Posted by Zsuzsanna Lonti and Natalia Nolan
Back in October of last year, we previewed some of the key findings from the upcoming release of Government at a Glance 2011, and made our case about the importance of measuring and benchmarking government performance in order to improve governments’ capacities in tough times. This continues to ring true as countries embark on major fiscal consolidation efforts. Indeed, the OECD’s Government at a Glance 2011 is released amid concern about debt levels and even fears of sovereign default; data from the new publication for example show that average public debt among OECD countries was 74.2% of GDP in 2010, up from 55.6% in 2007.
These high levels of debt will impede long-term economic growth and divert resources from important sectors such as education, healthcare and other vital investments. OECD estimates show that simply stabilising the debt-to-GDP ratio by 2026 would demand an average total improvement in underlying balances of nearly 4% of potential GDP from the 2010 fiscal positions. Ageing societies will further add to spending pressures in the form of healthcare and pensions. And the problem has become too serious to rely on automatic stabilisers that usually kick in during economic recovery.
Policymakers now face the unenviable task of restructuring the state and restoring public finances without excessively eliminating public services, much needed amidst a stormy economic climate. By the end of 2010 about half of OECD member countries had announced detailed medium-term plans for fiscal consolidation, and, as reported in Government at a Glance, the majority are leaning more heavily on spending cuts, rather than raising revenues. In some countries, social and economic programmes are being slashed, wages cut and the size of the public service workforce is being shrunk. For instance, survey results featured in this new publication reveal that several OECD countries are not filling all the vacancies created by retiring staff – Spain is planning to replace only 1 in 10 central government workers.
Citizens, businesses and governments must ultimately agree on what level of services governments are best-placed to provide – whether directly or indirectly – and to what extent the public is willing to pay for these services. But such decisions cannot be made in a vacuum. Comparative data on public finances, public management practices and outcomes in key sectors can support important ongoing policy debates about where cuts should be made and where reforms are most needed.
Indeed, Government at a Glance calls to question some myths that risk tainting important policy choices. For example, new data on compensation in central government reveal a very egalitarian wage structure in the civil service, with senior managers in key central government positions making on average 4.5 times more than administrative assistants per year. In the private sector, differences along the hierarchy are not so compressed. Results also show that many public sector professionals (especially teachers and nurses) earn less than similarly-educated counterparts. Average working hours per year are also presented in the new publication. In countries such as Chile, the average working week for civil servants is 44 hours.
These new data show us that, while workforce restructuring and cuts to pay and benefits may be necessary, at the same time the potential impact on the ability of governments to attract top talent and deliver critical public services could be threatened in the long-term. Such risks should be factored into decisions.
Governments also need to learn from the mistakes that contributed to the crisis. New data on the disclosure of private interests show that 63% of member countries do not require financial regulators to disclose previous employment, which can lead to improper behaviour on the part of financial regulators as well as “revolving doors” between financial institutions and national authorities.
Efficiency and streamlining will become more important in this post-crisis world. But how can they be measured? Government at a Glance includes indicators on outcomes in education, health and tax efficiency- looking at how, for example, spending per pupil varies in OECD countries in relation to the newest scores of the OECD Programme for International Student Assessment PISA ), or how much it costs different countries to collect the same amount of tax.
As always, decisions on where to cut or reform are politically tricky – despite general public support for consolidation, resistance inevitably bubbles whenever specific tax increases or spending cuts are proposed, or when sensitive areas are addressed. In this context, policymakers may remain uncertain on what steps to take, because they lack concrete data on which reforms lead to efficiency gains. This is where the OECD plays a role –we hope to broaden access to much needed empirical evidence, and also develop performance indicators to monitor and evaluate the progress being made.
For further information on the publication, please visit the OECD website.
Restoring Public Finances: Tough Decisions Must Be Made
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