Norway may have come better out of the global recession in comparison to many other OECD countries, but uses far too much of its GDP on public sector spending. A new OECD (Organisation for Economic Co-operation and Development) report recommends cuts to avoid financial overheating.

Unhealthy

“The share of public spending in mainland GDP is one of the highest in the OECD and there is evidence of spending inefficiencies. Norway is not getting as much as it could from its public expenditure.”

Reforms designed to improve efficiency in the healthcare sector haven’t been as successful as planned, nor has curbing the ever-rising level of spending.

“There were reforms some time ago designed to improve efficiency, notably the centralisation of hospital responsibility and the organisation of hospitals as enterprises, and moves towards fee-for-service financing. Though some measures of efficiency have improved over the last decade or so, overall spending climbed rapidly partly because of the fee structures themselves, partly because of the lack of hard budget constraints imposed on hospitals; the number of doctors and nurses relative to the size of population is at present significantly above OECD average.”

The report urges continued efforts, as well as improving co-ordination between municipalities and hospitals.

Education

More savings could be made regarding schools by, for example, closing cost-ineffective ones, reducing subsidies to children in higher education, and improving results by giving teachers targets, or salaries based on merit.

“Expenditure per student at the primary and secondary levels is about 40% higher than in the OECD area. However, international assessment surveys have found that Norwegian pupils perform rather modestly in various core subjects.”

The report goes on to mention the PISA survey (Programme for International Student Assessment), where pupils’ scores are around the OECD average. Norway also has twice the rate of over-16 dropouts than in other Nordic countries, exceeding the OECD 18 percent average by three percent.

“It would be wise to bring the structural deficit back to 4% of the Government Pension Fund Global value by 2013, or even earlier,” the report concludes; something to which Sigbjørn Johnsen, the Minister of Finance, endorses.

“We appreciate OECD’s assessment that our macroeconomic framework is serving us well. In the longer term it ensures that also coming generations will benefit from the petroleum wealth. The Government remains fully committed to bringing fiscal policy back to the 4-per cent path, in line with our fiscal policy framework,” he says.