This chapter examines how understanding of budgets and debt sustainability can be strengthened among key decision makers. It emphasises shifting efforts away from a narrow focus on the technical mechanics of the budget towards a broader view of fiscal sustainability, key budget pressures and how policy choices affect public finances over time. A stronger grasp of these issues will better equip decision makers to steer debate, explain the rationale for action, take informed decisions and engage more effectively with the public to build wider support for restoring public finances.
The People and the Budget
Empowering Public Understanding of Public Finances
Abstract
Stronger public finances start with clearer understanding: Demystifying the budget and strengthening understanding of fiscal sustainability among key decision makers is essential for restoring public finances. This enables them to engage more effectively in political debate, recognise fiscal risks, explain policy choices, support decisions that strengthen long term sustainability and engage the public on budget choices and the consequences of inaction.
Shifting the focus: Current initiatives to explain national budgeting focus too narrowly on the technical “plumbing” of the budget process. To be effective, they must pivot toward the fundamentals: why fiscal rules exist, what determines long-term sustainability, and the consequences of inaction on major challenges such as ageing.
Overcoming barriers: Decision makers such as elected officials face severe time constraints and may fear exposing knowledge gaps. Successful programmes can surmount these barriers by using tried and tested adult learning techniques, offering well-timed inductions at the start of terms, and providing on-demand, “bite-sized” content such as video explainers and short briefings.
Core competencies: Mastering the budget does not require understanding complex econometrics; it requires understanding the “big picture” trade-offs. Programmes should focus on simplifying complex concepts – using clear narratives and real-world examples – to empower policymakers to assess the long-term impact of today’s decisions.
Over time, spending pressures on ever more complex areas of policy mean that budget systems and documents have become increasingly more complicated. This makes discussions about policy priorities more difficult to hold in Parliament. It blurs the debates about how to restore public finances and inhibits communication with the public.
This complexity adds to the inherent difficulties faced by parliamentarians and other political officials when trying to fully grasp what is at stake in public finances. The challenge is made worse without proper support, specific training or background. When decision makers fully appreciate the pressures facing public budgets and how different policy choices play out over time, they are better equipped to steer debate, explain the rationale for action, and make decisions that can help restore public finances. This understanding also helps them communicate more openly with the public, build trust, and shape the political will needed to restore public finances in a credible and durable way.
Existing efforts in parliaments to support elected officials in their budget oversight role shine a light on what OECD countries are doing to demystify the budget for key decision makers. Where parliaments have activities to better equip decision makers with knowledge of budgetary issues in their own countries, these are often delivered by in-house technical units supporting budget scrutiny in parliaments.
Among in-house technical units, current efforts to improve understanding of public finances range from publishing briefing material to interactive tools. These bodies provide targeted briefings on training sessions, confidential enquires services and short explainers/infographics or videos (see Figure 2.1).
Note: This covers services provided by specialists from within parliament services. N=32 OECD countries.
Source: 2025 OECD Survey on Parliamentary Budget Oversight.
Depending on the countries, these efforts vary significantly in scope. At one end of the spectrum, they are infrequent and ad hoc; at the other end, they are far more comprehensive and structured.
A key challenge, however, relates to their focus. Ideally, efforts to demystify the budget would cover the fundamentals of public finances. They would promote an understanding of key overarching issues, such as fiscal sustainability and the importance of economic growth, and they would set out the major challenges facing public finances, including the cost of maintaining existing outlays in an ageing population, rising pensions and healthcare costs, a retiring workforce, and the costs of extreme weather events. Knowing the trade‑offs involved would help decision makers communicate the need for action more clearly.
Of the 38 OECD countries, only 10 reported that they had integrated fiscal literacy training in central induction activities in parliament (OECD, forthcoming[1]). In many of these, the programmes for members of parliament have a relatively narrow focus. Instead, they tend to put the emphasis on fiscal “plumbing” – how budgets and bills are enacted. There is much scope for creating a coherent and comprehensive platform to equip policymakers with a broader understanding of public finances and support them in addressing the major fiscal challenges.
2.1.1. Activity to strengthen understanding of public finances among key decision makers varies in intensity
There are few examples of initiatives in OECD countries aimed specifically at demystifying the budget and strengthening understanding of fiscal sustainability among key decision makers. Where such initiatives exist, they tend to take three forms. They range from infrequent, ad-hoc initiatives to more structured and comprehensive programmes.
1) Low intensity: infrequent, ad hoc initiatives on specific topics
At one end of the spectrum are infrequent initiatives on specific topics. These are designed to help inform stakeholders, such as elected officials, about key areas of public finances. They tend to involve ad hoc workshops, seminars, conferences, or educational sessions. The focus of these is usually on one technical area of budgeting rather than imparting a broad understanding of fiscal policy.
Examples include Spain where AIReF, the Spanish Independent Agency for Fiscal Responsibility, interacts once a year in a workshop involving all political parties. The workshops focus on AIReF’s main areas of work focus and specific key topics. For instance, one area of focus considered for 2024 is a workshop on the new system of fiscal rules that has emerged from the EU’s Economic Governance Review.
Another example is Ireland, where the Irish Fiscal Advisory Council organises an annual “Path for the Public Finances” conference. The conference seeks to bring more awareness to longer-term fiscal policy challenges that may get less attention in the national debate. Past conferences have focused on how to assess long-term fiscal sustainability, major fiscal risks, climate, and capital spending. Members of parliament participate, especially those on budget-related committees.
In Slovenia, the Slovenian Fiscal Council has organised a once-off workshop to explore technical aspects of the EU’s Stability and Growth Pact. This initiative, while generating good interest among elected officials, was technical in its focus.
2) Medium intensity: more regular, tailored efforts
In the middle of the spectrum are ongoing, unstructured activities that enhance policymakers’ understanding of public finances. These initiatives promote understanding of budgetary matters in a more tailored manner. Rather than fully-fledged training programmes, they may entail direct support on various issues provided at a time when analysts have completed some work or as the needs arise. It may be availed of regularly by key decision makers. Often, the support can be provided on a confidential basis.
