Finland’s public expenditure rose from 48.1 per cent of gross domestic product in 2006 to a provisional 57.5 per cent in 2025, according to Statistics Finland. Over the same period, public revenue increased by just two percentage points, from 52.1 to 54.1 per cent of GDP.
The figures cover the entire general government sector, comprising central government, municipalities, social security funds and wellbeing services counties, the regional authorities responsible for health and social services.
The latest statistics place Finland at the top of the EU ranking for public expenditure as a share of GDP.
The trend reflects both rising expenditure and weak economic growth, says Teemu Lehtinen, chief executive of the Taxpayers’ Association of Finland.
“GDP has barely grown in recent years,” he told Verkkouutiset.
Finland’s public finances have deteriorated substantially over the period. In 2006, the general government sector recorded a surplus of four per cent of GDP. By 2016, the balance had shifted to a deficit of 1.7 per cent, widening to a provisional 3.4 per cent in 2025.
The Ministry of Finance has forecast a deficit of 4.4 per cent of GDP for 2026.
Lehtinen says restoring balance to the public finances requires both tighter control of expenditure and stronger economic growth.
“If we can keep spending under control and get the economy growing, both will help improve the situation,” he says.
Pension costs rise, but Kela’s spending falls
Finland’s ageing population is reflected in rising pension expenditure. Total pension spending increased from approximately €17.9 billion in 2006 to a provisional €39.8 billion in 2025, a rise of 123 per cent in nominal terms.
Spending on earnings-related pensions grew even faster, by approximately 147 per cent. Total pension expenditure rose from 10.3 to 14.1 per cent of GDP.
However, pension expenditure by Kela, the Social Insurance Institution of Finland, fell over the period. It declined from approximately €2.78 billion in 2006 to a provisional €2.62 billion in 2025. This expenditure includes national pensions, guarantee pensions, survivors’ pensions and veterans’ supplements.
Lehtinen notes that Kela’s pension spending has not increased even in nominal terms.
He also points to the Finnish Centre for Pensions’ latest projections, which indicate that the financing outlook for the earnings-related pension system is stronger than previously assessed.
Earnings-related pensions are financed mainly through contributions from employers and employees, together with returns on pension fund investments, rather than through the central government budget.
Central government spending up 55 per cent after inflation
Verkkouutiset also examined the central government budget separately, comparing expenditure and revenue across ministries and their areas of responsibility.
Central government budget expenditure has increased by 55 per cent in real terms between 2006 and 2026. Compared with 2016, the increase is 33 per cent.
The calculations adjust nominal figures to 2016 prices using the consumer price index.
Changes within the budget have been highly uneven. Expenditure recorded under the Ministry of Finance has risen by 390 per cent in real terms between 2006 and 2026. The main reason is that central government funding for wellbeing services counties is now included in that ministry’s budget.
The Ministry of Social Affairs and Health’s allocation in the 2026 budget is approximately €11.8 billion, slightly below its 2006 level in real terms. However, administrative changes, including the health and social services reform and transfers of expenditure between ministries, complicate the comparison.
Lehtinen says spending on health and social services remains a major challenge for the public finances.
“It is important to contain the growth in spending on health and social services,” he says.
Defence spending has nearly doubled
Defence is another area where expenditure has risen sharply. Budget allocations under the Ministry of Defence have nearly doubled in real terms over 20 years.
Lehtinen says the changed security environment will continue to shape future budgets.
“The big spending trends visible in these figures are defence and security, and health and social services.”
Not all ministries have seen real-terms increases. Allocations to the Ministry for Foreign Affairs have fallen by approximately 20 per cent since 2006, while those for the Ministry of Agriculture and Forestry are down by approximately 36 per cent.
Allocations to the transport and communications ministry and the education ministry are also lower in real terms than they were 20 years ago.
The decline in the environment ministry’s allocation is partly explained by the transfer of general housing allowance expenditure to the Ministry of Social Affairs and Health in the 2007 budget.
Lehtinen cautions that changes in individual ministries’ allocations do not necessarily reveal political priorities, as there are often other reasons behind the shifts.
One expenditure item expected to grow in the coming years is interest on central government debt. Lehtinen says the increase reflects both a larger debt burden and higher interest rates.
“That will cost us more in the years ahead,” he says.
Tax revenue shifts reflect the healthcare reform
The largest change on the revenue side of the central government budget concerns taxes on income and wealth. Receipts in this category have increased by 112 per cent in real terms between 2016 and 2026.
Part of the increase stems from the health and social services reform, which shifted a substantial share of tax revenue from municipalities to central government. Municipal income tax rates were reduced, while central government taxation of earned income was increased correspondingly.
Finland’s overall tax-to-GDP ratio, however, has remained broadly stable at around 42–43 per cent, according to Lehtinen.
“Taxes in Finland continue to take roughly the same share of national output,” he says.
He argues that a well-functioning tax system depends on a broad tax base and moderate tax rates.
Less room to respond to future crises
Lehtinen says Finland’s next government will take office facing a difficult fiscal situation.
“The next government will inherit a state weighed down by debt,” he says.
Restoring balance to the public finances cannot rely on spending cuts alone, he argues.
“Above all, we need economic growth, which will then be reflected in tax revenues.”
Lehtinen believes Finland’s fiscal buffers have weakened considerably, leaving the country with less room to respond to future crises.
“To retain even some room to respond, we need to move quickly to reduce the deficit.”