Can independent fiscal councils promote increased fiscal sustainability by enhancing fiscal literacy among the general public?

Purpose There are substantial challenges to fiscal sustainability in a large number of countries around the world. An interesting question for consideration is whether independent fiscal councils (IFCs) can contribute to increased fiscal sustainability by expanding their remit to include promotion of fiscal literacy among the general public. Design/methodology/approach This study is based on surveys among IFCs and the Ministries of Finance in 11 countries, as well as interviews among six prominent independent fiscal institutions. I also conducted a theoretical analysis of the importance of enhancing fiscal literacy in light of theories on competitive political party behavior. Findings The study shows that governments do not always follow the recommendations of IFCs. It identifies a preference among IFCs and fiscal authorities: that IFCs should assume a dual role as a professional control mechanism and a facilitator of public understanding regarding fiscal challenges. The study suggests that enhancing fiscal literacy can increase the reputational costs of neglecting necessary fiscal measures. Consequently, the political cost may shift – from implementing unpopular but necessary actions to facing public criticism for failing to act when the necessity is widely understood. IFCs therefore can promote fiscal sustainability by enhancing fiscal literacy among the general public. Originality/value The question of whether recommendations issued by IFCs are followed by governments, as well as the issue of a potential expansion of the remit of fiscal councils, has received little attention in the literature. This study contributes new insights into whether increased fiscal literacy can promote greater fiscal sustainability.