In Mexico the Mexican Center for Public Finance Studies – like many other parliamentary budget offices – plays a key role in promoting elected officials’ understanding of the intricate workings of the Mexican budget. It is quite common for the Center to provide committees and individual members of Congress with reports and analysis on request. The responses are usually in writing and come with a typical turnaround time of 30 to 45 days. In addition, to strengthen legislators’ understanding of conceptual and technical matters, the Center produces a “basic concepts information booklet series”. The series explains the terminology and classifications involved in the Federal Budget. For instance, the September 2023 publication addressed the processes involved, the approval schedule, some of the key economic concepts and fiscal classifications that arise, and an overview of recent budgetary outturns.
Similarly, Australia provides its parliamentarians with bespoke support via the policy costing services of the Australian Parliamentary Budget Office. The service is able to respond to parliamentarian’s needs in a relatively informal and interactive manner. The Office encourages parliamentarians to have informal discussions with it before submitting requests for the policy costing services it provides. It also engages with parliamentarians during the preparation of its responses. This interactivity is seen as a positive aspect that has helped to enhance policy development more generally.
These types of support offer a more frequent way for key decision makers to develop their understanding of public finances. Yet, the focus is often subject to demand as issues arise, with some exceptions, as in the case of the Mexican Center for Public Finance Studies. Overall, they also lean towards the mechanics of the budget process rather than a more high-level understanding of fiscal challenges.
3) High intensity: structured, frequent, and comprehensive programmes
At the other end of the spectrum is a set of much more comprehensive and frequent engagements to improve understanding of public finances. These programmes delve into the intricacies of fiscal policy as it is enacted. Programmes may encompass a range of topics, such as how fiscal policy is formulated, resource allocation, expenditure oversight, and financial accountability.
The goal of these initiatives varies. In some cases, it is explicitly to help policymakers by equipping them with practical advice when navigating the complexities of budgeting. In other cases, the goal is to foster more informed and efficient governance.
In terms of how they are put into practice, these programmes are typically more engaging than those at the other end of the spectrum. They bring together key decision makers in hands-on workshops, seminars, and interactive sessions. Ideally, this creates a safe environment in which to learn without judgement.
An example of this is in the United Kingdom, where the Scottish Parliament’s Information Centre provides training support in addition to information and analysis to Members of the Scottish Parliament. Through its Financial Scrutiny Unit (FSU), the Centre aims to help Members scrutinise the budget more effectively.
The FSU uses a number of novel approaches. In particular, it has four key forms of intervention to enhance stakeholders’ understanding of various aspects of public finances.
First, the FSU organises a form of induction to the realm of budgeting at the very start of a new government term. It sees this as a critical period to enhance elected officials’ ownership of budgeting. It is a good time to seize on the initial enthusiasm of entering office as with this comes a greater enthusiasm to learn. It comes before official appointments to specific committees. The FSU uses this as an opportunity to emphasise the importance of focusing on key fundamentals and major policy areas rather than trying to cover too much. This helps ensure impact beyond the political cycle and a longer-term legacy. An optional refresher on similar content is available after two years.
Second, the FSU employs a series of regular briefings. These take various forms. One form is breakfast seminars, which prove popular as they align well with elected officials’ schedules. In particular, they offer a chance for reflection under Chatham House rules before getting caught up in the issues of the day. Seminars involving external speakers, especially those with a high profile, tend to prove more popular. One example is a presentation by the Scottish Fiscal Commission of its first Fiscal Sustainability Report. Other forms include private briefings, which give an opportunity to ask questions more freely. Briefings to specific members of parliament are also provided, which offer an opportunity to develop champions on certain issues that can have a positive influence within their respective parties.
Third, the FSU organises an annual business planning day. This usually takes place in off-site locations at a useful time in the calendar for planning ahead, for example before the summer recess. It provides an opportunity for the FSU to have direct contact with elected officials while planning committees’ work programmes for the year ahead. In particular, it offers a chance to focus on fundamental issues outside of the daily routine. This presents a unique opportunity to revisit some of the major fiscal challenges and principles that face policymakers.
Fourth, the FSU produces video explainers, data visualisations and online tools that can be accessed by political stakeholders as well as the general public. These cover topics such as the budget process, the latest tax and spending changes, current outlays, personal income tax liabilities, and details on devolved funding.
Another example in the United Kingdom comes from the Scrutiny Unit housed in the United Kingdom Parliament. It came into existence in 2002 after a committee concluded that select committees would need additional help examining a number of budgetary areas being reformed. Its role is to enhance the House of Commons’ work by offering specialised expertise to select committees, particularly on financial matters and on draft bills. Its staff is made up of a mix of lawyers, accountants, policy specialists, economists, and statisticians. It provides analysis, guidance, presentations, and even draft questions to Members and staff. As well as working with elected officials, the Unit encourages departments to provide better quality information.
An important part of the Unit’s work has been to provide training sessions to elected officials. These training sessions are tailored to the needs of Members of Parliament and their staff. Sessions cover topics such as legislative processes, financial scrutiny techniques, policy analysis, and other relevant areas aimed at enhancing the effectiveness of parliamentary scrutiny and oversight. The content and frequency of such training sessions may vary based on the evolving needs of the Members and the priorities of the Unit itself.
The United States also has similar supports. Together, the work of the United States House Modernization Committee and the Congressional Research Service enhances policymakers' understanding of fiscal issues and promotes effective governance in the realm of fiscal policy.
The United States House Modernization Committee has been instrumental in spearheading efforts to improve policymakers' understanding of fiscal issues. The Committee, established in 2019, has focused on modernising the operations and practices of the House of Representatives to better serve the needs of its members.
