Spotlight on data: trends in budget transparency, open spending & budgeting

** The Government Spending Watch database tracks spending in developing countries on key anti-poverty and development sectors linked to the Millennium Development Goals. This is then turned into easy-to-understand data and made freely available online. We also work with others to track and analyse trends. We exist to help increase the availability of budget information for tracking development goals, so citizens can hold their governments to account. This blog is written by Jo Walker, Programme Manager for GSW, and is one of a series of blogs by the GSW team focused on looking at latest cross-country trends from our database. **

The information contained in the Government Spending Watch database, gives us a pretty unique insight into government spending trends in areas critical for tackling poverty, and delivering key MDG commitments. It also gives us a good birds-eye view of trends in government openness and transparency in budgeting and spending (because we gather almost all our information from publicly available online government budget documents). In the last 12 months our online database has gone through a massive expansion; the number of countries has grown by 30%, and the amount of total data we track has risen significantly (i.e. we’ve broadened, through more countries, and deepened, through more data per country). One of the reasons we’re accessing more information is the significant increase in budget transparency and openness in recent years.

The greater push towards more “open governments” has led to a palpable shift in the amount of information made available in the public domain. That makes our job a lot easier (which is great!), but more importantly, this means the first critical stepping stone to improving government accountability – that people can access the information to do this – is being met in far more countries. What’s more, these changes are happening at a pretty good* (*but not good enough) pace.

When we first set out to track public spending on key MDG sectors, even five short years ago, it was not as widely presumed that governments in developing countries would (and should) make at least some key budget documents available. Now it is the accepted norm. This has helped us to boost the countries online in our database from 56 to 74 in just over a year – and we’re expecting to hit 80 countries before the end of the year. We aim to have all low income countries covered in our database – the rationale was always to cover the poorest countries first, where the greatest need to fill information and data holes for accountability and results exists –  progressively moving towards greater coverage of higher income countries. We now cover over 80% of all low-income countries in the world. As a crude proxy of the level of transparency in budgets, which allows for tracking development commitments, this points to some space for optimism. All but the most fragile, war-torn and secretive countries are not covered in our database – Chad, Somalia, Eritrea, Guinea and North Korea. These are the countries which we hold out little hope of filing in the gaps for, so we’re moving our attention much more firmly to lower-middle income countries (with 70% now covered), and increasing towards upper-middle income countries (with only 15 covered we still have some way to go here).

Even countries in the most difficult of situations have shown with the right support and political will, it’s possible to massively expand their openness and transparency.  Perhaps no country makes this case more powerfully than one of the latest additions to our database – South Sudan. South Sudan, the world’s youngest country, embroiled in conflict, now has more budget data and information related to the MDGs, which can be readily assessed and analysed from online sources, than the vast majority of the countries in our database – in fact, for data availability they have over 80% of all the areas we cover – vastly more than most countries.

Other new 2015 country additions to our database have also made huge strides in improving their data availability. For instance, in Mongolia and Kyrgyz Republic, both governments have undertaken significant transparency and budget reform processes in recent years, leading to large amounts of new information made available. In some cases, the trends in opening-up budgets to the public are truly impressive. In Latin America, for instance, there are now a number of transparency portals – such as the El Salvadorian Fiscal Transparency Portal, which provides timely, user-friendly information on budget planning and execution – allowing citizens to more access budget information in a way which is easy to understand.

Over and above these new country additions, over three-quarters of the countries which have been included in our database for two years or more have improved the amount of spending information we can track since 2012 (see chapter 5 of our recent report). This means that there is more information in circulation which we have been able to access through greater budget transparency.

Much of our findings echo the findings of the (brilliant) IBP 2015 Open Budget survey launched yesterday (and their Open Budget Tracker is a veritable treasure trove of budget documents). Many of the countries they mark as notable ‘improvers’ in their index score, are the countries which we have seen this in too – such as Krygyz Republic or El Salvador

While some of the countries which we most struggle to get information for are on the list of countries which they categorize as having “unacceptably low levels of budget transparency” or  which are “failing to advance reforms”. This includes some of the countries we can’t access any information for (i.e. Chad or Guinea). But also some of the countries we have tried to add, but still can’t access enough multi-year comparable data for (i.e. Iraq). Also included on their list are some countries which we’re trying to add to our database but are struggling with accessing enough data for (such as Bolivia and Vietnam).

We were also stuck by the key finding in the OBI report that volatility in transparency initiatives causes big problems for those trying to track spending – citing Ghana’s sporadic publishing of documents to track actual spending (something we have also struggled with). We have also found this in a number of other countries, such as Nigeria, Ghana, Gambia, Zambia and Cambodia, who have all made documents available and then changed this availability, which has led to less information being available and some movement backwards (and forwards) in recent years.

