Finland

Review of Public Administration

Study Visits

Study visit to Finland

Background

Finland is a constitutional republic, which has a population of 5.18 million. Given its historic linkages to Sweden (which previously governed the area) there is a considerable similarity in the legal and administrative systems. It has a unicameral national parliament that is elected for a four-year period. Economically it has a highly industrialised, free market economy with per capita output equivalent to that of the UK, France, Germany and Italy.

The Finnish economy experienced an " extremely severe economic recession" in the 1990s, which brought about a large deficit in public sector finances. Because of the economic slowdown the relative size of the public sector rose to 60% of GDP. This led the government of the time to embark on a radical reform of the public sector and economic policies, particularly the reform of social transfer payments. Throughout the 1990s public expenditure was cut although efforts were made to retain the heart of the Welfare State.

This was achieved through the use of public management techniques including opening public services to competition, reform of the budget system and performance management techniques.

Constitutional position of local government

The Finnish Local Government Act 1995 reiterated the constitutional autonomy of local authorities. The legislation states that Local Authorities "shall strive to promote the welfare of their residents and sustainable development in their areas."

The functions of local government are prescribed by legislation. The operations and finances of local government are monitored by the Ministry of Interior, which is also required to ensure that municipal autonomy is taken into account in the preparation of legislation concerning local authorities.

Finland is a signatory to the Council of Europe Charter on Local Self Government.

The Constitution divides Finland into "municipalities, whose administration shall be based on the self government of their residents".

Table 1. The levels of public administration in Finland

Finances of local government

Municipal Councils approve the budget and are expected to balance budgets over a three-year period.

Local Authority Annual Expenditure is €24 billion and is financed from taxes, state subsidies (<15%) and various charges and sales revenues. Taxes are collected through local income tax, real estate tax and a share of corporate tax. Tax revenues account for half of all municipal revenues. The average local tax rate is 17.5% of income. Charges and fees account for 25% of revenue. Total municipal borrowing stands at €5 billion. (Source Finnish Local Authorities: Publication by the Association of Finnish Local & Regional Authorities).

Local government expenditure accounts for 30% of total public spending and 66% of public consumption.

The national government has legislated for the creation of the Municipal Finance PLC (Munifin) an independent credit institution owned by the Local Government pensions Institution and the municipalities and municipality controlled entities.

Munifin offer funding on market terms to municipalities, joint municipal authorities and organisations owned or controlled by these and housing corporations that serve the public good. Munifin has low risk and high credit ratings in a number of states and finance organisations.

Structure and functions of local government

Municipalities are the only level of local government in Finland although there are a number of regional bodies that are regional arms of the national government or collectives of municipalities.

Duties on local authorities can only be changed by legislation.

Municipalities while meeting their statutory duties may also assume duties such as recreational, housing, energy, public transport and port services at their discretion.

An Advisory Board on Municipal Economy and Administration which is a central – local government cooperation body examines those parts of the national budget concerning local finance, assesses the prospects and monitors the functioning of the government grant sector.

Table 2. Functions and responsibilities of respective tiers of government and public administration

Authorities	Number	Responsibilities including	Size of authority
State	1	Foreign Policy and Defence Public Order and Security Judicial System Macroeconomic Policy Higher Education and Research Highways and long distance transport and communications Labour Market Policy and employment issues Social Insurance and Transfer payments	-
State Regional Administration (Reformed in 1997)	19 Plus government of Aland	Provincial State Offices Regional Economic Employment and Business Development Offices Environment Institutes Regional Administration of Ministries Regional Units of intermediate public administration. (e.g. National Pensions Institute, Fishing zones and rural, forest areas) Administrative licences	Variable
Provincial State Offices	6	Multi sectoral expert authority promoting nation wide and regional objectives. Covers functions of seven different ministries. Education and Cultural Affairs; Food; consumer competition and business administration; Social and Health Services; Veterinary services; Police administration; sport and youth affairs and judicial administration, the Regional Arts Council. The Provincial state offices support the development of municipal welfare services and evaluate their quality, accessibility, costs and impacts to ensure equal services regardless of one’s place of residence. Issues administrative licences and carries out control and surveillance. Have the right to use coercive means by penalty, fine or other sanction.	Variable
Regional Municipal Administration	270	Joint municipal boards Voluntary; Health care, vocational training Mandatory; Special health care, regional physical planning, care of the handicapped. Regional councils Regional Development and Planning. EU structural funds and Regional Policy, Spatial Planning and International Relationships connected with their work.	Variable
Municipalities	446	Education, (Maintain Comprehensive and upper secondary schools, vocational training) Social Services and Health Care Land use Water and energy supply Waste Management Street and Road Maintenance Environment al Protection Fire and Rescue services Promote commerce and employment Libraries, arts, adult education and cultural and education services	>50,000 (14) 10,00-50,000(92) 4,000-10,000 (140) <4,000 (200) Average Population 11,500

Table 3. Contextual information on size of public sector workforce

Finland labour force by economic sector		Municipal workforce by field of operations.
Public Sector	32%	Admin	13855	3.1%
Industrial	22%	Public Safety	8452	1.9%
Commerce	14%	Health	117908	26.5%
Finance, Insurance and Business Services	10%	Social Services	109952	24.8%
Agriculture and Forestry	8%	Education	109204	24.6%
Transport and Communication	8%	Public Works	10694	2.4%
Construction	6%	Building	7016	1.6%
		Utilities	67019	15.1%

Sources: CIA Worldbook 2002

Finnish Local Government: Approaching the new millennium

Key issues

Improving services

There has been a considerable amount of work in improving services in Finland. Structurally municipalities work in a collaborative approach for service delivery and improvement. Between 1993 and 2001 150 multi-service centres (one-stop shops) have been established. These enable citizens to access services in a single location from two or more service providers either separately or together.

