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OECD looks at government spending

The fiscal effort made by governments to help citizens and businesses bounce back from the global economic crisis pushed government’s share of the economy to record highs, according to a new OECD report.

Several countries now require substantial progress in government efficiency in order to reconcile fiscal consolidation and responsiveness to citizens’ needs.

The latest data from Government at a Glance 2011 show that average government spending in the OECD area is larger than ever before: it exceeds 45% of GDP, up from slightly more than 40% in pre-crisis 2007. Unsustainable fiscal positions in many countries will require a reduction in public expenditures, and in some cases revenue increases. But future fiscal consolidation efforts will also offer the opportunity to rethink and reform the public sector to improve its performance.

“With citizens in many countries questioning the effectiveness of governments and given the pressing fiscal constraints governments have no choice but to reform, said OECD Secretary-General Angel Gurría. “It is not about more or less government, but about better and more effective governance. “The same commitment that leaders applied first to fiscal stimulus and then to fiscal consolidation must be applied now to public sector innovation.”

Government at a Glance 2011 provides facts and figures to help decision makers identify new opportunities for savings and innovation in the public sector. It presents data on public finance and economics for 2000, 2007 and 2009, to showcase trends over this decade as well as the impact of the financial and economic crises. The report quantifies the size and role of government, including revenues generated, resources used and spending. It looks at how government works – both in terms of what it does and how it does it. And it details the goods and services governments produce along with their impacts on citizens and business.

New estimates of country-specific fiscal consolidation requirements show OECD countries must improve their fiscal positions by nearly 4% of potential GDP just to stabilise their debt-to-GDP ratio by 2026. In addition, offsets of an additional 3 percentage points of GDP will have to be found over the coming 15 years to meet spending pressures due to ageing populations. However, fiscal consolidation needs are not necessarily correlated with government size; those countries in a stronger fiscal positions are not those with smaller governments but those that learned from previous crises, and improved their fiscal and budgeting frameworks on time.

The report brings together 58 data sets on government. Statistics from Chile, Estonia, Israel and Slovenia, which joined the OECD in 2010, are included when available. The Russian Federation, which is seeking to join the OECD, and other major economies, including China, India, Indonesia and South Africa, are also covered.

A highlight of this year’s report is a series of international comparisons of pay for public servants like teachers, doctors and nurses or managers and other personnel in government departments. Launching just as over 25 countries across the OECD are freezing public sector wages or cutting government jobs in an effort to cut costs, the salary survey is designed to help governments ensure that reforms don’t endanger their ability to attract, motivate and retain qualified workers.

The report shows that governments are increasingly leveraging their resources by partnering with non-profits and private companies to deliver goods and services to citizens. The use of outsourcing has increased by over 15% on average over the past decade, representing about 10% of GDP in OECD member countries today. As governments look to all sources for savings, ensuring that outsourcing results in efficiency gains is essential.

The OECD also assesses conflict of interest disclosure rules in the three branches of government. The report reveals that, despite substantial progress in recent years, disclosures of potential conflicts of interest by financial regulators, procurement agents and tax and customs officials are not always required or made available for public scrutiny. Twenty-one OECD countries do not require financial regulators to disclose previous employment, and over half of countries do not require disclosure of income source and amounts for these positions. Only four surveyed countries make asset disclosures of financial regulators available for public scrutiny.

The report also looks at the implementation of policies to make government more open to citizens, through the promotion of transparency, efficiency and trust.

For the first time, the publication includes indicators of government outputs and performance. Indicators for fairness objectives, both in terms of income distribution and access to health and education services; and selected efficiency measures for tax administration, education and health are presented. This is an important step towards measuring public sector productivity across OECD countries.

Further information on Government at a Glance 2011, including country findings for all 34 OECD members, is available at http://www.oecd.org/gov/indicators/govataglance.






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