This presentation was made by Scherie Nicol, OECD, at the 9th Annual Meeting of the OECD network of Parliamentary Budget Officials and Independent Fiscal Institutions held in Edinburgh, Scotland, on 6-7 April 2017.

1. Subnational fiscal frameworks
Scherie Nicol
Public Governance & Territorial Development Directorate, OECD
9th Annual Meeting of the OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions
The Scottish Parliament, Edinburgh

2. • Current picture: subnational fiscal arrangements
• Recent trends and fiscal challenges
• Strong fiscal frameworks to ensure fiscal
sustainability
2
Outline of presentation

3. 3
Overview of subnational arrangements
Source: OECD (2016) Subnational governments in OECD countries

4. 4
Degree of decentralisation varies widely
Source: OECD (2016) Subnational governments in OECD countries

5. 5
Spending more decentralised than
revenues: risks of fiscal imbalances
Source: OECD (2016) Subnational governments in OECD countries

6. 6
Some policy areas more
decentralised than others….
Source: OECD (2016) Subnational governments in OECD countries

7. • Current picture: subnational fiscal arrangements
• Recent trends, fiscal challenges
• Strong fiscal frameworks to ensure fiscal
sustainability
7
Outline of presentation

8. • The OECD area has become more decentralised over the last
two decades
• Where increased decentralisation of spending and revenue
has been observed, there has been a strengthened role for
SNGs in fiscal policy
• Emergence of subnational IFIs
• Recognition of the importance of multilevel governance in
policymaking
– Particularly intergovernmental fiscal cooperation (IFC)
8
Recent trends

9. • The “common pool” problem
• Moral hazard
• Heterogeneity of SNGs
• Autonomy of SNGs
9
Fiscal challenges at the sub-national level

10. • Political economy obstacles
– Fragmentation of subnational levels of
government
– Differences in the political affiliations
– Fear of encroachment
– Ethnic tensions, differences in natural
resources/economic structures/levels of
development, or perceived unfairness
• Institutional factors
– Tradition of top down fiscal management
– Spending and revenue functions assigned
across government
10
Challenges to intergovernmental
fiscal cooperation

11. • Current picture: subnational fiscal arrangements
• Recent trends and fiscal challenges
• Strong fiscal frameworks to ensure fiscal
sustainability
11
Outline of presentation

12. • Revenue/spending assignment
• Transfer systems
• Fiscal management practices
• Fiscal rules
• Independent fiscal institutions
• Intergovernmental fiscal cooperation
12
Elements of a subnational fiscal framework

13. • Strengthen fiscal sustainability
• Ensure effective resource allocation
13
Subnational fiscal frameworks aim to:
Good frameworks are the ones that
perform against these dimensions

14. • Diversity of SNGs
• How SNGs are represented
in national legislature
• Characteristics of fiscal
decentralisation
• Power balances among
levels of government
• Form of government
14
Factors influencing choice of
subnational fiscal framework

15. • Well designed sub-national fiscal frameworks can
strengthen fiscal sustainability and ensure effective
resource allocation
– but no easy recipe
– affected by economic, socio-political and institutional
factors
Must be tailored to purpose
and country circumstances
15
Conclusions

16. Subnational fiscal frameworks and
intergovernmental fiscal co-operation
Thank you