Governments face difficult choices when managing public finances. They must balance the immediate needs of their citizens with long-term challenges, such as ageing populations and climate change. This balancing act is made more difficult by pressures to prioritise short-term gains over long-term sustainability. Independent fiscal institutions (IFIs) can play a crucial role in empowering public understanding of these issues by communicating complex fiscal issues in a clear and accessible way and helping citizens understand the trade-offs involved in different policy choices. This can, in turn, generate political will for reforms that promote long-term fiscal sustainability.
IFIs are independent, non-partisan bodies that provide objective analysis of fiscal policies. The number of IFIs surged following the global financial crisis, with most OECD countries (29 out of 38, 76%) now having established at least one IFI (Figure 9.8).
The 2024 OECD Fiscal Advocacy Index assesses the extent to which IFIs fulfil the role of fiscal advocates, (i.e. institutions that champion fiscal sustainability). The index evaluates 35 national IFIs across four dimensions: independence, analytical focus, communications apparatus and communications impact. A higher score indicates a greater capacity for fiscal advocacy. The average score for IFIs across the OECD is 1.8 out of a maximum possible value of 4 (Figure 9.9).
This indicates that, while some elements are in place, many IFIs still have room to increase their capacity for fiscal advocacy. IFIs score highest in terms of independence and communications apparatus, averaging scores of 0.6 out of a possible value of 1 in both dimensions. Communications impact is still in the early stages of development across most OECD countries, achieving the lowest average score of any dimension (0.14 out of 1).
The Institutions at the top of the index – Canada’s Parliamentary Budget Office, the Netherlands’ Central Planning Bureau, the United Kingdom’s Office for Budget Responsibility and the United States’ Congressional Budget Office – stand out for their effective communications impact. They achieve the highest scores in this dimension, ranging from 0.62 to 0.68. Others have a more limited focus or struggle to reach a wide audience. Larger IFIs with an official role in producing economic or fiscal forecasts have a natural advantage, as their work often attracts more interest due to these responsibilities. However, smaller IFIs with narrower remits do still have the potential to produce influential analysis that enhances the public debate. For instance, the Irish Fiscal Advisory Council scores 0.48 in this area (Figure 9.9).
One area where many IFIs could improve their fiscal advocacy score is their analytical focus. On average, IFIs across the OECD score 0.4 out of 1 on this dimension. Most IFIs do at least some of the analytical work core to a fiscal advocacy role. A majority of institutions (25 out of 35, 71%) cover long-term sustainability analysis, and just over two-fifths produce either macro or fiscal forecasts or both (15 out of 35, 43%). However, only a few IFIs produce dedicated fiscal risks reports (6 out of 35, 17%) and even fewer produce election costings (4 out of 35, 11%). This means that there is still substantial scope to broaden the work of IFIs and strengthen their capacity to be fiscal advocates (Figure 9.10).
