Reform of the VET funding system

Policy development
Regulation/Legislation
Finland
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Timeline
  • 2023Design
  • 2024Legislative process
ID number
46872

Background

A brief overview of the context and rationale of the policy development, explaining why it is implemented or why it is important.

In Finland, VET funding is based on an appropriation in the State budget. Funding is granted and paid directly to VET providers, who decide on its use and allocation of the financing in their organisation.

VET funding comprises core funding, performance-based funding and effectiveness-based funding. The Ministry of Education and Culture allocates core funding to education providers based on their applications, and performance and effectiveness-based funding is based directly on realised performance. The ministry prepares performance and effectiveness-based funding decisions each year. In addition, separate strategic funding decisions are prepared throughout the year to further specific education policy themes of VET.

The funding system and the annual process of funding VET providers is seen as labour-intensive and complex. There is a need to simplify the process and make the system overall more adaptive to the changing needs of the field of education and working life. At the same time, there is a need to make the funding system and process more transparent and predictable for VET providers.

In addition, VET education providers must have greater incentives to provide education and training that leads to better chances of employment or continuing education. There is a need to create incentives to ensure adequate instruction and guidance for people of compulsory school age, for adults to complete micro-credentials, and to reorient VET provision to better meet the needs of the labour market.

Objectives

Goals and objectives of the policy development.

The reform of the VET funding system aims to:

  1. create financial incentives for VET providers to make sure students complete qualifications and find a job or continue in education after graduation;
  2. increase the acquisition of micro-credentials especially to upskill or reskill adults in order to enhance their position in the labour market and increase employment prospects after graduating;
  3. make the VET funding system more simple and responsive to changes in the labour market;
  4. simplify the funding system and increase its predictability for VET providers.

Description

What/How/Who/For whom/When of the policy development in detail, explaining its activities and annual progress, main actors and target groups.

The Ministry of Education and Culture has appointed a working group to prepare the legislative changes needed to reform the VET funding system. The reform is prepared simultaneously with the reform of the operational guidance of education providers.

The legislative changes in the VET funding system are planned to come into effect in 2026.

2023
Design

The Ministry of Education and Culture appointed a working group to prepare a proposal for the new VET funding system. The working group's term started in October. In 2023, the working group prepared guidelines for the reform and a draft proposal for the new funding system.

The ministry also appointed a monitoring group that started its term in October. It has representation from education providers, students, teachers, and other central stakeholders.

2024
Legislative process

In 2024, the working group drafted the needed legislative changes. These were circulated for comments in May and June. The government proposal for the new law was prepared taking into consideration the comments from stakeholders. In October, the proposal was submitted to the Parliament.

Bodies responsible

This section lists main bodies that are responsible for the implementation of the policy development or for its specific parts or activities, as indicated in the regulatory acts. The responsibilities are usually explained in its description.
  • Ministry of Education and Culture

Target groups

Those who are positively and directly affected by the measures of the policy development; those on the list are specifically defined in the EU VET policy documents. A policy development can be addressed to one or several target groups.

Entities providing VET

  • VET providers (all kinds)

Thematic categories

Thematic categories capture main aspects of the decision-making and operation of national VET and LLL systems. These broad areas represent key elements that all VET and LLL systems have to different extents and in different combinations, and which come into focus depending on the EU and national priorities. Thematic categories are further divided into thematic sub-categories. Based on their description, policy developments can be assigned to one or several thematic categories.

Governance of VET and lifelong learning

This thematic category looks at existing legal frameworks providing for strategic, operational – including quality assurance – and financing arrangements for VET and lifelong learning (LLL). It examines how VET and LLL-related policies are placed in broad national socioeconomic contexts and coordinate with other strategies and policies, such as economic, social and employment, growth and innovation, recovery and resilience.

This thematic category covers partnerships and collaboration networks of VET stakeholders – especially the social partners – to shape and implement VET in a country, including looking at how their roles and responsibilities for VET at national, regional and local levels are shared and distributed, ensuring an appropriate degree of autonomy for VET providers to adapt their offer.

The thematic category also includes efforts to create national, regional and sectoral skills intelligence systems (skills anticipation and graduate tracking) and using skills intelligence for making decisions about VET and LLL on quality, inclusiveness and flexibility.

Optimising VET funding

This thematic sub-category refers to the ways VET is funded at the system level. Policies include optimisation of VET provider funding that allows them to adapt their offer to changing skill needs, green and digital transitions, the social agenda and economic cycles, e.g. increasing the funding for VET or for specific programmes. They can also concern changing the mechanism of how the funding is allocated to VET schools (per capita vs based on achievement or other criteria). Using EU funds and financial instruments for development of VET and skills also falls into this sub-category.

European priorities in VET

EU priorities in VET and LLL are set in the Council Recommendation for VET for sustainable competitiveness, social fairness and resilience, adopted on 24 November 2020 and in the Osnabrück Declaration on VET endorsed on 30 November 2020.

VET Recommendation

  • VET agile in adapting to labour market challenges

Subsystem

Part of the vocational education and training and lifelong learning systems the policy development applies to.
IVET
CVET

Country

Finland

Type of development

Policy developments are divided into three types: strategy/action plan; regulation/legislation; and practical measure/initiative.
Regulation/Legislation
Cite as

Cedefop, & ReferNet. (2025). Reform of the VET funding system: Finland. In Cedefop, & ReferNet. (2025). Timeline of VET policies in Europe (2024 update) [Online tool].

https://www.cedefop.europa.eu/en/tools/timeline-vet-policies-europe/search/46872