International review of approaches to tackling child poverty: Finland

Assessing the role of Government intervention in child poverty reduction

This section brings together the policies and wider context discussed in previous sections to provide an assessment of how far interventions and their outcomes were designed to tackle child poverty. To do this, we assess interventions according to the following criteria:

• Direct: The intervention was the result of Government action specifically targeting reducing child poverty, or by maintaining it at low levels.
• Indirectly targeted: The intervention was the result of Government action targeted at improving the wellbeing of families and children, but not specifically targeted at reducing child poverty, or maintaining it at low levels.
• Indirect: The intervention was the result of Government action targeted at broader aims or objectives that have a positive – if indirect – impact on reducing child poverty, or maintaining it at low levels.
• Induced: Action was instigated by wider social and/or economic change, an outside body or a non-Governmental organisation.

Level of Government intervention in poverty reduction factors

The interventions mentioned in the case study and their outcomes are classified as below:

1. Direct

• None

2. Indirectly targeted

• Child benefits
• Housing allowance
• Basic social assistance
• Child maintenance
• Childcare
• Parental and childcare leave, and allowances
• Progressive and redistributive tax system

3. Indirect

• Individual taxation
• Social insurance
• Women’s labour market participation and preference for full-time work

4. Induced

• Collective bargaining for wages
• Economic development

In the case of Finland, most policies are indirectly targeted, as family policies are intended to support the wellbeing of children, rather than tackle child poverty itself. Other policies have an indirect but positive effect on poverty through either providing income security for all households or supporting labour market participation. Economic growth and strong unionisation in Finland also play a role in helping ensure families have sufficient income from work and high levels of social expenditure. Policies have been classified based on the policy intent behind their introduction in Finland, therefore classification of a type of policy may differ across the case studies. For example, in Finland child benefit intends to primarily support the wellbeing of children and therefore is indirectly targeted. In another country, child benefit could be considered ‘direct’ if it was introduced to reduce or prevent child poverty.

Lessons for Scotland

The path dependency is important to consider when drawing lessons from Finland. Finland’s identity as a Nordic country and influence from countries such as Sweden that had developed comprehensive welfare states earlier have contributed to Finland’s ability to implement universal, generous and redistributive policies.

However, Finnish sociologist Mikko Kautto is clear that Nordic welfare states, including Finland, are still ‘the result of political bargaining, step-by-step reforms and their imperfect implementation’.^[137] The ongoing reforms from the early 1900s to now have created a comprehensive system, but also a complex one.^[138] As such, there are four key lessons that can be drawn from Finland’s experience:

1. The most significant contributing factor in the low levels of child poverty experienced in Finland is the level of redistribution and transfers benefiting families with children. This is demonstrated by a before-transfers relative child poverty rate in 2024 that is three times higher than the after-transfer rate (29.5% of before-transfers, compared to 11.6% after-transfers).^[139] However, it should be noted that this is assisted by a lower before-transfers level of poverty and higher income equality (as previously shown by the Gini coefficient and Palma ratio) in Finland compared to Scotland or the UK.^[140]

Core to the low post-transfer child poverty rate in Finland is a generous universal child benefit, where payment amounts increase for each subsequent child. Single parents also receive higher social assistance payments and state top-ups for unpaid child maintenance. In addition, low-income families can receive support with rent, water and heating costs through housing allowance, and all basic forms of social assistance include additional allowances for each additional child (however, it should be noted that large families in Finland are still at greater risk of poverty despite receiving more generous payments).

This contrasts to the Scottish context where Child Benefit payments, administered by HM Revenue and Customs, are less generous for each additional child and the child elements in Universal Credit are limited to the first two children born after 2017 (unless an exemption applies). This underlines the significance of Scotland’s efforts to increase financial support for children through the Scottish Child Payment and mitigating the UK Government’s two-child limit. However, Scotland may face barriers here because welfare and tax policy are not fully devolved, and Scotland has a higher prevalence of single parent families which would increase the cost of providing more generous payments for such families.

2. Related to this first lesson is financing more widely. In Nordic countries such as Finland, there is a higher general acceptance of the state playing a significant role in redistribution and the provision of services. In particular, the Nordic ideals of universalism, shared responsibility for children’s wellbeing, as well as unionisation and the broad acceptance of a redistributive tax and transfers system, have underpinned the nature of the labour market policies, social protection and family policy structures that have an indirect impact on child poverty. The social insurance system in Finland also means that employers, employees and the state share in the financing of unemployment and sickness benefits, and this helps to facilitate a greater level of income replacement. The transferability to Scotland here is potentially limited due to fundamentally different set-ups of the welfare system and political histories, as well as the elements of policy-making here that are decided at UK level.

Nevertheless, Scotland has powers here that can and have been exercised in efforts to reduce child poverty, for example through the Scottish Child Payment. However, the impact is currently limited against a backdrop of cuts and eligibility restrictions in the UK welfare system, such as the two child-limit and benefit cap.

3. The Finnish experience underlines the challenges of funding generous and universal benefits in modern economies, and the importance of economic growth to facilitate increases in welfare spending. After the golden age of the welfare state in Finland in the 1970s and 1980s, when economic growth allowed social expenditure to remain stable as a proportion of GDP despite increasing in cash terms, the sustainability of funding for social expenditure has been a political tension. This, in part, has been driven by changing geo-political influences and closer ties to the EU and more neo-liberal economic ideas. In the 1990s and 2000s, austerity measures aimed at cutting social expenditure and reducing public debt caused an increase in child poverty in Finland. Since then, there has been continued retrenchment of eligibility and generosity of the Finnish welfare state. Scotland may also find it challenging to secure the necessary political and social consensus to address child poverty while there are concerns about the level of economic growth and the sustainability of public finances, especially without the path dependence and Nordic ideals that also helped enable Finland’s welfare state expansion in the 1970 and 1980s period.

4. Scotland’s focus on tackling child poverty can perhaps have the greatest impact if combined with other policy objectives. Most of the policies that have impacted child poverty levels in Finland have had an indirect effect. Low child poverty rates are not the result of a targeted and deliberate policy focus on reducing or maintaining low levels of child poverty, but the result of policies promoting children’s wellbeing, social protection against shared risks and gender equality. For example, the universal right to a municipal childcare place is important in Finland as a means of providing for children’s wellbeing and development. It is therefore possible to reduce child poverty through policies that have a wider focus.

A joined-up approach is already taken through the drivers approach in Scotland’s Tackling Child Poverty Delivery Plan, which highlights the importance of access to childcare, income from social security, and employment support amongst wider action to tackle child poverty. Finland’s historic trajectory underlines the opportunity for joined-up work to tackle poverty through policies that have a positive impact on poverty by supporting broader outcomes such as economic growth, gender equality and labour market participation, income equality, as well as between central and local Government. Key to this is childcare provision and, in the Finnish context, collective bargaining and a stronger cultural norm for full-time work. The greater prevalence of low-paid and part-time work in Scotland may be a barrier to reducing child poverty rates through active labour market policies, as families may be less likely to take on more paid work and work may not provide as great a protection from poverty as in Finland.