How social expenditure is financed

The fiscal quotas i.e., the sum of direct and indirect taxes as a proportion of GDP, are generally high – among the highest in the world. There are many similarities in terms of how the Nordic countries finance their social security systems, but also differences.

In most countries, the local government are responsible for social services such as care for elderly and disabled and childcare. The central government and regions have the responsibility for health care services. A substantial part of the social expenditures is financed by employers and the insured through contributions and special taxes. The main source of finance varies among Nordic countries.

Denmark

Various types of taxes finance most of the social expenditure in Denmark. The largest tax contribution comes from income taxes, but there are also tax contributions from company profits, value-added taxes (moms) etc.
The yearly public budget bill determines the overall expenditure on social spending.

The regional administrations are responsible for providing specialised healthcare services. They finance about 80 percent of these services with grants from the national administration. The national and municipal administrations finance the remaining services through criteria dependent funding pools.

The municipal administrations are responsible for social services such as childcare and care for elderly and disabled people. The municipal administrations are also responsible for the payment of some types of social benefits. Municipal income taxes finance most of the municipal administrations’ expenditure on social services. Grants from the national administration finance the remaining expenditure on social services.

Faroe Islands

The national government is responsible for specialised healthcare and the administration of cash benefits. The local authorities are responsible for social services such as childcare, child and youth welfare, healthcare and nursing, and care for elderly and disabled people.

Finland

Income-related cash benefits are financed by employer and employee contributions, while the basic schemes are financed by government expenditure. The responsibility for organising healthcare, social welfare and rescue services was transferred from municipalities and joint municipal authorities to wellbeing services counties on 1 January 2023. There are 21 wellbeing services counties, and the division into counties is mainly based on the division into regions.  The wellbeing services counties receive most of their funding from the central government. Since the counties are self-governing, they decide on the use and allocation of their funding. The level of funding is allocated to counties based on imputed criteria and is adjusted annually.

The regions are responsible for specialised healthcare, while local authorities are responsible for social services such as childcare, child and youth welfare, healthcare and nursing and care for elderly and disabled people.

Iceland

The national government is responsible for specialised healthcare and the administration of cash benefits. The local authorities are responsible for social services such as childcare, child and youth welfare, healthcare and nursing, and care for elderly and disabled people.

Norway

The national government is responsible for specialised healthcare and the administration of cash benefits, while the local authorities are responsible for social services such as childcare, child and youth welfare, healthcare and nursing, and care for elderly and disabled people.

Sweden

Income-related cash benefits are financed by employer and employee contributions, while basic schemes are financed by government expenditure. Local authorities play the most important role in relation to financing services, but the national government also makes a substantial contribution in the form of general, non-earmarked grants.

The regions are responsible for specialised healthcare, while the local authorities are responsible for social services such as childcare, child and youth welfare, healthcare and nursing, and care for elderly and disabled people.