In 2020 and 2021, benefit costs temporarily increased due to the COVID-19 pandemic, followed by a decrease in 2022. In 2012, approximately EUR 15 billion was allocated to benefits, while in 2022 the figure was EUR 16.3 billion.
In 2022, Kela’s biggest expenses were in health care benefits, a total of 5 billion euros, which includes medical reimbursements, sickness allowances and parental allowances. Pension benefits were 2.5 billion euros and family benefits, such as child benefits and care allowances, 1.9 billion euros.
A closer look reveals that healthcare benefits accounted for just under a third of Kela’s total benefit expenses. Sickness allowance accounted for 35%, sickness allowance 24%, parental allowance 22%, private healthcare, dental care, check-ups and travel allowances accounted for 10% and other benefits accounted for 9%.
Over the past decade, the shares of benefits allocated to different categories have experienced some variation.
“For example, unemployment benefits usually reflect changes in the level of employment. In the early 2010s and during the COVID-19 period, unemployment benefit expenditures increased. In 2022, however, unemployment benefit expenditures decreased by 20% compared to the previous year,” explained the research manager. Signe Jauhiainen.
In contrast, housing benefit payments more than doubled between 2012 and 2021 due to changes in the support system, but actually decreased from 2021 to 2022.
When looking at all social security expenses, it is important to note that Kela’s benefits make up only about a fifth of Finland’s total social security expenses, which were estimated to be 79.4 billion euros in 2022. Other entities, such as pension funds, unemployment funds, and welfare districts also offer social benefits. For example, pension benefits were 31.4 billion euros in 2022.
The goal is to cut housing allowance and unemployment benefits in the government program
Government program led by the prime minister Petteri Orpo, aims for annual savings of around 1.2 billion euros in social security costs and benefits in the long term. Some of the savings are achieved through reductions in Kela’s benefits, while some affect earnings-related unemployment benefits.
In addition, the government aims to achieve annual savings of almost 0.4 billion euros in the long term by freezing benefit indices.
“In light of Kela’s total expenses, the savings outlined in the government program may not seem significant. However, when you look at changes, such as the housing benefit or the removal of the unemployment benefit’s child allowance, the effects on the individual’s finances can be quite significant, Jauhiainen stated.
Out of the total amount of the relative reduction, the most significant cuts are aimed at housing allowance. The government’s program aims for annual savings of 363 million euros, and changes include lowering the subsidy percentage from 80 percent to 70 percent, eliminating income security and completely ending owner-occupied housing. These changes will not affect all recipients in the same way.
The government program also outlines measures to achieve annual long-term unemployment insurance savings of around 570 million euros, which affect both the basic social security offered by Kela and the earnings-related unemployment allowance.
In terms of income support, the government aims for annual long-term savings of 100 million euros. Not all of the proposed changes will take effect immediately, as the government intends to carry out a comprehensive reform of income support. However, the proposal to tighten housing allowance standards is already in the public consultation phase.
“According to estimates, the cuts in unemployment benefits and housing allowance may slightly increase the expenses of subsistence allowance. The share of subsistence allowance in the income of households already receiving it will increase, and new recipients may come,” predicts Jauhiainen.
Child supplement funding and a temporary increase in Kela’s allowances
In addition to the budget cuts, the government is also planning to increase some of Kela’s benefits. Child benefit is to be increased by 70 million euros per year. From April 1, 2024, a higher child allowance will be paid to children under the age of three.
The government program also outlines a temporary increase in Kela’s private healthcare reimbursements. A budget of 335 million euros has been set aside for this purpose for the election period.
“The allocation of additional funds for Kela compensations differs from previous changes, as Kela compensations have been cut in the past. The changes aim to direct funds to benefit recipients,” Jauhiainen stated.
Source: The Nordic Page