One significant aspect of the House Modernization Committee’s work has been providing induction programmes for new members. This is something that the Congressional Research Service has helped co-ordinate. In addition, by leveraging digital tools and platforms, the Committee has facilitated easier access to fiscal data, analysis, and educational resources, thus empowering elected officials to make more informed decisions on budgetary matters.
The Congressional Research Service has also played a crucial supporting role. It provides policymakers with comprehensive and unbiased research on fiscal issues. As the research arm of the United States Congress, it conducts in-depth analyses, prepares reports, and offers expert guidance on a wide range of topics, including budgeting, taxation, and economic policy. Its research has helped to equip lawmakers with the information necessary to navigate complex fiscal challenges. Moreover, it often collaborates with congressional committees and individual legislators to tailor its research to specific policy inquiries.
A key lesson from one of the few evaluation reports on these programmes (Ross, McIntyre and Roy, 2021[2]) is that there is a risk countries spend too much time on the technicalities of a fiscal framework, This can come at the cost that time spent on key areas of significant importance to fiscal sustainability in the medium to longer term (see Box 2.1) is crowded out. Moreover, discerning important trends and budgetary outcomes can be challenging for key decision makers when vast amounts of information are provided in the form of reports.
Experience from Scotland provides valuable insight into how effective initiatives are at deepening elected officials’ understanding of budgetary matters.
The survey
In 2021, the Scottish Parliament’s Information Centre, Strathclyde University, and the University of Glasgow published the findings of a unique study (Ross, McIntyre and Roy, 2021[2]). It included a survey of members of Scottish Parliament with 27 responses (20% of all members), plus in-depth interviews with 23 key figures such as senior members of parliament. The goal was to gather their reflections on their understanding of and ability to scrutinise Scotland’s budget powers.
I mostly get it, others do not
The majority of members of parliament reported having a relatively good understanding of the Parliament’s budget process and powers (rating their understanding at 7.1 out of 10 on average, with 10 being “very high” and 0 “very low” understanding). However, they felt that other members of parliament had a weaker understanding in general (3.6/10). In terms of progress, the balance of opinion was that scrutiny had “got a little better” or “stayed the same”.
Wide budget scrutiny but not enough depth
A key finding from the report was that members of parliament felt budget scrutiny had widened, rather than deepened. In other words, the number of areas being scrutinised had increased, but the focus did not elicit a deeper understanding of key areas. Specifically, they noted that this had come at the cost of less incisive scrutiny of the structural challenges facing the public finances in Scotland.
Several explanations were given. First, it might just take time for the framework to bed down and Brexit and COVID-19 had occurred. Second, Scotland’s new budget powers were complex, including block grants, devolved taxes, shared taxes, assigned taxes, and so forth. Third, large information gaps remained. Despite a great deal of information being available, with some reports running into hundreds of pages, members felt they lacked time series data on spending areas, information on long-term trends, and that it was difficult to link draft budgets to final outturns.
One interviewee captured the concerns about a lack of focus on structural issues well noting:
“So much of the time has been devoted trying to scrutinise the mechanics of Scotland’s new budget framework, that debates are missing the bigger picture covering the structural economic, demographic, social and environmental issues that will stretch the sustainability of the Scottish Budget in the long-term or the track-record of policymakers to deliver the change that is required. Evidence sessions often reflect that.”
Time is precious
A broad concern emerging from the survey was that scrutiny time was limited and often this time could be used more effectively. It was felt that time spent on it often crowded out priorities such as debates over value for money or actual budgetary outcomes.
Source: (Ross, McIntyre and Roy, 2021[2]).
A solid understanding of public finances may be central to sound budgetary choices. Renewed approaches should focus on promoting a richer understanding. This means promoting deeper, more structured, and more engaging approaches.
In understanding how best to improve understanding among key decision makers, lessons can be drawn from the extensive efforts that have been made in relation to improving financial literacy.
OECD work suggests that financial literacy levels are often quite weak. In its 2023 Survey of Adult Financial Literacy, it finds that three-in-five adults fail to meet minimum targets for financial literacy (OECD/INFE, 2023[3]). In terms of adult skills, more than four-out-of-five adults never use advanced maths or statistics in their everyday lives. Three-quarters of adults rarely read charts (Jonas, 2018[4]).
The recent joint European Union and OECD initiative, “Financial competence framework for adults in the European Union,” provides the basis for a more co-ordinated approach to improve financial literacy across the EU. It also builds on existing OECD frameworks with core competencies for financial literacy.
These initiatives help promote a shared understanding and platform on which to improve knowledge, skills, attitudes and behaviours related to sound financial decisions. Ultimately, they should help achieve greater financial well-being amongst individuals.
How can these lessons be extended to public finances? This section outlines how countries can strengthen their work in this area. It first focuses on who might take responsibility for improving levels of understanding among key stakeholders, including elected officials and the public. Second, it considers the core material to improve understanding of public finances. Third, it explores how best to deliver these initiatives to maximise their effectiveness.
2.2.1. Who can lead efforts to improve understanding of public finances?
Actors who have already shown initiative in strengthening understanding of public budgets – IFIs and bodies that support parliamentary budget scrutiny (as well as finance ministries) – have an important role in strengthening understanding of public finances. This work could also be supported by supreme audit institutions.
For those bodies already undertaking this work, there is a need to redouble efforts. They need to focus on core aspects of fiscal sustainability and the major challenges facing OECD countries. Delivering on this will require them to be more targeted, more structured and more innovative in their efforts. For those that are not engaging in this space, they need to start doing so.
2.2.2. Core competencies – what should efforts to improve understanding of public finances focus on?
Efforts to improve financial literacy across the OECD have long focused on what might be considered “core competencies”. That is, things that are universally relevant and important to sustain or improve financial well-being in everyday life (OECD, 2018[5]).
In the realm of public finances, what might core competencies look like? First, it is important to emphasise a broader understanding of why these matter. Rather than focusing on specific features of budget processes in individual countries, a richer understanding of fiscal fundamentals is warranted. This can serve as the foundation on which people build a better understanding. It is only after this point that more intricate and country-specific features should be developed.
