Apologies have been received from the Chairman, Deputy Cassidy, who is away on other business, and from Deputy Tony Dempsey. I welcome members of the Finnish Parliament's economy committee to the meeting to discuss matters of mutual interest. The delegation is led by Mr. Jouko Skinnari, who is very welcome. I also welcome the Finnish ambassador, Mr. Seppo Kauppila. Following the delegation's opening remarks, we will have a question and answer session.
Finnish Parliamentary Delegation: Presentation.
Mr. Jouko Skinnari
I thank the committee for the invitation to come before it to discuss matters of mutual interest. We have been gathering information about Ireland since Sunday last. I am a Social Democrat representative from Lahti. If the other members of the delegation introduce themselves, the committee will be in a position to identify the political parties they represent.
Mr. Arto Bryggare
I come from Helsinki. I am also a Social Democrat. As well as being a member of the economy committee, I am a member of a sub-committee on taxation, housing and traffic.
Mr. Skinnari
Mr. Bryggare was a bronze medallist in the 110 m hurdles at the Los Angeles Olympics in 1984 and a silver medallist in the same event at the World Athletics Championships in 1983. That is good to know and members of the public like information of this kind.
Mr. Klaus Hellberg
I am also a Social Democrat. I am from Porvoo, which is 50 km from Helsinki. I visited the Oireachtas four years ago with the Speaker of our Parliament.
Mr. Esko Kiviranta
I am from Sauvo and represent the Finnish Centre Party.
Mr. Seppo Lahtela
I am a member of the Finnish Centre Party.
Mr. Jere Lahti
I represent the Coalition Party in Helsinki. As well as being a member of the economic committee, I sit on the defence and state accounts committees.
Ms Sirpa Paatero
I am Social Democrat member from Kotka.
Mr. Martin Saarikangas
I represent the Conservative Coalition. Until my retirement in 2002, I was a business leader and was based in Trafalgar House in London from 1998 to 2001.
Ms Minna Laulaja
I am an assistant to the economic committee.
Ms Tuula Kulovesi
I am clerk to the committee.
The delegates have very interesting backgrounds.
Mr. Seppo Kauppila
I am the Finnish ambassador in Dublin.
Mr. Skinnari
We have had many discussions in Ireland and compared the situation here and future possibilities with those in Finland. Ireland's population of approximately 4 million is projected to exceed 5 million by 2020. Finland's population of 5 million is expected to rise by 1 million, including migrants. There are 1.7 million cars in Finland, which figure is expected to increase to 3 million, while the number of housing units is increasing by 80,000 per year. The rate of increase is very high and begs the question of how long we, the USA and the rest of the world can continue to grow in this way. We have seen such growth in Japan, New Zealand, the USA and Ireland, as well as at home. Finland, for example, places importance on the PISA rating in education. We must ask what is the meaning of its position at the top of the PISA rankings.
The circumstances of companies and workers and the issues of employment and unemployment are important. Ireland has very good economic conditions. I visited here ten and 20 years ago when conditions were different. It is a wonder how this happened, but politics must have played a part. People might find that hard to believe, but it must be true. Our questions relate to the way in which small enterprises can take advantage of what has happened in Ireland and whether the committee can provide examples to show how the current economic success was achieved. What are the costs of starting a limited company in Ireland?
Yesterday, we had a discussion on energy, which was very cheap in Finland five years ago. The situation is different now and energy is a very important issue. We are hosting the Presidency of the European Union this year when the role of Russia and Norway in regard to energy will be high on the agenda. There are a great many questions to be raised on the issue.
Mr. Skinnari referred to housing in Finland. I am interested in an overview of its housing stock. What system is in place to allocate houses to people who have no jobs? Is the cost of a starter home high relative to the earnings of young people?
I will allow a member to ask another question before asking the delegates to reply, if they are agreeable to this suggestion.
Mr. Skinnari
We will translate the questions before answering.
Does Ms Huuskonen wish to translate?
Ms Outi Huuskonen
Yes.
Let me introduce myself. I am a social democrat, a Labour Party Member of the Dáil and a former Minister in the Departments of Health and Children and Environment, Heritage and Local Government.
