How to deal with contingent liabilities – Lessons from the Dutch experience

Heleen M.J. Hofmans and Clement van de Coevering

OECD Journal on Budgeting, 2014, vol. 14, issue 1, 35-45

Abstract: commission has reviewed all the guarantees, loans and financial interventions provided by the Dutch government. This review shows that policy makers often perceive these measures as a “free lunch”, do-not-ask (sufficiently high) premiums and do-not-build reserves to cover potential damages. The commission concluded that the Dutch government needs to reduce these measures where possible (e.g. by including sunset clauses), implement policies that reduce implicit risks, increase transparency, and consider asking for an external opinion regarding premiums in case of large and complex risks. Also internationally, an increased focus on budget systems that ensure transparency and provide the right incentives is necessary, as in recent years contingent liabilities increased while government finances deteriorated, making countries less resilient to these risks. Countries seem to use very different definitions and reporting methods with regard to contingent liabilities, making an international comparison and monitoring very difficult.

Keywords: Budget systems; contingent liabilities; fiscal policy; risk management; sunset clauses; the Netherlands (search for similar items in EconPapers)
JEL-codes: H12 H61 H81 H87 (search for similar items in EconPapers)
Date: 2014
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