On the fiscal front, there has been an intensive drive to correct the budget deficit, as indicated by the significant reduction in the structural general government deficit since 2009. The increased transparency and the strengthening of the fiscal framework further to the approval of the Law on Budgetary Stability and Financial Sustainability in 2012 assist the different tiers of government –central, regional and local – in meeting the budget targets. In turn, the reform of the pensions system is a necessary step for ensuring the sustainability of public finances in the medium term. Despite these achievements, the rising course of the public debt/GDP ratio has not yet been halted and is a reminder of the scale of the fiscal effort still required. There has also been progress in private-sector deleveraging. The sluggishness of household and corporate income is slowing the process, as a result of which the weight of the adjustment is falling on the contraction in lending extended to these sectors. That said, this contraction in credit may be and indeed is proving compatible with its appropriate restructuring. The analysis of the Banco de España suggests that, even in years  BIS central bankers’ speeches  3  as difficult as the past two, the proportion of firms that have not seen a fall-off in their bank loans has been significant, around 30%. And more significantly, those that have not seen their credit decline are, precisely, those firms which, in general, were departing from a sounder position of debt and profitability.
High tax rates promote tax planning and hamper the growth capacity of an economy. Low, broad-based tax rates are preferable to high tax rates with a narrow base. Norway made headway with the tax reform of 1992. There is still room for considerable improvement in the Norwegian system. Many public services are of considerable economic importance. Infrastructure, education, sound legislation and a solid judicial system are necessary for the economy to function and grow. Public services may be important in order to secure equality and security. At the same time, the public sector is so large that it affects the economy at large. This means that requirements concerning efficiency and adaptability must also apply to the public sector. Chart 18  Over a twenty year period, the number of employed in the health, care and education sectors increased by 240,000, which account for about 60% of the increase in overall employment in Norway. The number of employed in the health and care sector has more than doubled in 20 years. More people are now working in this sector than in the whole of manufacturing. Nevertheless, every day we receive reports of personnel shortages at hospitals, in elderly care or at schools. The authorities constantly signal increases in appropriations in order to remedy these problems. Norway imports labour from other countries to cover its resource shortages. What are the reasons behind this situation? BIS Review 14/2000  16  Chart 19  Demand for health and care services rises sharply when incomes increase.