Government agrees 60 million euro fuel-price relief package, rejects Finns Party proposal

The government has reached an agreement on a 60 million euro package aimed at easing the impact of rising fuel prices. Environment and Climate Minister Sari Multala (NCP) confirmed to reporters in Parliament on Thursday that a deal had been agreed, noting that all governing parties support the package as a whole. The measures include a reduction in vehicle tax, an increase in the maximum commuting expense deduction, and fuel subsidies for the transport, agriculture and forestry sectors. The government has also agreed to introduce flexibilities in the fuel distribution obligation, which sets requirements for the share of renewable fuels blended into transport fuels. The limits on cross-fulfilment and over-compliance will both rise from 30 percent to 100 percent, allowing companies to meet their obligations more cost-effectively, the government said. However, the government has not adopted the broader reduction in the distribution obligation advocated by the Finns Party. The package consists of: 30 million euros for fuel subsidies for businesses in the transport, agriculture and forestry sectors, 20 million euros to reduce vehicle tax, up from the previously agreed 10 million euros, and 10 million euros to raise the maximum commuting expense deduction from 7,000 euros to 7,800 euros in 2027. Environment and Climate Minister Sari Multala (NCP). Image: Markku Ulander / LehtikuvaMultala acknowledged that the measures would have only a limited impact on consumers’ fuel costs."We cannot afford to make tax cuts worth hundreds of millions, for example," she said. According to a press release, published by the ministry on Friday, the 60 million euro package will be funded from within the government's spending limits. Of the total, 40 million euros will be redirected from funding for biogenic carbon capture capacity that will go unused this year, with the remaining 20 million euros coming from the cutting of funding for basic transport infrastructure management. Finns Party says measures are insufficientThe Finns Party has criticised the agreement, arguing that the package should have gone further in easing the fuel distribution obligation to bring down prices at the pump. Jani Mäkelä, chair of the Finns Party parliamentary group, said his party had accepted the agreement because "some solution had to be found"."The government seemed to be quite incapable of acting in this matter, and the prime minister also had to save face," Mäkelä said. According to Mäkelä, the handling of the budget will not improve the internal atmosphere of the government. Image: Silja Viitala / YleMäkelä further argued that easing the distribution obligation, as proposed by his party, could have reduced fuel prices at the pump by a significant amount. He said the fact that the government had agreed on the package was not sufficient reason to rule out that option."If the distribution obligation cannot be compromised in a situation where the price of fuel is so high, it reflects a certain mindset," Mäkelä said. Multala was asked whether the Finns Party could have been persuaded to accept the agreement if the funding had come from money allocated to climate action. She replied that the question should be put to the party itself. Orpo defends government’s decisionSpeaking in Brussels on the sidelines of an EU meeting, Prime Minister Petteri Orpo (NCP) said that easing the distribution obligation would not have brought down fuel prices quickly."Being in the government means that when we are making decisions together, sometimes it is difficult to defend them, even if we have made the decision ourselves," Orpo said. He stressed that the government had little room for manoeuvre during the negotiations, but noted he was pleased that the money had been directed towards commuters and professional transport. Fuel prices are also on the agenda at the EU summit. Orpo said high prices at the pump were linked to the situation in the Strait of Hormuz and Russia’s war of aggression in Ukraine. Relief measures will not lower pump prices directlyHanna Kalenoja, a leading transport expert at the Central Chamber of Commerce, said the measures would not directly affect petrol and diesel prices. Instead, they would ease costs for some motorists and businesses, but not all, she noted. Kalenoja said she was relieved that the government had decided not to lower the distribution obligation. Image: Esa Syväkuru / YleThe vehicle tax reduction will be reflected in the tax bills of eligible car and van owners, rather than at the petrol station. For example, a household whose vehicle tax period began in July would not see the reduction until its next tax period in July next year, Kalenoja said. She estimated that the vehicle tax cut would save eligible motorists around 12 euros per year. The reduction applies to older cars and vans. The increase in the maximum commuting expense deduction, meanwhile, could benefit people with high travel costs. The government also plans to raise the maximum deduction, with Kalenoja estimating that the change would benefit people who commute more than 60 kilometres. The deduction can be adjusted through a revised tax card, although eligibility depends on the circumstances of the commute. In some cases, expenses can be deducted based on the use of a private car if public transport is not reasonably accessible. The fuel subsidies are aimed at businesses in the transport, agriculture and forestry sectors. A similar subsidy was made available retrospectively through the State Treasury in 2022. Experts welcome decision to retain distribution obligationKalenoja said she was largely relieved by the government's decision, particularly because it did not ease the distribution obligation. The requirement sets the minimum share of renewable fuels that must be included in transport fuels. Reducing it would lower the share of low-emission biofuels. According to experts, easing the obligation would not necessarily have an immediate impact on pump prices. Kalenoja also warned that it could undermine planned investments in the biogas sector."It is a big relief that the decision not to lower the distribution obligation was made now," she said. The Confederation of Finnish Industries (EK) also welcomed the decision in a statement on Thursday. However, Kalenoja said it was disappointing that the government had not included a reduction in diesel excise duty in the package.