I will be exploring some of these country level issues in more detail in coming weeks, as well as some of the challenges we still find in tracking the MDGs, and how these might impact on tracking the new SDG global goals. Because it is not only a question of whether governments publish budget documents, but also the level and degree of information, and how readily accessible and readable this is in order to track national or international commitments. So while total budget information is improving through transparency measures, even when the documents were published, they frequently lacked sufficient detail for us to be able to breakdown a number of different sectors we track, i.e. water and sanitation, social protection and gender are hard to track, due to the way governments set up their budgets. Also breaking down budgets by spending (recurrent or capital), and types of funding (donor aid or government spending) is hard.

However, crucially, one of the key messages which needs heeding now is that there is is still far too little information for us to sufficiently track the MDGs – and this raises concerns for the SDGs. Last year, Government Spending Watch published research with the International Budget Project showing the link between budget transparency, the tracking of development expenditure, MDG spending, and MDG results – and setting out suggestions for priorities in the SDGs. This means that tracking and monitoring spending on the SDGs is more likely to help make them a reality.

We know that right now, governments are not providing enough information to connect the dots from inputs towards outputs, and ultimately outcomes and achievements – more must be done to improve transparency in both spending and revenues to effectively track spending on the SDGs.  We are working on trying to understand some of the key challenges in improving transparency in a way which can ensure that this leads to easy to track and understand open budgets, so citizens can hold governments accountable. In just a few weeks’ time, the UN Post-2015 Summit will commit to the new Post-2015 development agenda, where the (really hard) task of making that work begins. We’re rolling up our sleeves for the task ahead…


Beyond Addis – How will the world finance the SDGs?

Matthew Martin from Government Spending Watch reflects on what happened in Addis and what’s next for financing the SDGs.

With the new post-2015 global goals text – “2030 Agenda for Sustainable Development” –  agreed a few days ago at the UN, ready for Heads of State adoption in New York in September, the world is one step closer to bringing to life this ambitious new development agenda.

All eyes must now turn to how this vision will be implemented and brought to life.

The recent outcomes of the Addis Ababa conference on Financing for Development hold some interesting lessons for moving forward and what will be required next in financing the new SDG agenda,

The Addis FfD conference was an exhausting week – during which I inputted into discussions on spending, tax, aid, innovative financing and many other issues, provoked by our latest Government Spending Watch analysis and 2015 report. This blog looks at the outcomes of Addis – and given everyone in development finance circles is probably feeling slightly jaded post-Addis also goes ‘beyond Addis’ to look at what we need to do next to finance the SDGs.

As for the outcome, it seems that what you see depends on your viewpoint. Those who expected or hoped that the conference would identify enough financing to fund the SDGs were sorely disappointed – as Winnie Byanyima of Oxfam said in her roundtable speech, and in a side-event on the final day, “We must all admit that we have failed to finance the SDGs”. CSOs and developing countries who hoped for a fundamental reform of global governance on tax, by a beefing up of the UN Committee of Experts on Tax into a full intergovernmental commission reporting to ECOSOC, were also very disappointed.

On the other hand, based on past experience of two FfD conferences, my expectations were never that high. Monterrey was a high point, with most governments in the world committed to delivering more financing for the recently-agreed MDGs, but even so – as one of the co-facilitators said to me – was successful only in starting various processes which have subsequently borne fruit (such as efforts to increase the amounts and results of aid, accelerate and increase debt relief, and mobilize more innovative financing). Doha was a low point, with nobody interested in discussing providing any money for anything as the financial crisis was hitting – and when the MDGs were more than halfway over.

Judged from this perspective – and given the global swing towards fiscal conservatism where many countries do not need at all to cut their aid budgets, but are doing so anyway to achieve budget surpluses – Addis was a mild success. Nobody expected EU countries to commit to reaching 0.7% (even if this has a faraway deadline of 2030, it gives us something to hold them accountable for). The CSO and developing country campaigns on tax issues led to tax being by far the most popular subject of the week, and to major pledges of increased technical assistance to help countries increase their tax revenues. There were also important steps forward on technology transfer.

The highlights of the week for me were nevertheless four side events.

The first was one GSW organized with the Organisation Internationale de la Francophonie, looking at why we need much more fundamental global tax reforms if we are to have any chance of funding the SDGs. As the GSW 2015 report says, we will need at least US$1.5 trillion more of public spending a year if we are to fund the SDGs in low and middle-income countries. We can do this only if those countries are able to increase their tax/GDP ratios by 10% (compared to the 8% they achieved under the MDGs) – which requires concerted global action to get corporations to pay tax in the countries where they extract resources, eliminate tax exemptions, fight against a global “race to the bottom” in tax rates, and combat evasion, avoidance and illicit flows – as well as national action to increase or introduce progressive taxes on income, wealth and land. In our meeting, Mauritania, Senegal and the Seychelles, on behalf of 26 other countries, committed to delivering their part of the bargain – and we will carry on pressing the international community to do the same, including in the buildup to the IMF Annual Meetings in Lima.

