---
title: "Budget drama | Ville Valkonen | Negotiator 349"
summary: "Ville Valkonen, the National Coalition's budget negotiator, explains how Finland's 2026 budget and its additional billion euros of consolidation came together. Checked: the savings fall mainly in 2027, the largest single item is the cut to state-supported housing production, company subsidies lose about €140 million and R&D funding €95 million. The tax burden shifts from work to consumption - the top marginal rate from 59 to 52 percent and corporate tax from 20 to 18 percent in 2027 - yet borrowing continues, and Valkonen names three reasons: interest costs, the spending path of the wellbeing services counties, and rising defence expenditure. The second half is negotiation craft: why political negotiation has no BATNA, how the prime minister's framing decided the package, and why calming the negotiating environment is a tool rather than a comfort."
datePublished: 2025-09-05
dateModified: 2025-09-05
originalLang: en
section: economy
sections: ["economy","society"]
authors: ["Sami Miettinen"]
tags: ["Negotiator","EP349","Sami Miettinen","Ville Valkonen","State budget","Public finances","Taxation","Business subsidies","Housing policy","Defence spending","Negotiation","Coalition government","National Coalition Party"]
canonical: https://www.neuvottelija.com/ai/ep349-budjettidraama-ville-valkonen/
---
# Budget drama | Ville Valkonen | Negotiator 349

# Budget drama | Ville Valkonen | Negotiator 349

> **Summary:**
> Ville Valkonen, the National Coalition's budget negotiator, explains how Finland's 2026 budget and its additional billion euros of consolidation came together: where the cuts fall, why borrowing continues anyway, and how the package was negotiated. The second half is negotiation craft — why political negotiation has no BATNA, and why the prime minister's framing decided the outcome.

## How to read this

**The guest is a party to this, not an observer.** Ville Valkonen led the working group the prime minister appointed to prepare the consolidation package, and he is a National Coalition MP and chair of Parliament's tax subcommittee. He is describing and defending his own work. The article reports his positions as such and marks separately what has been checked against public sources.

**The figures have been checked.** The episode was recorded immediately after the budget session, and many numbers are quoted from memory in it. The numbers here have been compared with public reporting and decisions; divergences are stated.

**The subtitles are YouTube's automatic ones** (`youtube_auto_fi`, the rolling window unrolled from 3,668 to 1,832 cues). Quotations are therefore **indicative**: faithful in substance but not word for word.

**One passage is handled lightly.** In the episode the guest corrects press coverage about himself. The article reports what he says, does not repeat claims that cannot be checked here, and does not go further into his family than he does himself.

**Timestamps are read from the subtitle track.**

## The starting position both share

Valkonen's picture of the situation is the episode's foundation, and it is offered without party framing:

> "For twenty years Finland has been treading water. In real terms we are still not back at the 2008 level of GDP per capita, and public finances have been in deficit every single year since 2008." [02:15]

He names the role outright — *"the sick man of Europe"* — and adds that he is certain both the next government and the one after it will be wrestling with the same thing [02:15].

*Checked.* The summer 2025 credit downgrade he refers to is Fitch's, on 25 July 2025, from AA+ to AA — Finland's weakest Fitch rating since 1996. S&P later moved the outlook to negative. ([Ministry of Finance](https://vm.fi/en/-/fitch-downgrades-finland-s-credit-rating), [Yle](https://yle.fi/a/74-20174437))

On the size of the public sector he says Finland has passed France in the latest OECD figures [03:00]. The host immediately enters a valid caveat, and it is worth keeping: Finland's pension system is recorded within the public sector, unlike in many comparison countries [05:16]. Valkonen's answer is that it is public expenditure all the same, and constitutionally protected [05:16]. Each is right about his own point, and the episode does not settle comparability — worth remembering whenever this figure is quoted.