The following three key topics could form a core part of any curriculum: the importance of fiscal rules, what determines fiscal sustainability, and understanding the long-term impacts of policy decisions.
Why do countries have fiscal rules?
Fiscal rules often baffle and frustrate those assessing them. When it comes to elected officials, as well as being highly complex, the rules also serve to curb fiscal aspirations. As a result, discussion around fiscal rules tends to be preoccupied with the near-term fiscal space provided by them. This inevitably overshadows the purpose and intended outcomes of fiscal rules.
% of years spent in deficit, 1995-2025
Note: The asterisk * denotes incomplete coverage. For Colombia, data are only available for 2000 to 2023; for Israel, 1998 to 2023; for Türkiye only from 2009. These two countries are thus excluded from the OECD average, while Türkiye is omitted from the analysis.
Source: (OECD, 2025[6]).
A core competency that could benefit key decision makers is an understanding of why fiscal rules have come about.
Put simply, governments are known to have a bias for running deficits. This bias is relatively pervasive. Across the OECD, countries typically spend three in every four years in deficit (Figure 2.2). There are exceptions: Norway’s rich oil and gas resources have seen it run persistent surpluses and there are examples of well-run fiscal frameworks in countries such as Canada and New Zealand that have limited the tendency towards deficits. Yet, the bias toward deficits is clear.
To tame this deficit bias, countries tend to have fiscal rules. These help avoid excessive borrowing and the damaging consequences that follow. The fundamental problem might be said to be the open-ended nature of budgeting. Governments can, with relatively little immediate concern, meet demands by spending more than they take in through taxes. Fiscal rules attempt to bind this open-endedness.
Initiatives to raise understanding of public finances need to be clear on the consequences of excessive borrowing. The social, economic and political ramifications of unsound policies should be made obvious. For this, the global financial crisis provides clear examples to draw from. Ireland’s is one extreme yet salient example (Box 2.2).
More generally, there is a need for greater understanding of the consequences of unchecked increases in public debt.1 Three key risks of excessive debt are as follows:
1. It hampers growth and the ability to respond to crises: Higher debt impedes a government’s ability to respond to fight recessions or other types of crises by expanding the budget. As government debt increases, borrowing costs throughout the economy also tend to rise. This reduces private investment and slows growth.
2. It squeezes out other priorities: Rising interest payments mean governments have to spend larger portions of their budget on servicing that debt. This leaves less money available for priorities such as infrastructure, education and health.
3. It raises the risks of a major crisis: Those financing a government may lose confidence in its ability to repay borrowings. This can lead to higher borrowing costs and increased risks that a country faces abrupt challenges in financing day-to-day spending. With larger levels of debt, increases in interest rates also raise debt-servicing costs proportionally more. This raises the risks of a sudden funding crisis. In addition, higher debt ratios might lead people to expect higher inflation as a means of eroding that debt. This, in turn, can erode confidence in the currency.
The hope in this line of instruction is two-fold. First, that policymakers engage with the fiscal rules on a deeper level. Second, that they can, in turn, communicate reasons to adhere to them more widely.
Ireland’s experience with austerity offers a striking and clear way to illustrate fiscal risks. Clear real-world examples such as this are a useful way to enrich elected officials understanding of how fiscal sustainability risks play out in the real world.
“Austerity”, in Ireland’s case, was not an ideology to squeeze government, nor a tool to manage perceived waste and moral hazard risks. It was the consequence of earlier policy decisions (Honohan, 2017[7]) leading to a sudden inability to finance day-to-day public spending.
A sharp fiscal expansion in the 2000s saw Ireland grow overly reliant on property bubble tax receipts fuelled by excessive bank lending. When the economy turned, a banking crisis ensued, and the receipts dried up. To stem mounting public debt and to convince lenders to purchase government debt issuances again, Ireland undertook a massive fiscal adjustment. This had enormous economic, social, and political impacts.
On the economic front, seven years of austerity budgets ensued. These saw an average 3.2% of national income of fiscal consolidation each year. That is equivalent to finding one-quarter of social security spending in a typical OECD country every year for seven years. The cuts to spending and increases in tax came at the same time as the wider economy was entering recession. Past profligacy therefore meant that budgets tightened – adding to the pain – rather than helping to offset the recession. A rising interest burden also swallowed proportionally more tax revenues, meaning less could be achieved with public resources elsewhere.
Few countries are likely to experience a budgetary shock the way Ireland did. A confluence of factors mattered: the simultaneous bursting of a property and credit bubble, the nature of the response to the banking crisis, Ireland’s membership of a common currency and monetary union. What is more, Ireland’s budget was only in deficit once during the years 1997 to 2007. As such, deficit bias was hard to detect. The reality was that temporary receipts masked underlying problems. These temporary receipts went undetected by standard methods of cyclical adjustment. This made it harder to identify the underlying or true deficits being built up over time.
But the basic principle of adhering to fiscal rules to limit deficit bias remains pertinent. Modern fiscal rules often aim to keep spending growth steady rather than focus on deficits. Such an approach, if applied correctly, could have limited Ireland’s budgetary excesses in the 2000s. It could have lessened the need for austerity. In turn, this could have made the economic, social and political fallout less painful.
What determines fiscal sustainability?
Related to fiscal rules is the core concept of fiscal sustainability. Again, this is a topic that can easily become more complicated than it needs to be.
While many elements are important, growth is key. A challenge for decision makers is that growth, and interest rates, are, for the most part, outside their control. Potential growth is hard to influence. Structural reforms have uncertain effects.
The budget balance therefore becomes a crucial part of the discussion, both in terms of its likely path, based on current policies, and what can feasibly be achieved (Blanchard, Leandro and Zettelmeyer, 2021[8]).