The second was a group of events on key sectors – education, food, health, social protection and WASH  – which showed that sector experts are much more advanced in costing the spending which we will need post-2015 to reach the various different SDGs. The latest contribution to this was a UNESCO report which covers a broader range of education spending (including upper secondary, technical and vocational training), and increases their estimates of additional needs from US$21 billion to US$39 billion a year in LICs and LMICs (though still leaving out tertiary education). Several of the side events drew on GSW work – on African health spending, for the UNESCO Education for All report, and on WASH absorption. They showed that globally we have a relatively clear idea of how much needs to be spent, but as GSW’s analysis keeps stressing, if we want this spending to be delivered post-2015, it needs to be country-designed and led (not top down via global funds and declarations), and made fully transparent so that governments and donors can be held accountable.

The third was organized by the UN Development Cooperation Forum. Commenting on a paper I wrote for DCF on how to assess the contribution of private and blended cooperation to the SDGs, stakeholders from all sides agreed that, if we are to finance a large share of the SDGs through private sector resources, and to use official money to “blend” with and encourage private flows, we need much closer tracking of the effectiveness and impact these flows are having on the SDGs.

The fourth was on innovative financing. This was the only event I attended which actually promised more public money for the SDGs ! Various speakers talked about the forthcoming European financial transaction tax, carbon taxes to fight climate change, allocating shares of mining revenues to the SDGs (as Ghana and Mali are now doing) including in a new UNIT-LIFE initiative, and a global declaration by like-minded countries promising to increase global solidarity levies, which will gather steam with more signatories as more developing countries decide how to introduce their own innovative financing levies in their next budgets.

Between them, these events really gave me a feeling that we can manage to finance the SDGs. It will be a long struggle, and to achieve results, we will need to monitor the “means of implementation” for the SDGs much more closely – spending on the different goals and whether it is fighting inequality, tax revenues, aid and its allocation among sectors and countries, the impact of private flows, and innovative financing. Setting strong clear indicators for the “MoIs”, together with a strong process for ensuring they are monitored, will be the next key requirement between now and the SDG summit in September, as we said in the last section of the Government Spending Watch report, and in our research with IBP and Oxfam last year.

Beyond the summit, we need – as a development community – to stop focusing on sectoral and national interests, and mobilize together to make sure solidarity levies, tax revenue and aid are sufficient to fund the extra public spending we need. And while we are mobilizing this money, we need to empower developing countries to design SDG plans and cost their spending priorities as decided by their citizens, and then to sign up to country compacts in which donors promise to provide aid and innovative finance, and help countries double their tax revenues, and all sides undertake to be more transparent and accountable to their citizens. If we don’t succeed, as an African finance minister said to me at the end of the conference, “we might as well throw the SDGs in the bin”.

Financing the SDGs – what lessons can we learn from the MDGs?

We’ve got a busy week ahead of us here at Government Spending Watch, we have a launch event in Norway with State Secretary Brattskar, a launch with ODI and the One Campaign in the UK, called “Financing the future: will Addis deliver?”; and meetings with Swedish officials in Stockholm.

All these events aim to highlight the findings from our recent 2015 GSW report: “Financing the Sustainable Development Goals: Lessons from Government Spending on the MDGs”.  The report is a culmination of 9 months’ work, compiling the latest budget information into the Government Spending Watch database – making it the most up-to-date and comprehensive picture on government spending on the MDGs in this final year of delivering the ‘Millennium Promise’. The report also draws on the accumulated experience we’ve gained from five years of compiling and analysing information on government spending on the MDGs.

But we haven’t done this simply as a retrospective exercise; we timed the report to coincide with the UN Financing for Development meeting in Addis, which will be discussing the hottest topic in development right now – how to finance the new Sustainable Development Goals (SDGs). That’s because we think there are vital lessons to be learnt from our experience and data, to help inform the current debate. In fact, it is rather staggering just how little information on current government spending and financing is informing the debate. In spite of the fact that the SDGs are supposed to build on the MDGs, learning lessons from their gaps and shortfalls, there is a remarkable lack of discussion about lessons from the spending and financing of the MDGs.

It was this lack of information on MDG spending which initially prompted us to set up Government Spending Watch with Oxfam – because we believe that there is an urgent need for a clearer picture.

So, as the world moves towards the Financing for Development meeting in Addis, the 2015 Government Spending Watch report takes stock of progress on spending and financing in some of the key MDG sectors, and what lessons can be drawn for financing the SDGs. It does this by analysing where current spending levels stand, how large a gap there is between this and the new SDG promises, and how the MDG spending is being financed.

Where does the world stand in financing the MDGs?

