Australia’s economy continues to grow stronger and the unemployment rate is lower than in most other advanced economies, and Australia’s fiscal position remains strong. Economic and fiscal management strategies applied during the global financial crisis mean Australia is in a strong position to withstand any intensification in global stresses.
Even in times of fiscal consolidation, maintaining a high quality of service delivery is of great importance. Cost reductions must not have a negative effect applying the rule of law.
At the federal level, the fiscal consolidation has resulted in intensifying existing efforts to improve the efficiency of the administration. In Flanders, as a result of the New Public Management movement, the Flemish government launched a reform in 1999 for "Better Administrative Policy" (BAP or "Beter Bestuurlijk Beleid" – BBB). This project aimed at re-organising the core of the civil service – the Ministry of the Flemish Community – the agencies or "Flemish public institutions" and the advisory councils.
Brazil had already made relevant adjustments to its fiscal policy before the beginning of the international crisis, which cushioned its effects. This allowed the country to adopt important counter-cyclical measures and policies, such as tax reductions for products in industries that have a great impact on the economy (such as car manufacturing and home appliance industries), and even to launch a programme (Minha Casa, Minha Vida) to construct 1 million homes per year for low-income families, which is perhaps the largest programme of this nature currently in progress in the world.
In response to the global financial crisis and its aftermath, the government of Canada has put in place significant policies. Canada is on track to recover from this crisis, powered by one of the strongest economies in the industrialised world.
If we define service delivery as government expenditure in education, health, social security, etc., the 2008-09 global crisis did not affect service delivery. In contrast to other OECD member countries, the fiscal balance rule followed by Chile for several years allowed the country to expand government expenditure during the crisis (in 2009, Chile’s fiscal deficit reached 4.4% of GDP, which is significantly lower than the OECD average.) As such, in the case of Chile, the crisis did not force fiscal consolidation. Actually, acting counter cyclically, Chile’s fiscal expenses during 2009 increased by 16.9% in order to boost employment, reactivate the economy and support social services.
The economic downturn that has followed the financial crisis has created a need for fiscal consolidation. However, budgetary cutbacks should be implemented carefully so as not to reduce the quality of public service – and not to disappoint the expectations of citizens.
The Estonian economy began to soften towards the end of 2007 (as part of the natural economic cycle). Less than a year later, as the global financial crisis spread to the real economy, and in response to an expanding fiscal gap, the Estonian government revised the 2009 budget. Three supplementary budgets representing 9.3% of GDP were passed in 2009. Roughly half came from expenditure cuts and the other half from increased revenues (both taxes and other income, such as extra dividends from state-owned companies).
The deep recession and the sharp weakening of general government finances caused by it have fundamentally changed the bases of the Finnish fiscal policy. General government finances are in a more vulnerable position from which to meet expenditure pressures caused by the ageing of the population and a restricting tax base. Ensuring the sustainability of public finances now represents a bigger challenge. In the next few years it will be essential in economic policy to implement a post-recession exit strategy in which measures supporting growth are combined with adjustment measures in general government finances. In fiscal policy, a strategy and measures to strengthen the long-term sustainability of public finances are required. It has been estimated that although general government finances will continue to improve over the years ahead on the back of economic recovery, it is expected that without new measures to stimulate growth and consolidate public finances, they will remain firmly in deficit in 2014.
Since June 2007, measures aimed at modernising central government public services have formed part of the overall framework of the "General Review of Public Policies" (Révision générale des politiques publiques, RGPP). The RGPP’s steering body, the Council for the Modernisation of Public Policies (Conseil de modernisation des politiques publiques), which met in June 2010 under the chairmanship of the President of the Republic, reaffirmed the priority being given to improving the quality of service delivery to users.
Budget consolidation – which is also affecting Germany in the current legislative period – has also led to a reduction in budget funds for public authorities delivering public services. These necessary budgetary cuts will reduce the federal ministries’ and their subordinate authorities’ scope for action, adversely affect individual projects and heighten the need to set priorities. However, budget-neutral, internal postponements or financial shifts in expenditure will ensure that the implementation of projects which are important in policy terms are not put at risk.
