1. Grants systems in OECD countries: trends and some policy issues Experts meeting on “General Grants Vs. Earmarked Grants: Theory and practice” Thursday September 17 th, 2009 Camila Vammalle, Hansjörg Bloechliger OECD 1

2. Share of transfers in total government expenditure (2005) 2 Source: National Accounts

3. Change in the share of transfers in government expenditure (1995-2005) 3 Source: National Accounts

4. Change in SCG expenditure to total government expenditure ratio (1995-2005) 4 Source: National Accounts

5. Change in SCG tax revenues on total government tax revenues (1995-2005) 5 Source: National Accounts

6. Composition of Grants (2006) 6 Note: the first line corresponds to state averages, the second line to local averages. Source: OECD Fiscal Decentralisation Database

7. Change in the composition of grants (2000-2006) 7 Note: the first line corresponds to state averages, the second line to local averages. Source: OECD Fiscal Decentralisation Database

8. Some policy issues (1/4) Grants have an equalisation role Equalisation grants represent: 2.3% of GDP 4.8% of total government expenditure 55% of total intergovernmental grants 8

9. Some policy issues (2/4) Grants may reduce externalities –Spending or tax –Horizontal or vertical –Matching grants –Are these externalities overestimated? 9

10. Some policy issues (3/4) Earmarked grants may be used to fund specific policies –Such as: risk sharing, experimentation, co-funding, addressing exceptional situations e.g.: Share of grants to SCGs in national stimulus packages: 10

11. Some policy issues (4/4) But grants may have unintended side effects –Reducing SCG tax effort –Putting pressure on spending, deficits and debts Thus need a skilful grant design and combining grants with complementary instruments 11

12. Thank you! 12