There is also the need to take account of how uncertainty, and hence risks, are magnified at higher debt levels. This is usefully illustrated in Barnes, Casey and Jordan-Doak (2021[9]). The authors show two scenarios, adapted slightly below (Figure 2.3). One scenario has a country start with a low debt ratio at 25% of GDP, another with a high debt ratio of 100%. They then look at how debt evolves over time for a range of common growth rate and interest rate scenarios.
The first thing to note here is that the paths for the two scenarios are strikingly different over the first ten years. In the low debt scenario, the debt ratio barely changes regardless of the growth and interest rate conditions. By contrast, the high debt scenario is highly sensitive to prevailing conditions.
The second thing to note is what happens when a shock such as a recession hits. In both scenarios a shock to growth is assumed to hit ten years out.2 This leads to a worsening of the path for government debt in all cases. But, notably, the range of impacts when debt is already at high levels are again much wider.
% GDP, government debt
Note: For different starting debt ratios, the figure shows how government debt ratios may evolve for illustrative interest-growth differentials of -5% (bottom of the range), -2% (middle lines), and 0% (top of the range) and a budget balance excluding interest of zero. The shock shows what happens if the interest-growth differential then worsens by 2 percentage points.
Source: Adapted from Barnes, Casey and Jordan-Doak (2021[9]).
This illustration highlights the risks of high debt. At low debt ratios, things are relatively certain. Economic conditions might be more or less favourable than expected. But when debt is low to begin with, the risks are narrower. By contrast, when debt is already high there is a far greater level of uncertainty around how things might evolve. Debt could easily explode – meaning that it rises in an inexorable fashion.
Can policymakers simply react by cutting spending and raising taxes when things go wrong? There are two problems. First, the depth of the response is potentially far higher at higher debt ratios and there are deeper risks and uncertainties. Second, there are doubts about the extent to which policymakers can feasibly improve budget balances to prevent an explosion (Bohn, 1998[10]; Blanchard, Leandro and Zettelmeyer, 2021[8]). It depends, for example, on how high taxes already are, a government’s strength, the time it will take, how long it can be sustained. This is the nature of conversations around Greece’s debt in 2010. Could Greece really run large enough surpluses not just for a few years but for more than a decade?
How to tackle major fiscal challenges in the context of just a few budgets?
Policymakers should ideally develop an intrinsic understanding of how today’s policy choices will have far-reaching consequences. That is, small decisions today can magnify over time.
For example, in financial literacy a core competency is how to balance today’s living standards and spending choices with outcomes in later life. This includes planning for an adequate pension on retirement. However, the OECD’s work on financial literacy finds that less than half of adults in 21 participating countries and economies are found to hold a savings, investment, or retirement product (OECD/INFE, 2023[3]). Of those that do hold such products, only one-half understand compound interest.
Labour and capital income as % GDP
Note: The figure shows different paths for labour and capital income as a percentage of GDP under two scenarios. One where increases in personal tax rates are phased in over ten years starting in 2026; the other starting from 2036. It is assumed that personal income tax rates on labour income and on capital income gradually increase over time in proportion to the rates under current law.
Source: (CBO, 2022[11]).
This speaks to broader problems in the population of extrapolating from today’s decisions into the future. In a similar vein, elected officials should understand that key policy decisions – or non-decisions as the case may be – will have a long-lasting bearing on future prosperity. This is highly relevant to decisions around the pension age, the design of the healthcare system, and so on.
Eliciting the far-reaching consequences of today’s policy choices is perhaps best achieved with scenario analysis. For example, the Congressional Budget Office has used its work on long-term projections to draw out the consequences of delayed action for stabilising federal debt (CBO, 2022[11]). It estimates that if policy were to adjust through the income tax side, a ten-year delay would require revenues 3.7% of GDP higher at peak when compared to the “acting sooner” scenario (Figure 2.4). Ultimately, this would involve a much larger reduction in people’s after-tax wages – almost 10% more than in the acting sooner scenario.
The takeaways from this sort of analysis are clear. The longer action is delayed, the larger the policy changes needed to stabilise debt. More than that, by drawing out the implications for peoples’ after-tax wages, the Congressional Budget Office shows the impacts of inaction in a tangible way.
This analysis also speaks to a second point: while policymakers might have only a small number of budgets in which to enact their agenda, relatively small changes accrue large impacts over time. This means that even if policy changes are restricted to small adjustments in the short term, their impacts can cumulate and impart a far greater legacy.
2.2.3. Foundations for a broader framework
This analysis illustrates some of the core competencies described that might be considered priorities. A more comprehensive framework might branch out these core competencies. For instance, fiscal rules can be branched out to include specific types of fiscal rules, escape clauses, and investment targets. The limits of fiscal policy in boosting long-term growth, the cycle and fiscal policy’s influence on inflation can fall under fiscal sustainability. How to measure value for money can be folded into the discussion of major fiscal challenges.
The idea is to structure programmes around key areas of focus. This should take the focus away from the more mechanical aspects of modern budget frameworks.
While being aware of the core competencies is helpful, there remain significant challenges. Elected officials are likely to have left formal education behind and will inevitably have extensive commitments as part of their political lives. Moreover, public finances are often a challenging and unappealing subject. The next section considers ways to overcome these challenges.
2.2.4. Improving understanding of public finances: Overcoming barriers to learning
The public finances may not be very alluring, or simple to grasp, but they carry with them immense responsibility. Together, these factors can be barriers to learning. Recognising these challenges, there are three principles to be considered when seeking to broaden understanding of public finances:
Time is precious
Time is a scarce commodity for all stakeholders, particularly key decision makers such as elected officials. They find themselves juggling myriad responsibilities, pressures, and legislative deadlines. It will be difficult for them to dedicate time and attention to the overarching principles of public finances.
