Sustainability assessments of general government finances in the knowledge base of economic policy

So far, the assessment of the sustainability of public finances has focused on the long-term sustainability gap. Assessment methods should be broadened.

The purpose of this audit was to evaluate sustainability gap calculations produced by the Ministry of Finance and the related reporting practices. In addition, the audit examined whether the sustainability assessments have been appropriately prepared and whether the reported sustainability information is sufficiently comprehensive for use in the framing of economic policy. In addition, the audit examined the usefulness of sustainability indicators in the steering of fiscal policy.

Sustainability gap and sustainability of general government finances have for years been important themes in economic policy debate. Sustainability gap, as an indicator reflecting the sustainability of public finances, has also played a key role in the justifications for the fiscal policy stance and structural reforms. Thus, the significance of the audit topic to central government finances is very high.

Assessment of sustainability as comprehensively as possible is important so that sustainability information could be extensively utilised in decision-making concerning public finances. Due to the great uncertainty involved in sustainability assessments they cannot be used as precise indicators. Instead, they are best suited for the formulation of a situational picture of public finances and assessment of the need for structural reforms.

Based on the audit, sustainability assessment at the Ministry of Finance has largely focused on the long-term sustainability gap indicator. Thus, the Ministry should develop its regular assessment of sustainability and sustainability reporting. Especially the information content should be expanded to also cover, for example, an indicator covering approximately the upcoming 15 years. The use of such an indicator has become an established practice, for example, in reporting by the EU Commission and by the Swedish government.

Based on the audit, the Ministry of Finance has produced its sustainability assessments carefully and with high expertise. However, the audit revealed certain issues in the information quality, especially in the simulations of the development of age-related expenditure. The National Audit Office recommends that the Ministry of Finance, together with the Ministry of Social Affairs and Health and the National Institute for Health and Welfare, ensures that the calculation and simulation methodologies are up-to-date and transparent.


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