OECD countries face multiple spending challenges, including from population ageing, healthcare costs and defence needs. Budget deficits have been persistent in recent years, and following a succession of shocks, public debt levels are historically high. Drawing on the results from the 2026 Survey on Restoring Public Finances, this report takes stock of the reform initiatives and savings measures implemented to help place public finances on a more sustainable footing in this challenging context. Governments are implementing a wide range of expenditure savings, which are most common in the large spending areas, including health, pensions, government operations, as well as in the area of support to businesses and households. Revenue measures are also being widely pursued. However, overall, savings remain modest and may not be commensurate with the challenge at hand. More action may be needed. Countries are reallocating some spending to support long term growth. Quality budget institutions and tools can help governments to make effective decisions on how to further allocate and re-allocate funds. Empowering public understanding of the fiscal challenges faced will be critical to ensuring public support and legitimacy for further reform.
Restoring Public Finances
Enabling Effective Government
Abstract
Maintaining the sustainability of public finances is fundamental to government’s capacity to address current and future challenges. Governments need to retain room to maneuver, to allocate and re-allocate resources as new priorities emerge, and be ready to cope with emergencies. This is critically important, as economies evolve in a complex and unpredictable environment, characterised by multiple crises and shifting priorities which are leaving public finances exposed to many pressures. Restoring public finances is essential to preserve government’s capacity to address both future emergencies and long-term challenges. Moreover, around 45% of people in OECD countries report low or no trust in public institutions. The OECD has found that the ability of governments to address long-term issues is the main driver of trust in national government (OECD, 2024[1]).
OECD countries face multiple spending challenges. Ageing populations are creating structural pressures for increased spending in areas including pensions, health and long-term care, while exposing countries to shrinking working age populations. Public debt levels are historically high, and interest rates have been rising. Many OECD countries are increasing defence expenditures substantially in response to emerging threats. A number of countries are also exposed to the economic effects of major natural disasters and weather-related events. Compounding these pressures, economic growth rates, and long-term productivity, have slowed in recent decades in many countries, limiting growth in government revenues.
Drawing on results from the 2026 OECD Survey on Restoring Public Finances (Box 1.1), this report takes stock of the reform initiatives and saving measures being implemented to help place public finances on a more sustainable footing. The overall picture is mixed. Many governments are undertaking efforts to shift and reorient public spending towards higher priority areas. Yet overall, at the aggregate level, the measures reflect incremental approaches to containing expenditures and improving public finances, which to be successful, would need to be consistently implemented over a significant time period. While governments are undertaking a wide range of policy measures to achieve savings, they are relatively modest in comparison with the challenges ahead. The OECD’s December 2025 Economic Outlook projections estimate that only half of OECD countries will improve their primary balances between 2023 and 2027 based on current policies, with an average improvement around 0.5% of GDP (OECD, 2025[2]). The responses to the RPF Survey reinforce this message.
Quality budget institutions have a strong impact on fiscal outcomes. Effective budgeting practices support governments to achieve fiscally sustainable policies. They help countries to address the fundamental decisions on how to reform expenditure commitments; on how to address trade-offs in order to allocate and re-allocate funds to the priorities that matter most; and in driving greater efficiency in government operations.
In this respect, the report highlights how the OECD’s Spending Better Framework (OECD, 2025[3]) can support countries seeking to reinforce their fiscal consolidation efforts going forward with a focus on effectively using medium-term budget frameworks and spending reviews to examine major spending areas and support ambitious and proactive reforms.
To face the challenges ahead, countries need to scrutinise all expenditures. This report is intended to support countries by sharing experiences with reform initiatives and savings measures which can serve as inspiration. The report covers key government spending areas and presents reform initiatives and savings measures in the context of relevant OECD comparative data on expenditure and related research. This offers an opportunity to explore the various paths, choices and trade-offs governments are making across all main policy areas. It offers practical insights and practices for budgeting across sectors.
The challenge is how to move from knowledge to action. A key priority is to increase public and policymaker awareness of these issues – highlighting both the urgency of action and the consequences of inaction. Quite simply: People are more likely to support reforms when they clearly understand them and recognise why they are necessary. This report complements the companion report “The People and the Budget,” as one of the main budgeting challenges faced by countries is indeed the need to empower public understanding to help build support for reform.
This report draws on responses to the 2026 OECD Survey on Restoring Public Finances (hereafter, the “RPF Survey”). The Survey provided insights into reform initiatives and savings measures designed to consolidate public finances. The Survey reflects decisions made by the national, central or federal government that have been approved or submitted to parliament for the current and upcoming fiscal years (i.e. FY 2025 and FY 2026). The Survey was conducted between the end of 2025 and spring 2026. The Survey was distributed to all 38 OECD Member countries, the eight accession candidate countries and selected economies. Responses were received from 351 OECD Member countries, 3 accession candidate countries (Bulgaria, Peru, Thailand) and one non-Member economy (Chinese Taipei). A detailed presentation of the survey methodology, content and mapping with the report structure is presented in Annex A.
1. Data for Colombia, Switzerland and the United States are not available.
In many OECD countries, governments need to take action to improve the sustainability of their finances. Years of deficit spending, in both good times and bad, have resulted in historically high levels of public debt. This is compounded by a slowdown in average GDP growth rates over recent decades which has limited growth in government resources. Public finances are also subject to multiple pressures: populations in OECD countries are ageing, creating ongoing pressures in areas such as health and pensions. Health care spending is also rising independently of ageing of pressures. Further new spending pressures are emerging such as in defence. Moreover, OECD countries face a less certain external environment, characterised by multiple risks and shocks. At the time of writing, OECD countries were experiencing rising energy prices, with the risk that any prolonged disruption in the supply of oil and gas could significantly impact growth and inflation in OECD countries (OECD, 2026[4]). All of these factors provide strong impetus for countries to focus on ensuring sustainable finances and restoring fiscal space, building financial room to maneuver in case of shocks, and re-allocating public resources to the priorities that matter most.
The first section of this chapter provides an overview of the current pressures. The second section reviews the main findings from the RPF Survey on how governments are tackling these challenges in their budgets for 2025 and 2026. A number of common themes emerge: Improving the long-term sustainability of social and health spending; tightening eligibility, removing duplication and merging social benefits; increasing user charges and redefining public-private boundaries for public services; Better targeting of economic support measures; and making government operations leaner and more efficient. In the longer term, governments face the question of choosing an optimal set of measures from across these options. To this end, the final sections of the chapter look at the importance of quality budget institutions for restoring public finances and the imperative of empowering public understanding of the need action and the consequences of inaction. People are more likely to support reforms when they clearly understand them and recognise why they are necessary.
1.2.1. Growth rates in OECD countries have slowed on average in recent decades
Average GDP growth rates per capita across OECD countries have slowed in most decades since the 1960s, falling from an average of 4.6% in 1962-1969, to an average of 1.3% so far in the 2020s (Figure 1.1) (Langenus, 2025[5]). (Figure 1.1). This indicates an underlying issue with slower growth in productivity. Research points to a variety of factors that contribute to slower productivity growth. Measures of dynamism in the economy, such as the proportion of people working in young firms, and the rate of job turn-over, have declined steadily since the mid-2000s (OECD, 2025[2]). Slow uptake of new technologies in many firms, and labour shortages in high-skill sectors are also having an effect (OECD, 2025[6]). Market concentration has increased substantially in recent years, with a greater share of output in many industries being delivered by a smaller number of leading firms (Calligaris et al., 2025[7]). This hinders competition and the pressures on firms to innovate and become more productive.
Growth rates of GDP per capita (volume), annual and decade averages, 1962-2024
Source: OECD Economic Outlook 118 dataset (OECD, 2025[8]), https://data-explorer.oecd.org/s/4dx.