Greece’s financial situation calls for a bold fiscal consolidation, through cutting costs in the public sector. In fact, Greece has made a serious reduction in government spending through the general suspension of permanent personnel appointments for 2010, the introduction of the 5-to-1 replacement rule, the additional reduction by 30% of personnel under limited period contractual agreements in relation to 2009 and salary cost reductions (i.e. 12% allowances reduction, reduction/elimination of 13th and 14th wage payment, abolition/reduction of committees’ remuneration and overtime compensation) as well as a reduction in operating costs.
The economic crisis has created a need for fiscal consolidation in the Icelandic Government. Consolidation has been, and will continue to be, both on the revenue and expenditure side of the budget. On the expenditure side, the emphasis has been on protecting the most vulnerable citizens on the one hand and the public services most important to economic recovery on the other.
The rapid deterioration in public finances in recent years has brought greater urgency to the need to improve the way in which services are provided by the public service.
Israel entered the recent period of global financial turmoil in a healthy position due to a stable banking sector, no local real estate bubble and no credit bubble like in many other countries. The government carried out responsible fiscal policy: decreasing expenditure and temporarily increasing the deficit. Because of the government’s responsible and balanced actions, service delivery has hardly been affected.
The Italian approach to fiscal consolidation aims at bringing the Italian economy back on the path to financial sustainability while simultaneously fostering its growth potential. Agreements taken at the European level are thus honoured on both the expenditure and revenue side, introducing structural reforms in order to enhance competitiveness and growth in general through public sector productivity and efficiency. In particular, the latest corrective action (Law 122 adopted by the parliament on 30 July 2010 "Urgent Issues for Financial Stabilisation and Competitiveness") foresees that the overall net public debt will be reduced by EUR 12.1 billion in 2011 and by around EUR 25 billion in 2012-13. Consolidation relies on a reduction of expenses by two-thirds (namely through freezing civil servant salaries and curbing pension expenditures, both in the private and the public sector) and on a one-third increase of revenues (mainly through reducing tax elusion and evasion). Simplification and liberalisation measures have also been established, which are aimed at profoundly changing the relationship between businesses and the public administration, at cutting administrative burdens and at favouring e-government policies.
Following the Cabinet decision concerning the Budget Formulation Reform in October 2009, the National Policy Unit published guidelines for improving the disclosure of information on budget execution as well as for budget monitoring and promoting efficiency teams (published in March 2010), which was followed by the implementation of budget monitoring and the establishment efficiency teams in each agency. This will be followed up through meetings of the team leaders.
In Korea, "fiscal consolidation" refers to balanced budget implementation with improved efficiency and transparency in fiscal management, and aims to reduce national debt and manage the appropriate delivery of social services such as the welfare system.
In its inaugural speech of 29 July 2009, the Luxembourg government stated that it would continue to modernise the central government during the 2009-14 period through a series of reforms aimed at improving quality, effectiveness and transparency. On this basis, a framework for action was prepared comprised of a series of measures to reform service delivery and improve the quality of public services, in particular in the field of egovernment, administrative reform and administrative simplification.
The government of Mexico supports projects for people living in poverty, incorporating the development of human and technical skills as elements for promoting economic and environmental sustainability.
The new Cabinet has expressed its intention to restore the health of public finances and to achieve a balanced budget by 2015. To achieve this goal, the Dutch government will improve the financial position by EUR 18 billion in 2015. In 2015 EUR 6.14 billion will be saved by reducing the size of the government, social expenditure will decrease by EUR 4.34 billion and the rest will be saved on health care, international aid, etc. Because some of the savings will take longer than 4 years to implement structurally, the reduction will amount to EUR 24.8 billion. In the meantime there will be extra expenditures for care for the elderly, public security and infrastructure.
The current government’s fiscal strategy aims to deliver a fiscal position that is sustainable in the long term, contributes to economic stability and advances key priority policies. In the short-term, the New Zealand government aims to return to a surplus position as soon as possible.
According to Norwegian fiscal guidelines, the budget policy shall contribute to stable economic development. In January 2009, as a response to the financial crisis, the Norwegian government proposed to the parliament expansionary amendments to the 2009 Fiscal Budget, which were adopted with only minor changes. Measured as the change in the non-oil structural budget deficit as a share of non-oil GDP, the fiscal stimulus was estimated at three percentage points. This fiscal response was among the strongest among OECD member countries (later revisions have brought the calculated stimulus down to 2.1 percentage points).
