Eu economic governance and fiscal

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Presentation on EU economic governance and fiscal decentralisation made at the 2nd CoR conference on sub-national public finances in Brussels on 24 June 2014, by Joaquim Oliveira-Martins, Head, Regional Policy Division, OECD. For more information see www.oecd.org/regional/regional-policy/.

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Eu economic governance and fiscal

  1. 1. EU economic governance and fiscal decentralisation Joaquim Oliveira Martins Head, Regional Development Policy Division OECD Brussels, 24 June 2014
  2. 2. Subnational governments (SNGs) are key economic actors in the OECD and the EU 39,9% 63,3% 50,0% 72,2% 33,2% 19,6%33,6% 51,7% 45,9% 65,8% 26,6% 15,7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Expenditure Staff expenditure Public procurement Direct investment Tax revenue Debt OECD average Minimum Maximum European Union average % of General Government - 2012
  3. 3. Weight of the subnational government expenditure in GDP and Total Public expenditures Australia* Austria Belgium Canada** Germany Mexico* Spain Switzerland* United States* Czech Rep. Denmark Estonia Finland France Greece Hungary Iceland Ireland Israel* Italy Japan* Korea* Luxembourg Netherlands New Zealand** Norway Poland Portugal Slovak Rep. Slovenia Sweden Turkey* United Kingdom OECD33 EU27 0% 10% 20% 30% 40% 50% 60% 70% 80% 0% 5% 10% 15% 20% 25% 30% 35% 40% Subnational government expenditure as a % of GDP in 2012 Subnationalgovernmentexpenditureasa%ofpublicexpenditurein2012 * 2011 data ; ** : 2010 data
  4. 4. Role of Subnational Governments by types of expenditures 26% 18% 14% 14% 12% 16% 20% 13% 12% 16% 20% 18% 0% 5% 10% 15% 20% 25% 30% Education Health Economic Affairs General Services Social protection Other* OECD (27 countries) EU27 OECD and EU (2011, % of expenditure) *Other: Defence; Public order and safety; Housing and community amenities; Recreation, culture and religion; Environment.
  5. 5. The role of SNGs is particularly marked for Public Investments 5 72% 66% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Canada Belgium UnitedStates Germany Switzerland Japan France Finland OECD33avg Italy Ireland Austria Australia EU27 Netherlands Mexico Israel Spain Denmark Slovenia CzechRepublic Korea Portugal Sweden Norway UnitedKingdom SlovakRepublic Iceland Poland NewZealand Luxembourg Hungary Turkey Estonia Greece Rest of public sector (central government and social security) Subnational governments (States, regions and local governments) Subnational direct investment as a % of public direct investment (2012)
  6. 6. Among subnational government expenditures, Public investment was the most hit (EU, 2000-13) In volume, base year 2000 = 100 Change in 2013 (%) +0,1% -2,3% -0,8% +1,0% -1,4% +0,2% 100 105 110 115 120 125 130 135 140 145 150 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP Total expenditure Direct investment Social benefits Staff expenditure Intermediate consumption
  7. 7. Very strong reductions in subnational investment in some countries 7 * Average annual growth rate 2007-2012 ** Average annual growth rate 2007-2011 Ireland Spain Iceland Turkey** Portugal Italy Greece EU Estonia United States* Slovak Rep. Austria Czech Rep. Hungary Switzerland* France Japan* Korea** Poland United Kingdom Slovenia Belgium Mexico* Germany Netherlands Australia* Luxembourg Norway Denmark Israel* Canada* Finland Sweden -25% -20% -15% -10% -5% 0% 5% 10% Average annual growth rate 2007-2013 (% in real terms)
  8. 8. • Invest using an integrated strategy tailored to different places • Adopt effective co-ordination instruments across levels of govt • Co-ordinate across SNGs to invest at the relevant scale Pillar 1 Co-ordinate across levels of governments and policies • Assess upfront long term impacts and risks • Encourage stakeholder involvement throughout investment cycle • Mobilise private actors and financing institutions to diversify sources of funding and strengthen capacities • Reinforce the expertise of public officials & institutions • Focus on results and promote learning from experience Pillar 2 Strengthen capacities and promote policy learning at all levels of government • Develop a fiscal framework adapted to the objectives pursued • Require sound and transparent financial management at all levels • Promote transparency and strategic use of procurement • Strive for quality and consistency in regulatory systems across levels of government Pillar 3 Ensure proper framework conditions for public investment at all levels of government 8 A new OECD instrument: The Principles for Effective Public Investment Across Levels of Government This is the first OECD Instrument in the area of regional policy and multi- level governance This is the first OECD Instrument in the area of regional policy and multi- level governance
