What are independent fiscal institutions?
Independent fiscal institutions (IFIs) are defined as non-partisan public bodies, other than the central bank, government or parliament, aimed at promoting sustainable public finances through various functions, including monitoring compliance with fiscal rules, production or endorsement of macroeconomic forecasts for the budget, and/or advising the government on fiscal policy matters. These institutions are primarily financed by public funds and are functionally independent vis-à-vis fiscal authorities. Courts of Auditors are included in this definition if their activities go beyond the accounting control and cover any of the tasks mentioned above. The EU fiscal governance framework (through the Council Directive 2011/85 on requirements for national budgetary frameworks, the Fiscal Compact and the 'Two- Pack' Regulation 473/2013) specified the role and formalised the tasks of national IFIs in order to foster budgetary discipline and to increase national ownership of EU fiscal rules.
While some IFIs already exist for a long time, many were established only after this legal base came into force. Today, IFIs exist in all Member States (except Poland) and they cooperate closely in a network (EU IFI network). DG ECFIN organises workshops with the IFIs at least twice a year to promote mutual exchange of ideas and information.
What are their benefits?
The existence of 'fiscal watchdogs' is conducive to increased accountability and improved fiscal transparency by providing positive and/or normative analysis, assessments, and recommendations in the area of fiscal policy. In particular, fiscal institutions can produce or endorse macroeconomic forecasts for the budget preparation that do not suffer from the optimistic biases often found in official government forecasts; they may impartially monitor the implementation of budget plans and the respect of fiscal rules and budgetary objectives; they may raise awareness about short and long-term costs and benefits of budgetary measures both among policy-makers and the public, and, they can assess whether fiscal measures are appropriate in terms of respect of rules, sustainability of public finances, and stability-oriented fiscal policies.
Jankovics, L., Sherwood, M., Independent Fiscal Institutions in the EU Member States, European Commission, European Economy Discussion Paper 67, July 2017.