The report shows that none of the spending targets for the MDG sectors are anywhere close to being met, even though there is clear evidence that increased spending on the MDGs accelerates delivery of the goals (as Chapter 4 of the report shows).

Even the best-performing sectors are falling well short of what is required. Education performs best, but only around 20% of countries are meeting one or both of the ‘Education For All’ targets. No African country is meeting its Abuja health spending target. Average spending is only half the targeted level. In water, sanitation and hygiene; and social protection spending averages less than 1% of GDP.  This means there are already large gaps in spending to meet the MDGs – according to our analysis, MDG spending is falling one-third short of needs.

Scaling-up spending to meet the much more ambitious SDGs is a vast undertaking. For instance, the SDG target for zero hunger and sustainable agriculture will require a doubling of spending; the universal free health care commitment will need an increase of US$50-80 billion; and universal access to WASH demands US$24 billion more. Overall, using the various assessments available across the SDG sectors, this could mean additional public spending of US$3 trillion a year.

Financing the new sustainable development goals

So how should this be financed? This is the focus of all the heat in the FfD negotiations, and the report has some interesting findings to make them hotter.

A lot of global discussions on financing the post-2015 goals seem to be saying that international public finance (especially aid) is no longer important, and most of the SDG agenda can be paid for with international private finance or governments’ own tax revenues. Non-concessional finance, public-private partnerships, and private finance, can all have important roles in financing the SDGs, notably in the most profitable sectors and projects, and for upper-middle income and OECD countries. However, the report cautions heavily against using these expensive and risky types of finance for less profitable sectors and low/lower-middle income countries. Debt burdens are already rising fast or very high in a large number of LICs and LMICs, and debt servicing is already “crowding-out” MDG spending in 21 of 66 countries. So the scope for non-concessional public or private finance in these countries and in the social sectors is very limited.

The second lesson is that international public finance remains absolutely key for sustainable development. In lower-middle and low-income countries, least developed countries, small islands, fragile and conflict-affected states, or simply those countries with the most need, concessional finance and ODA remain vital. We estimate that, taking into account the contribution the private sector could make (around one-third of funding in these countries), public financing must be scaled up by at least US$1.5 trillion a year.  This requires three sets of actions.

The most important is to help developing countries accelerate the recent increase in their tax revenues. The GSW report shows that LICs and LMICs have already made major strides in this area during the MDG period, managing to increase revenues by almost 9% of GDP since 2000, trebling the amount of spending funded by revenues, and currently funding 77% of MDG spending themselves. They have done this by introducing new taxes, improving tax collection systems, renegotiating tax and royalty agreements with major extractives companies, and clamping down on tax exemptions.  In addition, this money has been very high quality – revenue-funded spending tends to be much more stable, aligned with government priorities, balanced between investment and recurrent, and easy to implement than donor-funded spending. So it is the top priority.

GSW calculations indicate that, to continue to fund three-quarters of the SDGs from tax revenues, countries will need to double their tax revenues, and therefore to raise their revenue/GDP ratios by a further 10%. Some of this can come from higher income levels and traditional tax reforms, but in most countries these reforms have little scope left to increase revenues. The vast bulk of extra revenues will require a radical overhaul of global tax rules. This means going way beyond the current OECD discussions on Base Erosion and Profits Shifting (BEPS) and Automatic Exchange of Information on company tax payments, which would raise only about 1.5% of GDP. It means OECD governments, international organisations and developing countries working together in partnership to end almost all tax exemptions; revise investment and tax treaties to give preference to paying taxes in countries where commodities are extracted; forensically audit large corporations to reduce their tax evasion and avoidance; and OECD countries and tax havens agreeing to supply information unilaterally to developing countries on bank accounts held by individuals overseas (unilaterally because it is highly unlikely that French citizens for example are avoiding tax by putting money in accounts in Senegal).

To implement these changes successfully, developing countries will require major capacity-building support on these additional issues: current plans to provide TA to help implement BEPS fall way short. It would also seem essential that they get equal decision-making power on global tax reforms, with a strong voice for the countries with the most needs, preferably through a reinforced UN Tax Committee transformed into an intergovernmental tax body. Taken together, these measures would be a genuine partnership between developing and developed countries, to ensure developing countries get their “fair share” of global tax revenue.

The second set of actions is a doubling of development cooperation. ODA has doubled during the MDG period, and South-South cooperation has trebled, but its share of MDG financing has fallen to only 23%. To ensure that international finance bears its fair share of the burden of financing the SDGs, DAC donors would need to commit to reach 0.7% of GNI by 2025, mobilising an additional US$250 billion a year; and South-South cooperation providers could continue recent rates of increases, which would bring South-South cooperation to US$80 billion a year by 2030.