To address this time constraint, initiatives to develop their understanding should be a) concise, b) focused, and c) available at optimal times or even on demand. This means that initiatives to strengthen understanding of public finances should avoid providing excessive levels of detail across all the technicalities of a fiscal framework. Moreover, they should be a part of a wider structure of support that allows key decision makers to access the information they need when they need it.
The experiences of OECD countries show that larger programmes of support are better targeted at the start of a new political term. This “induction” period offers a unique chance to engage newly elected officials in a constructive and open way while introducing them to key issues. After the “honeymoon period”, time inevitably becomes scarcer and the willingness to ask questions that might betray a lack of understanding diminishes. Finding time and appetite thereafter will require more thought. This is where initiatives such as breakfast seminars, annual planning days, and other well-tailored initiatives prove useful.
There are tried and tested ways to promote learning
Many techniques exist to enhance people’s ability to acquire knowledge. Box 2.3 breaks down some of the findings from cognitive science that can be applied to training sessions geared towards key decision makers such as elected officials.
The advice from cognitive science poses some practical challenges to developing well-designed interventions for elected officials. While stakeholders’ time is precious, enhancing understanding of public finances will inevitably require some time and effort. This will ideally involving smaller, more frequent interventions. Ensuring that the material can be delivered in multiple ways and elaborated on requires substantial forethought. Testing the material can help enhance learning but might not be practical.
One way to save time is to structure activities so as to build on induction periods. Follow-up seminars can be used to broaden understanding, widen the delivery format, elaborate on the key principles with more tangible real-world example, and embed the concepts more deeply. In addition, planning days provide further scope to reinforce concepts.
On-demand supports can help when time is scarce. The standard format has tended to be briefing papers, but there are various newer forms that are more accessible and able to foster deeper engagement:
Short video explainers – these offer a useful and permanent resource that can be accessed as needed. Ideally, these should be highly focused and as short as possible. If more detail is warranted, additional video explainers can be developed. It should be possible to string these together to form a cohesive whole. A useful example outlining the annual budget process is provided by the Scottish FSU (Burnside, 2023[12]).
Storytelling is considered to have proven useful in the financial literacy sphere as a means of conveying information. The view here is that simpler narratives allow individuals to learn from vicarious experience (OECD/INFE, 2015[13]). Storytelling offers a useful pathway to understanding the real-world impacts of fiscal sustainability and fiscal risks. In particular, the experiences of past and present elected officials could be a useful way to cut through the more turgid aspects of core competencies. It also offers another way to deepen and elaborate on understanding.
Online interactives – another avenue is to use online interactive content to enhance understanding. This can include tested content. Initiatives in the financial literacy space offer some useful examples. For instance, New Zealand has developed workplace programmes to improve financial education. The “Sorted at Work Programme” provides flexible programmes, with face-to-face and virtual webinar options. The webinars can comprise a series of 1-hour virtual seminars over several weeks or, alternatively, they can consist of longer, more condensed sessions. They cover topics such as budgeting, debt, goals, savings, retirement plans, and investments (OECD/INFE, 2015[13]). They have been shown to improve understanding and result in significant and sustained improvements in staff work satisfaction, capability, confidence and productivity.
There is plenty of empirical support in the field of cognitive science showing that certain learning techniques work. This box reviews some of the methods that can be applied to enhancing understanding of public finances among key decision makers such as elected officials.
A) Space out training sessions
People are more likely to retain information if material is spread out over time rather than bunched into a larger mass (Baddeley and Longman, 1978[14]; Lee and Genovese, 1988[15]; Kapler, Weston and Wiseheart, 2015[16]). As well as promoting retention, the benefits may also extend to enhancing an individual’s conceptual understanding and reflective thinking (Yuan, 2022[17]). At a cognitive level, spacing out sessions can provide more opportunities to repeat new knowledge, both consciously and unconsciously. Retrieving the information at intervals may therefore strengthen the neural pathways underpinning the memory. In practice, this argues for smaller, more frequent means of acquiring knowledge.
B) Deliver material in multiple ways
A classic finding in cognitive science is that multiple forms of delivery work better than single forms (Kobus, Moses and Bloom, 1994[18]). Groups that receive only the spoken or printed word show significantly poorer recall than multimodal groups where a mixture of print, picture and spoken word are used. There are nuances: related information should be introduced together; the speed, continuity, and complexity of information must be considered; and verbal and graphical information should align well in terms of their meaning to be effective (Park and Etgen, 2000[19]).
C) Elaborate on the material
Elaborating on material has long been known to help deepen one’s knowledge, moving the material from a transient experience to a more persistent understanding (Craik and Lockhart, 1972[20]; Coleman, Brown and Rivkin, 1997[21]; Leutner and Schmeck, 2014[22]). The idea is that once some material has been recognised, having individuals enrich or elaborate on the material themselves deepens their understanding of it. Elaboration involves triggering associations, images or stories based on one’s past experience with the material. This helps make meaningful connections rather than engaging in activities that involve simple repetition. Useful examples include asking individuals to predict their expectations first (Tucker et al., 2024[23]), asking individuals to generate simple drawings of the material (Leopold and Leutner, 2012[24]) short, even one-sentence, written summaries of it (Doctorow, Wittrock and Marks, 1978[25]), and reflecting on and answering questions related to graphs and figures based on the material (Menekse et al., 2013[26]). A useful summary of ways to promote this form of learning is provided by (Fiorella and Mayer, 2015[27]).
D) Test the material as part of the learning process
A robust finding in cognitive science is that taking tests on material to assess retention enhances retention itself as well as providing feedback on what one knows. This phenomenon is known as the “testing effect” (Roediger and Karpicke, 2006[28]) and is found to be independent of individual cognitive ability (Jonsson et al., 2021[29]). Moreover, repeated tests and tests with feedback are found to produce better retention (Karpicke and Roediger, 2009[30]). However, the complexity of the material matters, with the testing effect found to decrease or even disappear with more complex learning tasks (van Gog and Sweller, 2015[31]).