I welcome the delegates and I am interested in sharing views with them. I am happy to address some of the points they have made and wish to ask them questions. By way of observation on the points made, if during their visit the delegates work out how the economic miracle happened in Ireland, they might tell us because we are not fully sure. People ask how we achieved such economic growth and I think the key to our success has been three important initiatives: first, early and very significant investment in education; second, a tax regime that was very attractive to inward migration of capital and investment; and third, the social partnership model, whereby we created a stable economic climate across political parties to ensure the people would not face shocks after an election with the oscillitation of policy between political parties.
I am very interested in the Finnish economic model. Finland has managed to maintain manufacturing when other developed economies have a declining manufacturing base and become increasingly dependent on services as manufacturing moves to other countries. How dependent is Finland on Nokia and ICT? Has ICT dominated?
On regional disparities, has Finland succeeded in sharing economic prosperity across a very large country or are there underdeveloped regions? How did it implement a policy of equality of the regions in terms of employment and economic well-being?
Migration has become an issue in Ireland. Is inward movement of workers from new member states an issue of debate in Finland?
Mr. Skinnari
I will try to explain the Finnish model as I have been involved with social and health policy. Unlike Ireland, we have high taxation rates. Taxation and the high cost of social security are met from one's salary. The employer pays 17% of salary for pension purposes and the employee, 5%, making a total of more than 20%.
Is more than 20% of salary allocated to pensions only, not social security benefits?
Mr. Skinnari
Yes. The money is allocated for pensions. This system has operated for more than 40 years in private companies. After 30 years service one will get 60% of salary as a pension, 2% per year. This money is paid by companies annually. Therefore, problems will not arise in the future. Finnish salaries are low compared to Irish salaries. When one adds the allocation to pensions of more than 20% to taxes of 22%, it amounts to more than 40% of salary. However, people have a pension. The pension fund is approximately €100 million.
Is that a private and public pension scheme?
Mr. Skinnari
Yes. There are enough funds for all.
Mr. Bryggare
There are 30% not covered.
Mr. Skinnari
This is important in Finnish business life because it was possible to borrow this money, but now more and more is needed for pensions. The year 2015 will be most difficult because of the number born after the Second World War who will be in receipt of pensions. It will then become easier. We have social, health and education services which are run by municipalities that have their own taxation systems. The state helps in the education and social policy area.
Are there taxes on income or indirect taxes?
Mr. Skinnari
One must pay a percentage of one's salary.
What is the total tax on income?
Mr. Skinnari
This taxation policy will continue. The sub-committee on taxation includes Arto Bryggare, who was a silver medallist at the 1983 World Athletics Championships, as one of its members. Taxes were set at a high rate last year. Our pension system in the only one of its kind in the EU. Germany, for example, has a system whereby the authorities there collect the money each year, which is why they must have spare money. The situation in Italy is worse. Ireland may be better off in the future because it does not have this type of system. Each country must develop its own system. It is difficult to decide in which companies to invest.
Mr. Saarikangas
I will comment on the question in regard to the manufacturing industry in Finland and the dependency on Nokia. The latter accounts for approximately 0.5% of our gross national product. While it is of some significance, it is not, therefore, as significant as one might think. In regard to the manufacturing industry, I take the example of the Finnish shipbuilding industry, the counterparts of which in most other countries have died. During my time, I had 16 shipyards around the world, including one in Ireland. We try to operate in specialised niches, such as passenger shipbuilding and cruise shipbuilding. In that respect, our only goal is for Nokia to be number one. The same approach applies in respect of shipbuilding as applies in the case of IT technologies. If we want to be humble when the Americans ask, we say that we want to be second to none, which is the other alternative.
Today's version of Nokia began in the late 1980s. It was the first company to spend money on research and development in telecommunications. It had the advantage of entering the market approximately two years before anyone else. This is what we try to do in shipbuilding. For example, we design the prototypes and our competitors build the copies. When one is the market leader in research and development, one is always one step ahead of the competition, which is important.
In order to be cost-effective and to be able to compete, one must aim for quality. In our industry, only top quality is good enough. Products of inferior quality are no longer built in Europe. One must maintain high quality in manufacturing industries, including the technology industry. Reliability is also important, including on-time deliveries and trustworthiness. One must honour one's promises. If one is marketing a product, one must meet the requirements.