  9. 9. The Governance system of SNGs: a fragmented and evolving picture Federations & quasi-federation Unitary countries 38 960 4 160 360 573 78 2 489 1 766 2443 031310 8 185 36 828 8 222 437 114 74 11 638 446 311 320 254 338 3 196 2 935 2 363 2 434 605 420 2 875 6 267 103 106 211 226 OECD: 140 879 subnational governments in 2012: • 136 346 municipal-level entities • 4 007 intermediary-level entities • 526 regional or State-level entities
  10. 10. 10 Large variation in average population and land size across municipalities 13 17 17 17 24 29 32 36 37 50 52 62 87 96 102 126 200 220 266 266 274 299 406 440 440 601 612 798 900 1 057 1 392 1 552 2 192 2 408 4 025 6 000 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 Czech Republic Slovak Republic Switzerland France Luxembourg Hungary Germany Austria Italy EU27 Belgium Spain Israel Slovenia Netherlands Poland Estonia Japan OECD Turkey United States Portugal1 Greece Denmark Korea1 United Kingdom1 Ireland Mexico Norway Finland Iceland Sweden Chile Canada New-Zealand Australia Average municipal area, km² 1 680 1 735 1 850 3 140 3 305 3 590 4 320 4 605 5 670 5 690 5 905 7 170 7 305 8 240 8 815 9 115 9 665 11 725 15 545 16 915 18 855 25 180 31 050 32 935 34 050 34 885 38 960 40 085 41 125 44 780 50 440 56 180 64 550 74 170 155 775 220 285 0 50 000 100 000 150 000 200 000 250 000 Czech Republic France Slovak Republic Hungary Switzerland Austria Iceland Luxembourg EU27 Spain Estonia Germany Italy Canada United States OECD Slovenia Norway Poland Finland Belgium Turkey Israel Sweden Portugal Greece Ireland Australia Netherlands Mexico Chile Denmark New-Zealand Japan United Kingdom Korea Average number of inhabitants per municipality
  11. 11. Regional governments vs. municipal governments: a more contrasted picture 11 Germany Mexico Italy France* Spain Japan Poland Netherlands Chile Denmark Austria Turkey Greece Czech rep. Slovak rep. Hungary Sweden New Zealand Switzerland Norway 0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000 5.500 0 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 Averageregionalgovernmentsize(thousandsofinhabitants) Average municipal size (inhabitants) France: without overseas regions ; Belgium, United Kingdom, Canada, United States, Australia and Korea are not represented on this graph. Average size of regional and municipal governments (population)
  12. 12. Size of regional government budget in 2012 (expenditure as a % of GDP) Economic weight of regional governments may not match their population size 12 1,0% 1,3% 1,5% 1,7% 2,2% 3,9% 6,0% 6,6% 9,7% 9,9% 11,3% 12,2% 13,4% 15,3% 18,1% 19,4% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Poland France Netherlands Slovak Rep. Norway* Czech rep.* Denmark Sweden Austria* Mexico Italy Germany Switzerland Belgium Spain Canada Austria* : excluding Vienna; Norway*: excluding Oslo Czech republic*. estimated 2011 figures
  13. 13. Policy trend #1: Reforms for merging of Municipalities 13 0 1000 2000 3000 4000 5000 6000 Austria(1950) Sweden(1952, 1963) Japan(1953, 1999) Denmark(1970, 2007) Finland(1976, 2010) Belgium(1975) NewZealand (1989) Lithuania(1994) Greece(1997, 2011) Israel(2002) Turkey(2008- 2012) Latvia(2009) Number of municipalities before the reform Number of municipalities after the reform Number of municipalities in 2012
  14. 14. Policy trend #2: A growing focus on metropolitan governance 14 Average number of metropolitan governance bodies created or reformed in OECD countries per decade 0 5 10 15 20 25 30 35 40 45 50 1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 2001-2010
  15. 15. Policy trend #3: Fiscal autonomy and partnerships across levels of government Creation of new taxes Tax collection Leeway over tax rates Leeway over tax bases Legal power Regulatory / administrative / adaptation power Scope of competences and functions Tax autonomy index: Own-source tax revenue as a % of total revenues The main components of fiscal autonomy 0 2 4 6 8 10 Assets management (financial, physical) Tariffs & fees (leaway) Taxes Grants and subsidies (earmarked/general) Borrowing Budget management Spending and investment (norms & standards, etc.) Human resources Local public service delivery Control : monitoring, audit, evaluation, performance assessment Equalisation mechanisms
  16. 16. • OECD national accounts and Eurostat • OECD (2013) « Regions at a Glance » • OECD (2014) “Subnational government in OECD countries: key data” • “Investing Together: Working Effectively across Levels of Government”, OECD Publishing (forthcoming December 2013) • OECD Regional Outloook 2014 (forthcoming) • http://www.oecd.org/gov/regional-policy/ • OECD Fiscal Network: : http://www.oecd.org/tax/federalism/ Thank you ! 16

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