Promoting Fiscal Responsibility: Transparency, Rules and Independent Fiscal Authorities

Abstract

Hemming and Kell explore the link between fiscal adjustments that took place in OECD countries during the 1990s and changes introduced in budgetary frameworks with a view to promoting fiscal responsibility. They review the reforms that have tried to counter the deficit bias by improving transparency and accountability of policy makers and by introducing fiscal rules. They emphasize that efforts to increase transparency are particularly important both in their own right and as a precondition for other lines of action and that public opinion should be informed about fiscal policy objectives, assumptions and projections and public sector accounts. Hemming and Kell highlight the pros and cons of different rules and conclude that a combination of expenditure ceilings to constrain short-term pressures and a medium-term debt ceiling can be a valuable solution. The creation of an independent fiscal authority, with some powers to set fiscal policy independent of government, would be highly controversial. This depends on the multiple objectives and instruments of fiscal policy and the redistributive and political implications of fiscal decisions.