Jón Blöndal, Head of Budgeting and Public Expenditures OECD - IFAC Sovereign Debt Seminar

1. Fiscal Sustainability
Jón Ragnar Blöndal
Head, Budgeting and Public Expenditures
Organization for Economic Cooperation and Development
International Federation of Accountants Seminar
Vienna, 20 March 2012

2. Agenda
• The crisis as a catalyst for structural reform
– OECD’s Going for Growth Study
• The crisis as a catalyst for reform of budget
institutions
– The OECD’s Senior Budget Officials
• The limits of accruals for fiscal sustainability
purposes
– The OECD’s Annual Accruals Symposium
1

3. The crisis has acted as a catalyst for
reforms…
Responsiveness to Going for Growth recommendations across the OECD, 2005-11
2005-07 2008-09 2010-11
Responsiveness rate
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Labour utilisation Labour productivity Overall
Figure 1.2 of Going for Growth 2012
2

4. …with a clear acceleration in the
past two years…
Change in overall responsiveness to Going for Growth recommendations
across OECD countries from 2008-09 to 2010-11
Percentage points
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
-0.1
-0.2
-0.3
Figure 1.3, Panel B. of Going for Growth 2012
3

5. …as the need for medium-term
fiscal consolidation became more
pressing
Overall responsiveness to Going for Growth priorities and fiscal consolidation effort
Responsiveness rate, 2010-2011
1.0
GRC
0.9
0.8
ESP
0.7 IRL
PRT
NZL AUT POL
0.6
SWE GBR HUN
0.5 FIN
DNK KOR CZE ITA
0.4 USA AUS
JPN FRA
0.3 CAN
CHE NLD
0.2 NOR
BEL
Correlation coefficient: 0.57
0.1
LUX DEU ISL Statistically significant at the 1% confidence level
0.0
-4 -2 0 Variation in the underlying primary balance as a 8
2 4 6 percentage of 10
potential GDP12
from 2010 to 2012
4
Figure 1.5, Panel B of Going for Growth 2012

6. Agenda
• The crisis as a catalyst for structural reform
– OECD’s Going for Growth Study
• The crisis as a catalyst for reform of budget
institutions
– The OECD’s Senior Budget Officials
• The limits of accruals for fiscal sustainability purposes
– The OECD’s Annual Accruals Symposium
5

7. The crisis as a catalyst for
reform of budget institutions (1)
• The great lesson from the countries that
experienced fiscal crises in the 1990’s:
Budget institutions matter
• Many of the reforms today are aimed at
better implementation of and building on
previous reforms
– Parliamentary budget offices & fiscal councils are the
clear innovation
6

8. The crisis as a catalyst for
reform of budget institutions (2)
• Fiscal rules
– Design choices
• Medium-term expenditure frameworks
– Better integration with annual budget process
• Top-down budgeting
– An (even) greater role for finance ministries ?
• Budget transparency
– Long-term reports
• Independent fiscal institutions
– Parliamentary budget offices & fiscal councils
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9. Agenda
• The crisis as a catalyst for structural reform
– OECD’s Going for Growth Study
• The crisis as a catalyst for reform of budget
institutions
– The OECD’s Senior Budget Officials
• The limits of accruals for fiscal sustainability
purposes
– The OECD’s Annual Accruals Symposium
8

10. The limits of accruals for fiscal
sustainability purposes
• Accruals is an immensely important
managerial tool
– Role of accruals in reforming civil service pension
plans
– And public sector pay-setting
• But is not well suited for long-term fiscal
analysis
– Recognition criteria (taxes, social security)
– Long-term cash flow analysis is the way forward as
recognized by IPSASB
9

11. To recap
• The crisis as a catalyst for structural reform
• The crisis as a catalyst for reform of budget
institutions
• The limits of accruals for fiscal
sustainability purposes
10

12. For further information
• OECD Journal on Budgeting
• www.oecd.org/gov/budget
• Jon.BLONDAL@oecd.org
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