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Government renewal and reform in EMEA
Deloitte research into getting the balance right
Many countries in the Europe, Middle East and Africa (EMEA) region are experiencing hard times due to a large fiscal imbalance between expected revenues and committed expenditures.
The key question for governments today is – how to go about developing the right portfolio of initiatives to structurally reduce the fiscal deficit?
Our research has shown that countries move through a number of phases when dealing with this scale of fiscal imbalance. During the early phases, governments generally reduce programme expenditure and seek to increase revenue; however, this is neither a sustainable nor complete solution. In fact, across the seven European Countries we researched, they would need to decrease programme expenditure by 25% or increase tax revenue by 17% just to establish a public fiscal balance. This is in an environment where all seven countries have increased their relative expenditure (as a percentage of GDP) since 2006, and only three of the countries have had a sustained year-on-year reduction in expenditure of more than one year (Ireland, Greece and Portugal) – i.e., general expenditure is increasing. In addition, while revenues in each country have seen significant changes since 2007, no country has achieved anything like a 17% increase. The general absence of real growth in most European economies (and occasionally real decreases in economic activity) has further handicapped governments’ ability to increase revenue. Given the evidence that reducing programme expenditure is a major challenge and that increased revenue is slow to come in, alternative means of public service delivery offer a significant new mechanism to reduce government spending.
Deloitte’s Government Renewal and Reform programme is an EMEA initiative which brings together our global experience to support EMEA governments in tackling the current economic crisis. Deloitte has considerable experience in supporting countries and regions around the world –with the implementation of cost reduction initiatives, enhancing tax policies and/or driving economic activity.