Policy Note 35: EcoAustria Europe Benchmarking: Achieving better performance with less expenditure

Austria's economy is currently growing more slowly. Added to this are uncertainties from abroad, such as weak growth in Germany, the unclear outcome of Brexit and increasing trade conflicts worldwide. This makes it all the more important to strengthen the competitiveness of the local business location and thus lay the foundations for more growth and prosperity. To this end, the tax burden on labor and companies, which is high by international standards, should be significantly reduced and the reform should be financed through efficiency potential on the expenditure side, in addition to self-financing. There is considerable potential for efficiency: Austria occupies a top position in European comparison in terms of public spending in many areas, but often only achieves mediocre results in terms of output.

The EcoAustria Europe Benchmarking compares the expenditure as input with corresponding performance indicators as output variables in the areas of administration, education and health. The comparison is deliberately only made with countries that achieve at least the output level of Austria and therefore have a comparable or better range of services.

Adjusted for purchasing power, administrative personnel and material costs in Austria amount to EUR 822 per year and inhabitant. In terms of the quality of public administration according to the World Bank's WGI index, however, Austria is only in the upper midfield with an index value of 1.44. Denmark, with only 557 euros per capita and year, i.e. 265 euros less, scores 1.67 points and thus a significantly better result in terms of the quality of administration. And the Netherlands also achieved 1.67 index points with purchasing power-adjusted expenditure per capita and year of just 483 euros. That is 339 euros less than in Austria.

In the school system , total education expenditure in elementary, primary and secondary education per pupil in Austria amounts to EUR 9,373, adjusted for purchasing power. This gives Austria 492 points in the OECD's PISA test. In comparison, the Netherlands, with expenditure of only EUR 8,273, i.e. EUR 1,099 less per pupil and year, achieved a significantly better test result of 508 PISA points. The difference in efficiency is even more striking when compared to Finland. With total expenditure of just EUR 7,733, i.e. EUR 1,640 per pupil per year less than Austria, the Finns achieve a full 523 PISA points.

Adjusted for purchasing power, total healthcare expenditure in Austria amounts to EUR 3,932 per capita per year. In terms of average life expectancy, Austria thus reaches 81.7 years in a European comparison. Finland achieves the same output value with expenditure per capita of 3,020 euros, i.e. 911 euros less. The comparison with Spain is even more striking: Spain achieves an average life expectancy of 83 years with health expenditure per capita of EUR 2,398 adjusted for purchasing power, i.e. EUR 1,534 less.

If one calculates the public expenditure that would be incurred if Austria were to maintain its current level of performance but produce services as efficiently as the comparative countries examined, there is potential for billions in efficiency in the areas of administration, education and healthcare alone. And even if it is unrealistic to fully exploit this potential due to structural differences, it is worth tackling even just a part of it. After all, the results show that even better services are possible at lower costs.