Transcript 28_Thomas Wilhelmsson_engx

Fiscal rules and medium term
budgeting in Sweden
Thomas Wilhelmsson,
Budget Department, Ministry of Finance
Ministry of Finance Sweden
Government Offices of Sweden
The Swedish budget
process
Riksdag decision on
the Budget Bill
Spring Fiscal Policy Bill
Dec
Appropriation
directions
Nov
Jan
Oct
Budget Bill
submitted to the Riksdag
Feb
March
Spring Fiscal Policy Bill
submitted to the Riksdag
April
Sept
Aug
July
June
May
Preparation of framework
Budget Bill
Riksdag decision on
Spring Fiscal Policy Bill
Ministry of Finance Sweden
Government Offices of Sweden
A stringent budget process
• Collective decision making process by the Swedish
government
• The Ministry of Finance has a central role
• The Minister for Finance decides what room there is
for reform
• Clear, well-known budget principles
• An established, transparent time-line of activities
• Top down process – at all stages of the process
Ministry of Finance Sweden
Government Offices of Sweden
The Ministry of Finance is the
ultimate guardian of fiscal policy
The Ministry of Finance has a central role:
– Co-ordinates and enforces the budget process
– Responsible for meeting budget targets
– Shall always be consulted on all matters with
economic consequences
– Monitors and controls spending flows during the
fiscal year
Ministry of Finance Sweden
Government Offices of Sweden
“Don’t waste a good crisis”
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Deep economic crisis in 1993-1995
A period of radical reformation
Commitment from decision makers
Fiscal framework: gradual build up of complexity and
firmness
Ministry of Finance Sweden
Numerical fiscal rules
General Government sector
Central
government
Local government
Pension
system
Surplus 1% of GDP over cycle
Expenditure ceiling
Balanced budget
Rules of SGP:
- MTO (structural balance -1%)
- Expenditure benchmark
Ministry of Finance Sweden
Surplus target
• Net lending 1 % of GDP over cycle
• Forward-looking anchor for fiscal policy
(structural balance, 7-year average of net lending)
• Also backward-looking assessment
(10-year average of net lending)
Ministry of Finance Sweden
Government Offices of Sweden
Expenditure ceiling
• An overarching restriction for total expenditure in the budget
process.
• Mandatory by law to propose to Parliament ceiling for at least
three years. Government is obliged to make sure ceiling is not
exceeded.
• Covers all expenditure in central government and pension
system excl. interest payments on national debt
• Restriction for actual nominal expenditure (in SEK)
• Set on a rolling basis  ceiling for 2018 is fixed (proposed to
parliament).
• Once decided, the ceiling is not changed. However, formally no
problem to do so (f.ex. change of government).
Finansdepartementet
A surplus biased budget
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Most taxes are proportional and grow in the long run with GDP
Degree of indexation of expenditures vary, but hardly any
items grow with GDP.
=> Automatic increase of revenues faster than expenditures.
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Ministry of Finance Sweden
Political choice between:
- compensating automatic hollow out of existing spending
- spending it on new policy
- letting budget balance improve without cuts or tax hikes
Some observations
• Parliament took the lead, the Government
followed
• The reforms were based on changed attitudes
towards public finances
• The thorough restoration of the Swedish public
finances in 1995 and 1996 was carried out
without the support of a new budget process
• The new top-down process has contributed to
keep the public finances in good order
Ministry of Finance Sweden
Government Offices of Sweden
Swedish Fiscal Policy Council
Tasks:
1. Evaluate whether fiscal policy meets its objectives (long-run
sustainability, surplus target, expenditure ceiling, stabilisation
issues).
2. Evaluate whether developments are in line with healthy
sustainable growth and sustainable high employment.
3. Monitor the transparency of the government budget proposals
and the motivations for various policy measures (e.g. infra
investments, tax cuts).
4. Analyse the effects of fiscal policy on the distribution of
welfare.
5. Contribute to a better economic policy discussion in general.
Impact:
Extensive media coverage, formal response in SFPB.
Ministry of Finance Sweden
Government Offices of Sweden
Thank you!
[email protected]
More information:
Government communication concerning the Swedish Fiscal Policy
Framework:
http://www.government.se/contentassets/fa45b4f60d424c149a8ce26cf6
835de8/the-swedish-fiscal-policy-framework
or just Google “Swedish fiscal policy framework”
Ministry of Finance Sweden
Government Offices of Sweden