Different administrative systems allow sub-central governments greater or lesser autonomy in raising and spending resources. Correspondingly, fiscal results in those different levels of government may vary substantially. Nevertheless, in order to avoid generating the wrong set of incentives, sub-central governments are often subject to tight fiscal rules, especially about incurring debt in order to finance deficits.
In 2019 the average budget balance among OECD countries was -2.9% of GDP for central government, -0.5% of GDP for state governments and -0.01% of GDP for local governments. Social security funds were in surplus on average, at +0.3% of GDP. As noted above, budget balances deteriorated significantly in 2020 as governments spent large amounts on COVID-19 response measures. National governments were responsible for the bulk of the general government deficit in 2020. In 18 of the 26 OECD countries for which data are available, central government was responsible for more than 90% of the deficit in 2020. Those countries where this was not the case include three federal countries where states were responsible for a substantive portion of the deficit (Belgium, Canada and Germany). They also include three countries where a portion of the deficit in 2020 was accrued via social security funds (Estonia, France and Spain) (Figure 2.13).
General government debt in OECD countries is held mainly by national governments (Figures 2.14 and 2.15). In 2019, on average across OECD countries, national governments held 82% of general government debt. The COVID-19 crisis has had no appreciable effect on the distribution of government gross debt across levels of government. Although national governments have been responsible for most of the deficits incurred in 2020, the proportion of government debt held by national government has not been significantly affected, as they already held the majority of government debt. For example, among the 22 countries which are EU and OECD members (OECD-EU), debt held by national governments increased from an average of 84% of GDP in 2019 to 99% in 2020 (Figure 2.14). However, the national governments’ share of national debt remained the same, at around 82% of the total (Figure 2.15).
