The commerce sector’s messages for the budget framework session: Purchasing power and restructuring must be taken into account

Strongly rising inflation is reducing the purchasing power of consumers. Total inflation in Finland was 4.5 per cent in February. As a result of the Russian war of aggression, rises in prices are likely to accelerate further. According to Statistics Finland’s data, consumer confidence has weakened significantly. There is a danger of slowing economic growth and weakening employment.

“In order to mitigate the negative development, economic and tax policy must support the purchasing power of Finns. The most important way to strengthen purchasing power would be to reduce the income tax in all income brackets,” emphasises Mari Kiviniemi, Managing Director of the Finnish Commerce Federation.

Private sector consumption accounts for about half of Finland’s GDP and has a significant impact on employment. Reducing income tax would reduce the tax wedge on labour, reduce incentive traps and improve purchasing power without increasing salary costs.

The Finnish Commerce Federation would also want to see decisions that can create and promote investments and growth and improve the functioning of the market.

“A key action would be the dismantling of existing monopolies. In particular, the pharmacy market should be reformed in the interests of consumers and society on the basis of the proposals for measures presented by the Finnish Competition and Consumer Authority,” says Simo Hiilamo, Director of Public Policy and Advocacy at the Finnish Commerce Federation.

With regard to the retail sale of alcohol, it is also time to move to European regulation by allowing the sale of wine in grocery stores and by allowing distance selling of alcoholic products. The smoothness of zoning is also crucial for investment. Speeding up the government’s ongoing projects and raising their level of ambition would allow for taking quick-acting measures to stimulate growth.

Solutions needed for incentive traps

The combined effect of taxation, income transfers and service fees continues to create incentive traps in Finland. The dismantling of incentive traps is a means of improving employment on market terms. “In commerce, incentive traps are reflected in the availability of labour,” says Anna Lavikkala, Labour Market Director at the Finnish Commerce Federation.

In the short term, accelerating the social security reform and dismantling the incentive traps would make it profitable to accept and work every working hour and would make it safe from the standpoint of the individual’s own livelihood. Reforming unemployment security by staggering income security would provide a solution to labour shortages and increase employment, which in turn would strengthen the public economy.

In the longer term, in order to dismantle incentive traps in Finland, a basic salary should be introduced, which has been proposed by several specialists. The Finnish Commerce Federation expects the government to make decisions on the further preparation of the basic salary model during the budget framework session. Similarly, general income security must be investigated as quickly and comprehensively as possible.

Fully integrate the waste heat potential of the commerce sector into energy security and climate action

The changed security situation in Europe requires a rapid increase in energy self-sufficiency. The commerce sector has a role to play in strengthening energy security, as the sector generates high levels of emission-free waste heat.

“A more efficient use of the waste heat from commerce will also help to achieve ambitious climate and energy targets. The introduction of cost-effective and untapped energy sources will also soften the cost impact of the green transition for citizens,” Hiilamo emphasises.

The waste heat potential of the commerce sector alone is almost one terawatt-hour per year, which corresponds to the volume of biogas production in Finland. The largest untapped waste heat potential in the commerce sector is in refrigeration systems in the grocery trade (800 GWh/year). Another significant source of waste heat is the cooling energy of shopping centres (113 GWh/year).

“It would make sense to recycle waste heat back into heating energy, for example through heat pumps, as required by the European Commission’s Fit for 55 package. In addition to utilising waste heat inside a property, two-way district heat is a solution for utilising excess waste heat,” Hiilamo states.

In order to make the use of waste heat more widespread, models for example contracts are needed that share the economic benefits equally between the tenant and the owner of the property. The obligations imposed on the owner of a property or a district heating network to receive waste heat are also a prerequisite for efficient and rapid utilisation of waste heat.

The sudden change in the security situation and energy availability in Europe will have a major impact on the daily lives of citizens and businesses, so all potential and cost-effective means of generating or utilising emission-free energy must be deployed within an accelerated timeframe.

Additional information

Mari Kiviniemi, Managing Director
050 511 3189
mari.kiviniemi@kauppa.fi

Simo Hiilamo, Director, Public Policy and Advocacy
050 350 7564
simo.hiilamo@kauppa.fi

Anna Lavikkala, Labour Market Director
040 040 6088
anna.lavikkala@kauppa.fi