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Construction of an index on the quality of institutions for medium-term budgetary planning

The index was calculated taking into accounts both the existence and properties of national MTBFs and the preparation and status of SCPs. A difficulty when constructing the index was to assess how national MTBF, when they exist, interact with SCPs. In some cases, for instance, the SCP is entirely based on a pre-existing national MTBF: there is no formal approval of the budgetary targets set in the SCPs in the national Parliament, but the SCP is entirely based on a document which was previously approved by the national Parliament. This was taken into account when attributing scores for the various dimensions considered. Another case concerns the situation where the national MTBF concerns only the central government sector. In such a situation, scores concerning the coordination between levels of government prior to setting the multiannual targets was made taking into account the information on the preparation of the SCP. This box provides details on the how scores were attributed and how the EU-27 countries rank with respect to this index. 

Construction of the index

The synthetic index measuring the quality of institutions for medium-term budgetary planning is made of five components (justifications for taking into account these dimensions are in the main text). For each criterion, the scores were attributed as follows:

(1) Existence of a national MTBF (on which the SCP is based):

2 for a MTBF covering the whole of government sector or a large part of it (e.g. central government and social security)

1 for a MTBF covering central government

0 no national MTBF

(2) Connectedness between the multiannual budgetary targets and the preparation of the annual budget (domestic MTBF or SCP):

2 fixed framework (articulated around a pre-defined path for government expenditure, generally not revised over time)

1 the medium-term budgetary targets form the basis upon which the budget is prepared but there can be deviations

0 flexible framework in which medium-term targets are only indicative (no clear link with the annual budget)

(3) Involvement of the national Parliament in the preparation of the medium-term budgetary plans (domestic MTBF or SCP):

2 vote of the Parliament on the main medium-term objectives (in the context of a national MTBF or of the SCP)

1 no vote but formal presentation of the objectives to the national Parliament

0 no formal presentation of the objectives to the national Parliament

(4) Existence of coordination mechanisms prior to setting the medium-term budgetary targets (domestic MTBF or SCP):

2 in case there is a proper ex ante coordination mechanism between all levels of general government

1 coordination mechanisms only for some general government sub-sectors

0 no coordination mechanism

(5) Monitoring and enforcement of multiannual budgetary targets:

2 if there are well-defined actions in case of deviations form plans and a regular monitoring of targets (reports, etc.)

1 some monitoring and enforcement procedures

0 no clearly defined monitoring and enforcement procedures

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