There are other useful initiatives in the financial literacy space to draw on. Interactive methods, such as games, competitions, and visualisations have been used to good effect. For example, the Financial Consumer Agency of Canada has launched an online Budget Planner tool incorporating Canadian statistical data, behavioural insights, and gamification to enhance financial literacy (OECD, 2022[32]).
There are few examples in the fiscal domain. One useful example is “The Fiscal Ship” – a game that simulates policy choices intended to highlight the trade-offs involved in putting the federal budget on a sustainable path while meeting wider policy priorities.3
Blog posts and social media – one avenue for delivering insights relevant to understanding budgets is the use of blog posts and social media. These represent a simpler and more succinct format, often being delivered in more casual and accessible language. For example, the use of blogposts and social media by the Scottish Parliament Information Centre (SPICe) is mutually reinforcing: the SPICe Twitter account alerts Twitter users to new SPICe blogs, which are often very topical. When SPICe blog posts are tweeted, on average they get 26% more views (Von Trapp and Nicol, 2019[33]). Moreover, briefings promoted through social media attract more than double the views of briefings not promoted in this way. SPICe is particularly good at linking tweets to ongoing parliamentary business, which helps increase its relevance and reach.
Artificial intelligence (AI) bots – one avenue that will become increasingly useful is the potential for AI to deliver domain-specific knowledge in a user-friendly way. Modern AI models can be trained on domain-specific content to develop bots with specialised knowledge and an ability to generate responses to user questions related to these domains. For instance, in the medical field, models can be trained on medical literature, journals, and clinical records to understand medical terminology, diagnoses, and treatments. An example here is Ada Health (n.d.[34]). These models can be fine-tuned by developers, meaning that they can leverage the knowledge encoded in pre-trained natural language models and adapt it to their specific needs.
Such models could be usefully applied to the field of the public finances. AI-powered bots can be trained on literature relevant to the wider public finances, fine-tuned to incorporate national specificities and then used to enter natural language conversations with users. This would allow them to query the bot for information or help in areas specifically related to understanding public finances. This avoids the risk that comes with using standard AI tools such as ChatGPT or Gemini, which rely on a wide array of content with greater risk of inaccuracies or “hallucinated” content. In this vein, chatbots are already being rolled out by tax administrations to answer citizens’ queries on tax legislation.
The material should not be too complex
While public finances are complex and involve many conditions and wide uncertainties, this does not mean it is impossible to convey them in a simple manner.
For example, when it comes to fiscal sustainability, the definitions are often loose. There are many aspects to consider and plenty of uncertainty. The OECD (2013[35]) has defined fiscal sustainability as “the ability of a government to maintain public finances at a credible and serviceable position over the long term”. This definition refers to government capabilities as well as credibility and long-term economic conditions. These aspects are either unobservable or highly uncertain. The definition could also entail thinking of fiscal sustainability as referring to the net financial and non-financial worth of a country or in terms of its ability to service financial liabilities.
As one potential measure of fiscal sustainability, debt sustainability is influenced by multiple factors. Growth, inflation, prevailing interest rates, the structure of sovereign debt securities, the balance between revenues and expenditure, the composition of those as well as their variability, whether or not policymakers will be able to run smaller deficits or even sustained surpluses, and so on.
The multi-faceted nature of debt sustainability highlights the substantial amount of variability involved. As Blanchard, Leandro and Zettelmeyer (2021[8]) note, “there is no single, time-country-invariant, magic debt or deficit number.” Rather than simple “yes” or “no” answers to questions such as “if I do this, will it be sustainable?”, the answers are more likely to warrant probabilistic assessments. For example, “it is estimated that pursuing these tax cuts would raise the probability of an unsustainable debt path from 5% to 15%”.
Despite the number of factors and the level of uncertainty involved, there are ways to reduce the problem to the things that matter the most. Rather than engaging in multiple caveats as a start, general guidelines can be offered before considering case studies where these general statements do not hold (Pinker, 2014[36]). People deal with uncertainty all the time; it does not require constant emphasis.
It should be possible to address complex topics such as debt sustainability with general statements at first. Then, one can outline the circumstances where these statements do not apply. One can also assume that, while uncertainties are high, people will nonetheless be able to reason intuitively with some degree of uncertainty without the need for excessive hedging.
Below is an example of an application of this approach to the concept of debt sustainability. An introduction to the subject for policymakers could read as follows:
“If governments spend more than they take in, they will run deficits. Ongoing deficits lead to rising debt, higher interest payments, and risks that debt cannot be repaid. This leads to bankruptcy. For governments, that means a sudden need to cut spending, or hike taxes, usually at a time when people are already losing their jobs. In other words, austerity. Austerity is bad for jobs, bad for growth, and bad for running a stable democracy.”
Just six sentences provide a reasonably clear way to conceive of debt sustainability. This is exactly the type of phrasing that finance ministers might deliver in pressurised media engagements. Indeed, the phrasing is inspired by the recollections of Michal Horvath, the Slovak economist who briefly served as Minister of Finance in 2023. He recounts having at most “five sentences” to deliver difficult messages about public finances on television.
Most economists would disagree with this exposition of debt sustainability, pointing to numerous caveats, nuances, and qualifiers that can be added. For instance, an economist might note that persistent deficits can be perfectly sustainable in the right conditions. High growth, low interest rates or limited deficits might still produce a sustainable debt path.
An economist would probably also take issue with the word “bankruptcy”. They would likely note that, technically, governments do not go bankrupt. There is no formal bankruptcy process and governments often have many options businesses do not, such as stoking inflation to devalue outstanding debt and reducing borrowing costs by forcing banks to hold more government debt.
Finally, an economist might also dispute the likelihood of austerity arising in these situations. Fiscal consolidations might be avoided, they may be stretched out over a long period of time to limit their impact, they may not coincide with a general downturn in the economy, and monetary policy could offset their worst effects.
Nonetheless, there are many advantages to starting with a general statement along these lines.
