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The Hague, The Netherlands 10-11 November 2004

Budget reform in OECD countries -Common themes-. The Hague, The Netherlands 10-11 November 2004. Successful Fiscal Consolidation. Economic Growth Political Commitment to Fiscal Discipline Institutional Arrangements for Budgeting. Institutional Arrangements. Medium-Term Budget Frameworks

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The Hague, The Netherlands 10-11 November 2004

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  1. Budget reform in OECD countries -Common themes- The Hague, The Netherlands 10-11 November 2004

  2. Successful Fiscal Consolidation • Economic Growth • Political Commitment to Fiscal Discipline • Institutional Arrangements for Budgeting

  3. Institutional Arrangements • Medium-Term Budget Frameworks • Prudent Economic Assumptions • Top-Down Budgeting Techniques • Budget Transparency • Relaxed Input Controls • Focus on Results • Accruals

  4. Medium-Term Frameworks • Setting of fiscal objectives • “Operationalizing” fiscal objectives • Enhances credibility • Enables managers to plan better • Key features • Level of detail • Time-span • Living document (reconcile changes) • Caution: economic assumptions

  5. Economic Assumptions • The Most Significant Fiscal Risk • Good Working Methods • Full Disclosure • Sensitivity Analysis • Comparison With Private Forecasters • Independent Board • “Prudency” Factors • Canada • The Netherlands

  6. Top-Down Budget Process • Pre-Set Spending Limit for Each Ministry • Reflects Political Prioritization • Pre-Set Limits Hamper “Auto” Increases • Better Decision-Making • “Ownership” of Actions • Information Asymmetry • Easier to Reallocate • Reduces Game-Playing

  7. Budget Transparency • “Significant Advances in late 80s/early 90s • “Things are really as bad as we told you.” • Three Elements • Release of Budget Data • Effective Role for the Legislature • Effective Role for Civil Society • OECD Best Practices

  8. Relaxing Input Controls • “Deregulation” in the Public Sector • Level of Detail of Budget Appropriations • Salary, travel, etc. • Decentralization of HRM Function • Common Service Provisions • Office accommodations, etc. • Heads of ministry/agency in best position • to manage resources effectively & • efficiently

  9. Focus on Results • “Quid Pro Quo” for Increased Flexibility • Very difficult in practice • Some more easily measured than others • Outcomes versus outputs • “What gets measured, gets managed” • Information Overload • Buy-in from ministers/parliamentarians • Reliability and Consistency • Targets

  10. Accruals • Very contentious issue • Financial reporting versus budgeting • Selected transactions only • Treatment of Unique Assets and Liabilities • Heritage, Military, Infrastructure Assets • Social Insurance Programs • Valuation Methodology • Accounting Standards-Setting

  11. Conclusion • All OECD Member countries are moving in this same direction

  12. The OECD Journal on Budgeting • www.oecd.org/gov/budget

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