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E ducation and the Quality of Public Finances Fabienne Ilzkovitz DG ECFIN. Symposium on the future perspectives of European education and training for growth, jobs and social cohesion Brussels, 19-20 June 2007. Overview. The quality of public finances: a multidimensional concept - PowerPoint PPT Presentation
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EEducation and the Quality of Public Finances
Fabienne IlzkovitzDG ECFIN
Symposium on the future perspectives of European education and training for growth, jobs and social
cohesionBrussels, 19-20 June 2007
2
Overview
1. The quality of public finances: a multidimensional concept
2. Why is it acquiring a growing importance in the policy debate?
3. Composition, efficiency and effectiveness of public spending
4. Way forward
3
Overview
1. The quality of public finances: a multidimensional concept
2. Why is it acquiring a growing importance in the policy debate?
3. Efficiency and effectiveness of public spending
4. Way forward
4
Quality of public finances:Definition
Quality of public finances refers to the conduct and organisation of budgetary policy and its potential impact on the long-term growth and adjustment capacity of the economy
5
Quality of Public Finances:A multidimensional concept
1. Institutional settings, including fiscal rules
2. Composition of public spending
3. Efficiency of public spending
4. Efficiency of tax revenues
6
Overview
1. The quality of public finances: a multidimensional concept
2. Why is it acquiring a growing importance in the policy debate?
3. Composition, efficiency and effectiveness of public spending
4. Way forward
7
Why is it important?
• Public spending and revenues account for a large share of GDP
• Fiscal discipline in the context of the Stability and Growth Pact (SGP)
• Spending on growth enhancing measures in the context of the Lisbon Strategy
8
Sustainability of public finances
• Spending pressure on public balances stemming from ageing
• Avoid the crowding out of growth-enhancing expenditures
9
Benefits from good quality education spending
• Education spending accounts for a large share of total public spending
• Improved educational achievements can contribute to :– raise productivity and facilitate adjustment
in a globalised economy– increase employability and stimulate
social cohesion– combine sound and sustainable public
finances
10
Increased attention by ECOFIN Council for
Quality of public finances
ECOFIN Council Conclusions of 5/06/07:1. Continue to analyse impact of institutional settings on
composition, transparency and efficiency of public budgets
2. Improve data availability, in particular for education, health care and social protection and R&D by 2008 at the latest
3. Develop analysis of public expenditure efficiency and effectiveness, in particular in R&D and education
4. Exchange information on current and planned tax reforms and their impact on growth and employment
11
Overview
1. The quality of public finances: a multidimensional concept
2. Why is it acquiring a growing importance in the policy debate?
3. Composition, efficiency and effectiveness of public spending
4. Way forward
12
Composition of public spending
social protection 37%
health12%
education13%
culture and religion3%
environment protection
1%
housing2%
economic affairs11%
public order and safety
4%
defence3%
General public services
14%
Source: EUROSTAT, COFOG, EU-25 average
13
Concepts of efficiency & effectiveness
Input Output OutcomeEfficiency Effectiveness
Institutional and structural factors
Effectiveness
14
FI
LU
SENLIE
PL
BE
SKEL
ESPT
HU
CZ DEDKFR
AT
IT
460
470
480
490
500
510
520
530
540
550
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000
Cumulative expenditures per Pupil over the duration of primary and secondary studies (in $, PPPs)
PIS
A 2
00
3 -
Pu
pil
s p
erf
orm
an
ce
in
th
e
do
ma
in R
ea
din
g (
me
an
sc
ore
)
Spending - PISA
Source: OECD
15
Efficiency of public spending on education
Countries Clements (2002) OECD (2007) Afonso et al. (2006)
Possible efficiency gains using the same resources
Austria 1.3 6.0 9.5
Belgium (*Fl.) - 2.0 5.5
Czech Republic 0.9 6.0 6.8
Denmark 1.7 4.9 9.3
Finland 0.0 1.6 0.0
France 1.3 5.4 7.2
Germany 1.3 9.1 8.3
Greece 0.0 7.0 8.2
Hungary 0.5 4.7 10.5
Ireland 0.0 2.2 7.9
Italy 1.4 6.9 5.1
Netherlands 1.1 5.1 3.7
Portugal 5.3 2.2 6.1
Slovak Republic - 5.3 1.8
Spain 2.0 3.4 2.9
Sweden 1.7 6.0 0.0
US 2.4 8.2 -
16
Investigating the determinants of efficiency is crucial
• Various determinants (institutional, structural)– In the area of education: greater autonomy of
schools and education of parents
• Interactions between determinants
• No “one-size-fits all” model for efficiency improvement
17
Function-by-Function approach
• Measurement of efficiency is complex• Function-by-Function approach more
promising to derive concrete policy conclusions
• First candidates :– Growth-enhancing expenditures : R&D, education– Expenditures affected by ageing : health care
18
Overview
1. The quality of public finances: a multidimensional concept
2. Why is it acquiring a growing importance in the policy debate?
3. Composition, efficiency and effectiveness of public spending
4. Way forward
19
Way forward
• Improve data availability
• Agree on concepts and methods
• Integrated in the assessment of the NRPs and, in a more medium term perspective, of the SCP
Thank you!Thank you!