The Fiscal Policy Council Meeting with Denmark s Fiscal Council Stockholm 23 January, 2015 1
The Swedish Fiscal Framework Top-down budget process (preparation in Government as well as decision in Parliament); A fiscal surplus target for general government net lending of 1% of GDP, on average, over the business-cycle; Central government expenditure ceiling set 3 years in advance; decision by Parliament; Balanced budget requirement for local governments; Since 2007, a Fiscal Policy Council with a broad remit (to facilitate transparency and accountability). Note: The strength of this framework depends on the political will to respect it 2
The set-up of the council Established in 2007; An agency under the Government; Six members: Academics; Policy-making experience; Supplementary activities to ordinary jobs (mainly academic positions); Small secretariat: five persons; Annual budget 900 000 ; Provisions to safeguard the Council s independence, such as a stipulation that the Council itself proposes its members to the Government. 3
THE RIKSDAG (Parliament) 349 members The Committee on Finance 17 members GOVERNMENT 24 Ministers The Swedish National Audit Office 300 employees The Riksbank (Central Bank) 400 employees Ministry of Finance 470 employees Swedish Fiscal Policy Council The Swedish National Financial Management Authority 160 employees The National Institute for Economic Research 60 employees The Council 6 members Chairman: John Hassler The agency 5 employees 4
The tasks of the Fiscal Policy Council 1. Focus on ex post evaluation, with some ex ante evaluation; 2. Evaluate whether the fiscal policy meets its objectives: Long-run sustainability; Surplus target; The expenditure ceiling; Stabilization issues. 3. Evaluate whether the developments are in line with healthy sustainable growth and a sustainable high employment; 4. Monitor the transparency of the government budget proposals and the motivations for various policy measures; 5. Analyse the effects of fiscal policy on the distribution of welfare; 6. Contribute to a better economic policy discussion in general: Annual report in May (this year May, 15); More information on www.finanspolitiskaradet.se. 5
The Swedish Fiscal Framework 6
The Swedish Fiscal Framework Top-down budget process (preparation in Government as well as decision in Parliament); A fiscal surplus target for general government net lending of 1% of GDP, on average, over the business-cycle; Central government expenditure ceiling set 3 years in advance; decision by Parliament; Balanced budget requirement for local governments; Financially stable pension system; Since 2007, a Fiscal Policy Council with a broad remit (to facilitate transparency and accountability). 7
The Surplus target Net lending surplus of 1 percent of GDP Average over the business cycle Entire public sector, central and local gov t as well as pension system Evaluated with several indicators but: Difficult to define the business cycle Judgemental Target in place since 2000, but currently questioned for being too strict 8
The Expenditure ceiling Nominal ceiling for Central Gov t expenditure Covers all expenditure except interest on national debt Set by parliament on a three year rolling basis Can be changed by parliament but at a potentially high political cost Compliance monitored monthly and reported to parliament twice per year 9
Has the fiscal framework worked? Generally successful: Top-down approach is followed; Expenditure ceilings have not been breached (but there has been some creative bookkeeping); Surplus target has been met at least until now Broad political support: opposition wanted more spending during crisis; 10
General Government Net Lending 1993 2018 Per cent of GDP 6 4 2 1 per cent surplus target 0-2 -4-6 -8-10 -12 1993 1996 1999 2002 2005 2008 2011 2014 2017 11
General Government Net Lending 1976 2014 Per cent of GDP 6 4 2 0-2 -4-6 -8 General government net lending Average net lending 2000-2014 = 0,5-10 -12 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 12
Per cent of GDP 38 36 34 32 30 28 26 24 22 Expenditure Ceiling 1997 2017 20 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 13
Expenditure ceiling and government expenditure Per cent of GDP 38 36 34 32 30 28 26 24 22 Expenditure ceiling Government expenditure Per cent of GDP 38 36 34 32 30 28 26 24 22 20 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 20 14
SEK billion 1 400 1 200 1 000 800 600 400 200 Government expenditure Government expenditure, nominal (left axis) Government expenditure, % of GDP (right axis) Per cent of GDP 38 36 34 32 30 28 26 24 22 0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 20 15
19-årssnitt 18-årssnitt 17-årssnitt 16-årssnitt 15-årssnitt 14-årssnitt 13-årssnitt 12-årssnitt 11-årssnitt 10-årssnitt 9-årssnitt 8-årssnitt 7-årssnitt 6-årssnitt 5-årssnitt 4-årssnitt Fiscal balance over various periods, ending 2018 Average over each period Procent av BNP 0,6 0,5 0,4 0,3 0,2 0,1 0,0-0,1-0,2 VP14 Procent av BNP 0,6 0,5 0,4 0,3 0,2 0,1 0,0-0,1-0,2-0,3-0,3 16
General Government Gross and Net Debt 1980 2014 Per cent of GDP 80 60 40 20 General government gross debt General government net debt 0-20 -40 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 17
Konjunkturjusterat sparande
Varför ska vi intressera oss för konjunkturjusterat sparande? Kan ge insikter om utvecklingen i de offentliga finanserna på (medel)lång sikt Indikator på diskretionär finanspolitik För Sverige: Indikator för uppfyllande av överskottsmålet Inom EU, Medium Term Objective för finansiellt sparande uttrycks i konjunkturjusterade termer (MTO för Sverige: finansiellt sparande som lägst -1 procent av BNP)
Konjunkturjusterat sparande 2013 2015 Procent av BNP 2013 2014 2015 FiD 0,1-0,9-0,4 OECD -0,4-0,8-0,4 EU-KOM -0,3-1,5-1,1 KI -0,7-1,6-1,2
Aggregerad metod (FiD) s = S Y s s = Ss Y s S = s Ɛ Y Y Y Ɛ = 0,55 Girouard och André (2005): Ɛ = 0,55 Flodén (2009): Ɛ = 0,53
Dis-aggregerad metod (KI) KI tar hänsyn till den cykliska utvecklingen i olika skattebaser och utgiftsbaser, inte bara den cykliska utvecklingen i BNP. S = i T i B i B i Y Y + E U E o rd S S = i T i B i B i Y Y + E U U U E o rd S S s = j T i Y B i B i Y Y B i Y E U U U U Konjunkturjusteringen beror på BNP-gapet, skattebasernas avvikelse från jämvikt som andel av BNP och arbetslöshetsgapet.
Strukturellt sparande Procent av potentiell BNP 4 3 2 1 0-1 BP15 BP14 BP13 BP10 BP09 BP07-2 -3 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
BNP-gap Procent av potentiell BNP 4 2 0-2 -4 BP15 BP14 BP13 BP10 BP09 BP07-6 -8 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Strukturellt sparande Procent av BNP/potentiell BNP 4 3 2 BP15 KI augusti 2014 1 0-1 -2 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Differensen i strukturellt sparande mellan BP15 och KI augusti 2014 dekomponerad Procent av BNP 2,0 1,5 Faktiskt sparande BNP-gap Engångseffekter/extraordinära k-vinster Metod 1,0 0,5 0,0-0,5-1,0-1,5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Differensen i strukturellt sparande dekomponerad i olika delgap Procent av BNP 2,0 1,5 Sysselsättningsgap Medelarbetstids- och produktivitetsgap Övrigt 1,0 0,5 0,0-0,5-1,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Prognoser för strukturellt sparande differensen dekomponerad Procent av BNP 0,6 0,4 0,2 0,0-0,2-0,4-0,6-0,8-1,0 Faktiskt sparande BNP-gap Engångseffekter/extraordinära k-vinster Metod 2014 2015 2016 2017 2018