In recent years, governments worldwide have been contending with a complex mixture of fiscal challenges, from responding to exceptional events such as the COVID-19 pandemic, to mounting pressures on public spending from longer-term factors such as population ageing and the climate transition. This has resulted in a renewed international policy focus on fiscal sustainability, as countries emerge out of a period driven by a need to respond to significant and unforeseen economic, revenue, and spending shocks, and seek to return to a stable and purposeful long-term fiscal trajectory.
Like many international counterparts, the Welsh Government has expressed its intention to strengthen its approach to incorporating a medium- and long-term perspective in fiscal and budgetary decision-making. In June 2024, it was announced that the next Welsh Spending Review would extend ‘beyond short-term priorities to focus on the key medium to longer term challenges and opportunities’, helping to embed a whole-of-government approach to identifying priorities and delivering outcomes.
To support this programme of work, the Wales Centre for Public Policy (WCPP) was asked to synthesise evidence on international best practice for adopting a medium to long-term perspective in fiscal and budgetary policy making. Specifically, our research will address the following research questions:
- How are governments internationally adopting public financial management (PFM) processes and frameworks to enable a medium- to long-term approach to fiscal and budgetary policy making?
- Which PFM processes and frameworks have been effective in helping governments to:
- anticipate and plan for public spending pressures over a longer time horizon; and
- better mobilise nearer-term fiscal and budgetary decision-making towards medium- and long-term policy outcomes?
- What key lessons and best practices can be identified from these approaches, with a particular focus on:
- case studies of how governments have tackled significant public spending challenges through longer-term planning; and
- international examples that are comparable to Wales in terms of fiscal levers that are currently or potentially available to the Welsh Government?
To respond to these questions, we are conducting a synthesis of existing research on PFM processes that support medium- to long-term approaches to fiscal and budgetary policy making, including Spending Reviews, medium-term budgetary and fiscal frameworks, and strategic budget initiatives. We will produce a series of reports outlining key lessons and best practice principles, including international examples drawing on existing published case studies. These will be available in Spring 2025.
In addition, we worked in partnership with the OECD to deliver an expert masterclass on Spending Reviews for officials in the Welsh Treasury in March 2025.