First, it sets out a clear linear narrative for why fiscal sustainability matters, running from the basics of a deficit to its impact on debt and finally linking it to painful societal outcomes.
Second, as Thomas and Turner (2011[37]) note, this exposition serves as important scaffolding rather than the promise of covering every eventuality. In other words, it is the gateway to a far deeper understanding. It does not preclude the caveats and nuances from coming later.
Third, it is couched in the language of everyday experience rather than technical language. Bankruptcy is a commonly understood phrase, even if the specifics of every bankruptcy are uniquely different. And few policymakers will be oblivious to the pain of the austerity era that followed the financial crisis.
The sustainability of public finances is simple but not easy. That is, the equations are known and the uncertainties involved can be estimated. The real challenge is the inability to be precise, consistent, and robust in assessments of how to maintain fiscal sustainability in a world that is prone to new and unexpected shocks.
2.2.5. Fostering a culture of evaluation and learning
These initiatives should be part of a framework that encourages a wider culture of evaluation and learning. Including elected officials, stakeholders and the wider economic community in the process of re-evaluating and re-defining the goals and objectives can help ensure buy-in, while reinforcing the quality of the initiatives being delivered.
Tracking progress
Thinking about how to evaluate people’s understanding of public finances early on is a key lesson from the OECD’s work on financial literacy. The goal of the initiatives considered in this chapter is to enhance understanding. As such, tracking the success of initiatives and refining them will be essential to ensuring that this goal is achieved.
Measuring the success of initiatives should involve looking at quantitative indicators. This could include measuring participation, measuring the change in fiscal knowledge associated with each initiative, measuring the increase in access to information, and using waves of surveys measuring understanding of public finances. These can translate to key performance indicators (KPIs) that can then be assessed and tracked over time. In designing these there needs to be a good understanding of what the priorities and assumptions are underpinning any evaluation.
Funding for evaluation should be earmarked in advance. This may require resources to engage professional and external evaluators to bring relevant skills and an external perspective.
Making the most of key time periods and strengthening understanding of public finances as a two-way process
There are likely to be specific windows during the year that can be best used to enhance understanding of public finances. At the same time, these efforts can be seen as a two-way process. For example, elected officials can reinforce the case for sustainable fiscal policy by enhancing their citizens’ understanding at the same time as their own.
One example of this is parliamentary committees or hearings, which provide an opportunity to begin the two-way process. They often involve hearing from citizens about their concerns or priorities. However, they can also provide a useful exchange for informing citizens about trade-offs and risks facing elected officials. Sectoral committees, in particular, have a role to play. They are primed to engage with citizens. However, they need to communicate their own constraints when doing so. They also need to ensure that these engagements feed into the budget process itself, including by co-ordinating parliamentary work across committees.
Another useful example is Ireland’s annual forum, the National Economic Dialogue (NED). The NED seizes the opportunity to broaden understanding among both elected officials and citizens several months before the annual budget. It brings together social partners, unions, businesses, and civil society. A crucial feature of the NED is the scene-setter, in which independent economic experts present the macroeconomic and fiscal outlook. This helps to ground discussions in a shared understanding of constraints and risks, moderate demands and foster consensus. This reduces the risk that runaway expectations influence the final budget (Government of Ireland, 2015[38]).
Other considerations
There are other things that should be considered when seeking to enhance understanding of public budgets. One is the extent to which participation in initiatives should be made compulsory or not. Another is whether a certain level of knowledge should be defined as reaching a reasonable standard. This feedback could be anonymously provided in a way that grades against peer standards to encourage development.
Demystifying public finances is essential for strengthening the foundations of sound fiscal policy. As the fiscal pressures facing OECD countries intensify, strengthening understanding of budgets, debt dynamics and long‑term sustainability becomes a prerequisite for decision makers taking credible, durable choices. This chapter has shown that, while many initiatives already exist to support decision makers in this role, current approaches remain uneven, too focused on technical processes, and often insufficiently connected to the bigger picture.
Enabling deeper understanding means that efforts to demystify the budget must move beyond the mechanics of the annual budget cycle. Effective initiatives focus on the fundamentals: why fiscal rules exist, what drives sustainability, and the consequences of inaction. They use clear and relatable narratives and apply adult‑learning techniques that recognise the time constraints and responsibilities of decision makers. They also make greater use of digital tools, interactive content and storytelling to bring abstract fiscal concepts closer to lived experience.
Decision makers need support to understand the long‑term implications of today’s policies, but so, too, do the wider intermediaries who help shape public debate. Elected officials, the media and civic organisations play a vital role in translating fiscal information for citizens, contextualising major challenges and helping build a shared appreciation of constraints and trade‑offs.
Looking forward, strengthening understanding of public finances must become a shared institutional endeavour. Fiscal councils, parliaments, supreme audit institutions and other analytical bodies all have a role, as do elected officials, journalists, educators and civic organisations who mediate public debate. A culture of continuous learning, evaluation and openness will help ensure that knowledge‑building efforts improve over time
Ultimately, strengthening understanding of public finances will ensure citizens and decision makers understand the scale of the challenges ahead, appreciate the trade‑offs involved, and are equipped to support the difficult choices needed.
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← 1. For a wider-ranging discussion of federal debt and its consequences, see the Congressional Budget Office’s (2020[40]), “Federal Debt: A Primer”.
← 2. This is conceptually equivalent to a shock to average effective interest costs. In practice, average effective interest rates are often slower to respond due to various actions by debt management offices that mitigate the immediate risks. The average effective interest rate is the annual interest bill expressed as a percentage of outstanding debt in the previous year. This is slow to respond as much of the existing debt will continue to exist and is often at fixed interest rates. Even if it is not fixed, debt management offices can hedge the interest rate risks involved for floating debt securities.
← 3. A good explainer on how The Fiscal Ship can act as a teaching tool. See (Lee, Schüle and Sheiner, 2019[39])