But these amounts from provider country budgets will not be enough. We need to mobilise large-scale extra resources through “innovative financing” – financial transaction and carbon taxes, or IMF Special Drawing Rights, totalling US$500 billion a year if we are to finance the SDGs for LICs and LMICs (though we could do more and help to finance the SDGs in OECD countries as well).

Put simply: we need to double tax revenue, double development cooperation and be bold on mobilising innovative financing. The Addis conference represents our best chance to launch bold coordinated action to finance the SDGs in ways which do not bankrupt poor countries or force them to ditch half the SDGs up front. DFI and Oxfam are working with more than 50 governments to try to make this happen so that the SDGs are not dead at their birth.

Financing the Sustainable Development Goals: Lessons from Government Spending on the MDGs

Over the last 9 or so months the Government Spending Watch (GSW) research team have been hard at work compiling and uploading new data into the GSW database – and today we’re launching that new data, alongside a report analysing what the latest MDG trends signify for future government financing around the new SDGs.

New GSW online data & database features

Compiling the data set required a lengthy exercise of investigative data-gathering, from public and semi-public budget-related documents, to identify MDG spending (and when we’re not sure about data, we’re ruthless about excluding it).

After all these months of painstaking work by the team, this new data has now been uploaded onto our online, free, open source database for all to use (for the years 2012-14). We’ve also added some new countries to our database – part of the ongoing focus and ambition of GSW to get as many low and middle income countries online. After starting with a handful of countries way back in 2009, and launching our online database in 2013 with 52 countries, we now have 67 low- and middle-income countries live on the new website (for more information on which see map here).

Over 2015 we’re going to be adding in more countries, and, of course, continuing to re-fresh our data when the latest budget years become available (in fact we’re already starting uploading some of the latest figures for 2015-16 budget years). We’ve also added new functions to the online database so that countries can be compared in their spending patterns and different sectors.

Lastly, we’ve also added in data for each country on how much countries are spending on non-MDG areas (or, as we’re calling them ‘less desirable’ spending) on debt and defence. At present this data is limited to 2013 planned spending – but we’re going to be adding in more in future. We’ve added this feature because we’re acutely aware that both debt and defence spending can detract from the government spending on MDG sectors. For more information on GSW sources and definitions for data-gathering go here

New report and analysis

All of this new data has given us the most up-to-date, comparable and comprehensive government spending analysis available across six MDG areas. This is a valuable insight as the world undertakes the complex final negotiations around the new Sustainable Development Goals (SDGs) – and the Financing for Development agenda (FfD).

Hence we are also launching a new report – Financing the Sustainable Development Goals: Lessons from Government Spending on the MDGs – packed with all the latest analysis. The report, along with the new data-sets, are timed to coincide with the current negotiations taking place in New York to discuss the FfD agenda in the run-up to the Third International Conference on Financing for Development to be held in Addis Ababa later in the year. The report takes a look at whether current spending trends will suffice to achieve the SDGs: examines how spending has been funded since 2008, and what needs to change in FfD: identifies what needs to be done to ensure government spending combats inequality; and finally assesses how ready countries (and the international community) are to track SDG spending, and to hold governments and funders accountable for its levels and results.

The report is jam-packed with analysis, and we’ll be blogging and examining some of this in more detail in the coming weeks. But the main lessons to be drawn of relevance to current negotiations happening in New York on the FfD agenda are:

  • Government spending is falling one third short of MDG needs – exacerbating slow progress on some of the goals.
  • The SDGs will require at least US$1.5 trillion extra in public financing annually – meaning a total of US$22.5 trillion in $additional finance will need to be mobilised over the lifetime of the SDGs.
  • The report recommends that this can be financing through a three-pronged FfD approach:
  1. Doubling tax revenue, by radically overhauling global tax rules
  2. Doubling concessional development cooperation, and improving its allocation and effectiveness
  3. Raising US$500 billion in public innovative financing. In addition, all spending must be dramatically reoriented to fight inequality, and be much more transparent and accountable to the world’s citizens.
  • The report concludes by warning that if these measures are not taken, the SDGs may well be dead at birth.

For more information, or to download a copy of the report – go here

Social protection: underspent and underreported

Last week I [1] attended an event on social protection at ODI, which was a discussion of the findings of the ILOs World Social Protection Report 2014. The report is really a very good read on all matters to do with social protection. It really highlights the importance of more investment in social protection in order to overcome inequality, tackle extreme poverty and foster more inclusive growth. It gives a great overview of what each country has been doing on social protection over recent years which builds into an excellent global picture and overview of social protection systems and policy. It reviews social protection for children, women and men in working age, older persons, and reports on progress towards achieving universal health coverage. It also analyses recent trends, such as the impact of austerity programme in the aftermath of the financial crisis.

What was really excellent – from our perspective here at Government Spending Watch (GSW) – is that report uses some of our GSW data to show how much some countries are spending on social protection. In fact, the report uses a host of different data sources, which is almost certainly a reflection of the fact that good data on social protection spending by governments is so very hard to come by.

