spending limits and managed to agree on cutbacks in the spending limits decision for 2006-2009 in order
to remain on target.
Besides expenditures, tax reliefs and taxation overall, public lending and financial subsidies must be
considered to get a whole picture of the quantity and effectiveness of public finances. Tight spending
limits can lead to alternative ways to attain public support. International comparisons of public
expenditures alone are somewhat debatable.
Because of the ageing population Finland is facing major challenges particularly for the sustainable
funding of general government. Finland is continuing to prepare for the challenges by several structural
measures. These include reducing levels of public debt, reforming the pension system, increasing
prefunding of pensions, launching productivity action programme, promoting skills and competitiveness,
and seeking to drive up the employment rate. Several pension reforms over the past ten years have had
the effect of significantly increasing the sustainability of the pension system among other things by
encouraging people to stay longer in the labour market.
The productivity action programme and the basic services programme in the municipal sector form an
extensive reform package, which aims at securing the quality and provision of public services in the
future. Many of the measures included in the package are in an early stage of implementation, but the
future effects of the programmes are expected to be substantial. There are 432 municipalities and 231
joint municipal authorities in Finland that have responsibility for the provision of the bulk of welfare
services in the country. Therefore, measures to rationalise municipalities’ service production and enhance
productivity in the municipal sector can have a considerable impact on the productivity and quality of the
general government expenditures.