Spending Review: Where to Now? - OECD - Spending Reviews - Marc ROBI… · Two defining features of post-GFC Spending Review: 1. Combines strategic and efficiency review Illusion

Spending Review:

Where to Now?

Marc Robinson

Little SR before Global Fiscal Crisis (GFC) ◦ Netherlands, Denmark; few other countries

Massive increase in SR over past six years ◦ Tool of fiscal consolidation

Two defining features of post-GFC Spending Review:

1. Combines strategic and efficiency review ◦ Illusion about potential rapid efficiency savings abandoned

◦ No alternative but to cut services and transfers as well

2. Comprehensive review ◦ Open hunting license in search for savings measures

◦ Vs. selective SR, where there is prior list of review topics

Spending review needs to become ◦ A permanent part of budget preparation

◦ Maintaining focus on strategic as well as efficiency savings

◦ Routine spending review

Because…

Better control of aggregate expenditure essential ◦ Irrespective of one’s stance on SR “austerity” policies

◦ Need for LT restoration of fiscal sustainability

◦ Trend revenue growth slower than pre-GFC

Need for fiscal space for pressing new spending ◦ New spending proposals can’t be just banned indefinitely

Past experience of SR lapsing after immediate crisis

◦ Although fiscal conditions are more difficult now

Discredited in backlash against austerity policies?

◦ SR identified only as a tool for cutting aggregate spending

Reallocation is always difficult

◦ Pre-GFC, most governments preferred to avoid choices

Need to press case for institutionalized SR

◦ Role in creating fiscal space

◦ As well as aggregate spending control

Challenge: how to design routine spending review

Routine SR must be selective, not comprehensive ◦ Comprehensive review too demanding

◦ Huge demands on MOF and political leadership

Selective SR – how to target review activity? ◦ Discretionary choice of review topics essential

◦ Major role for political leadership in selection

◦ Automatic review cycle?

Permit spend-to-save options ◦ Options which require spending to realize savings

Permit reallocation options? ◦ Proposals for new spending from savings

Savings option work primarily a civil service function

◦ Selective external contribution

◦ Particularly on efficiency reviews

Political leadership of SR process

◦ Not just a “technical” exercise by bureaucracy

Strong hands-on MOF role

◦ Whether in joint reviews, or

◦ Challenge to ministry options in bottom-up review

Pressures and incentives for ministries to “play ball”

Limited use of formal performance information in SR

◦ Indicators or evaluation

Much available evaluation not very useful

◦ Management/policy improvement focus

◦ Quality not always good

Requirement is more relevant evaluation

◦ Not more evaluation

SR as key tool of performance budgeting

◦ Key instrument for making budgeting “performance informed”