One thing myself and colleagues here at GSW consistently find is just how hard it is to gather good data on public financing for social protection.  Often it is hard to tell what exactly a government is spending on social protection because there is no separate function on social protection or it is buried across multiple budget lines and within multiple ministries. It is almost universally the hardest area for us to define and track in budgets (well, maybe gender spending is harder but it certainly is tough!).

Even when we can actually identify social protection spending it is it is almost certainly lower than the estimated amount necessary.  Our analysis last year of GSW data on social protection showed that no country in the GSW database is meeting two targets which have been set as benchmarks for spending on social protection. In Windhoek in 2008, African governments adopted a declaration which recommended that spending on social protection should be around 4.5 per cent of GDP. In addition, the International Labour Organization (ILO) and others have estimated the level of government spending needed to provide basic social protection at between 2.9 and 5.2 per cent of GDP. No country is meeting either of these, and most spend well below 1% of GDP

This is in spite of increasing evidence of the absolute centrality of social protection spending in tackling inequality and promoting inclusive growth.  One of the interesting findings of the ILO 2014 World Social protection report is that while social protection schemes have been contracting in developed countries as a result of the financial crisis, the authors find that middle-income countries have been “boldly expanding” their social protection systems, while in many lower-income countries, the authors note that social dialogue is taking place on building social protection floors, and that even in the poorest countries options are available for extending social protection systems.

This is something which we are beginning to build a related picture of here at GSW – it certainly seems as we go through and update our database – of mainly low income countries but with some more middle income countries coming on stream in 2015 – with the latest budget years that more countries have explicit budgets allocated towards social protection (or maybe a new ministry). That seems to suggest a more explicit policy focus. We’re yet to finalise our updates and consolidate this, which we will be doing early next year as we launch our 2015 report and findings – but watch this space for when we launch our new findings in early 2015 for our final analysis of the latest data.


[1] This blog was written by Jo Walker the Prorgrammes Manager of GSW

Taps, toilets, teachers & tablets: the anti-inequality fighters

My introductory post to Blog Action Day started by highlighting the growing groundswell of anti-inequality voices, and ended with a call to action to begin a global conversation to find the solutions to inequality. In that spirit, this post aims to do just that: contribute some of the wisdom we’ve gained here at Government Spending Watch over the years of doing analysis of public spending in low-income countries. We know that the right kind of public spending, backed by progressive taxation, is one critical part of tackling growing inequality in low-income countries – and that’s why taps, toilets, teachers and tablets are critical anti-inequality weapons.

Before heading off in search of solutions, it’s useful to know the scale of the problem. Economic growth in most developing countries over the last 20 years, has helped to close the gap between the nations of ‘haves’ and ‘have nots’ (for an absolutely fascinating graph on this dynamic, see this on Gapminder). At the same time this has helped to halve extreme poverty. But this has also served to blur the growing inequality which sits behind these figures, and often masks a grotesque and growing divide in low and middle income countries. The poorest – or the ‘new bottom billion’ – are often being left behind in extreme poverty, locked out of development and increasing prosperity, struggling to get by and secure the basics of survival. Income inequality increased by 11% in low and middle income countries between 1990 and 2010. Within some countries the contrasts are getting ever sharper. In China, the gap between rich and poor surpassed the US this year. In India, income inequality doubled over the last two decades. While in sub-Saharan Africa, rising inequalities led the 2012 Africa Progress Panel to conclude that the wealth disparities in Africa are now among the biggest in the world. In sub-Saharan Africa’s economic powerhouses, South Africa and Nigeria, inequality is most certainly worsening: in fact, economic inequality in South Africa is now higher than under apartheid, while in Zambia, income inequality is at a record high.

For anyone who cares about ending poverty, it’s urgent to get to grips with solutions to this rising inequality because evidence shows that, beyond a certain threshold, inequality harms poverty reduction.

Inequality: starting off on the long road to solutions

At Government Spending Watch we track public spending on vital social services and other poverty reducing programmes. To be precise, we track how much governments are investing around the broad areas related to the Millennium Development Goals (MDGs): agriculture, education, environment, gender, health, social protection, water, sanitation and hygiene (WASH).  We then look at how different governments are doing in terms of reaching their international financing commitments, as well as what donors are doing to support this.

But what has this got to do with inequality? A lot. Especially in low-income countries, where the right kind of investment by governments in public services can halt runaway inequality and tackle extreme poverty.

Investment in basic services, such clean and accessible water which can increase hours spent working, vital lifesaving healthcare services to tackle diseases and stop unnecessary deaths, good quality education that gives poor children a leg-up out of poverty, support to the poorest families to grow more food so they can feed their families, and basic social welfare measures to stop the poorest falling through the cracks, can tackle extremes in inequality.