Over the long term, trends in productivity and demography drive down economic growth projections. The OECD’s most recent Long-Term Model scenario projects a slowdown in global growth under current policies, with annual real GDP growth for the OECD+G20 projected to decline from around 1.8% currently to around 1.3% by 2060. This is due to slowdowns in both population growth and labour productivity (Guillemette and Château, 2023[9]). While the future is unknown, these trends and economic scenarios indicate that prudent fiscal policy cannot rely on increases in trend growth in GDP alone to lessen fiscal pressures.
1.2.2. Persistent deficits have created a legacy of high debt and increasing debt service
Public finances are constrained by the burden of persistent budget deficits and the public debt. Budget deficits have been in place across most OECD Members since the 1970s. The evolution of overall and primary balances between 1991-2024 is shown in Figure 1.2. In recent years, many OECD countries have consistently run primary deficits (A primary deficit is the difference between government revenues and expenditures, excluding interest payments on public debt). Prior to 2007, the OECD as a whole had alternating periods of primary surplus and deficit, helping to keep public debt levels in check (Figure 1.2). However, since 2007, OECD countries have persistently had an overall primary deficit. There was a sharp spike to -6.7% of GDP in 2009, due to the exceptional financing needs for responses to the Global Financial Crisis (GFC). OECD countries then worked to improve their primary balances through the 2010s, with significant fiscal consolidation efforts. In 2020, primary deficits spiked again to -8.7% of GDP as governments responded to the COVID-19 pandemic.
This has resulted in a rapid accumulation of public debt, which is now at historically high levels in many OECD countries (Figure 1.3). More than half of OECD countries (19 out of 36) increased general government gross debt by 20 percentage points of GDP or more between 2007 and 2024. Public debts averaged around 110% of GDP across OECD countries as of 2024. A substantive proportion of recent debt accumulation has been driven by spending to support households and businesses during recent crises (Moretti, Braendle and Leroy, 2021[10]).
General government budget balance and primary balance, OECD, 1991-2024
Note: Budget balance is general government net lending
Source: OECD Economic Outlook 118 dataset (OECD, 2025[8]), https://data-explorer.oecd.org/s/4dx.
General government gross debt, 2024 and change 2007-2024
Note: Data for Colombia is 2019 instead of 2023, no data for 2007. Data for Türkiye is for 2010. No data for Costa Rica.
Source: OECD Public finance main indicators - government at a glance, yearly updates - based on OECD National Accounts Statistics (database) and Eurostat Government finance statistics (database) as of 9 January 2026, https://data-explorer.oecd.org/s/4bo.
While interest rates will fluctuate with economic conditions, increases in the stock of debt add to the budget cost of servicing that debt over time. Through much of the 2010s and 2020s, central banks held interest rates close to zero, to support economic recovery from crises. These had an impact on long term interest rates which lowered the cost of financing public debt. However, both short term and long-term interest rates have now begun to rise. As a result, government expenditures on net interest payments have begun to rise, from an average of 1.9% of GDP across OECD countries in 2020 to 3.3% of GDP in 2025 (OECD, 2026[11]) and can be expected to rise further as debt matures and has to be refinanced at higher interest rates. In a number of countries, the cost of these payments per annum exceeds the amount spent on key policy areas.
1.2.3. Expenditure pressures risk increases to public expenditure
Governments face increasing fiscal pressures on social and health care expenditure, which represent on average half of public spending. On average in the OECD, government expenditures grew from around 39.7% of GDP in 2007 to around 43.1% of GDP in 2023. Almost all of this expenditure was due to increases in spending on social protection and on health, which both grew by 1.7 percentage points of GDP (Figure 1.4). Most other areas saw minor change or slight falls in expenditure during this period.
The pressures on spending in these areas are structural, and reflect a mix of demographic, policy and technological changes in the case of healthcare. Populations across the OECD are growing older as people are living longer lives. Life expectancy at birth in the average OECD country increased from around 70 years in 1973 to just over 81 years in 2023 (OECD, 2025[12]). In addition, fertility rates are declining as the number of children that the average woman will have in her lifetime, have declined through recent decades and now average 1.46 children per woman (OECD, 2025[13]). This is below the “replacement rate” needed to keep the total population steady of around 2.1 children per woman. Both of these changes lead to an increase in the average age of people living in OECD countries. Initially, population ageing resulted in an increase in the share of working age cohorts, up to 65 years old. However, as countries have now passed this phase, the net effects of changes in demographic structures are now depressing labour markets in OECD countries.
General government expenditure by function, OECD average, % of GDP, 2007-2023
Source: Public finance by function - government at a glance indicators, yearly updates, based on OECD National Accounts Statistics (database); Eurostat Government finance statistics (database) as of 9 January 2026; https://data-explorer.oecd.org/s/4bo.
The effects of ageing are visible in social protection spending, which has grown by around 1.7% of GDP since 2007 (Figure 1.4). This has been driven largely by old-age pensions and benefits expenditures, which are now the largest area of expenditure in most OECD countries, averaging around 8.8% of GDP. This pressure is likely to accelerate, as the proportion of people of working age is forecast to decrease more rapidly in future. In 2000, there were 22 people aged 65+ for every 100 people in aged 20‑64. This had risen to 33 people as of 2025 and is projected to accelerate to 52 people by 2050 (OECD, 2025[13]). Over the even longer term, the old-age dependency ratio across most OECD countries is projected to roughly double from its current level at some point between 2080 and 2090 (United Nations, 2024[14]). In recent decades, these effects have been partly offset by growth in female labour force participation, but the potential for further gains from this source is more limited than in the past. Under current policies, OECD projects that pensions spending will increase to around 10% of GDP by 2040 (OECD, 2023[15]).
Healthcare is also a key spending pressure, though it is only partly driven by demographic factors. Healthcare spending has been the second largest driver of increases in public expenditure in OECD countries, increasing from around 6.7% of GDP in 2007 to around 8.4% today. Long term care expenditure increases as life expectancies increase, and the number of elderly people experiencing disability increases. Health care spending is also subject to structural pressures. Health care is labour intensive, requiring doctors, nurses and carers to provide care to patients. While health care is mobilising technologies, these do not necessarily result in labour productivity gains: while patients may be better treated with more advanced techniques, health personnel is still required. This dynamic, where costs rise without matching productivity gains is known as “Baumol’s cost disease” (Baumol, 2012[16]). Higher volumes involve hiring more staff. Employment in health and social work grew by 30% on average across OECD countries during 2013-2023, twice as fast as the economy as a whole (OECD, 2025[17]). Using newer and often more expensive medical technologies and pharmaceuticals for a larger population of patients results in significant increases in expenditures. Overall, it is estimated that maintaining current public service standards and benefits while keeping public debt ratios stable could increase fiscal pressure in the median OECD country by 6.25 percentage points of GDP between 2024 and 2060 (Guillemette and Château, 2023[9]).
OECD countries also face significant pressures for increased defence spending. NATO member countries are committed to spending 5% of GDP annually on defence requirements by 2035. This includes at least 3.5% of GDP annually on defence expenditure, and a further 1.5% of GDP annually for purposes including protecting critical infrastructure, defending networks, ensuring civil preparedness and resilience, innovation, and strengthening the defence industrial base (NATO, 2025[18]). Most NATO members are also OECD Member countries. To meet the 3.5% target, countries need to increase defence expenditure from 2023 levels, by an average of 1.9% of GDP (Figure 1.5). Beyond these NATO-OECD Members, other countries are also planning to increase defence expenditure: for example Japan is moving to increase spending to 2% of GDP as part of its National Security Strategy (Ministry of Foreign Affairs of Japan, 2022[19]). Overall, 24 OECD countries indicated in the RPF Survey that they are planning for growth in defence spending.