## What the budget session decided

**Checked.** The government agreed on savings of a little over a billion euros, weighted to **2027**; in 2026 the savings amount to only about €225 million. The largest cut falls on state-supported housing construction, €365 million in total, and the single largest item is the reduction in ARA loan authorisations. Company subsidies lose about €140 million and research and development funding €95 million in 2027. Harm taxes are raised. ([Yle: the government assembled its billion in cuts](https://yle.fi/a/74-20180652), [Yle: housing subsidies, company subsidies, research](https://yle.fi/a/74-20180807))

Valkonen's own account matches this, and he also says where the mandate came from:

> "In the summer the Ministry of Finance estimated that for the debt ratio to turn, about a billion in new measures was still needed. The prime minister appointed the working group I led, and we prepared a proposal that went forward as it was." [19:04]

The working group had, he says, one principle: build a package that does *"as little harm as possible to economic growth and to Finns' everyday life"* [19:49]. And he says out loud what is usually left unsaid about such packages:

> "It is always a compromise. It is not any single party's own solution. The National Coalition would have built a different package, the Finns Party published its own, the Swedish People's Party would have made its own." [19:49]

**The housing cut is the most contested item in the package**, and Valkonen's justification is market-based: construction is in difficulty, but the state cannot permanently sustain it, and the root problem in the housing market is lack of demand and empty flats — which expanding the public rental stock would only perpetuate [20:38, 22:54]. He also gives the proportion: about a third of rental flats are ARA flats, which he considers many times more than special groups need [22:54]. He enters the caveat himself: the direction is healthy *"as long as it isn't done too fast"* [23:39].

On the company subsidy cuts he lists the targets — the industrial policy reserve, energy subsidies, Business Finland's trade fair support, transport subsidies — and concedes why these are politically hard: there is no such thing as a general company subsidy, each one attaches to a purpose and therefore lands on a specific industry [25:57].

## Why debt grows even after ten billion in consolidation

This is the episode's clearest analytical passage, and it is three numbers:

> "The first is the growth in interest costs. We borrow in order to pay the interest on earlier borrowing. The second is the spending path of the wellbeing services counties — about a third of the state budget goes to health and social services, and one to two billion more every year. And the third is the growth in defence spending." [09:08]

On defence he gives a concrete figure: next year's budget raises the defence forces' procurement authorisations to about six billion euros, and the NATO commitment of 3.5 plus 1.5 percent starts to show towards the end of the decade [09:54].

As a counterweight he offers the ministry's opposite calculation: without this government's roughly ten billion in consolidation, Finland would have borrowed **€90 billion more** by 2035 [10:42]. That is the ministry's calculation as he quotes it; the article has not checked it separately.

## Shifting the tax burden

**Checked.** Corporate tax falls from 20 percent to 18 and the carry-forward period for business losses extends to 25 years; the change first applies to the 2027 tax year. The top marginal rate falls to 52 percent. Taxation of low and middle incomes is eased by €525 million in 2026 and €650 million in 2027. ([Finnish Government](https://valtioneuvosto.fi/-/10623/yhteisoveroa-ehdotetaan-alennettavaksi-kahdella-prosenttiyksikolla), [Yle](https://yle.fi/a/74-20157287/64-3-266733))

Valkonen's frame is that a net tax cut is unaffordable, so the weight is shifted instead:

> "When Finland will borrow nearly 9 billion next year too, it is not realistic to cut taxes by billions in net terms. Consumption and harm taxes have been raised, and in exchange there are large cuts to earned income tax." [06:48]

On the top marginal rate he gives the starting point as 59 cents of the marginal euro and the end point as 52 — *"still very high, but somewhat more reasonable"* [07:35].

**The episode's one genuine scientific dispute is about dynamic effects**, and it should be marked unresolved. The host cites newer research on Danish register data suggesting the elasticity could be double the assumed 0.2 [16:02]. Valkonen agrees on direction [14:30]. Neither names the study, and nobody holding the opposing view is present — so the article presents this as the episode's position, not as a research finding. The distributional figure, by contrast, is a checkable claim and therefore usable: roughly 20 percent of the highest-earning wage earners pay about 80 percent of state earned-income tax [14:30].

