By Lucy Phillips
23 March 2011
The UK has been ranked ninth in a global ‘fiscal responsibility index’, published today.
Australia topped the list of most fiscally responsible countries, with New Zealand in second place. Greece and Portugal came in bottom of the 34 ranked nations, with the United States, the world’s largest economy, only narrowly behind them at number 28.
The fiscal indicator was compiled by former US comptroller general David Walker, who now heads the ComebackAmerica Initiative, a campaign to promote fiscal responsibility. The list was drawn up in partnership with the public policy and international studies programme at Stanford University in California.
The rankings are based on a country’s current level of government debt, the sustainability of the debt over time and the transparency and accountability of fiscal decisions.
Four of the top ten most fiscally responsible nations in the index are countries with emerging markets – Estonia in third place, China in fifth, Chile in seventh and Brazil in tenth.
Walker said the findings would be ‘embarrassing’ for Americans but also warned of an imminent debt crisis in the US that would affect economies around the world.
He said: ‘It is clear that there is great potential for a fiscal crisis in many countries, including the United States, if they don’t start addressing the structural deficit challenges that lie ahead. The index reinforces the fact that the US needs to engage in comprehensive and timely reforms to restore fiscal responsibility and sustainability and to avoid a debt crisis that would be felt around the world.’
Walker added that the index showed that countries that had ‘engaged in dramatic and comprehensive reforms’, such as New Zealand in the early 1990s, could ‘dramatically improve their fiscal prospects’.
Alex Maasry, a member of the Stanford University team, said: ‘I was stunned as our team conducted our analysis to find that in only two to three years, the US overall fiscal score will be the same as Ireland or Portugal today.
‘On the other hand, to see the progress of Australia, New Zealand and emerging markets like Brazil and Mexico was great. Through disciplined spending and legal reforms, these countries have put themselves on solid ground. It shows countries can change their future through political will.’
In an interview with Public Finance last week, Walker praised the UK’s government’s approach to deficit reduction.
