Download Grants systems in OECD countries: trends and some policy

Grants systems in OECD countries:
trends and some policy issues
Experts meeting on
“General Grants Vs. Earmarked Grants:
Theory and practice”
Thursday September 17th, 2009
Camila Vammalle, Hansjörg Bloechliger
OECD
1
Share of transfers in
total government expenditure (2005)
Source: National Accounts
2
Change in the share of transfers in
government expenditure (1995-2005)
Source: National Accounts
3
Change in SCG expenditure to total
government expenditure ratio (1995-2005)
Source: National Accounts
4
Change in SCG tax revenues on total
government tax revenues (1995-2005)
Source: National Accounts
5
Composition of Grants (2006)
Note: the first line corresponds to state averages, the second line to local averages.
Source: OECD Fiscal Decentralisation Database
6
Change in the composition of grants
(2000-2006)
Note: the first line corresponds to state averages, the second line to local averages.
Source: OECD Fiscal Decentralisation Database
7
Some policy issues (1/4)
• Grants have an equalisation role
Equalisation grants represent:
• 2.3% of GDP
• 4.8% of total government expenditure
• 55% of total intergovernmental grants
8
Some policy issues (2/4)
• Grants may reduce externalities
– Spending or tax
– Horizontal or vertical
– Matching grants
– Are these externalities overestimated?
9
Some policy issues (3/4)
• Earmarked grants may be used to fund
specific policies
– Such as: risk sharing, experimentation, co-funding,
addressing exceptional situations
e.g.: Share of grants to SCGs in national stimulus packages:
General
Purpose
Grants
Australia
Canada
France
Germany
Japan
Korea
Norway
Portugal
Spain
United States*
average (16)
33%
7%
2%
Earmarked Grants
Current
Expenditure
Capital
Expenditure
0%
6%
2%
1%
1%
56%
78%
27%
29%
18%
28%
30%
22%
72%
13%
23%
TOTAL
56%
84%
27%
29%
51%
28%
39%
22%
73%
13% 10
26%
Some policy issues (4/4)
• But grants may have unintended side
effects
– Reducing SCG tax effort
– Putting pressure on spending, deficits and
debts
• Thus need a skilful grant design and
combining grants with complementary
instruments
11
Thank you!
12