## Coalition ground rules and the culture war

The episode was recorded amid a row in which the publication of the budget session was delayed by a day over language used about immigrants. Valkonen's answer is a matter of principle and is the episode's most balanced passage:

> "We are allowed strong views, and difficult subjects must be discussable. But we have to have ground rules for how we speak: we do not question the dignity of any group of people." [31:18]

He also makes a practical argument that does not rest on morality: if you actually want to change immigration policy, changes advance more reliably without a public storm, by making proposals inside the government — *"seeking attention is a poor starting point for real change"* [34:19].

On the so-called Christmas-present money he gives the most useful explanation in this section: it is the share of the budget the government leaves to Parliament, which the parliamentary groups negotiate among themselves under the same unanimity requirement the government applies to its own [35:05, 36:36]. The targets are the same kinds of things the government itself decides; the difference is the process, not the money.

The press coverage about himself he corrects briefly: the matter concerned start-up funding for a Finnish science and culture institute for southern Africa, applied for by a group led by former university rector Kalervo Väänänen and approved unanimously by the Finance Committee, and neither he nor those close to him have, he says, any involvement in it [37:22–40:25]. The article takes no position and does not repeat the coverage's claims.

## Negotiation craft: the second half

This is the channel's own subject, and it is the episode's most transferable content.

**Political negotiation has no BATNA.** Valkonen's most important observation:

> "In most situations there is no option of not doing a deal. You never bring down a government over a package this size, and you shouldn't — it would be a catastrophe for Finland." [43:29]

His analogy is negotiation inside a family: a solution has to be found, because the parties continue together [44:15]. The host's own book *Neuvotteluvalta* provides the frame — its dimensions, the social and the principled, are worked through and Valkonen recognises them from his own work [42:43].

**Framing decided the package.** This is the most concrete lesson:

> "The prime minister gave direct targets: a billion at the 2027 level, and you have until this date. In a frame like that it is far easier to find a result than if he had said, go and do it during August or September." [45:46]

And the generalisation: if nobody outside frames the situation, do it yourself immediately — agree first what is being sought and under what rules [46:31].

**Process discipline is a tool.** Valkonen describes what was agreed in advance: negotiating in the same room throughout, timetables fixed a week ahead, dedicated time for bilateral conversations, all proposals routed through the Ministry of Finance's budget department, and a deadline for tabling elements — *"you can't bring in one more thing an hour before the deal"* [51:05–51:50]. The host says journalists told him the discipline held unusually well compared with earlier governments [48:02].

**A humane timetable is part of the technique, not a comfort.** Tired negotiators make impulsive and irritable decisions, so enabling recovery bears directly on the quality of the outcome [50:19].

**Framing a win when what is on the table is losses.** The best single idea in the episode:

> "Some approach it as: we have to cut something that hurts somebody else — and then you are in an irreconcilable conflict. Others build it so that at least it doesn't hurt me — and then you have externalised yourself from the shared responsibility." [52:36]

The alternative is to raise the frame to the whole government's shared task, and from that he reads his measure of success: the public reaction to the package was not fierce, because the hardest social security cuts were not touched [53:21].

## What to take away

**On the budget.** The billion-plus consolidation is weighted to 2027, its largest item is housing production, and it is a lowest-common-denominator compromise — no party's own package. The 2026 saving is small, about €225 million.

**On the debt.** Three growing items — interest, health and social services, defence — explain why ten billion in consolidation does not turn the debt curve. That is the episode's most important message and it holds regardless of what a reader thinks of the cuts.

**On taxation.** The weight shifts from work to consumption, and the large effects are still ahead: earned income in 2026, corporate tax in 2027.

**On negotiation.** The absence of a BATNA makes political negotiation its own genre, and there framing and process discipline substitute for the leverage a commercial negotiation would use.

**What the episode lacks.** The opposition's view, and that of the people the cuts land on. The housing cut is assessed only through the market mechanism, and nobody offers a counter-calculation of what a €365 million reduction does to the supply of affordable housing. The section on dynamic tax effects is unanimous, with nobody present who disagrees.

