Indicators to monitor sustainable development : challenges and recent developments

1. Indicators to monitor sustainabledevelopment: challenges and recentdevelopments Speech by the President of the Parliamentary Budget Office Giuseppe Pisauro INTOSAI WG on keynationalindicators27 March 2018

2. Outline • Whyequitable and sustainablewell-beingindicators • International attempts and experience • The Italian experience • The use of multivariate indicators of well-being • From symbolic to political and instrumental use • Equitable and sustainable well-being indicators in the Italian decision-making process

3. Why equitable and sustainable well-being indicators • Theoretical bases • Amartya Sen questioned the exclusive focus on income and its growth, replacing the assumption of utility maximization (generally measured in monetary units) with the extension of the range of opportunities and the enhancing of individuals freedom • Extend the analysis from strictly economic and monetary variables to other socio-economic aspects of human development • Globalization and the crisis highlighted the limits of economic policies exclusively concentrated on GDP growth (increasing wealth gap, insufficient attention to environmental sustainability, etc. ) • Promote citizens participation to decision processes

4. The international attempts and experience • Several empirical analyses addressed to build multivariate indicators of well-being. Some examples: • the UNDP main indicator – the Human Development Index (available since 1990) – synthesizes the combined result of three indexes: life expectancy, education and per-capita income • The OECD program Better life (2011), takes into account 11 dimensions in 2 areas (material living conditions and quality of life), plus 4 concepts of  sustainability (natural, human, economic and social capital as resources for future well-being). The Report How's Life?2017 considers 50 indicators • The European Commission started the initiative Beyond GDP with the European Parliament, the Club of Rome, OECD and WWF(2007). The Communication GDP and beyond: Measuring progress in a changing world (2009) outlines an EU roadmap with 5 key actions to improve the indicators of progress

5. The international attempts and experience • In France in 2008 a Commission was established chaired by J.F. Stiglitz, A. Sen e J.P. Fitoussi. The final Report (Rapport de la Commission sur la mesure des performances économiques et du progrèssociale) tackles the problems emerging in the quality of life and sustainable development evaluation and provides a number of recommendations. The chosen dimensions are material living standards (income, consumption and wealth); health; education; personal activities including work, political voice and governance, social connections and relationships; environment (present and future conditions); personal and economic insecurity

6. The Italian experience • Some private initiatives were developed: the provinces ranking on quality of life (Il Sole 24 ore, since 1990) and the index of quality of Regional development (QUARS) (Sbilanciamoci!, since 2003) • At local level some municipalities tried to measure the well-being of their community • Around 2011 an important initiative was the joint project CNEL – ISTAT to measure the equitable and sustainable well-being in Italy, with the help of a scientific Commission. Representatives of the third sector and civil society were involved in the development of the multidimensional approach, that led to a measure of “equitable and sustainable well-being” (BES) • The annual BES Report (published by Istat since 2013) includes 12 domains and 130 basic indicators • The 12 domains are: health; education and training; work and life balance; economic well-being; social relationships; politics and institutions; safety; subjective well-being; landscape and cultural heritage; environment; innovation, research and creativity; quality of services.

7. The use of multivariate indicators of well-being • According to Chancel, Thiryand Demailly (2014): • A symbolic application, when the aim is representing the progress of a community • A political use, when the idea of the sustainable development enters the public debate on Government intervention assessment • A instrumental use, when the indicators are used in the process of execution and monitoring of specific public policies

8. From symbolic to political and instrumental use • The political and instrumental use of well-being indicators has been firstly stressed by some international institutions • Internationally shared goals may also influence the definition of national policies • International targets favor cross-countries comparisons • The United Nation Agenda 2030 for Sustainable Development includes 17 goals and 169 targets • It follows the Millennium Development Goals, expired at the end of 2015 • UE member states are committed on the Agenda 2030: the National Reform Programs reports on the national strategy to apply the Agenda 2030

