1. Introduction
1.1. Rationale for a comprehensive dataset for analysing the quality of public
finances
The feature of quality of public finances is regularly underlined in EU policy documents, within the a
context in which fiscal discipline and a sustainable fiscal position are maintained. The March 2003
ECOFIN Council stated that “greater attention should be paid, within the overall constraints of the
Stability and Growth Pact, to the quality of public finances with a view to raising the growth potential of
the EU economies.”
Against that background the EPC established a new Working Group on the Quality of Public Finances
(WGQPF) that aims at analysing the links between public finances and long term growth. The work
should provide contributions to clarifying the concept of quality and to addressing useful tools for the
analysis of the use of public resources.
From a theoretical point of view, the issue of whether public finance enhances long-run economic growth
has been widely discussed in recent years. Economic models confirm that it is possible to distinguish
between “productive” and “unproductive” expenditures, as well as between “distortionary” and “non-
distortionary” taxes.
Although a growing strand of empirical literature has tried to identify the features of “productive”
expenditure, the understanding of the links between public expenditures and economic growth is still
limited. The unsatisfactory knowledge can be attributed, among other reasons, to the lack of a uniform,
coherent set of data, comparable across countries, for in-depth analysis of the different activities of
government.
A reliable dataset is a necessary tool to analyse the quality of public finances in the political framework
of the BEPGs as well. The 2004 implementation report of the 2003-2005 BEPGs highlights a lack of
timely and comprehensive data as the main obstacle for analysing trends in the composition of total
public expenditure. Therefore the WGQPF stresses that “considering the methodological complexities
and the problems of collecting comparable data among Member States, the first and probably permanent
part of the work should be devoted to the development of a consistent methodology to analyse the
composition of public expenditures” (WGQPF, 2004).
1.2. Structure of the paper
This note is an attempt to examine the problems and data needs related to the WGQPF definition of
quality of public expenditures.
Mainly, the paper focuses on four issues:
1) The possibility to construct – and the way to achieve - an enlarged information system
characterised by coherence, comparability, consistency and completeness, without entailing an
excessive increase in the administrative burden;
2) The present state of data availability, of time specification and of timeliness across countries;
3) What could be implemented in the short run and what should be left to the medium-long-period
work;
4) The assessment of the state and the perspectives of statistics officially produced by European
Member States and of the possibility to improve them in the next future.The paper is organized as follows.