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Remarks on Independent Fiscal Institutions

Remarks on Independent Fiscal Institutions. Lars Calmfors OECD High-Level Parliamentary Seminar The Swedish Parliament 18 June 2013 . Issues. The role of independent fiscal institutions What should they do? Relationship to the Parliament How should they work?

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Remarks on Independent Fiscal Institutions

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  1. Remarks on Independent Fiscal Institutions Lars Calmfors OECD High-Level Parliamentary Seminar The Swedish Parliament 18 June 2013

  2. Issues • The role of independent fiscal institutions • What should they do? • Relationship to the Parliament • How should they work? • How should one guarantee their independence?

  3. Roles of independent fiscal institutions Parliamentary budget offices Fiscal councils (watchdogs) To strengthen incentives for politicians to heed good advice - higher reputation cost of bad policy with more transparency and accountability • To give politicians a better basis for decision-making - better analysis - fiscal policy analysis would be promoted

  4. Roles of independent fiscal institutions continued • Many alternative assessments of macroeconomic and fiscal situation • Authoritative status of fiscal council - public judge of government policy • Media logic in contrasting government policy to council assessments

  5. Questions for a fiscal watchdog • Only evaluation of adherence to intermediate fiscal objectives or evaluation also of the intermediate objectives? • Only positive analysis or normative recommendations as well? • Only analysis of fiscal policy or analysis of employment, growth and income distribution as well?

  6. The Parliament and the fiscal watchdog Ideal world Real world Important with input from the fiscal watchdog at an early stage Spring Fiscal Policy Bill in Sweden In Sweden only late monitoring of actual Budget Bill • The Parliament improves on the budget bill using the expertise of the fiscal watchdog • This does not happen

  7. Activities of fiscal council • Continuous participation in the public debate is desirable - not only in connection with annual report - reports and public appearances over the year • Adequate resources are necessary • Often too small resources for fiscal councils

  8. Independence • Severe time-inconsistency problem • Formal rules guaranteeing independence are necessary - fixed, non-renewable terms of office - guarantees against dismissal • Statutory authority under the Parliament or the government? • Long-term budget is crucial

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