5th Meeting of the INTOSAI Working Group on Key National Indicators

1. 5th Meeting of the INTOSAI Working Group on Key National Indicators A performance audit on indicators measuring fiscal long term sustainability Ulrike KATTERL, SAI of Austria

2. Content • Scopeoftheaudit • Sustainability • S2-Indicator • Additional costsof an ageingpopulation • Data coverageandquality • Date requirements • ACA recommendations • Lessonlearnt Ulrike KATTERL, SAI of Austria,

3. Scope of the audit • Performance audit on the national budget planning process: Focus on long term budgeting, i.e. fiscal sustainability • Legal obligations to pursue sustainable public finances: constitutional law; national budget law; EU regulations • Risk: „Sustainability gap“ which can result from demographic developments • „S2“ – Indicator to measure long term fiscal sustainability challenges that countries face Ulrike KATTERL, SAI of Austria,

4. Sustainability • Sustainability relates to the ability of a government to assume the financial burden of its debt currently and in the future • The sustainability indicators provide a firm basis to identify the size and the main source of risks to public finance sustainability in a long-term perspective Ulrike KATTERL, SAI of Austria,

5. S2 indicator • S2 indicator:showsthe durable adjustmentofthecurrentprimarybalancerequiredtofulfilthe infinite horizon intertemporal budgetconstraints, includingpayingforany additional expenditurearisingfrom an ageingpopulation • Itcanbedecomposedinto • a partthatrelatestothestartingfiscalpositionand • a partthatrelatestotheadditional costsof an ageingpopulation Ulrike KATTERL, SAI of Austria,

6. Additional costs of an ageing population • Public pensions expenditures • Healthcareexpenditures • Long-term careexpenditures Ulrike KATTERL, SAI of Austria,

7. Data coverage and quality • Austria transmitsdata on pensions, healthcareandlongtermcaretothe European Commission (EC). The EC services carry out –based on thesedata - the so called „ageingprojections“. • The auditpursuedbythe ACA showedthatthedatacoverageandqualitycanbeimproved. • This isimportantasthedatacoverageandqualitydeterminethesignificanceoftheprojectionresults.

8. Data requirements I • Public pensions expenditures: • Some expenditures not directlylinkedtopensionbenefits (asforrehabilitation, administrative costs, etc.) are not included in theprojections. These otherpensionexpendituresmakeupforapproximately 0.9% of GDP. • Means-testedminimum pensions throughsocialassistancescheme (“Ausgleichszulagen”) areexcluded (0.3% of GDP). • Uncleardefiningofpensionpaymentsforcivilservantsofthestatesandmunicipalities e.g. teachersofthestatescomparedtoothercivilservantsofthestates Ulrike KATTERL, SAI of Austria,

9. Data requirements II • Healthcareexpenditures: • Noage- and gender- relatedinformationregardingoutpatientclinic (ambulance); just lump-sumconsiderationpossible Ulrike KATTERL, SAI of Austria,

10. Data requirements III • Long-term careexpenditures • Nocross-statescomparabilitypossibleregarding in-kind transfers (nurseryhomes, etc.) • Classificationproblemsamongcareexpendituresandsocialbenefits • Spending on „homecare“ difficulttoillustrate (comparedtoinstitutionalcare)

11. ACA Recommendations • Improve data coverage, notably data generated by the states (data on teachers employed by the states, spending on long-term care, health expenditures) • Enhance data quality, i.e. improved age-related information (e.g. hospitals) • Improved cooperation among the federal level and the states to ease the illustration of the fiscal sustainability of the economy as a whole

12. Lesson learnt • Itisdifficulttoevaluateindicators per se, • however, promising toevaluatetheunderlyingdata. Ulrike KATTERL, SAI of Austria,

13. Ulrike KATTERL katterl@rechnungshof.gv.at Phone: 0043 711 71 - 8620 Ulrike KATTERL, SAI of Austria,