BCOP’s work on developing knowledge resources has been featured on the World Bank’s blog and distributed internally across the World Bank Group. The published blog is given below. It is based on the knowledge product on Spending Review Practices in the Netherlands. The topic was chosen because the Netherlands has the longest history and most spending reviews conducted over several decades. The knowledge product provides a step-by-step overview of the spending review process in the Netherlands. It also takes a deeper dive into one specific case – the spending review on child support schemes.
The knowledge product development and its contents were decided and steered by the leadership of the PPBWG. The report was delivered by the BCOP Resource Team supported by the World Bank (Iryna Shcherbyna, BCOP Resource Team Coordinator; Maarten de Jong, Consultant and Core Author; Richard Allen, Strategic Thematic Advisor; Naida Carsimamovic Vukotic, BCOP Resource Team member, William J. Gallaher, Editor; and Kora Reichardt, Designer). Some of the BCOP’s knowledge products take a detailed stock of the status and challenges in PEMPAL countries in different PFM areas to benchmark the experiences and draw recommendations, while others, such as this one, provide a deep-dive analysis to give a detailed review of practices in a specific country or a narrow topic. Such a versatile approach to the development of knowledge products caters to the different levels of progress in different PEMPAL countries, while also providing information on concrete practical good practices.
Publishing BCOP’s work promotes PEMPAL to a wider audience. This is in line with the PEMPAL Strategy Activity Plan, which includes action on promoting the benefits of PEMPAL by COP representatives and the World Bank. Importantly, it also testifies to the relevance and quality of BCOP’s work.
Spending Reviews: Lessons from the Netherlands
The PEMPAL (Public Expenditure Management Peer Assisted Learning) is a network that facilitates the exchange of professional experience and knowledge among 23 countries in Europe and Central Asia. For several years PEMPAL Budget Community of Practice (BCOP) members have focused on strengthening their capacity to implement spending reviews (SRs). The number of knowledge products on different aspects of SRs has been developed, including an analysis of expenditure review practices in Netherlands. The objective of that product was to present one of the global good practices of the spending review approach (the full report can be downloaded here).
SRs are not standardized globally but share some common characteristics. They generally refer to the process of developing and adopting savings measures and efficiency improvements, based on a systematic scrutiny of a government’s baseline expenditures. They are also used as a way of identifying alternative options for delivering public services. An increasing number of governments has introduced SRs to create fiscal space and reprioritize expenditure during periods when resources are heavily constrained, especially after the global financial crisis of 2008-2010 and the Covid-19 pandemic of 2020-22. Not surprisingly, SRs are high on the list of public financial management reforms in many countries, and PEMPAL BCOP members and not an exception. Only one PEMPAL country had conducted a spending review prior to 2016. As a contrast, 16 countries have conducted SRs by 2016 or plan to do so in the nearest future.
The Netherlands was a pioneer in implementing SRs. The first reviews were introduced in 1981 and the government has thus developed an approach and methodology that has been in continuous use for more than four decades. Over the years more than 300 SRs have been conducted covering all areas of government expenditure. The SR process presents government staff and political leadership with alternative options to alter current policies that will improve the efficiency and effectiveness of public spending or innovate government policies.
SRs are challenging for different reasons such as the availability of analytical capacity in the public sector, political commitment, and safeguarding impartiality. The most important obstacle however concerns the engagement of line ministries and government agencies. Understandably ministries may perceive a spending review initiated by a ministry of finance as threatening and may retreat into a defensive position. At the same time, having access to technical knowledge and data relating to these ministries’ policies and programs is indispensable. The Dutch methodology has evolved to address most of these challenges effectively. Although every approach to spending reviews is optimized for local circumstances, the Netherlands’ experience offers several practical lessons that may be applicable across different national contexts and administrative traditions. These lessons are summarized below.
As SRs in the Netherlands are regulated by broad process principles and terms of reference rather than by detailed step-by-step guidelines, the report illustrates the approach through an in-depth analysis of an influential review of child support schemes. This serves as an example of how the SR analysis is conducted and leads to alternative policy options.
Iryna Shcherbyna, PhD- WB Senior Public Sector Specialist (EECG1) and Coordinator of the Budget Community of Practice (BCOP) of ECA regional Public Expenditure Management Peer-Learning program (PEMPAL).
Maarten de Jong, PhD –BCOP thematic consultant and the core author of the KP.
Richard Allen - global expert on public finance and BCOP consultant (strategic adviser), co-editor of the IMF’s PFM blog