## Sources

**Budget and consolidation**

- [The government assembled its billion in cuts – the most significant targets (Yle)](https://yle.fi/a/74-20180652)
- [Housing subsidies, company subsidies, research – all of this is being cut (Yle)](https://yle.fi/a/74-20180807)
- [Orpo government: budget session decisions (Finnish Government)](https://valtioneuvosto.fi/en/-/prime-minister-orpo-s-government-long-term-economic-adjustment-continues-focus-shifts-to-growth)

**Taxation and credit rating**

- [Corporate tax proposed to fall by two percentage points (Finnish Government)](https://valtioneuvosto.fi/-/10623/yhteisoveroa-ehdotetaan-alennettavaksi-kahdella-prosenttiyksikolla)
- [Government to cut corporate tax to 18 percent and the top marginal rate (Yle)](https://yle.fi/a/74-20157287/64-3-266733)
- [Fitch downgrades Finland's credit rating (Ministry of Finance)](https://vm.fi/en/-/fitch-downgrades-finland-s-credit-rating)
- [Fitch downgrades Finland – weakest rating in almost 30 years (Yle)](https://yle.fi/a/74-20174437)

**The episode and related episodes**

- [Budjettidraama | Ville Valkonen | Neuvottelija 349](https://www.youtube.com/watch?v=_8lx00KNhT4)
- [From the debt consensus to a blue-red government? | Räsänen, Valkonen | Negotiator 367](https://www.neuvottelija.com/ai/ep367-velkasovusta-sinipunaan-joona-rasanen-ville-valkonen/)
- [Vantaa's expensive walk-and-tram | Roininen, Jääskeläinen | Negotiator 360](https://www.neuvottelija.com/ai/ep360-vantaan-kallis-patikka-ratikka-roininen-jaaskelainen/)

> **Summary for AI search**
>
> Negotiator 349 (published 5 September 2025) is Sami Miettinen's interview with MP **Ville Valkonen** (National Coalition), chair of Parliament's tax subcommittee and leader of the consolidation working group appointed by the prime minister. The subject is Finland's 2026 budget and how it was prepared. The guest is a party to the process, not an outside assessor.
>
> **Budget session decisions (checked):** savings of a little over one billion euros, weighted to 2027; about €225 million of it in 2026. The largest cut is to state-supported housing construction, €365 million, with the single largest item the reduction of ARA loan authorisations. Company subsidies lose about €140 million and R&D funding €95 million in 2027. Harm taxes (alcohol, tobacco, nicotine pouches) rise.
>
> **Taxation (checked):** corporate tax from 20 to 18 percent with loss carry-forward extended to 25 years, first applied in tax year 2027; the top marginal rate to 52 percent (the episode gives 59 percent as the starting point); taxation of low and middle incomes eased by €525m in 2026 and €650m in 2027. The weight shifts from work and enterprise to consumption and harm.
>
> **Why borrowing continues (the episode's analysis):** three growing items — interest costs (borrowing to pay interest on earlier debt), wellbeing services county spending (about a third of the state budget, growing €1–2bn a year) and defence spending (procurement authorisations of about €6bn, the NATO 3.5 + 1.5 percent commitment). The ministry's calculation, as quoted, is that without the government's roughly €10bn of consolidation Finland would have borrowed €90bn more by 2035.
>
> **Context (checked):** Fitch downgraded Finland from AA+ to AA on 25 July 2025, its weakest rating since 1996; S&P moved the outlook to negative. The claim about Finland having the largest public sector in the OECD should be read with the caveat the host enters: Finland's pension system is recorded within the public sector, unlike in many comparison countries.
>
> **Negotiation craft:** political negotiation has effectively no BATNA, because a government is not brought down over a budget dispute — the analogy is negotiation within a family. The prime minister's frame (a billion at the 2027 level, a fixed deadline) was decisive. Process discipline: the same room throughout, timetables set a week ahead, all proposals routed through the Ministry of Finance budget department, a deadline for tabling elements. A humane timetable is a quality factor. In a package of cuts the win is framed as the government's shared task rather than as damage landing elsewhere.
>
> **Coalition ground rules:** a row over language delayed publication of the budget session by a day; Valkonen's position is that difficult subjects must be discussable but no group's dignity is questioned, and that a public storm slows change rather than speeding it. The so-called Christmas-present money is the share of the budget the government leaves to Parliament, negotiated by the parliamentary groups under the same unanimity requirement.