Skip to content

Kela director: Finland’s system of social benefits is unsustainable

The director of Finland’s social benefits administrator Kela says Finland’s generous system of state assistance has become unsustainable, particularly when it comes to the 1.7 billion euros awarded each year by the state in housing expense support. Liisa Hyssälä suggested that municipalities should try covering half of the housing allowance in future, so efforts to create truly affordable housing in Finland would finally get off the ground.

Kela's Director General Liisa Hyssälä Image: Yle

Liisa Hyssälä says the myriad of social benefits that she has overseen as Director General of Finland’s Social Insurance Institution - better known as Kela - has come to the end of the line. She says the behemoth system is careening out of control, and the Finnish society simply can’t afford to foot the bill much longer. 

Kela was founded in 1937 to administer state pension payments, but its role expanded in the 1980s and 90s to include family allowances, health insurance benefits, rehabilitation benefits, basic security benefits for the unemployed, general housing allowances and student benefits. Kela also provides disability benefits and conscript allowances.

“The old system doesn’t work. It was created during the Second World War,” Hyssälä said in a TV1 appearance Saturday morning.

As an alternative, the director of Finland’s social benefits administrator said a basic income scheme would safeguard wellbeing better than the current system, providing more security to Finland’s residents during difficult times.

She argued that a monthly basic income allowance could in theory cover up to 6 or 7 separate “quilt work pieces in the benefit jungle” that currently exist in the system - a major win in terms of administration, she said. 

Taking advantage of good intentions

The Kela director was particularly critical of the social benefits that are meant to be temporary forms of assistance, but have become permanent income supplements for many. She said large segments of society in Finland now believe they are entitled to the general housing allowance, for example, and play the system so as not to lose it. Some keep their income levels intentionally low to avoid losing the state-funded assistance.

“The line between individual and societal responsibility has blurred, and from Kela’s standpoint, it is easy to see just how much. The system is too easy to play,” Hyssälä said.

Municipalities should try paying their share

Hyssälä says the largest and fastest-growing benefits are the most problematic. These include the general housing allowance, the care allowance for pensioners and Kela reimbursements of travel expenses.

“When we are already talking about billions of euros in spending and the numbers keep on growing, every self-respecting Kela director should feel obliged to examine the justifications behind it all. It is irresponsible to think that this could go on indefinitely,” she said.

She mentioned the growing expense of Kela reimbursement for medicine, which grew last year by 5.5 percent to 1.4 million euros. The latest change to the housing allowance criteria also caused expenses in that area to grow by 20 percent.

“Society can’t handle paying 1.7 billion euros in housing allowances each year. And if it continues to grow by 20 percent annually, things will eventually hit a wall,” the Kela director said.

Renters that are permanent residents of Finland are entitled to a housing allowance equal to 60 percent of their total rent if they qualify, a benefit that some 800,000 Finnish residents currently enjoy - and the numbers are rising.

Hyssälä says one solution is for the country’s over 300 municipalities to foot 50 percent of the housing benefit bill in future. She said the cities and regions classified as municipalities already pay half of people’s income subsidy in times of hardship, in addition to half of people’s long-term unemployment compensation.

“Maybe then we would see faster progress in city planning to create affordable housing,” Hyssälä said.

No way, municipalities reply

The municipality association of Finland was quick to respond to the Kela director’s suggestion Saturday evening.

“Our municipal finances can’t take any added expense from any direction,” said the Association of Finnish Local and Regional Authorities’ deputy director Timo Reina.

He said Hyssälä’s idea would end up costing Finland’s local governments hundreds of millions of euros, forcing them to hike up municipal taxes.

“It would also lead to cuts in service, which would make vulnerable people even worse off,” Reina said.

The former Centre Party minister Liisa Hyssälä will leave her Kela post at the end of the year. She says she is too young at 68 to retire, and plans to continue working in another area.

Latest: paketissa on 10 artikkelia