Current defence spending (2023), and new spending needs for NATO members (2035)
Note: Data for Costa Rica is for 2021. Data for Belgium, France, Germany, Portugal, Slovak Republic, Spain, is provisional. No data for Canada, Mexico, New Zealand, Türkiye. Not applicable to Iceland. Data is based on OECD sources, which may be at variance with NATO estimates.
Source: Public finance by function - Government at a Glance indicators, yearly updates (OECD, 2025[20]), based on OECD National Accounts Statistics (database); Eurostat Government finance statistics database; authors calculations, https://data-explorer.oecd.org/s/4bo.
1.2.4. Fiscal consolidation efforts appear modest in comparison to fiscal challenges
Current efforts across OECD countries to achieve savings and reduce budget deficits appear modest in comparison to the fiscal challenges at hand. Figure 1.6 shows projected changes in government receipts (i.e. revenues), disbursements (i.e. expenditures) and net lending (i.e. budget balance) from 2024-2026 from the December 2025 OECD Economic Outlook (OECD, 2025[2]). Most OECD countries (21 out of 33) will see their budget balance (net lending) worsen under their current policies. Widespread increases in public expenditures are a significant contributing factor. Spending is projected to increase as a share of GDP in 23 out of 33 OECD countries over this period, by 0.8% of GDP in the average country. Most countries (24 out of 33) are also forecast to increase their public revenues as a share of GDP, by 0.3% of GDP in the average country. In many cases, increases in revenues are not sufficient to cover rising expenditures. Over the medium term, the budget balance (net lending) is projected to deteriorate by an average of 1.7% of GDP from 2022 to 2027 (OECD, 2025[2]).
These estimates are based on the OECD Economic Outlook from December 2025, which was the most recent available year when finalising this report. However, the conflict in the Middle East as of February 2026 have since been testing the resilience of the global economy, in particular through a supply crunch in energy markets (OECD, 2026[4]). While evolution of the conflict and the energy crisis are subject to high uncertainty, prolonged disruptions would put significant pressure on government budgets, increasing fiscal deficits as economies slow, as well as potentially through further discretionary fiscal support measures to relieve households from the effects of the shock (OECD, 2026[21]).
Although the RPF Survey is primarily qualitative in nature, respondents were also asked to provide self-estimates of the size of discretionary spending and revenue measures in 2025 and 2026, where available. Self-estimates were received from 26 respondents and are shown in Figure 1.7. Unlike Figure 1.6, the numbers in Figure 1.7 are intended to count only deliberate changes in revenue or expenditures policies, as distinct from the operation of automatic stabilisers, for example as a result of legislative changes. While estimates have been prepared without a common methodology, overall, they reinforce the finding that countries are on average making only modest budget adjustments at present, and that these adjustments are driven more by the revenue side than by the saving side.
As a further comparison, the scale of efforts to adjust budget balances at present is also modest in relation to the last substantial wave of consolidation across OECD countries. This was undertaken during the five years following the Global financial crisis (GFC) (2010-2015). During this period, almost all OECD countries undertook fiscal consolidation efforts and improved their primary balance. The average improvement across OECD countries was 5.1% of GDP. However, around half of OECD countries are projected to expand their primary deficits over the period 2023-2027 (Figure 1.8). As a result, the average improvement is more modest and is projected at 0.5% of GDP. Only three countries (Czechia, Italy, Japan) are forecast to improve their primary balances by more than 2 percentage points of GDP over this period
There are major caveats to this comparison, and the scale of adjustments taken in the 2010s is not necessarily a guide to the scale or speed required at present. First, there is some variability across countries, with governments including Italy, Czechia and Japan forecast to make large consolidations. Second, many countries undertook extensive consolidation following the GFC, and 7 OECD countries had a substantially better primary balance at the outset of COVID (+1 percentage point of GDP) than they did at the outset of the GFC. These include Greece, with a primary balance 6 percentage points of GDP better in 2019 than in 2007, Portugal (+3.2pp) and Hungary (+1.5pp). Third, many OECD countries have had to contend with other urgent expenditure needs post COVID-19 pandemic. Finally, in several cases, countries own forecasts indicate larger consolidation efforts than do OECD forecasts, such as Australia, Denmark, Korea, Poland. Nonetheless, the experience of the 2010s demonstrates that significantly greater adjustment effort has been delivered in the recent past. The risk remains that government’s current efforts may not be sufficient to address the scale of the challenges that they face.
Changes in general government disbursements, receipts and net lending, 2024-2026
Note: Data not available for Chile, Colombia, Costa Rica, Mexico, Türkiye.
Source: OECD Economic Outlook 118 dataset (OECD, 2025[8]), https://data-explorer.oecd.org/s/4dx.
Respondent reports of total impacts of discretionary budgetary measures on budget deficit, 2025 and 2026, central government
Note: Results based on 39 RPF Survey responses. Presents responses to the question “Please provide estimates of fiscal consolidation measures at an aggregate level that have been approved and submitted to Parliament for the current and upcoming fiscal years, a) estimated size of total expenditure measures, and b) estimated size of total revenue measures”. Responses were requested for 2025 and 2026 in % GDP. No data on expenditure measures for Denmark, Norway. Data is not available for Costa Rica, Czechia, Germany, Japan, Lithuania, Mexico, Spain, Türkiye, United Kingdom, Argentina, Brazil, Bulgaria, Croatia, Indonesia, Peru, Romania, Thailand as well as Chinese Taipei.
Source: 2026 OECD Survey on Restoring Public Finances, Question 16: Overall Perspective.
Change in general government primary balance, 2010-2015 and 2023-2027
Note: Data not available for Colombia, Costa Rica, France, Mexico, Spain, Switzerland. No data for 2023-2027 for Israel. Data for 2026 and 2027 are forecasts.
Source: OECD Economic Outlook 118 dataset (OECD, 2025[8]), https://data-explorer.oecd.org/s/4dx.
1.2.5. Revenue increases are supporting consolidation efforts
Many RPF Survey respondents are introducing measures to raise additional revenue as part of their efforts to put public finances on a more sustainable path according to the RPF Survey. The majority of respondents have implemented at least one discretionary revenue‑raising measure in the 2025-2026 fiscal year. This marks a shift away from crisis‑era tax relief and toward revenue‑raising reforms aimed at restoring fiscal resilience while maintaining competitiveness and equity consistent with existing OECD work on trends in taxation (OECD, 2025[22]).
However, overall, the measures differ in scale, reflecting differing tax structures, institutional capacities, demand for additional revenues, and political constraints and choices. Yet they share common objectives: strengthening public finances, protecting and broadening tax bases, and improving the agility and buoyancy of tax systems to respond to future shocks. Respondents are also starting from different tax structures. Around half derive a large share of revenues from taxes on income and profits, while others rely more on social security contributions (SSCs) or taxes on goods and services, including value added tax (VAT). These structural patterns shape the set of viable consolidation options: respondents with low excise for VAT bases may find more room to raise revenues through consumption taxes, while those with high labour tax wedges may seek alternatives to personal income tax (PIT) or increases in SSCs (see Chapter 14 for more detail).
During the pandemic and the subsequent inflationary period, governments deployed significant generous tax relief measures, including temporary rate cuts, deferrals, and tax deductions and credits. Since 2023 relief measures are being withdrawn, temporary supports phased out, and governments are now prioritising pragmatic and incremental revenue‑raising tools where possible (OECD, 2025[22]).
