Addressing Inequality in Budgeting
Lessons from Recent Country Experience
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In many countries, public expenditure, including transfers, plays a major role in reducing income inequality. The report reviews the various ways that budgeting can be used to this end. A first includes taking a broad approach to results-based budgeting, taking social and distributional goals into consideration. A second relies on integrating distributional impact analysis directly into the budget process. The report discusses the concrete experience of eight OECD countries in this area, analysing how they are integrating distributional impact assessment in spending and budgeting decisions. Finally, it discusses the tools, frameworks and data that are needed to take distributional considerations into account as part of evidence-informed policy making.
Foreword
Increasing inequalities have received strong attention as part of policy debates in recent years, prompting many countries to pay greater attention to the redistributive implications of their policy choices. In public finances, the conversation surrounding inequality usually focuses on redistribution through a taxation angle. However, the redistributive impact of public expenditure in reducing inequality is even greater than that of taxation. Going some way to recognising this, many countries have increased their focus on the redistributive impact of public spending. Given this increased interest, this report aims to shed light on how evidence related to distributional issues can be integrated into policy making through the budget process. This area has seen many innovative practices emerge in recent years. Countries have been developing results-based budgeting approaches that can help integrate broader social and distributional goals into the budget process. Many have also introduced distributional impact analysis as part of the budget formulation process.
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