Financial crisis ‘led to European PFM renaissance’

24 Jun 14
The global financial crisis has triggered a ‘renaissance’ in public financial management across Europe, consultants Deloitte have suggested.

Following conversations with more than 30 government finance leaders across 19 European countries, the firm highlighted that some of the most ambitious finance leaders now plan to take their functions to a new level, moving from ‘bookkeepers’ to strategists’.

‘The conversations leave no doubt that public financial management has entered a new phase,’ said Richard Doherty, Deloitte’s public sector leader for Europe, Middle East & Africa.

‘Fiscal consolidation measures, political imperatives and unprecedented public interest have put a new level of pressure on the people managing taxpayers’ money.’

The report, The government finance renaissance: conversations across Europe, also noted that governments have not changed their revenue mix in response to the crisis. Indeed, revenue has proved ‘surprisingly robust’ and had returned to pre-crisis levels relatively quickly.

However, governments were focusing more on improving tax administration and compliance, which was likely to continue.

Another theme to emerge from the conversations were weaknesses in management information, with financial information collected inconsistently across government departments and a lack of integrated IT systems.

‘As a result, governments’ abilities to create consistent, pan-government management information are limited,’ Deloitte’s report stated.

‘Some interviewees added that as a consequence of this limitation, the financial implications of policy decisions – and certainly the long-term impact – are not clearly understood by government decision makers.’

Elsewhere, the report highlighted public sector employment restrictions, such as lower salaries and no performance-related bonuses, which were limiting the pool of talent available.

Poor communication of financial information to citizens in order to secure engagement and support was also a concern. Government finance leaders view this as an area for further development.

The report made four recommendations to help Europe’s governments maintain momentum and continue the PFM renaissance.

These are: greater sharing of experience across borders; a fresh approach to public finance recruitment and retention; the development of new ways to information and communicate about government finances; and investment in leadership within the government finance community.

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