The most common approaches in the recent fiscal year do not involve broad increases in statutory rates of the main taxes (PIT, CIT, and VAT). Instead, respondents are prioritising specific measures which can help balancing the budget, including:
Increased taxes on specific sectors, especially banking, insurance, and energy.
Excise tax increases, particularly on tobacco and emerging nicotine products.
VAT base broadening, including scaling back reduced rates and exemptions.
These approaches allow governments to raise revenues while limiting short term impacts to investment and labour markets, especially in an environment where stimulating labour force participation remains a central concern. However, considering the significant future spending pressures, governments appear to be more short-term-oriented with their tax reforms, while adjustments to longer-term structural changes are progressing more gradually.
Past experiences of budget consolidation offer some guidance on the path forward. 25 OECD countries have seen at least one episode of sustained reduction in public debt levels since the 1970s. In most cases, these countries undertook discretionary measures to improve their primary balances, including changes in the conduct of fiscal policy (as distinct from the operation of automatic stabilisers). This laid the groundwork for public debts to reduce when the economy next experienced higher growth (Pina, Hitschfeld and Miyahara, 2025[23]). However, other aspects of the current context offer new challenges. Examples of nominal cuts to expenditures in some areas currently driving expenditure growth, like health and social expenditures, are rare, reflecting significant rigidities in public expenditure (Barnes, Cournède and Hanmer, 2025[24]). Tackling these challenges will require effective and well-planned strategies to drive savings in expenditures with sustained efforts over the medium to longer term.
This section provides an overview of reform initiatives and savings measures approved or submitted to Parliament covering the fiscal years of 2025 and/or 2026, drawing on results from the RPF Survey. This helps to identify three main approaches to expenditure savings:
Comprehensive strategies to lower expenditure. Some RPF Survey respondents have put forward broad-based saving strategies over this period. These seek to cover all main areas of public expenditure, and each ministry is often expected to contribute to reaching quantitative objectives associated with fiscal targets. Austria is a case in point. After a period of deteriorating public finances, the government introduced a broad budget consolidation plan in 2024 to reduce deficits. Discretionary expenditure cuts are estimated to amount to approximately 0.9% of GDP in 2025 and 1.3% of GDP in 2026. The consolidation package includes targeted measures to reduce spending on pensions, family support and environmental subsidies, but also across-the-board cuts. The plan balances expenditure savings with targeted tax increases and structural reforms, among others to increase employment. While measures are specified only for 2025 and 2026, the plan sets out an objective to continue to gradually reduce deficits over a seven-year period.
Selective strategies involving significant reprioritisation, with a particular focus on operating expenditure to achieve savings. Other respondents are focusing on changing the composition of expenditure, by pursuing selective savings in targeted areas. Such reforms can create fiscal space to help accommodate growing spending pressures or finance strategic spending increases in high-priority areas. Several governments are specifically seeking to rationalise operating spending and curb public sector growth. Through Canada’s 2025 Comprehensive Expenditure Review, the government targeted reductions in operating spending and programme costs. Beyond this review, the government’s aim is to ultimately balance its day-to-day operating spending with revenues by 2028-2029, while continuing to expand capital investment. The government framed the review both as a fiscal consolidation exercise and a way to redirect federal spending toward long-term priorities.
Structural or efficiency-enhancing reforms with longer-term benefits. Respondents such as Denmark, Ireland, Norway and Sweden, are primarily pursuing reforms that will not deliver sizeable aggregate consolidation in the short-term but are expected to contribute positively to public finances over time, for example by supporting economic recovery, increasing the labour supply or enhancing public sector efficiency. Such reforms and savings measures are observed across spending areas and are discussed throughout the subsequent chapters.
In line with the discussion in the previous section, the specific measures being undertaken across spending areas suggest that most Survey respondents appear to be pursuing incremental adjustments and selective spending reforms rather than broad-based consolidation. However, while the scale may be modest on average, the scope of readjustment and reallocation is significant. As seen in Figure 1.9, reform activity is broadly aligned with the relative size of spending areas. Savings measures are most frequently pursued in categories such as health, government operations and pensions, which account for the largest share of government expenditure. Savings measures targeting smaller spending categories appear less frequently but can be significant when aggregated. While the RPF Survey identifies savings measures, it does not necessarily capture the full scope of budgetary developments at the level of individual spending categories or countries.
Percentage of OECD Members and RPF Survey respondents reporting one or more savings reforms 2025-2026, by spending category
Note: Results based on a total of 39 RPF Survey responses. Percentages shown in the data table are based on responses from OECD countries only. The graph also shows the percentage of OECD Members and all respondents pursuing at least one reform of the labelled type. The graph refers to measures approved or submitted to parliament for the fiscal years of 2025 and 2026.
Source: 2026 OECD Survey on Restoring Public Finances.
The RPF Survey offers a valuable snapshot of reforms and savings measures being undertaken in 2025 and 2026. It should be noted that some respondents have undertaken consolidation efforts in past years which will not be reflected in the Survey results. For example, Greece has adopted significant saving measures over the past years, including structural reforms in the areas of social benefits, healthcare and public employment (OECD, 2026[25]). However, these ongoing reforms fall outside the scope of the RPF Survey, as they took place earlier. The following sections discuss the main strategies for budget savings reported in the RPF Survey, including both sector-specific and cross-sectoral trends.
1.3.1. Improving the long-term sustainability of social and health spending
Social protection and health account for around half of general government spending in OECD countries, making their long-term sustainability central to restoring public finances. Almost 90% of RPF Survey respondents (89% of OECD Members) report reforms to health, pensions and/or social welfare. They are applying three principal levers to strengthen the sustainability of social and health spending:
Reinforcing the long-term fiscal sustainability of pension systems. Governments are adjusting pension parameters to improve long-term cost control. Alongside changes to retirement ages, several respondents are modifying indexation rules, so that pensions grow at a slower rate relative to inflation, as well as their calculation formulae for pension levels. Given the long-term nature of pension reforms, the RPF Survey’s responses for old age pensions included both new measures and previous reforms that have an impact in 2025-2026, such as increases in pension age due to previous legislation. Some respondents have implemented automatic adjustment mechanisms, which adjust key pension parameters such as the retirement age and pension levels in response to demographic, economic or financial indicators. Some of these are designed to help ensure pension schemes maintain balance, through automatic adjustment mechanisms. For example, Austria will introduce a sustainability mechanism, requiring the federal government to take certain measures if a set budget path is not adhered to by 2030. This will legally require the government to take measures to improve the sustainability of the pension system if expenditure exceeds a certain threshold. Mechanisms aiming to align pension expenditure with economic conditions and support fiscal sustainability are examined in Chapter 2.
Increasing labour force participation. Many respondents are prioritising budget reforms to extend working lives and enhance incentives to work, particularly among older individuals and those out of work, either receiving old age pensions, unemployment, family, sickness or disability benefits. Reforms also include raising the statutory retirement age. As actual retirement can occur earlier, ongoing reforms also aim to tighten eligibility for early retirement. This can include raising the number of years an individual must contribute to pension funds before being eligible for public pensions, and introducing stronger incentives to continue working, such as discounts on insurance contributions and tax benefits. Several respondents also recognise that improving employment outcomes for older workers requires addressing barriers to employability and job retention. For example, Austria provides an Older Workers’ Employment Package which is designed to strengthen labour demand and support for continued employment among older workers. Reforms of unemployment, sickness, and disability benefits similarly seek to reinforce work incentives. Measures include faster phasing out of benefits, more targeted training, and stronger conditionality linked to job search and reskilling. Examples range from Belgium’s reforms to get people back to work after sick leave to Korea requiring individuals with repeated benefit claims to report job-seeking activity every two weeks. Cases are elaborated upon in Chapters 2-4.
