at present. The working
group’s proposals for local government restructuring are also
aimed at strengthening municipal finances and improving
their flexibility in the changing economic environment.
“Reforms in municipal
structure discussed
actively”
However, Finnish municipalities have strong self-government
based on local decision-making and the right to levy taxes,
and thus varied strategies are being applied to cope with the
increasing challenges. Due to the strong local autonomy,
political pressures might prevent the enforcement of any
coercive measures. Therefore, financial pressure is the
most powerful driver for municipal structural reforms. The
Ministry’s working group also suggests the execution of
municipal mergers will necessitate the use of more effective
merger procedures.
The rapid ageing of the population is one of the main
challenges facing the Finnish economy. The Finnish age
pyramid is one of the most unfavourable within the EU. By
2020, the old-age dependency ratio (the ratio of those aged 65
and over to those aged 15–64) will increase from its current
level of 17% to 23%. The ratio is deteriorating rapidly because
of the retirement of the baby-boom generations born after
the World War II, as well as the increasing life expectancy
of the population. Due to the ageing of the population, the
workforce has started decreasing, and, at the same time, the
need for social and welfare services is increasing. Therefore,
lengthening the duration of working-life is actively discussed
as one means to support the sustainability of public services.
This is pursued both by looking for means to speed up the
education of younger generations and postponing retirement
for older workers.
The OECD stated in its recent economic survey on
Finland that the current plans in the government’s policy
programme are not ambitious enough to deal with future
fiscal challenges related to the ageing population. Raising
the retirement age, improving incentives to work for
older individuals and further tightening early-retirement
schemes would increase labour supply and could lower fiscal
costs sufficiently to address these long-term challenges.
Without major retirement reforms, significant further fiscal
consolidation would soon be needed to deal with the costs of
ageing, states the OECD.
“Retirement reforms are
needed to deal with the
challenge of an ageing
population”