This has been achieved by way of strong outsourcing, which began in the late 1980s when I was leader of the Finnish industrial employers federation. We made a decision to distribute components to sub-contractors throughout the country, to neighbouring countries and around the world. This meant that at the end of the 1980s, if 25% of the price of a component was sub-contracted, at the millennium shift, it was vice versa, with 25% being built in-house. As it is important to distribute work, one must find producers around the world.
Reference was made to immigrants. Even though Finland has kept its borders closed, they will soon be opened. There is a shortage of workers in the service, construction and metalwork industries. Our immigration figures are approximately 3,000 people per year, while Ireland has 12 or 15 times that number. I will leave some other comments to my colleagues, so that I do not empty the entire basket.
Mr. Bryggare
Mr. Saarikangas, who is a very well known CEO, was replying to the question about production problems. I was going to ask the members the same question, namely, how is Ireland preparing for this change? I am aware that Ireland has benefited from American industries, which are now trying to move to Belarus, India and so on. It would be wrong to think that Finland has benefited from globalisation. While we have done fine, we have not done better than any other European country. Much of our Nokia production is being discontinued. A hectic discussion is taking place about globalisation because people are dissatisfied with it. People are worried because they are losing jobs. In Finland, some 3,000 jobs are being lost in the paper industry in an area where there is a population of approximately 15,000.
People all over Europe are facing the same kinds of problems. Our answer has been to invest in research. We are one of the leaders in the world in this regard. We are better than the US and equal to Japan. While this is one way of dealing with the problem, Europe should be a non-player in this globalisation aspect. Given that we are a community of 400 million people, if we combine our forces, we could do much better.
Did Mr. Bryggare say "not fair" or "non-player"?
Mr. Bryggare
Non-player. Look at what the companies are doing. If Europe could start to combine its forces, we could do much better. It is a difficult question, as markets are very open. Finland has been a winner in terms of globalisation. Nokia is a large example but, as Mr.Saarikangas said, it is not our only exporter.
Deputy Howlin asked about regional equality. Finland's system, while criticised and complicated, is one in which all of the communities collect their own taxes at flat rates of 13% to 23%. The taxes are given to the Government, which then distributes them to the communities. The taxes of some communities are paid to other communities that are incapable of providing services. The equality question, which is always hectic and political, is how much money should come from outside. We have too many communities that are too small, those with 1,000 or 2,000 people, whereas Helsinki itself has 550,000 and the entire Helsinki area has 1.3 million people. The issue is one of how to build up structures in society that could sustain our modern welfare system.
Mr. Saarikangas spoke about immigration. Finland deals with a different number of people from Ireland. Irish politics have been very open, which I admire. Finland still has responsibilities in Europe but we are slightly more reserved. Now that we will open our borders at the beginning of May, we are a little frightened but optimistic about what will happen. Our language, Finnish, will be a fence——
Finland will get Hungarians.
Mr. Bryggare
They know nothing of Finnish. As to our weather, we have beautiful winters of approximately minus 30 degrees Celsius. Our situations are different.
Taxation is not too bad in Finland. If I remember correctly, Denmark's rate is a little higher. Ours is approximately 39%, comprising approximately 20% in local taxes and progressive taxes starting at a rate of 11% but that can bring the overall figure to a maximum of 55%.
Adding everything, including social taxes, what is the total tax on income?
Mr. Bryggare
Approximately 39%.
Mr. Saarikangas
The average tax paid is 39% and social taxation is at approximately 7%. The rate is approximately 45% in total.
Mr. Bryggare
That is everything combined.
That is no different from us.
Mr. Bryggare
It is not different. If everything Ireland collects is compared to what Finland collects, the figures are approximately equal.
The top rate of income tax here is 42%.
Mr. Bryggare
The top bracket in Finland pays approximately 60%. An issue in Finland concerns dividend tax.
What is that?
Mr. Bryggare
A person must pay tax on all dividends received. We first raised that tax one year ago, which led to a large debate. Previously, dividends were tax free.
Does Mr. Bryggare mean dividends from shares?
Mr. Bryggare
Yes.
We call it capital gains tax. Our rate is 20%.
Mr. Bryggare
Ours is 28%. Some scheming business people who are not being paid salaries are instead paid with dividends. The Social Democrats sometimes ask whether this is the way to rebuild a society, although a number of conservatives believe differently.
