Transcript BUILDING THE CAPACITY FOR EFFECTIVE PUBLIC SPENDING

BUILDING THE CAPACITY FOR EFFECTIVE PUBLIC SPENDING
Institutional arrangements and sub-national finance
Visit of Mexican Legislators
On Fiscal Policy and Public Finance
OECD Headquarters, Paris
26 March 2007
Claire Charbit and Lee Mizell
OECD Regional Competitiveness and Governance Division
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Governance of Regional Development
Policy
• In all national case studied, RDP is a shared responsibility
…often employing contractual mechanisms for dealing with coordination needs (e.g. France, Italy, Spain, Canada, Germany)
• A contract between levels of government is any arrangement
reorganising, beside the constitution, the rights and duties of
governments
– Contracts among levels of government are unavoidable (vertical
interdependencies + assignment of responsibilities)
– Contracts allow a customized management of interdependencies, useful in
either unitary or federal contexts
– Contracts are tools for dialog, for clarifying responsibilities, for learning
– Bilateral commitments must be as « verifiable » as possible
• Coherence of Regional Policy is needed for improving public
spending.
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Effective place-based spending rests on
three important pillars
Coherent
institutional
arrangements
Strong
sub-national
finances
Effective
administrative
capacity
… at all levels of government
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CHALLENGE 1: Developing coherence by
enhancing institutional arrangements
SCT
SENER
SAGARPA
SEDESOL
•
•
•
SEMARNAT
SECONOMIA
“gatekeeper”
+ resources
+ authority
SHCP
Inter-ministerial commission (proposed)
(Comisión Interinstitucional para el Desarrollo Nacional y Regional)
Sub-secretariat (e.g. Italy before) ; Single ministry (e.g. Italy present)
Agency model (e.g. Canada)
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Fiscal Federalism Issues and Institutional
Concerns
• Local Public Services are absolutely required for social
and economic development
– Who provide them and with what type of budget?
• Providing basic services more effectively allow for
available funds for economic development support
– What strategies are used by OECD countries for improving
effectiveness of local public services delivery?
• Place based approaches require the participation of
different levels of government
– What are the mechanisms used by OECD countries for
governing regional development policy?
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Fiscal Autonomy and Fiscal Decentralisation
Sub national governments' share in general government revenues
and expenditure; per cent (2003)
Revenues
Expenditures
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Effectiveness of Sub Central Public
Spending
• Funding arrangements and budget rules
– Types of grants (earmarked vs. general purpose)
– Multi-year budgeting
• Competition and other market-based mechanisms
– On Supply side (less monopolistic behaviours thanks to competitive
tendering for public procurement), and
– on Demand side (more user fees)
• The relevant size for organising local public service provision
– Mergers vs. cooperation
– Central government incentives
– Urban and rural considerations
• Indicators to measure performance
– Evaluation
– Incentives
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CHALLENGE 2:
Strengthening finances for place-based policies
3 categories of challenges
1. Funding at the national
level
2. Co-financing for regional
development
-
EU Structural Funds
3. Fiscal relations among
levels of government
– Low own-source
revenue
• Set aside unique funding
• Prioritize multi-year expenditures
• Enhance use
• Requires sub-national own-source
revenue
• Increase incentives to raise subnational revenue
• Strengthen accountability for
earmarked grants
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CHALLENGE 3:
Strengthening sub-national capacities
•
Professional workforce
– Extend LSPC to all public servants
– Continue extension of similar reforms at sub-national levels
•
Management of diverse stakeholders
– Assess and strengthen existing mechanisms
•
Monitoring and evaluation
– Build sub-national capacities for monitoring and evaluation
– Extend evaluation to mechanisms of co-ordination
•
Diffuse good practice
– Proposed regional development agencies could provide forum
•
Accountability
– Strengthening capacities – including sub-national finance –
improves accountability
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Sub-national tax revenue in Mexico
accounts for ~3% of total tax revenue
Distribution of total tax revenue by sub-sector of government, 2004
100
Local
Gov't
90
80
70
State or
Länder
Gov't
60
50
Social
Security
Funds
40
30
Federal or
Central
Gov't
20
10
0
Germany
Belgium
Switzerland
United
States
Canada
Austria
Australia (1)
Mexico
Source: OECD (2006), Revenue Statistics
Note: (1) VAT is collected by the federal government and all receipts are appropriated to States and territories
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