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.
The case of Ireland
Ireland benefits from a strong and high-level commitment to integrate equality and its different dimensions into budgetary processes. These efforts are articulated under the “Equality Budgeting” initiative, which has been progressively implemented across the government since 2018. As part of this initiative and the country’s wider performance framework, the distributional impacts of budgetary and welfare measures are analysed to inform budgetary decisions. Government departments are also responsible for setting equality-related goals and relevant performance targets. An advisory group steers the development of the initiative, while the technical capacity to support its implementation is provided by an interdepartmental network of experts. Distributional analyses are underpinned by Ireland’s tax-benefit microsimulation model, which is developed and maintained independently. Overall, Ireland’s case therefore provides an example of a robust institutional framework for the routine consideration of equality in the budget cycle.
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