Press release | Independent Fiscal Councils: Watchdogs or lapdogs?
CEPR has released its latest eBook entitled Independent Fiscal Councils: Watchdogs or lapdogs? edited by Roel Beetsma (European Fiscal Board) and Xavier Debrun (IMF). It looks at the main issues relating to the effectiveness of independent fiscal councils, and includes 16 detailed contributions from leading macroeconomists specialising in fiscal policy and public finance.
The authors say that independent fiscal councils (IFCs) have the potential to play an increasing role in fiscal policy across the globe. As government spending is influenced by popular opinion, their success relies on targeting problems that are strongly in the public interest. Failing to do so could lead to their demise.
- A good fiscal framework requires the right balance between rules and independent institutions. The latter can raise the reputational/political costs of deviating from well-defined rules, contributing to better fiscal performance.
- The design of IFCs is crucial for their effectiveness. This requires a mandate addressing country-specific gaps in the conduct of fiscal policy, and legal and operational independence, which implies sufficient resources and unrestricted access to relevant information.
- IFCs are inherently fragile, especially in light of their dependence on politicians’ will to fund their activities. Strong political ownership, skillful public communication and interactions with stakeholders in the budget process promote success, whereas low ownership can directly threaten the IFC’s relevance or existence.