Structural reforms of health and long-term care systems. Since the early 2000s, many OECD countries have substantially reformed their health care systems. Consequently, ongoing health care reform and savings measures tend to focus on incremental improvements. The most common measures seek to reduce spending on the costliest technologies and treatments, including drugs, access to acute hospital care and specialist treatments. Around half of RPF Survey respondents (45% of OECD countries) are trying to curb spending on pharmaceuticals such as by reviewing purchasing procedures or promoting generic drugs. For example, Japan reported a set of measures, including product‑specific price revisions, tighter coverage rules, and higher patient cost‑sharing when lower‑cost alternatives exist. Structural reform is more pronounced in long‑term care, where countries seek to strengthen system effectiveness and long-term sustainability in the face of demographic shifts and a general increase of the very old population – the “Ageing of the Aged”. Approximately two-fifths of respondents report policies to actively redirect care from residential settings to home- or community-based care. For example, Slovenia’s Long‑Term Care Act (2025) establishes a new mandatory social insurance scheme while introducing expanded home care and support for family caregivers. Furthermore, many are experimenting with new technologies, both in health and long-term care, that could support modernisation and more effective use of public funds. Reconciling the growing pressures on health and long-time care with fiscal sustainability remains a challenge. Cases are elaborated upon in Chapter 6.
1.3.2. Reforming social welfare benefits
Approximately 70% of RPF Survey respondents (69% of OECD countries) are adjusting components of their social welfare benefits other than pensions. Many have lowered the level of benefits, shortened the duration for which they can be claimed, or tightened eligibility requirements to achieve savings. Changes to conditionality and eligibility rules is the most common approach used, pursued by one-third of respondents (Figure 1.10). There are also several examples of governments implementing stricter assessments and more thorough oversight and anti-misuse mechanisms, reducing the scope for error, fraud and abuse. For example, Portugal now verifies the legitimacy of temporary incapacity for work claims after 3 days instead of the previous 30 and has introduced a proposal to facilitate dismissal of fraudulent claims.
The results suggest that governments are increasingly examining benefit systems holistically, with greater attention to overall benefit levels and potential substitution effects. This approach is valuable for understanding both the direct and indirect effects of policy change. A commonly used approach to reduce payments while strengthening work incentives is to consolidate or merge benefits. For example, Czechia’s new “super allowance” replaces four existing benefits – child allowance, housing allowance, housing top-up, and living allowance – with a single payment, while also introducing stricter means-testing. Other countries are simplifying benefit structures or reducing overlap between programmes. For example, Denmark has introduced a new cash-based benefit system with three standard levels for unemployment support. There are also examples of countries capping the total amount of payments one can receive, seen for example in Estonia and Sweden. Efforts to reduce duplication also includes developing tools to help better identify wasteful overlap, standardising delivery requirements, greater data-linking efforts, and harmonisation across regimes. Thailand is linking databases across agencies to provide information for verifying the eligibility of welfare recipients. Cases are elaborated in Chapters 3 and 4.
% of RPF Survey respondents reporting at least one reform of unemployment, disability, sickness or family benefits
Note: Results based on a total of 39 RPF Survey responses. Percentages shown in the data table are based on the total number of responses. The graph shows the percentage of respondents pursuing at least one reform of the labelled type, across the following three categories of the RPF Survey: Unemployment and social assistance, Disability and sickness benefits and Family and child benefits. The graph refers to measures approved or submitted to parliament for the fiscal years of 2025 and 2026.
Source: 2026 OECD Survey on Restoring Public Finances.
1.3.3. Increasing user charges and redefining public-private boundaries
Expanding private sources of financing and redefining public-private boundaries can help governments recover costs and ensure public spending is focused where it is most needed, particularly in areas where services generate significant private benefits. In the RPF Survey, these strategies are visible in pensions, health, and education (Chapters 2, 6 and 7 respectively).
By increasing fees, charges or co-payment mechanisms, governments seek to moderate demand or inefficient practices while raising revenue. In health and long-term care, several respondents are increasing the participation of households in the financing of their healthcare by raising fees or co-payment charges. For example, Finland plans to link public healthcare fees to a new index, tied to average earnings, from 2027 onwards. In education, some governments are seeking selective increases in user charges, although these cases are mostly limited to ancillary activities (such as after school care or transport) and foreign students. In education, the most notable reforms, however, involve restructuring or reducing student support. Such reforms are reported by around a quarter of respondents, and are often designed to reduce generosity of support, while simultaneously improving incentives to complete a qualification and enter the labour market. For example, New Zealand is replacing its covered tuition fees in the first year of study with covered tuition for the final year of study and will only pay the benefit upon qualification completion.
A few governments are limiting public coverage and/or redefining public-private boundaries to reduce pressures on public spending. In health, this involves either limiting the public coverage of certain goods and medical treatments or shifting some of the health care coverage to private insurance. For example, Norway has eliminated public coverage for certain treatments. In pensions, some governments are trying to achieve savings on public funds by encouraging greater reliance on private pension funds. For example, Korea plans to increase its complementary pension scheme contribution rate by four percentage points in the next seven years.
1.3.4. Better targeting of economic support
Following a period marked by high support spending in response to successive shocks, the RPF Survey results reflect governments’ continued efforts to phase out and rationalise such measures. Two-thirds of RPF Survey respondents (71% of OECD Members) have initiated measures to achieve savings on economic support to businesses or households. Agriculture and other primary sectors feature less on countries’ savings agendas, with less than one third of countries pursing reform in this area (23% of OECD Members).
Many governments seek to streamline and reduce generic business support while prioritising selective support for R&D and strategic sectors. Cross-sectoral spending reviews or third-party assessments are commonly used to identify duplication, overlaps or outdated policies. For example, Denmark reached a broad political agreement in 2024 to restructure business support, combining the elimination of outdated support schemes with new initiatives to improve framework conditions for firms. Savings from reduced or discontinued support are partly reallocated to finance other policy priorities, including R&D incentives.
In recent years, indirect support instruments – such as tax expenditures and below‑market finance – have become more common. These measures are less visible in standard budget presentations and may therefore be subject to less scrutiny. However, the RPF Survey suggests that respondents are increasingly undertaking systematic assessments to better identify and evaluate indirect support. Several governments have established structures to regularly review or phase out outdated or inefficient tax expenditures. In a recent assessment, the Netherlands identified around 200 tax expenditures, many of which were found to be ineffective.
Survey respondents have also phased out emergency support in response to the energy price spike in 2022-2023 and the subsequent cost-of-living crisis. Some countries, such as Czechia, have gradually moved from broad energy price support to more means-tested social benefits. A few countries are taking steps to increase energy efficiency and resilience, with the aim to reduce the need for large-scale state interventions in the future. More than two-fifths of RPF Survey respondents are pursuing targeted reductions in energy-related support policies, including tax expenditures, typically in areas where fiscal costs have risen or technologies are maturing. In some areas, such as low-emission vehicles, governments are scaling back incentives that are no longer considered necessary for adoption. Examples are elaborated on in Chapter 13. It should be noted that RPF Survey responses were received prior to the situation in the Gulf in early 2026.
1.3.5. Making government operations leaner and more efficient
Government operations is a central focus of current efforts to restore public finances, with most RPF Survey respondents (77% of OECD Members) seeking savings either on input costs or by changing the structure and/or management of government functions. The full benefits will only materialise over time. The Survey results suggests that a combination of approaches aimed at reshaping how governments operate – including organisational redesign, streamlined administrative processes, digitalisation and better data integration – may be needed to achieve lasting efficiency gains. These measures are covered further in Chapter 11.