9. From symbolic to political and instrumental • The Europe 2020 strategy is the EU’s agenda for growth and jobs for the current decade emphasizing smart, sustainable and inclusive growth as a way to overcome the structural weaknesses in Europe’s economy, improve its competitiveness and productivity and underpin a sustainable social market economy • contemplate 5 areas and 8 common targets, translated into national targets (employment: 75% of people aged 20–64 to be in work; research and development: 3% of the EU‘s GDP to be invested in R&D; climate change and energy: greenhouse gas emissions 20% lower than 1990 levels, 20% of energy coming from renewables, 20% increase in energy efficiency; education: rates of early school leavers below 10%, at least 40% of people aged 30–34 having completed higher education; poverty and social exclusion: at least 20 million fewer people in – or at risk of – poverty/social exclusion) • the strategy is monitored and implemented within the European Semester • information on the path to the national targets is reported by EU Governments in the annual National reform program

10. Equitable and sustainable well-being indicators in the Italian decision-making process • In August 2016 the Italian Parliament approved the inclusion of equitable and sustainable well-being indicators in the reform of the accounting and public finance law and provided for adding such indicators to the government’s policy objectives • A special Committee (BES Committee) was appointed to select the indicators to be included in the decision-making process • By mid-February the Ministry of Finance is required to present a report to the Parliament showing the evolution of the indicators taking on board also the effects determined by the budget law for the three-year period ahead • The Economic and Financial Document (EFD) in April reports on the trend of the main aspects of well-being in the past three years, and will provide a forecast of the future trend of these variables, along with the impact of the policies • On an experimental basis the EFD for 2017 included the first 4 indicators (average disposable income, income inequality, the rate of non-participation in the labor market, and CO2 and other climate-altering gas emissions). • In October 2017 a Decree increased from 4 to 12 the number of indicators to be included in the budget cycle (the additional indicators are: people living in absolute poverty, health life expectancy at birth, overweight or obesity, early leavers from education and training, ratio of employment rate for women 25-49 years with children under compulsory school age to the employment rate of women 25-49 years without children, illegal building rate)

11. Equitable and sustainable well-being indicators in the Italian decision-making process • The inclusion of these indicators in the budget cycle is welcome but it is not trivial • The selection of indicators has been attributed to a Committee chaired by the Minister of Finance, so it is neither completely outside the Government nor completely within the competence of the executive → the selection is somehow shared by the political forces in Parliament through the opinion requested to the parliamentary committees • Reporting the figures of some indicators in the EFD helps to put such dimensions at the center of the debate on Government’s policies • But forecasting these indicators for a three-year period represents a challenge, requires consistency with budgetary and long-term policies, and a political commitment to these forecasts, comparable to that taken on the evolution of macroeconomic variables

12. Equitable and sustainable well-being indicators in the Italian decision-making process • The choice of indicators should not be considered an objective and definitive technical decision, remaining conditioned to a series of factors that may also be questionable (relevance or relative severity of different problems, explanatory capacity of the indicator) or transitory (the seriousness or resurgence of a given problem in a certain historical moment) • The chosen indicators are not an exhaustive list of the information needs to design and discuss policies (simplicity versus complexity?)

13. Equitable and sustainable well-being indicators in the Italian decision-making process • The selection of indicators should be in principle lasting but, as it was recommended by the Committee, subject to a periodic review • The change in the chosen indicators may be related either to respond to technical needs and to improve their representativeness or dictated by a change in policies and therefore in the sensitivity to the latter • These aspects are delicate, because they affect the ability of the indicators to adequately monitor the effects of policies, limiting the possibilities of a distorted use aimed at shaping the perception of the results of the Government

14. Risks associated with the definition of the indicators • The assessment of a specific policy crucially depends on the definition of the indicators • Example: disposable income inequality is calculated as the ratio of total equalisedincome received by the 20% of the population with the highest income to that received by the 20% of the population with the lowest income • This indicator is much more sensible to current policies than the one that at both the numerator and the denominator shows the upper limits of the income quintiles • Eg: the introduction of Reddito di Inclusione in 2018 is expected to reduce disposable income inequality in the first case and to leave it unchanged in the second.

15. Thankyou for the attention