Public services: anti-inequality weapons

A 2012 OECD study found that public services (education, health and social services) are worth 75% of the income of the poorest 20% of the population, compared to only 14% of the income of the richest. They therefore have a huge anti-inequality effect, including providing a “virtual income‟. They found that OECD countries which increased spending on services throughout the 2000s had more success in reducing income inequality. Oxfam used this analysis earlier in the year to calculate that between 2000 and 2007, the “virtual income‟ provided by public services reduced income inequality by an average of 20% across OECD countries. In five Latin American countries (Argentina, Bolivia, Brazil, Mexico and Uruguay), this virtual income from healthcare and education alone has reduced inequality by between 10% – 20%. So investment in public services can help to tackle inequality by lifting the poorest out of poverty and acting as a redistributive tool within the economy. Meanwhile, the IMF is also increasingly acknowledging in its research that increasing spending on education, health and social protection has a key role to play in tacking inequality.

However, in spite of this evidence, what is becoming increasingly clear to us at Government Spending Watch, as we delve ever deeper into our analysis of government budgets, is that the kind of spending necessary to tackle inequality through public services is woefully lacking. In part, the problem lies with low-income country governments, who have made commitments to spend a higher proportion of their budgets in pro-poor sectors such as health and education, but have often failed to do so – and this is exacerbated by donor countries failing to support these services sufficiently.

Last year the 2013 annual Government Spending Watch report found that the vast majority of low-income countries we analysed were spending far too little, and much less than they have promised – for example, on wages for teachers and nurses, and maintenance of water facilities – to achieve the MDGs. Only one-third of countries were found to be meeting promised or needed levels for health, one-quarter for education, and one-fifth for agriculture and water and sanitation. In particular, social protection spending is very low and therefore income inequality and vulnerability of the poorest remains high.

This means governments are simply not spending enough to unleash the anti-inequality benefits of investment in public services.

But more money alone is not enough.  What is currently spent is often poorly targeted, and goes disproportionately to wealthier citizens or regions. Our analysis has shown a lamentable failure to target the poorest – those most in need – with government spending.

Spending on public services often tends to be ‘regressive’, i.e. more beneficial to wealthier citizens. Education offers a stark example of this (and education has a profound impact on either cementing inequality or acting as a leveller). The Education for All Global Monitoring Report shockingly reports that 43% of public spending is received by the most educated 10% – almost unilaterally the richest quintiles – in sub-Saharan African countries. This can sometimes lead to outrageous differences in spending. For instance, in Malawi, 73% of public resources allocated to the education sector benefit the most educated 10%. On average spending per pupil at university level is US $16,334, compared to just US $57 at primary level. This is in a country where only 7% of the poorest children complete secondary school, and virtually zero make it through to university, and only 16% can do basic maths sums.  How can we ever hope to overcome deeply entrenched inequalities when such inequalities exist at the very starting line of life for the poorest?

Our analysis of spending patterns also shows that less is being spent in poor rural areas (where the very poorest live), where costs tend to be higher for services to reach due to lack of infrastructure and the need to pay premiums to workers to attract them to the more remote areas. This is doubly regressive: not only do the rural poor get less per head but they also need more per head.  The negative effects of this misallocation in terms of equity are confirmed by much lower school enrolment and completion rates, and poorer health indicators, in rural poorer areas.

Government spending must be targeted to overcome and offset inequality. This is going to involve adopting deliberate approaches to equitable financing, such as those adopted by Brazil, one of the much heralded inequality success stories, where global inequality trends have been bucked – albeit from a very high base – through a combination of redistributive policies and focused social spending.

Here at Government Spending Watch we will be working hard with partners to try and influence similar approaches in all countries. We also know that the increases in spending that are necessary to tackle inequality is going to require a massive boost to revenues. That’s why in 2015, Government Spending Watch is going to be expanding our data collection to include analysis of revenues, to calculate how progressive tax systems are in funding services – watch this space for more information.

Influencing budgets, deepening democracy & busting inequality

One final critical part of ensuring that public services meet the needs of the poorest and act as an anti-inequality weapon, is making budgets transparent and helping citizens hold their governments accountable for spending. We know that many governments need nudging in that direction, not least because at the moment extreme concentrations of wealth too often puts power in the hands of elites. This power translates into decision making which favours the needs of the wealthier in society, and because decisions are made behind closed doors this is often not visible.

This is why Government Spending Watch emphasises the importance of transparency and accountability in setting budget priorities.  In a recent review of country studies by Government Spending Watch, in collaboration with Oxfam and the International Budget Partnership, we showed that a mix of transparency, accountability and citizen engagement in budget processes can lead to an increase in the share of funds being turned into textbooks, teachers, clinics and water points that reach the poorest.

