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.
