Incoming Finland prime minister announces spending boost, tax hikes

The man set to become Finland`s first left-leaning prime minister in 20 years announced plans on Monday for a big public spending increase on welfare and infrastructure, paid for by tax hikes, sales of state assets and a boost in employment. Social Democrat Antti Rinne, who cobbled together a five-party coalition after barely beating the far-right Finns party into first place in an election in April, unveiled the programme for his new government of centrist and left-leading groups. "This government program will reduce income differences in Finnish society," Rinne said at a public event in Helsinki`s new central library.

Rinne unveiled proposals to boost permanent public spending by 1.23 billion euros ($1.37 billion) a year by 2023 and spend an additional 3 billion euros on one-off investments during the four year term. The plans were in line with figures leaked to the media a day earlier. To fund the increased spending, the government will raise taxes by 730 million euros ($815 million), much of it through environmental levies, and sell off up to 2.5 billion euros of state assets. It also aims to boost Finland`s employment rate to 75% from 72.4% in April.

The Finnish parliament is fractious, with 10 parties winning seats in the April 14 election. Rinne`s Social Democrats placed first with just 17.7% of the vote, beating the Finns party by just 7,666 votes, or 0.2 percentage points. It was the closest the nationalist Finns have come to a victory in the party`s 24-year history, putting pressure on Rinne to address social discontent. Finland`s outgoing centre-right government led by centrist Prime Minister Juha Sipila had imposed austerity measures to cut public expenditure by around 4 billion euros. It also managed to cut Finland`s debt for the first time in a decade, but its stricts financial policies made it deeply unpopular.

Rinne said it was now time to "invest in the future" with decisions such as making all secondary education free and raising the compulsory school age to 19 from 17. To boost the economy, Rinne said Finland would seek a national exception to EU legislation to exempt small business from paying value added taxes, to ease their administrative burden.