May 9, 2018 / 4:48 PM / in 2 months

Finland should emulate Britain's welfare payments scheme -finance minister

HELSINKI (Reuters) - Finland should emulate Britain’s social security system as it plans new welfare reforms after a basic income pilot scheme that attracted global attention, Finance Minister Petteri Orpo said on Wednesday in an interview.

FILE PHOTO: Finland's Finance Minister Petteri Orpo listens to the media in Helsinki, Finland, November 29, 2017. REUTERS/Tuomas Forsell/File Photo

Last year, 2,000 unemployed Finns who were chosen at random became the first Europeans to enjoy guaranteed basic income with monthly payments of 560 euros ($664) in a two-year trial the government has opted not to extend after next December.

The scheme was considered radical because it enabled unemployed people to receive payments with nothing expected in return.

The trial’s aim is to encourage them to start work without fear of losing benefits but some lawmakers and economists say the scheme is too expensive and narrow to yield credible conclusions. Swiss voters rejected a similar scheme in 2016.

“The trial was good to have. It helps us plan the welfare reform ... but I still haven’t grown into a fan of that model,” said Orpo, who is tipped as a possible next Prime Minister after a general election in April 2019.

Orpo said he favored Britain’s Universal Credit scheme, which simplifies payments to claimants by consolidating six different types of means-tested state benefit into one that is adjusted automatically for other income in a real-time register.

“This is what I support. It can be built with real incentives to take up work ... Our current system makes people passive, it is too complicated.”

Orpo said he hoped Finland’s next government would start a project to reform the welfare system.

Britain introduced the reform in 2013 but a series of management failures, expensive IT blunders and design faults mean the project has fallen at least five years behind schedule and its costs have ballooned.

The British government is pressing ahead with the rollout of the policy despite concerns by lawmakers that some claimants have to wait too long to receive payments and criticism that it risks harming vulnerable citizens.

AGEING FINNS

Following the financial crisis of 2008, Finland suffered a decade of stagnation due to a string of external and internal problems, including high labor costs, a decline of Nokia’s (NOKIA.HE) former mobile phone business and recession in neighboring Russia, a major trade partner.

While the economy has returned to brisk growth, Finland’s employment rate lags around 71 percent, compared to 75 percent in neighboring Nordic countries.

“The work life has changed a lot .... We need to find new ways to flexibly combine small income with social security, and entrepreneurship with social security,” Orpo said.

In addition to the “welfare trap” problem, a fast-ageing population poses another strain: Finland’s ratio of old people who rely on working-age people is the third-highest in the EU after Italy and Greece.

“We need to lift the employment rate so we can take care of our services and pensions in the future,” Orpo said.

The three-party government has sought to solve economic problems with spending cuts, labor market reforms and a proposed health care reform.

In a recent opinion poll by Helsingin Sanomat, Orpo’s right-leaning NCP party ranked second after the Social Democrats, which is currently in opposition. Prime Minister Juha Sipila’s Centre Party was in third place.

($1 = 0.8432 euros)

Additional reporting by Andrew MacAskill in London; Editing by Matthew Mpoke Bigg

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