Achieving savings on public sector input costs
Most governments (69% of OECD Members) are exploring ways of managing government inputs to lower operating costs of the public sector. General government compensation (i.e. wages for public sector employees) accounts for 23% of general government expenditure in OECD countries, approximately three-fifths of RPF Survey respondents are pursuing public employment reforms aimed at optimising the size, structure and compensation of the workforce. The most common levers involve freezes or targeted restraints on public sector remuneration and a diverse set of measures to achieve workforce reductions. Some governments are deploying a broader package of reforms, combining measures on remuneration or headcount adjustments with organisational and efficiency-enhancing reforms. For example, Canada has laid out a strategy for a leaner public service, combining measures to downsize and renew the public sector workforce with the promotion of new tools, technology and training to enhance productivity. Such comprehensive strategies may offer opportunities to modernise structures and processes while also addressing concerns about the size or sustainability of the public workforce.
In addition, around a quarter of RPF Survey respondents are pursuing efforts to streamline public procurement and a one-third is seeking to improve the management of their real estate portfolio. In procurement, efforts focus on centralising, simplifying and digitalising public procurement to enhance value-for-money. Following a broader trend of countries centralising and streamlining procurement functions, several governments, such as Germany, Latvia and Mexico, are reporting ongoing initiatives to establish or expand central purchasing bodies. To optimise the management of real estate, reform initiatives focus on reviewing asset inventories, promoting asset re-use, and enhancing space utilisation. For example, Belgium is establishing an inventory of all its real estate property, owned and leased, with a view to reduce the portfolio and Mexico reports ongoing efforts to promote asset reuse or disposal of under-utilised properties.
Reorganising government, mobilising IT and outsourcing
Many RPF Survey respondents are seeking ways to improve government operations to generate efficiency gains. As seen in Figure 1.11, budget reforms reported in the RPF Survey converge around three main approaches: re-organising the public administration, using data and digitalisation to increase efficiency of administrative processes and across-the-board reductions or productivity dividends (Figure 1.11).
Re‑organising the public administration can enhance efficiency by breaking down silos, simplifying processes, eliminating duplication of functions and achieving economies of scale, for example through shared services. Almost half of RPF Survey respondents are taking measures to reduce cost by expanding the use of shared platforms and services for back-office functions (e.g. HR management, procurement, ICT). For instance, in the Netherlands, ministries have been shifting HR, IT and procurement functions to centralised units to achieve cost-reduction targets. Around 40% of RPF Survey respondents are also consolidating departments or agencies, by merging/abolishing some of them or by bringing agencies back into ministerial hierarchy. Whereas many countries are pursuing targeted measures in one of these categories, some (such as Denmark and Germany) are undertaking more comprehensive reform to re-organise their public administrations.
The simplification of processes and the automation of administrative tasks through digitalisation, and particularly the use of AI, are increasingly considered important levers for improving public sector efficiency (OECD, 2025[26]). Such measures are frequently reported across spending areas in the RPF Survey, reflecting government efforts to exploit new technology to reduce the workload of public servants and reduce administrative burdens, both for users and providers of public services. For instance, in Denmark, the government has been scaling AI pilots with the aim to free up 50 million hours of public servants’ time (equivalent to 30 000 full-time employees) by 2035. Thailand is piloting the use of AI chatbots to cut public servants’ workloads in high-volume areas, such as land registration, auctions, and food approvals. The potential of such efforts on achieving efficiency gains rests on connecting underlying government data sets and can be deepened by lifting internal administrative requirements (“beige tape”).
% of RPF Survey respondents reporting at least one budget reform in government operations and restructuring
Note: Results based on a total of 39 RPF Survey responses. Percentages shown in the data table are based on the total number of responses. Graph shows the percentage of respondents pursuing at least one reform of the labelled type, under the Government Operations and Restructuring section of the RPF Survey. Graph refers to measures approved or submitted to parliament for the fiscal years 2025 and 2026.
Source: 2026 OECD Survey on Restoring Public Finances.
Although selective expenditure savings appear to have become more common, around two-fifths of RPF Survey respondents report ongoing across-the-board reductions, for example in the form of annual efficiency requirements. For example, in Sweden, agencies are not fully compensated for annual wage and price increases, a system which applies continuous, built-in pressure on agencies to improve efficiency. Such targets are sometimes complemented by productivity dividends, whereby ministries and agencies are incentivised to identify efficiency gains by being allowed to reinvest the resulting savings in priority areas.
1.3.6. Re-allocating spending to support long-term growth
Over the long-term, economic growth can support country’s efforts to restore their public finances. The RPF Survey captures a wide range of budget measures that countries are undertaking to support growth. There is substantial variation across OECD countries, which is expected, as their economic situations, opportunities and investment needs are different. However, the most common measures include new investments in transport and energy infrastructure; measures to improve skills and education levels; and support for research and development (R&D) (Figure 1.12).
The most common areas of new expenditures to support growth are in infrastructure. 13 countries noted investment in new energy infrastructure, with Poland, Sweden and the United Kingdom all investing in new nuclear power generation. 8 countries noted new investment in transport infrastructure. For example, Canada plans new spending on infrastructure to support major trade routes (Box 1.2), while Mexico is expanding train connections between major cities.
Measures to support labour supply and productivity are also significant. Nine OECD countries indicated that they are planning new expenditures on education with the aim of supporting growth. Measures to support education include university reform in Australia, and student loans in Hungary. In addition, three countries (Australia, Costa Rica, Luxembourg) noted new expenditures on vocational training or apprenticeships. Six OECD countries (Austria, Belgium, Denmark, Norway, Slovenia and Sweden) indicated that ongoing reforms to pension systems help to support growth by improving labour supply. Additionally, Finland and Belgium are adjusting unemployment insurance programmes, partly with a goal of improving labour incentives.
Eleven OECD countries indicated that they are undertaking new budget measures to provide direct funding for research and development (R&D). For example, Finland will provide direct funding for new R&D activities of up to 1.2% of GDP.
Number of OECD countries reporting expenditure measures to support economic growth in the medium to long-term, by area, 2026
Note: Results based on 35 RPF survey responses by OECD countries. Figure presents responses to the question 16.4 “Please specify budget measures designed to stimulate economic growth in the medium to long term”. Answers were received in open text format and response were analysed and grouped by OECD Secretariat. Figure presents most commonly reported areas of support, covering areas where at least 6 respondents reported planned new spending. Data is not available for Chile, Colombia, Greece, Iceland, Korea, Spain, Switzerland, Türkiye, United States.
Source: Authors own analysis of open-text information reported in by OECD countries in 2026 OECD Survey on Restoring Public Finances.
Several OECD countries are also planning to provide new public funding to support specific industrial or economic sectors as part of their plans to stimulate medium-term growth. Seven countries indicated that they are planning increases in expenditure on defence, which will support growth by stimulating their domestic defence industries (Canada, Hungary, Latvia, Poland, Slovenia, Slovak Republic). Five OECD countries plan new expenditures to support digital technologies (Canada, Japan, Luxembourg, Slovak Republic), with AI being a priority. For example, Luxembourg, as part of its AI strategy, is investing in supercomputer capacity and in support to businesses to make better use of AI (Luxembourg AI factory, n.d.[27]; Government of Luxembourg, 2025[28]; LuxProvide, n.d.[29]).
