Fiscal policy in line with the framework but reporting should be improved
The Swedish National Audit Office has reviewed the Government’s proposed fiscal policy in the fiscal policy bills in 2023. The overall conclusion is that reporting is done in accordance with the fiscal policy framework, but that several important improvements should be made.
For example, in the fiscal policy bills in recent years, the Government has made several changes to the indicators on which it bases its fiscal policy assessments, without explaining why. There is a risk that this impairs comparability with previous fiscal policy bills and other experts’ assessments.
“To enable the Riksdag to assess the fiscal policy and its impact on the economy, reporting needs to be transparent. Changing indicators without any justification counteracts transparency and democratic control,” says Auditor General Helena Lindberg.
In 2022, the Government changed the method used to calculate the structural balance. This constituted a deviation from the accepted method and has had major consequences for interpreting fiscal policy. The Swedish National Audit Office directed sharp criticism at this in its audit of the proposed fiscal policy in last year’s Budget Bill, and the Government has not yet satisfactorily justified why it was important to deviate from the accepted method.
The change of method also means that the Government no longer employs the same method as its expert agencies – the National Institute of Economic Research and the National Financial Management Authority, leading to differences in forecasts of the structural balance due to different methods and not due to different assessments of economic development. In light of this, the Government’s forecast comparisons are not sufficiently good, and threaten to counteract confidence in fiscal policy.
“The lack of transparency in the Government’s forecast comparisons make it impossible, in practice, for an outside observer to assess the reasonableness of the Government’s fiscal policy,” says Dan Sölverud, project leader for the audit.
The Swedish National Audit Office also notes that the Government remains committed to previously established levels for the expenditure ceiling, resulting in large budget margins. This means that the most important function of the ceiling will be disabled and essential priorities between expenditures will be ineffective. Here too, the Government has been unclear on what has governed the proposed level for the expenditure ceiling for the third additional budget year.
The Swedish National Audit Office has been critical, several times in the past, of the Government’s management of the expenditure ceiling, which ultimately risks causing the expenditure ceiling to lose its role as a governing budget policy objective.
“It is remarkable that this deficiency persists year after year. It indicates that the issue needs to be part of the coming review of the fiscal policy framework,” says Helena Lindberg.
Recommendations in brief
The recommendations to the Government include the following:
- More clearly justify the need for new or amended indicators in assessments of whether fiscal policy is expansionary, neutral or restrictive.
- Ensure that an accepted method for calculating the structural balance is established.
- Continue to develop the forecast comparison in relation to other experts, so that it is clear how different factors contribute to the assessment of the structural balance.
- Develop reporting of considerations in the preparation of the proposal of a level for the expenditure ceiling.
- Commission the future framework committee with developing and clarifying the function of the expenditure ceiling in connection with the next review of the fiscal policy framework.
See the report for the full recommendations.
Press contact: Olle Castelius, phone: +46 8-5171 40 04.
Presskontakt: Olle Castelius , telefon: 08-5171 42 06.
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