We have all read about the expansion of Europe, that it is being done so that people in all nations can carry the load. However, in Finland, people are not very much in favour of the European Union at present. We used to view the EU more favourably but it is not very popular with Finns, which worries us. This view is the result of the Union's expansion. While my colleagues could add other reasons to the list, this is one of the major issues. How does Ireland feel? It has been a great success story in the history of the European Union but what will happen in the future? Does a large EU flag fly everywhere in Ireland and do people say they like the Union or is opinion more critical or——
Jaundiced.
Mr. Bryggare
There will be elections within the year in Finland and I sense criticism of the European Union could be one of the issues for discussion for those who are against the Union and wish to take Finland out of it.
Mr. Saarikangas
The reason Finns are not delighted with the European Union is that we are now payers and do not receive money.
We know the feeling.
Mr. Saarikangas
Ireland knows it. We understand Ireland receives agricultural direct payments of 75%, which is a lot of money. However, our agriculture sector does not receive anything even close to the amount received by the French. Currently, we have one metre of snow, while France has the type of weather one needs to grow crops. This has put us in a position we do not like to be in.
I understand our guests have to be somewhere else at 3.30 p.m. Before Deputy Callanan begins, I asked a question about the housing sector. How does Finland's health service operate? How does Finland deal with the issues of homeless people, anti-social behaviour and vandalism?
I welcome the delegation. Mr. Bryggare spoke about taxes. Does Finland have a system of domestic water charges or house taxes? I was a farmer before I became a Member of the Dáil and would like to know whether Finland is an importer or exporter of food. Is agriculture a viable proposition in Finland?
Our guests referred to energy issues. Has Finland made any progress in respect of green energy sources such as rape seed oil, wood chippings and so on?
The number of road deaths presents a problem here. How is the problem controlled in Finland? Does it have a better way of policing than we do?
I read in the document submitted that the number of tourists travelling from Finland to Ireland had decreased considerably. Why is this the case? Are our costs too high and have we priced ourselves out of the market? What are the delegation's views on the issue?
Ireland is too cold.
We are not too cold.
Mr. Bryggare
Members should visit Finland because we would need a few days to answer these important questions. We do not possess sufficient data to answer those questions.
On housing for young people, the problem in Finland is not as serious as it is in this country. There is funding available and, because of the market rates, people are buying houses. There is a problem getting single houses in Helsinki. While the housing problem is not bad, there is a difficulty with homeless people, which is the case in every urban area throughout the world. This issue will become more acute. Finland has done a great deal by way of funding but difficulties remain in the metropolitan area of Helsinki. The problem is not as bad as it is in Dublin because we continue to provide a great deal of social housing. However, we would like to be in a better position in this regard.
Is there a waiting list in Finland?
Mr. Bryggare
We have a waiting list for rented houses. Approximately 15,000 people are on the housing list in Helsinki, but the number fluctuates. Five years ago, the numbers on the housing list were high but now single housing for students is the problem. It is difficult to get houses in Helsinki that are suitable for families. The latter are moving further away from the capital, which is not good for the structure of the city.
Tax on housing is very low and people are charged for the amount of water they use.
There are no water charges in Ireland.
There was an attempt to introduce water charges here but it was not successful.
The charges were abolished by a progressive Minister.
Mr. Bryggare
We have a charge for the amount of water people use.
Mr. Skinnari
We must pay charges for water, electricity and waste collection.
Mr. Bryggare
I have no knowledge in respect of tourism. I am a member of a sub-committee on road safety, which is continually debating the question of investment. We would like to invest much more on our roads, some of which are not very secure because of the harsh winter conditions. We are currently investing billions of euro on our road infrastructure. Sufficient roads are not being built. A major debate is taking place in the Finnish Parliament on how to provide sufficient funding in this regard. We have a funny way of presenting our budget and it will be interesting to see what the government will do. It has promised to give the green light in respect of certain projects. Road safety is a major issue in Finland. While the position may not be as bad as it is in Ireland, our record is not good either.
Do drivers receive penalty points for exceeding speed limits?
Mr. Bryggare
The fines for speeding depend on a person's income. Mr. Saarikangas knows someone who was obliged to pay a speeding fine of €30,000.
The fine was based on the person's income.
Mr. Bryggare
While he is not poor, the fine was quite high.
Mr. Saarikangas
It was his second fine.
He did not learn his lesson on the first occasion.
Mr. Saarikangas
No.
