Preface 3

Foreword 4

Acknowledgements 5

Executive summary 12

1 Overview, key findings and strategic directions 14

1.1. Introduction 15

1.2. Restoring public finances: A challenging context 16

1.3. Strategies for expenditure savings 25

1.4. The role of quality budget institutions and empowering public understanding 34

1.5. Conclusion 40

References 41

2 Old-age pensions 44

2.1. Recent trends in pension spending 45

2.2. Reform initiatives and savings measures 49

References 59

3 Unemployment, sickness and disability benefits 60

3.1. Recent trends in unemployment, sickness and disability expenditure 62

3.2. Reform initiatives and savings measures 64

References 76

Notes 77

4 Family and child benefits 78

4.1. Recent trends in expenditure on family and child benefits 79

4.2. Reform initiatives and savings measures 82

References 86

Notes 87

5 Housing 88

5.1. Recent trends in housing spending 89

5.2. Reform initiatives and savings measures 92

References 97

6 Health and long-term care 100

6.1. Health 102

6.2. Long-term care 117

6.3. Achieving structural savings through using of budgetary tools in health and long-term care 123

References 124

Notes 127

7 Education 128

7.1. Recent trends in education spending 129

7.2. Reform initiatives and savings measures 133

References 143

8 Agriculture and primary sectors 144

8.1. Recent trends in spending on support for agriculture 145

8.2. Reform initiatives and savings measures 148

References 153

9 Research and development 154

9.1. Recent trends in government spending on research and development 155

9.2. Reform initiatives and savings measures 159

References 164

Note 164

10 Public investment 165

10.1. Recent trends in public investment 166

10.2. Reform initiatives and savings measures on public investments 170

References 177

11 Government operations 179

11.1. Recent trends in central government operations spending 181

11.2. Managing inputs into government operations 185

11.3. Transforming how the government operates 196

11.4. Conclusion 206

References 207

12 Fiscal transfers across levels of government 210

12.1. Recent trends in spending on transfers to subnational governments 211

12.2. Reform initiatives and savings measures 213

References 219

13 Other areas of public spending 220

13.1. Economic support to businesses 221

13.2. Non-welfare support for households 229

13.3. Development Assistance Spending 235

References 240

Notes 242

14 Revenue measures 243

14.1. Trends and recent developments in tax revenues 244

14.2. Recent tax policy developments 247

14.3. Challenges ahead 258

References 259

Notes 260

Annex A. Methodology 261

FIGURES

TABLES

BOXES