The Expenditure Benchmark: Complex and Unsuitable for Independent Fiscal Institutions

The expenditure benchmark is an indicator for the evolution of public expenditure introduced in 2011 in the already complex European fiscal rules framework, being a very specific application of an expenditure rule. However, it is a quite complex indicator and not suitable for the use at national level by the Independent Fiscal Institutions—that monitor compliance with national fiscal rules—as it relies on the European Commission’s data inputs and judgement not available in real time. This paper argues for more transparency and for a simplification of this indicator to reduce the reliance on non-observable variables. Such improvements are essential as most existing proposals to reform the European Union’s fiscal rules aim to use an expenditure rule as the operational fiscal rule, a role the expenditure benchmark as is cannot fulfil.