The Polish economy has thus far proven to be extremely resilient to the global economic crisis. Government activities such as the state transition pension reform, the reinforcement of Poland’s credibility in international markets, the anti-crisis measures targeted at the labour market or the major privatisation scheme, have consolidated the foundation of the Polish economy. In November 2008 the government put forward the Stability and Development Plan aimed at protecting the Polish economy against the global financial crisis. In addition, the Package of Anti-Crisis Measures was introduced by the government in 2009. The Polish currency was stabilised and its position safeguarded. A programme supporting Polish enterprises has also been developed.
Budget consolidation undertaken between 2005-08, has not had a negative effect on the provision of public services, neither in terms of quantity nor in terms of quality. This process of budget consolidation implied the rationalisation of resources (for example, the Programme for Restructuring the Central Administration – PRACE) which enabled financial savings without jeopardising public service delivery.
The reduction in budget revenue during the global financial crisis and subsequent stabilisation of the economy has led to cuts in expenditure for managing the federal provision of public services, while also reducing the number of federal government employees. According to the Budgetary Address of the President of the Russian Federation Policy for 2011-13, by 2013 the number of government employees will be reduced by 20%. At the same time, new technologies will continue to be introduced that allow better services to be rendered at lower cost; these will include "one-stop-shop" delivery of state and municipal services, and e-services.
As a part of its fiscal consolidation plans, the new government plans to decrease wage expenditures by 10%; the intention is to decrease costs and improve productivity in the public sector.
To achieve the objective of reducing the central government budget deficit by 2013, savings in the total amount of EUR 1.2 billion or EUR 400 million per year are required. The pace of achieving these savings will not be the same every year.
In all of its initiatives, the general administration of state in Spain seeks to include the private sector in the main actions influencing its current modernisation and improvement policies. Thus, in the area of e-government, an important milestone was the approval in 2007 of Law 11/2007 on Citizens’ Electronic Access to Public Services, which placed Spain among the leading countries in the use of e-government. For the implementation of this law, which recognises the right of citizens to communicate with the administration through electronic means, various measures are being taken. Some of these measures are described in Plan Avanza for the fostering of an information society, and in its revised version – Plan Avanza 2 – which was approved in July 2010 and includes measures for the next 5 years.
During the economic crisis, Sweden was able to combine limited deficits in public finances with significant fiscal stimuli, including temporary transfers to local governments (see below) in order for them to maintain their levels of service delivery despite sharply decreasing tax revenues at the local level. The ability to maintain surpluses during the good pre-crisis years made this possible; the existence of a well-defined national fiscal policy framework, combined with a strong political commitment, has been essential.
According to current financial planning, federal government expenditure for the period 2011-14 amounts to CHF 63-68 billion per annum. Planned expenditure cuts add up to CHF 1.5 billion p.a. However, some of these cuts have no influence on service delivery (lower interest charge on public debt, compensation of investments which were brought together to stimulate economic growth in 2009, adaptation of planned expenditure to lower inflation forecasts). The remaining cuts amount to CHF 150 million in 2011 and CHF 450-500 million for 2012-14. Compared to total expenditure, this amount is too small to have severe impacts on service delivery.
With the economic and fiscal policies it applied, Turkey has fared rather well in relation to other countries during the financial crisis. This is clearly seen in the indicators relating to growth, employment, budgetary deficit and debt stock. The 2010 budget has been announced as the budget to exit the crisis, and this has been proved by the economic growth now being experienced. The main target of the 2011 budget is to ensure sustainable growth and to further recover financial balances.
The economic crisis has made many people wonder about the feasibility of reforms at such a juncture. On the one hand, the crisis is a unique opportunity to implement long overdue reforms as measures to save the country. On the other hand, the crisis increases by many times the risks peculiar to the major reforms: failure can bring a weak economy to disaster.
The reductions in government spending over the medium term mean that it will not be possible or desirable to simply maintain current models of service delivery. Rather than "top-slicing" budgets, the government is taking a more strategic approach to the consolidation, looking first at removing funding from activities that the state does not need to perform while protecting areas of activity that are vital for the state to provide. However, in all public services there will need to be a focus on improved efficiency, so that the same or better outcomes can be secured with lower inputs.
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