A government in serious trouble

Juha Sipilä’s government is confronted to serious difficulties. A number of efforts have been asked from Finnish families, from students, from retirees, from universities and public services. Public sector doctors and nurses have heard that they are going to work for private companies. At the same time, Finland continues to lag behind the other EU countries in terms of growth. The public deficit continues to increase. There are tensions in the government, as the polls become more and more worrying for the parties in the coalition, and there has been a number of situations where the only thing unifying the government is a common will to stay in power.

Some people are considering that this situation comes from the fact that Juha Sipilä was a newcomer to politics, so he made normal mistakes. Some stress that, with a limited experience in economic matters, he has not yet been able to understand that a country cannot be governed as a company: it you cut in the costs, you cut the incomes of the consumers and taxpayers, and the result has nothing to do with a company cutting in its expenses. Others consider that for ideological reason and under the influence of big companies, the conservatives from the National Coalition Party have pushed for cutting in the public expenses and for privatization, which has generally in other countries not been so successful, and that in addition Alexander Stubb has not been a good partner. The choice of Timo Soini as minister of foreign affairs and of the Finns Party as a coalition member has made Finland lose its international credibility and deteriorated its relation with Russia, which was its main customer.

And even if Alexander Stubb is supposed to have some knowledge of the EU, it looks like Finland has tried to be the best student in the class , following the Commission’s liberal recommendation. It is not providing the expected results, with Finland’s growth expected to be at 0,7 % in 2016 and in 2017, when countries who have refused to cut really in their public expenses have a lot better perspectives (France 1,3 % in 2016 and 1,7 % in 2017, Italy 1,1 % and 1,3 % for example, with a diminution of public debts).

All these elements are somewhat true, but in fact, it is probably not the core of the problem. As we have already indicated, the main problem comes from wrong decisions taken between the three partners from the coalition behind public doors, which leads to sometimes correct them  later in a hurry without thinking. It givesa global impression of amateurism, when Finland needs to feel that the government in charge is professional.

This can be corrected if Juha Sipilä would look outside Finland, and for example take some lessons from the UK, where there is a tool used to assess decisions before they go to the Parliament (and before they go public). It is quite clear that for a majority of decisions, it has not been done in the last year in Finland.

Better legislation framework with different impact assessments

The UK “Better Regulation Framework” indicates the following principles for the government’s action:

The Government will regulate to achieve its policy objectives only:
(i) having demonstrated that satisfactory outcomes cannot be achieved by alternative, self-regulatory, or non-regulatory approaches
(ii) where analysis of the costs and benefits demonstrates that the regulatory approach is superior by a clear margin to alternative, self-regulatory or non-regulatory approaches
(iii) where the regulation and the enforcement framework can be implemented in a fashion which is demonstrably proportionate; accountable; consistent; transparent and targeted.

There will be a general presumption that regulation should not impose costs and obligations on business, social enterprises, individuals and community groups unless a robust and compelling case has been made.

This is clearly not the case for the legislation proposed in Finland, for example concerning daycare, pensioners housing subsidy, cuts in universities or students’ support. There is no demonstration of such a process, and that is Finland’s government’s problem.

For government’s decisions, there is also a Green Book which is a tool for public deciders to appraise decisions before they are taken or even presented. The guidance provided applies “At the start … to any analysis used to support a government decision to adopt a new policy, or to initiate, renew, expand or re-orientate programmes or projects, which would result in measurable benefits and/ or costs to the public“. It  describes how the economic, financial, social and environmental assessments of a policy, programme or project should be combined.

What does it mean? It means that, before taking a decision, the government should have made its homework with the relevant experts, and for example should have answered the following questions:

1. What do we want to achieve?
2. What are the different options to achieve it (and the following questions should be considered for all the options)
3. What are the costs and the benefits?
4. What is the impact on public finances?
5. What is the environmental impact?
6. What is the health impact?
7. What is the impact on small businesses? On big companies?
8. What is the impact on the third sector?
9. What are the groups of population impacted? How are they impacted?
10. In particular, what is the impact on children? On families?
11. What is the impact on poverty? On inequalities?
12. What is the impact on men-women equality?

The present situation in Finland is that some of these impacts assessments (on public finances, on the environment, on equality for example) are performed, generally after a meeting where the partners in the coalition have already agreed without really assessing all the consequences. But is is generally too little and too late to be efficient.

It is not a question of cost or of difficulty. These studies are not expensive, and Finland has some very good think-tanks able to dot it, such as SITRA and DEMOS. It is a question of political will: when the children’s Ombudsman has asked the government to systematically analyze the impact of new legislation on children, it was just simply refused. the result is that M. Sipilä is in the same situation as a driver who does not know its way and refuses to use a map or a GPS.

Maybe he should visit the UK, before the Brexit…

Categories: Economy, Environment, Government

Tags: Economy, Finland, Impact assessment