Minister of Finance Annika Saarikko (Cen) has backed calls to compensate for the increase in energy costs by lowering the value added tax (VAT) on the price of electricity.
Interviewed on the Yle current affairs programme Ykkösaamu on Saturday, Saarikko said that reducing VAT on electricity would be justified, as long as the electricity companies do not use it as an opportunity to reap additional profits.
A VAT cut was proposed last week by a fellow Centre cabinet member, Economic Affairs Minister Mika Lintilä.
The Centre Party chair is preparing her second annual budget blueprint since taking over the finance post in May 2021. The five-party coalition government meets for budget negotiations in late August and early September.
She told Yle that her ministry is mapping out possible means to combat and cope with inflation ahead of those talks.
In July prices were up by 7.8 percent year-on-year, the sharpest rise since the 1980s.
According to current forecasts, inflation will continue to rise this autumn before slowing to around 2.7 percent next year.
"Now is the time for social responsibility"
According to Saarikko, electricity is the biggest price concern for this coming winter.
"A reduction in the VAT tax rate on electricity would be a justified change in that it could be put into effect quickly," she argued.
Saarikko said, however, that the government must ensure that electric utilities would not transfer the tax discount to their own profit margins, but that the tax relief would actually be reflected in consumers' wallets.
"Now, if ever, is the time for social responsibility," she said.
Food prices set to rise further
The rise in food prices is also hitting consumers hard in Finland. The growing costs of the food chain are reflected those in primary production, for example, in the price of fertiliser, noted Saarikko, whose party has traditional ties to the farmers' union MTK.
Although producer prices have risen slightly recently, according to the minister, there is no relief in sight for farmers.
"The price pressure will continue because right now farmers have to purchase fertilisers for the upcoming harvest season at record-high prices, for example," she noted.
Purchasing power partly depends on wage settlements
According a June forecast by the Finance Ministry, the purchasing power of consumers in Finland will improve slightly in 2023 after weakening this year.
"The price of fuel surprised motorists last spring, the price of food has been creeping up all summer and the increase in the price of electricity has become clear to many in the form of price increase notices from their electricity companies," said Saarikko.
She pointed out that future fluctuations in purchasing power depend largely on how inflation develops in the coming year and what kinds of wage deals are reached in key labour sectors.
"I hope that the salary solutions will be moderate, so that we won't price Finnish expertise out of international competition," the finance minister added.