Canada has launched a major budgeting reform to separate day-to-day operating spending from capital investment, reorienting federal budgets toward capital formation that deliver long‑term economic returns. Introduced in Budget 2025, the Capital Budgeting Framework sets out clear criteria and categories to identify and organise spending that contributes to capital formation, while enhancing transparency on how public spending is allocated between current services and growth-enhancing investment. The six categories used in the framework are: capital transfers, capital-focused tax incentives, federal asset amortisation, private sector R&D, support to unlock large-scale private sector capital investment, and measures to grow the housing stock. This approach is reflected in a range of planned investments, such as the “Build Communities Strong” fund, which is intended to provide CAD 51 billion over 10 years to improve local infrastructure such as roads, bridges, waterways, colleges and hospitals. Additional investments will be made through a CAD 5 billion Trade Diversification Corridors Fund to support trade-enabling infrastructure, particularly in Canada’s core trade corridors, and a dedicated CAD 1 billion Arctic Infrastructure Fund to support critical Arctic transportation infrastructure with dual civilian and military applications. Infrastructure investments in Artificial Intelligence are also planned.
1.4.1. Quality budget institutions
The design and operation of budget institutions can have a significant and consequential impact on fiscal outcomes. Reconciling the multiple spending pressures with the already stretched public finances requires quality budget institutions. Resources will need to be re-allocated to meet the many current and emerging pressures on public expenditures in order to ensure fiscal sustainability. The OECD’s Spending Better Framework identifies the key components of Quality Budget Institutions (Figure 1.13) (OECD, 2025[3]). In the context of restoring public finances, several elements are especially relevant for supporting durable progress.
Clear fiscal objectives
Setting clear fiscal objectives refers to specifying the quantitative objectives which government is seeking to achieve. They provide an anchor for setting fiscal policy and are a clear and public signal of the government’s fiscal intention (OECD, 2025[34]). Most OECD countries have fiscal rules and objectives in place, most often expressed in limits on key variables in terms of percentages of GDP. The challenge is to effectively relate those macro-aggregate objectives to operational budget decision making.
Source: (OECD, 2025[3])
Objective economic assumptions
Objective economic assumptions are the foundations of good budgeting. The forecasts underlying the budget need to be as accurate as possible. “Optimistic” economic assumptions give rise to unrealistic and excessive resources becoming available for budgeting. Rigorous and regular scrutiny of forecasts can help to ensure their accuracy. Independent fiscal institutions (IFIs) also have an important role to play. Several OECD countries have given responsibility for producing the macroeconomic forecasts to arms-length bodies, including the United Kingdom and Costa Rica, while many others require IFIs to provide oversight of the official forecasts.
IFIs are also well placed to produce long-term fiscal sustainability assessments. These analyses project forward levels of revenue, spending, deficits and debt under different scenarios, typically with a 31-50 year time horizon. These allow the early detection of long-term fiscal risks to be identified.
Multi-year expenditure baselines
Baselines are the building blocks of budgeting. They provide estimates of expenditures over a multi-annual period, often 3 years beyond the current budget, assuming that the government’s current policies and programmes remain unchanged. They include the costs of all planned spending, including spending mandated by separate legislation. During the budget process, the aggregated expenditure baseline is combined with the revenue forecasts to create estimates of the path of the budget balance. This shows the amount of available fiscal gap, or fiscal space, consistent with the government’s fiscal objectives (Figure 1.14).
Source: (OECD, 2023[35])
Top-down expenditure ceilings
Top-down expenditure ceilings operationalise the government’s high-level fiscal objectives in concrete terms and reflect allocations and reallocations to fund new policy initiatives. The ceilings should be set for medium-terms horizons and be informed by the multi-year baselines in place. Most OECD countries already use multi-annual top-down expenditure ceilings (Figure 1.15).
The total level of annual expenditure should be disaggregated into separate expenditure ceilings allocated to ministers. An expenditure ceiling should optimally be the responsibility of a single minister. A minister may have one expenditure ceiling for the whole of their ministry, or there may be specific sub-ceilings ceilings within the ministry for certain programmes. Certain expenditure ceilings may be deemed flexible in nature. This is especially applicable to cyclical areas of expenditures, such as unemployment benefits. Interest expenditure may be similarly treated.
Ministers should have flexibility and autonomy to reallocate resources within their expenditure ceilings. The budget office should have the capacity to assess such reallocations and ensure that decisions by line ministers are within the overall policy and budget framework.
Spending reviews
Spending reviews systematically analyse the government’s baseline of total expenditure. They have been adopted by nearly all OECD countries (Tryggvadottir, 2023[36]). Spending reviews identify opportunities for reallocation in order to align spending with government priorities, and to control total expenditures They enable governments to take a more informed and targeted approach to fiscal consolidation and resource allocation. Despite the widespread use of spending reviews, efforts are often fragmented and limited in scope, focusing on readily achievable savings rather than the broader reforms needed to strengthen public finances. This underscores the importance of moving towards a strategic use of spending reviews. In particular, spending reviews that assess major spending areas, such as health or pensions, can support more fundamental, forward-looking reforms. In addition, comprehensive spending reviews allow countries to examine a wide range of government programme simultaneously and is increasingly being adopted (Box 1.3).
Setting clear quantitative targets for the level of savings to be identified helps to focus analysis and supports the uptake of findings. Integrating the timing of spending reviews with the budget process, so that results are available ahead of key budget decisions, increases the likelihood that findings are acted upon. Actively involving line ministries throughout the process also strengthens ownership and supports effective implementation (OECD, 2025[3]). Examples of spending reviews mobilised to support current consolidation efforts are identified in the RPF Survey (Box 1.3).
Length of top-down expenditure ceilings in OECD countries
Note: Chile, Norway and Spain use binding top-down expenditure ceilings, while Costa Rica, Japan, Korea and Luxembourg use indicative top-down expenditure ceilings for the upcoming budget year. Australia, Belgium and Italy do not use top-down expenditure ceilings as part of their budget systems. Australia and Belgium publish multi-annual expenditure forecasts that are not ceilings in nature. In Italy, legislation authorises the use of expenditure ceilings, but they have not yet been used in practice. Data for Slovak Republic has been updated. Data for Lithuania and Mexico are not available.
Source: 2023 OECD SBO Survey on Budget Frameworks.
Use of spending reviews in OECD countries 2011-2023
Note: The number of OECD countries has increased over time. The data is for survey respondent OECD countries at that point in time. The 2020 dataset refers to all current 38 OECD countries. In 2023, 34 OECD countries out of 35 survey respondent OECD countries implement Spending Reviews.
Source: OECD (2023), OECD Spending Review Survey, results for 35 countries, Q1.
Canada’s 2025 Comprehensive Expenditure Review covered a wide range of public agencies and sectors. As part of this exercise, most departments were required to identify up to 15% in potential savings from work streams that were underperforming, duplicative, or considered to fall outside the federal government’s core mandate. The review also included proposals to improve the efficiency of internal operations. Submitted measures were assessed against criteria including fiscal sustainability, programme coherence, and avoidance of adverse impacts on health, safety, and national security. Planned savings fall under three broad categories: modernising government operations, streamlining programme delivery, and recalibrating government programmes. The review is expected to generate savings of CAD 9.2 billion in 2026-2027, CAD 11.3 billion in 2027-2028, and CAD 14 billion in 2028-2029 and ongoing (EUR 5.7, EUR 7 and EUR 8.7 billion). Savings are expected to free up funds for other areas of investment.
Estonia has introduced a framework inspired by zero-based budgeting to thoroughly reassess the necessity and efficiency of existing expenditures. The framework consists of three pillars, 1) comprehensive reviews of ministerial budgets and baselines; 2) cross‑cutting thematic reviews across policy areas; and 3) performance assessments of national development plans and EU structural funds, all aimed at strengthening spending efficiency. The reviews place emphasis on financial diagnostics, including analyses of carry‑overs and unspent funds, and these analyses, in turn, lead to the consideration of improvement measures such as streamlining or consolidating activities.
