Governments are currently facing a fast-changing and complex policy landscape with significant implications for the national budget. One the one hand, public finances are facing multiple spending pressures related to ageing, health care and defence. These pressures are compounded by a declining potential growth rate in many countries, making the policy choices required to maintain long-term fiscal sustainability particularly difficult. The capacity of governments to address these long-term issues is also the main driver of trust in national government. At the same time, in a context of low trust and difficulties in reaching fiscal policy decisions, addressing fiscal trade-offs is becoming increasingly challenging. Restoring public finances is thus a prerequisite for enabling effective government to respond to the policy challenges of the day, to address long-term needs and respond to crises, and ultimately to improve growth and trust in public institutions.
The current fiscal situation reflects years of consecutive deficits in many countries. A series of crises since 2009 have necessitated extraordinary expenditure, leading to public debt across the OECD rising rapidly from 73% of GDP in 2007 to around 110% in 2024. These have added to increased spending related to long term pressures, including related to social protection and health. Debt service reached 3.3% of GDP in 2025 up from 1.9% in 2020 and continues to rise.
This report presents findings from the 2026 OECD Restoring Public Finances (RPF) Survey completed by 35 OECD countries, three accession candidate countries and one non-Member economy, which sought to understand the level and depth of fiscal reforms currently being undertaken to address fiscal sustainability.
In terms of OECD countries, most governments are currently seeking savings in public expenditure. They are developing three main approaches to savings: 1) comprehensive strategies to lower the rate of growth of expenditure across the board, as is the case of Austria; 2) selective strategies involving significant reprioritisation, with a particular focus on operating expenditure, as in Canada; and 3) structural efficiency-enhancing reforms with longer-term benefits, such as in Denmark.
Almost 90% of OECD countries are seeking savings in social protection and/or health spending, which now account for 51% of public expenditure. Measures include reinforcing the long-term fiscal sustainability of pension systems, increasing labour market participation and achieving savings in health and long-term care. Some are also reviewing benefit levels and how different benefits interact, focusing on reducing payments while strengthening work incentives, including through consolidating or merging benefits. Others are also adjusting eligibility and strengthening means-testing. A few countries are expanding non-government sources of financing and redefining public-private boundaries to help recover some costs.
Almost 80% of OECD countries are taking steps to make government operations more efficient. Many governments are working to optimise the public sector workforce including through adjustments in pay, benefits and employment conditions. Most countries are also seeking efficiencies from improving how the public administration functions. This involves simplifying administrative processes through digital technologies, reorganising the public administration, using shared services and platforms and streamlining agencies and ministries. Governments are also strengthening the management of their real-estate portfolio and increasing value for money in public procurement. Finally, just under 40% of OECD countries are using productivity dividends or efficiency targets, and some are outsourcing services or functions.
60% of OECD countries are rationalising economic support to businesses, and more than 50% are adjusting support to households, which has grown in recent years due to crisis-related support. Measures are intended to streamline, cap, phase out or ensure that support is better targeted. They cluster in areas where support was considered to be less effective, involved heavy administration, or less needed as markets have matured, even if the recent 2026 increase in energy prices has renewed pressures for support. Almost one quarter also report savings measures in agricultural support. With rising housing costs, some are tightening, targeting and ensuring stricter eligibility rules for housing benefits.
OECD countries also highlighted spending increases to support competitiveness and growth, including in education, research and transport infrastructure. However, many are reviewing expenditures and improving efficiency in these areas. Around 60% of OECD countries are pursuing efficiencies in education spending, especially in higher education. Measures involve recalibrating the balance between public support and non-government contributions and aligning the organisation of schools with changing demographics and regional population shifts. Concerning public investment, around 50% of OECD countries are pursuing selective savings though overall spend has increased in recent years. Measures include reducing or delaying some investments, ensuring that expenditures go to projects with the highest expected returns, simplifying regulatory requirements and streamlining procurement to achieve value for money. Spending on research and development (R&D) sees limited savings: only around 30% of countries are reducing support for R&D by businesses and/or for publicly funded R&D.
OECD countries are also achieving savings in transfers across levels of government through a structural redesign and targeted adjustments. While sizeable expenditure reductions are rare, around 60% are seeking efficiency gains and better alignment of incentives, including savings through reassigning responsibilities across levels of government, reducing or restructuring general transfers to subnational governments, redesigning the structure of grants, adjusting fiscal equalisation arrangements, and ensuring better co-ordination.
In addition, several OECD countries are significantly reducing spending on international development assistance.
Close to all OECD countries are also introducing measures to raise revenue. Rather than increasing tax rates that apply to broad tax bases, governments are predominantly pursuing targeted rate increases and base broadening measures, with a shorter term focus, and with an impact on specific sectors, or focusing on excise taxes such as taxes on tobacco products and replacing previous reductions and exemptions to value added tax with standard rates. Some are pursuing targeted increases to corporate taxation and are also improving compliance through improving government operations in tax administration.
Overall, measures are numerous and the willingness to restore public finance is notable, with some significant readjustments and reallocations within government budgets, in some cases with clear strategies to re-allocate resources to new priorities, in particular on defence. Nevertheless, most measures appear to be incremental rather than reflecting comprehensive fiscal consolidation and their impact at present does not appear commensurate with the scale of the challenge. At the time of writing, only about half of OECD countries were projected to improve their primary budget deficits between 2023 and 2027. Savings measures do not offset spending increases as expenditure is still projected to rise by of 0.8% of GDP between 2024 and 2026 in the average OECD country, while revenue measures add just 0.3%. The energy price shocks of early 2026 are likely to worsen this outlook.
In today’s environment, fiscal reforms are very challenging to implement, despite the fact that quality budget institutions and tools, such as spending ceilings and spending reviews are in place in most OECD countries. A number of countries are facing significant difficulties in ensuring adoption of reform proposals and budget bills in Parliament. A companion report, The People and the Budget, addresses these challenges and sets out concrete ways to empower public understanding of fiscal matters which is key in making fiscal reforms happen.