Context

KPMG International and Jericho hosted a roundtable discussion in July 2025, bringing together global experts to explore the evolving role and effectiveness of fiscal councils around the world — and the lessons they offer for good governance, economic planning and public trust in times of uncertainty

As countries navigate the dual pressures of rising public debt and demands for investment, the role of independent fiscal institutions has come into sharper focus. The discussion examined the purpose, design and communication of fiscal frameworks and councils, comparing international practices and drawing lessons from different jurisdictions.

The session was held under the Chatham House Rule and included contributions from participants representing international financial institutions, public policy bodies, academia and civil society. The write-up below summarizes the personal views of participants and does not necessarily reflect the views of any particular organization, including KPMG.

Executive summary

  • Fiscal governance under strain: Participants discussed how high debt levels, elevated interest rates and increasing global uncertainty are reinforcing the relevance of clear fiscal rules and independent oversight — but also raising new challenges for their application and public perception.
  • Design and implementation matter: There was broad agreement that the credibility and effectiveness of fiscal rules depend on their design. Many participants highlighted the growing use of expenditure-based rules, which some see as more straightforward and adaptable than other frameworks.
  • Different mandates, different impacts: Fiscal councils vary significantly in their authority and functions — ranging from assessing government forecasts to preparing independent ones. A relatively small number, including in the UK and the Netherlands, are involved in official budgetary forecasting.
  • Forecasting and communication: While forecasting was viewed as an essential function, participants noted its inherent uncertainties. Discussions explored how forecasts are used and interpreted and the importance of communicating limitations and ranges rather than definitive outcomes.
  • Credibility, trust and institutional independence: Fiscal councils were widely seen as playing a role in enhancing fiscal credibility. However, participants also noted that the visibility and influence of such institutions mean that their mandates and communication approaches merit ongoing attention.
  • Flexibility and resilience: There was interest in approaches that combine fiscal discipline with adaptability — such as dynamic fiscal rules, clear escape clauses and forward-looking correction mechanisms.
  • Navigating uncertainty: Participants emphasized that global market dynamics, investor expectations and domestic political processes all influence the perceived credibility and sustainability of fiscal frameworks.

Purpose and pressure

Fiscal rules remain important, but expectations are evolving

Participants began by reflecting on the objectives of fiscal rules: promoting sustainability, reducing procyclicality and fostering public and market confidence.

While these aims remain widely accepted, many participants noted that shifting macroeconomic conditions are testing the limits of current frameworks.

The conversation highlighted the rise of expenditure rules in several jurisdictions, with some suggesting that these are easier to manage and communicate than structural deficit or debt-based rules. Combining such rules with broader debt anchors was cited as a way to preserve flexibility while maintaining discipline.

The role of fiscal councils

Institutional models vary, but transparency and clarity are valued

The discussion covered the different models of fiscal councils around the world. While most councils assess government forecasts and monitor rule compliance, only about one-third prepare their own forecasts — and even fewer see those forecasts adopted in official budgets.

Examples such as the UK’s Office for Budget Responsibility and the Netherlands Bureau for Economic Policy Analysis were noted as cases where fiscal councils produce official forecasts, supported by dedicated analytical capacity. Other models, including those in Latin America, involve external technical groups contributing to projections on key variables such as commodity prices.

Participants emphasized the importance of institutional clarity, legal independence and well-defined roles in supporting the credibility and effectiveness of fiscal councils.

Forecasting and interpretation

Forecasts are influential — how they are used and understood matters

Forecasting was recognized as a complex but central component of fiscal governance. Participants noted that forecasts can have significant policy and political implications, particularly when used to assess compliance with fiscal rules.

Some contributors raised questions about how to ensure forecasts are interpreted as estimates within a range, rather than as fixed outcomes. Others emphasized the value of councils providing risk assessments and alternative scenarios to inform public understanding and policy debate.

There was agreement on the importance of improving how forecasts, and their inherent uncertainties, are communicated to different audiences. Several participants highlighted the need to move beyond binary interpretations of fiscal rule compliance, advocating for a more “grey-scale” approach that recognizes degrees of deviation and the context behind them. Rather than treating forecasts as definitive triggers for action, it was suggested that a more flexible framing (acknowledging uncertainty, ranges and proportional responses) could help reduce unintended political and social consequences.

Public understanding and legitimacy

Credibility depends on both technical rigor and societal trust

Participants discussed how fiscal councils contribute to overall fiscal credibility, especially in the eyes of investors. At the same time, several emphasized the importance of public understanding and institutional transparency in building broader legitimacy.

While fiscal councils are typically independent, their growing visibility has prompted discussions about how best to position their role in democratic systems. Some contributors suggested that strengthening communication, especially about mandate and limitations, may help reduce misinterpretation or politicization of their outputs.

Adapting to complexity

Balancing credibility, flexibility and clarity

Looking forward, participants discussed how fiscal frameworks can be designed to accommodate uncertainty while maintaining credibility. There was interest in features such as:

  • Well-defined escape clauses for extraordinary circumstances
  • Automatic correction mechanisms to restore rule compliance
  • Risk-based or medium-term targets, rather than short-term thresholds

Some also pointed to the experience of monetary policy, where clear goals, credible institutions and transparent communication have helped maintain public trust. They suggested that fiscal governance might draw useful lessons from that evolution.

Next steps and open questions

Continued reflection and adjustment are essential

Participants broadly agreed that fiscal rules and institutions remain central to sound fiscal governance — but also that they must evolve alongside changing economic, social, and political conditions. Areas identified for further exploration included:

  • Enhancing communication strategies for fiscal councils
  • Encouraging a diversity of evidence and perspectives in forecasting
  • Reviewing how rules interact with long-term investment needs
  • Clarifying the role of fiscal councils in shaping vs. assessing policy

Ongoing international dialogue, comparative research and inclusive debate were seen as important tools for supporting the continued effectiveness and legitimacy of fiscal institutions in the years ahead.

Contributors:

  • Fernando Blanco, Principal Economist for Europe and Central Asia of the IFC, World Bank
  • Era Dabla-Norris, Deputy Director, Fiscal Affairs Department, IMF
  • Paul Gisby, Senior Manager, Accountancy Europe – observing
  • Becky Holloway, Programme Director, Jericho
  • Raphael Lam, Deputy Division Chief, IMF
  • Neal Lawson, Partner, Jericho
  • Chris Morgan, Adviser to Global Responsible Tax Program at KPMG International
  • Tim Sarson, Partner, UK Head of Tax Policy, KPMG in the UK
  • Nicola Smith, Director of Policy, TUC
  • Grant Wardell-Johnson, Global Tax Policy Leader and Chair of the Global Tax Policy Leadership Group, KPMG International
  • Phil White, Activist, working on social justice and climate change, Patriotic Millionaires