In the United Kingdom, the Spending Review 2025 established a multi-year framework for departmental expenditure, setting limits for day-to-day spending until 2028-2029 and for capital investment until 2029-2030. This was described as the first “zero-based” review in nearly 18 years, requiring departments to reassess every line of government spending to ensure value for money. All government departments identified at least 5% savings and efficiencies by 2028-2029, with funding reallocated to core priorities. Saving measures include reductions in administrative costs, programme rationalisation and more efficient use of public assets. The UK government is now running a programme of targeted value for money reviews to challenge cost growth, performance, and deliverability, and to inform spending decisions ahead of the Spending Review.
Source: (Government of Canada, 2025[37]; OECD, forthcoming[38]), HMT Treasury, United Kingdom
Covering all expenditure
Public expenditures can be controlled more effectively when discussions involve all the different forms of public expenditure. This includes not only appropriations authorised in the annual budget, but also expenditure authorised in standing legislation (“entitlements,” or “mandatory” expenditure) and expenditures authorised in tax legislation (“tax expenditures”).
Effective oversight and monitoring of mandatory expenditure enhances transparency and allows for more informed decisions. Such mandatory expenditures should be included within the multi-year expenditure baselines, to ensure their costs are visible and taken into account. Assessing mandatory expenditures through spending reviews can support government to make legislative adjustments to lower them or improve their efficiency (OECD/KIPF, 2026[39]).
Tax expenditures are provisions that allow defined actors to benefit from lower rates or other exemptions from a particular type of tax (OECD, 2010[40]; OECD, forthcoming[41]). Many examples are identified through the RPF Survey and are discussed in the various sections of the report. However, their costs are often non-transparent and potentially invisible when setting the budget. While easy to introduce, they are often hard to control and can create risks for fiscal sustainability (OECD, 2025[3]). To help control tax expenditures, their costs should be estimated and integrated into budget reporting, allowing full transparency (OECD, Forthcoming). The RPF Survey finds that several respondents plan to reinforce efforts to systematically review and streamline tax expenditures to streamline support to businesses and households. For further discussion see Chapter 13.
Informed spending decisions
Greater use of performance information throughout the budget process can strengthen the quality of spending decisions by informing spending decisions with data on results. This involves collecting relevant performance information, and ensuring it is timely, credible and actively used in budget discussions. When systematically integrated into budget decisions, performance information can help identify underperforming programmes, support more informed reprioritisation, and improve accountability for outcomes. The RPF Survey finds several examples of countries expanding the use of performance information, for example in the areas of inter-governmental transfers and health.
Ex post evaluation of measures after their implementation can further support policymakers to make informed decisions on their continuation or redesign, including by identifying any unexpected negative consequences.
1.4.2. Empowering public understanding
While quality budget institutions remain essential for achieving sustainability, they are not sufficient. Governments need public support to restore public finances. Policy reform requires a broad legitimacy based on a shared understanding of the fiscal challenges that lie ahead. A key priority is therefore to increase awareness and understanding of fiscal challenges by decision makers and the public – highlighting both the urgency of action and the consequences of inaction, and empowering public understanding of the trade-offs and policy decisions around public finances. People are more likely to support reforms when they clearly understand them and recognise why they are necessary. Independent fiscal institutions have an important role to play in this area. These issues are addressed more fully in a companion report, The People and The Budget (OECD, 2026[42]). It rests on four interconnected pillars.
Demystifying the budget
There is a need to demystify the budget, especially among key decision makers such as elected officials. Legislators are often confronted with thousands of pages of technical jargon and acronyms and may fail to grasp the big picture. Efforts must move beyond explaining the technical details of the budget process to ensure legislators appreciate more fully major long-term challenges. Parliamentarians can then discuss trade-offs credibly with their constituents, keeping budget conversations anchored in fiscal reality.
Communicating the public finances
Public finance issues need to be communicated clearly. The use of impenetrable jargon alienates citizens and prevents shared understanding. Communication strategies must use relatable comparisons, clear visuals, and short explainers to demystify abstract, large numbers. Effective communication is not about “dumbing down” complex economics; it is about elevating the public’s capacity to engage with trade-offs. Citizens do not need to understand every detail, but they do need to understand why budget choices matter to them and their families. This also requires mobilising effective and multi-channel communication tools through social media and artificial intelligence tools to achieve impact in a context where algorithms play a key role in prioritising what gets seen and read by citizens (OECD, forthcoming[43]).
Citizen engagement
There is a call for governments and parliaments to engage citizens more effectively in restoring public finances. Traditional budget consultations often fall short because they do not clearly convey the scale of the challenge or the trade-offs involved. Parliaments, particularly through committee oversight, are well placed to strengthen engagement. They can actively gather evidence from citizens and experts ensuring that budget choices reflect real world pressures and that the need for reform is clearly understood. Only when citizens understand why reform is necessary are they likely to support it and accept difficult decisions.
Creating champions for fiscal sustainability
Finally, there is a need for strong fiscal advocates. Independent fiscal institutions such as fiscal councils and parliamentary budget offices, and other independent bodies such as supreme audit institutions, are widely trusted and well placed to play a more visible role in supporting fiscal sustainability. While maintaining their independence and impartiality, they can step beyond their traditional analytical functions by speaking out more clearly on the state of the public finances. Through raising awareness of spending pressures and highlighting the long-term costs of inaction, these institutions can help ensure that the consequences of today’s policy choices are better understood by the public and decision makers alike.
These four pillars – demystifying budgets, communication, citizen engagement, and advocates for sustainability – work together to create a shared recognition of the challenges ahead. Without a concerted effort to empower public understanding, budget reforms risk permanent gridlock. However, by placing public understanding at the core of how countries govern, it is possible to build the will necessary to secure fiscal sustainability for today’s citizens and the next generation.
The fiscal reality facing OECD countries is challenging. High public debt now coincides with strong and persistent spending pressures ranging from ageing populations to national defence. Without decisive policy change, public finances are on a trajectory that puts debt on an unsustainable upward path, steadily erodes governments’ room for manoeuvre, and weaken their capacity to deliver public services, respond to shocks and invest in the future.
Current efforts to restore public finances are not commensurate with the scale of the challenge. While most governments are taking action, consolidation remains modest and often incremental in ambition. If pursued in isolation, this approach risks crowding out discretionary spending, placing pressure on core public services, and delaying necessary structural reforms.
More significant and sustained reforms are therefore required. Governments will need to tackle the drivers of expenditure growth, scrutinise all areas of spending and make difficult choices about priorities. This includes better targeting of public support, reforming large spending programmes such as health, pensions and social benefits, redesigning government operations to achieve lasting efficiency gains, and reallocating spending towards investments that support productivity and growth. These reforms cannot be delivered through one‑off savings exercises but require continuity, discipline and a clear medium‑term direction to avoid postponing costs and risks into the future.
Established reform “playbooks” already exist across some of the major spending areas. What is lacking is generally not knowledge but the ability to move from analysis to action and to sustain reforms over time. Strong budgeting institutions, including effective medium‑term frameworks and spending review, are essential to structure choices and manage trade‑offs. However, institutional quality alone is not sufficient.
Restoring public finances will not succeed without stronger public backing for difficult fiscal choices. Reforms that affect benefits, services or contributions cannot be sustained unless citizens understand why change is needed, and what is at stake for future living standards. Empowering public understanding is therefore a core component of fiscal sustainability efforts.
Only a combination of well‑designed fiscal reforms, supported by quality budget institutions, and empowered public understanding can put public finances on a sustainable path. Restoring public finances is ultimately about safeguarding the ability of the state to deliver security, opportunity and better lives over time, while ensuring that today’s policy choices do not unduly constrain the options available to future generations.
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