Some of the municipalities also participate in benchmarking activities.

To provide services the municipalities can function with one or more other municipalities. This can be done in the following formats:

       contracts between municipalities
       joint enterprises/utilities under private law
       a joint municipal board, which is a public judicial body.

There is a strong commitment to the use of The European Foundation Quality Excellence Model as a tool for service improvement. In addition, organisations are encouraged to use the Balanced Scorecard approach with a view to improving the strategic management systems in the public sector.

There is a sense that the commitment to local government and its considerable independence from the state allows services to be tailored more appropriately to local needs.

There has been an increasing trend to improve systems of regulation from the central government. The use of quality standards and performance criteria now increasingly accompanies the allocation of state funds.

There is recognition at all levels that there is a need to coordinate central policy as it impacts on local government organisations.

An equalisation process is in place, which means that municipalities have the right to have 90% of the average tax revenue base.

There has also been considerable investment in IT infrastructure and while citizens can receive a considerable amount of information on the Internet, the roll-out of transactional services is continuing.

Enhancing democracy

Like most western democracies there is a trend wherein citizens believe themselves distant from the political process. Attempts are being made to engage citizens at different levels in the communities.

The government has introduced a financial equalisation scheme to ensure that all the citizens can receive an appropriate level of services irrespective of geographical location. This scheme redistributes tax revenue from more prosperous municipalities to those who have a lower tax base on which to raise revenues.

Better governance

The municipal council is the most significant body in local government and exercises decision-making power. Composed of 17 to 85 members, according to population. The council is responsible for the local authority’s finances and operations and makes decisions in all-important issues. It can also delegate its power to the executive or to committees.

Each municipality has an executive board appointed by the council. The executive board is responsible for the preparation and execution of the decisions for permanent functions of the municipality and the appointment of the boards of management for commercial or other utilities.

The division of power and responsibility is based on legislation and the council itself is the highest decision-making authority. It is required by law to undertake the following activities:

       establishment of policy and targets
       finance
       organisation
       budget
       elections of employees to subsidiaries or joint ventures.

Organisationally regulations about structures are being loosened. The traditional committee structure is set out in Table 5.

Table 5. Traditional organisation of municipality

Source Structure and operation of local and regional democracy, Finland, Council of Europe

*Compulsory committees

Municipalities are now beginning to create their own structures and an example from Hameelinna is set out below in Table 6.

Table 6. Alternative committee structure Hameelinna

Highlighted areas indicate the relevant political committee and their size

Members of municipal councils are elected for four years. While Executive Boards are elected for two. It is not possible to be an official or have a supervisory task over municipal administration and have a leading role in a municipality

Chairmen and Deputy Chairs of the Councils, the Board and the Committees receive permanent remuneration while councillors are paid an attendance allowance, are provided with compensation for loss of earnings and travel costs. There are no pension rights. The Council determines attendance rates while travel and compensation rates are regulated by the Association of Finnish Local Authorities.

Involving communities

The Constitution contains a provision that "public authorities shall promote the opportunities for the individual to participate in societal activity and to influence the decisions that concern him or her."

The Local Government Act 1995 places more emphasis on citizen engagement than ever before. And defines the rights of local residents in terms of:

       suffrage and voting rights
       opportunities to participate and exert influence
       right of initiative
       information
       municipal referenda
       referendum proposals.

In regard to opportunities to participate and exert influence councils are required to ensure that local residents and service users have opportunities to participate and influence their local authority’ operations. These can include:

       electing representatives of service users to municipal organs
       providing information about local affairs and holding hearings
       finding out residents opinion before decisions are made
       helping citizen’s manage, prepare and plan matters on their own imitative
       by arranging municipal referenda.

The right of initiative allows the residents the right to submit initiatives to the local authority related to its operations.

Local residents representing at least 5% of those entitled to vote might propose a referendum, which the council has to consider without delay.

These proposals have manifested themselves into actions such as the creation of Disability Councils within municipalities and special projects dealing with local problems.

Support

Within Finland there is a successful support organisation of local government, which takes on a role of not only providing support such as training, but also research and lobbying the national government on behalf of municipalities and county councils. Membership is voluntary and its commercial activities and membership fees fund it.

Bibliography

Structure and Operation of Local and Regional Democracy, Council Of Europe

Issues and Developments in Public Management: Finland 2000, OECD, Ms Katsu Holkeri

From Uniform Administration to Governance and Management of Diversity, Reforming state functions and public administration in Finland.

Seppo Trihonen, Economics Department of the Finnish Ministry of Finance, OECD

The creditworthiness of Finnish Municipalities, The Association of Finish Local and Regional Authorities, The Ministry of the Interior.

Finnish Local Government: Approaching the New Millennium, Edited by Sari Pikkala, The Finnish Association of Local Government Studies

Participation Project

Promoting Citizen Opportunities for participation and influence within local administration in Finland, Ministry of Interior.