Ensuring priorities are tailored to the needs of the poor, will entail building citizen pressure and the power of the voice of the many to challenge the policies which work only for the few. At Government Spending Watch, we hope that the data we collect on budgets in low and lower middle income countries can help put tools in the hands of citizens, which can turn numbers into nurses and become a weapon in the fight against inequality.

** Jo Walker works for Government Spending Watch, a joint project of Oxfam and Development Finance International (DFI), which tracks and analyses how much low and lower middle income countries are spending on 7 vital public sector investment areas – agriculture, education, environment, gender, health, social protection, water, sanitation and hygiene (WASH) – this information is made available for citizens and non-governmental organisations to help empower them in their campaigning for positive change **

Why I’m taking part in Blog Action Day 2014: Let’s talk about #inequality

Inequality has become a hot topic, with everyone from the Pope to Barak Obama expressing concern about the growing gap between the haves and have nots.  A new wave of diverse voices, from journalists, to faith leaders, trade unionists, billionaires, and international institutions, are beginning to converge into an increasingly powerful narrative, warning that inequality can have a corrosive impact on democracy, security, and overall growth. In fact, looking back, 2014 might just prove to be the year where inequality went mainstream.

When Oxfam warned at the start of the year that 85 global billionaires now own the equivalent wealth of half the world’s population – a staggering 3.5 billion people – and this statistic went viral, it was clear it had hit a visceral nerve with the public, tapping into a raw sense of injustice about growing inequality.

While in April when Piketty’s book ‘Capital’ – which cautioned that runaway wealth inequality will rise indefinitely unless conscious interventions to prevent this are taken – began flying off shelves and hit the best-seller list in the United States, this also seemed to be tapping into the same sense of growing disquiet.  Certainly, the extraordinarily popular success of a 600 page economics tome, thick with data and complex analysis, seemed to herald a new appetite among the public for understanding the complexities of modern day wealth and income inequality.

Here in the UK, increasingly the general public are beginning to express a desire for a fairer post-financial crisis economy, with a recent survey showing that more people would choose greater equality over greater wealth for the UK.

As an international development activist one of the moments which has made me sit-up this year and start taking notice of the shifting sands, was when the International Monetary Fund (a hugely powerful institution in setting low-income countries economic agendas) published a paper warning that extreme inequality is a drag on economic growth and can hinder poverty reduction. But perhaps most surprising – especially to those of us who remember the devastating impact that IMF-enforced cuts to tax and public spending had in developing countries back in the ‘bad old days’- is that the IMF paper also outlined how redistribution can tackle inequality, including investment in public services. That is a welcome surprise, especially given the IMF’s previously slavish commitment to trickle down growth, and hugely restrained government social spending and re-distributive measures. Certainly, until very recently, the IMF seemed an unlikely candidate to jump on the inequality bandwagon.

All of this points to a powerful emerging mainstream narrative around inequality. That’s why the choice of inequality as the theme for Blog Action Day 2014 couldn’t be timelier.

In my view, it is also timely, because, in spite of increasing concerns being raised about inequality, solutions remain far thinner on the ground – thinner yet is the kind of political will necessary to enact bold actions which can turn this around. It is time to shift dialogue past simply exposing increasing inequality towards shaping actions to tackle it.

Here at Government Spending Watch ( we’ve been gathering information on public spending on poverty tackling initiatives in low and lower-middle income countries for the last 3 years. As part of that process, it has become increasingly clear that, unless this spending is targeted towards tackling entrenched inequalities, public spending will not fully unleash its poverty-busting potential, and play a role in reducing inequality.  My next blog post will focus on some of the key lessons we’ve learnt through the process of gathering detailed information on over 60 low and lower-middle income governments’ public spending patterns on key sectors – to help inform tackling inequality in developing countries moving forward.

Government Spending Watch is also committed to making this information and data available to the public and civil society, so this can help instigate greater transparency and open debate among citizens about their priorities for public spending. I believe Government Spending Watch has a vital role to play in fostering this dialogue in developing countries.

More broadly, I believe igniting this open public dialogue and citizen-led pressure for change has to be a vital part of building a necessarily bold policy response to inequality – not least because this will involve taking on the status quo and bumping up against powerful vested interests. Finding workable solutions should be fostered through public dialogue and ultimately building the power to make these changes.

Which is why blog action day is so important – we need to build the power of the voice of the many, to challenge the policies which work only for the few. Let the global conversation begin!

Follow the conversation on twitter #BAD2014 #Blogaction14, #Inequality, #Oct16

** Jo Walker works for Government Spending Watch, a joint project of Oxfam and Development Finance International (DFI), which tracks and analyses how much low and lower middle income countries are spending on 7 vital public sector investment areas – agriculture, education, environment, gender, health, social protection, water, sanitation and hygiene (WASH) – this information is made available for citizens and non-governmental organisations to help empower them in their campaigning for positive change.