Mr. Kauppila
It is disappointing that Irish tourists to Finland are scarce. Finnish tourism has diminished slightly. The main problem is that there are not direct flights throughout the year between Finland and Ireland. We must rely on SAS flights through Stockholm or Copenhagen to Helsinki. There is a direct Finnair flight from Helsinki to Dublin and vice versa for less than half the year. If members have any influence on Ryanair, they might recommend that, instead of people being obliged to make the journey to Finland in two or three legs, it might fly directly from Dublin to Helsinki. This would benefit greatly tourism in both directions. The single most important factor in this regard is the lack of direct flights to and from Finland throughout the year.
Mr. Skinnari
I will make some brief points on our motorway and railway system. Russia is very important to Finland because it plays a major role in exports and imports to our country. This is why we need a good railway system from Helsinki to Moscow and China. The railway to China is ready but the journey takes too long. We are trying to improve matters.
EU Structural Funds are important to areas in Finland, including Lapland and eastern Finland, where there is a great deal of unemployment. Many elderly people reside in these areas. Structural Funds for southern Finland are being reduced. I live in Lahti, 100 km from Helsinki, which has an unemployment rate of 28%. There are other areas where the unemployment rate is 15%. This matter is a topic of debate in Finland. There are almost 400 municipalities in Finland.
Are there any further questions?
Mr. Saarikangas
There was a question about energy.
Mr. Bryggare asked a profound question of us, which we will not be able to debate here. It strikes me that we need a forum to have a dialogue on the future of Europe and its role in globalisation. We must discuss where we will preserve European models in a different international climate. While governments are engaging on these issues, parliaments are not. It is clear that in the past year the European Union, by focusing on the minutiae of the new constitution, lost the people across the member states. While it is trying to recapture an agenda which is real for people by speaking about energy, we need to address issues we are all dealing with individually in the absence of proper dialogue. As I am very interested in hearing the comments of the delegates, it is a pity we do not have a forum through which we can build common perspectives within the European Union which are not decided by governments alone but by parliamentarians addressing issues of concern to constituents across member states.
Mr. Skinnari
On the energy issue, Finland is to commission a new nuclear plant, but nuclear energy is not the only possibility. Currently, nuclear generation accounts for approximately 20% of our electricity supply, whereas in Sweden it accounts for almost 50%.
How much electricity is produced through hydro generation?
Mr. Skinnari
Hydro generation is important in Nordic countries and we need to obtain more of our power by this method. We must also consider biomass and agricultural products. Brazil faces similar issues. Forests will be too expensive to burn in the same way as oil. In 30 years we will need forests for other reasons. In Finland we are very concerned about globalisation. China presents opportunities but is also a cause of unemployment. Where there were more than 100,000 working in the IT industry in Finland, that number has fallen. The same is true of the cultural products industry. While energy issues are important, they are not everything. We must find ways to use our knowledge, examine new products and plan something new, which is not easy. Ireland has had some ideas in this regard. That is why we are here.
I thank Mr. Skinnari and the delegation for a useful exchange of views. It is a pity we did not have more time for this very interesting discussion. We may take up Mr.Bryggare's suggestion that we should visit Finland at some stage. I appreciate that the delegates were unable to provide the finer details on some of the questions asked.
It would be remiss of the committee to fail to recognise the role Finland played in the peace process in the north eastern part of our island. In 1995 the former Finnish Prime Minister Harri Holkeri, Senator George Mitchell and General John de Chastelain were appointed by the British and Irish Governments to an international body to assess the decommissioning of arms by the Irish Republican Army. That body had to visit arms dumps. Members of the Finnish armed forces are currently serving with General de Chastelain. On behalf of the Government, I record our gratitude to the Finnish Government for the role it played in the peace process.
I hope the delegates have enjoyed their visit to Ireland, socially and professionally. I hope they will bring home with them fond memories and that we will visit Finland in the not too distant future. From time to time I have visited Finland for car rallies. It is a great place for rallying and some of my friends visit on a regular basis.
Mr. Skinnari
On behalf of our delegation, I thank the committee very much for facilitating this discussion and for the information we received. I have a small souvenir which includes some of Finland's finest music.
I thank Mr. Skinnari. The committee also has a pen to present as a small token. I hope Mr. Skinnari will not get cramp from writing too much with it.
The joint committee went into private session at 3.25 p.m. and adjourned at 3.30 p.m. sine die.