site.btaDenmark’s Fiscal Measure for Automatic Prioritisation Would Save Bulgaria’s Budget BGN 625 Mln, Fiscal Council Says

Denmark’s fiscal measure for automatic prioritisation of the budget would save the Bulgarian treasury nearly BGN 625 million in 2025, if applied here. If cultural and educational institutions are exempted from the measure, as they are in Denmark, the savings would amount to just over BGN 561 million. This is according to an analysis by the Fiscal Council, which examines the Danish fiscal measure of automatic budget prioritisation introduced there in 2016.

The measure is a tool that streamlines the budgeting process, highlights key expenditures and savings, and ensures that critical needs are met. The Danish cabinet has set a 2% mandatory and across-the-board reduction in central government operating costs. Thus, each year the Ministry of Finance automatically withholds 2% of the previous year’s budget from all ministries, agencies or other government institutions. The savings are pooled and reallocated to new policy priorities, such as increased defence spending, the analysis says.

The Fiscal Council notes that the rule is automatic, so ministries and agencies must cut back or do their work more efficiently to stay within the lower budget. Automatic budget prioritization does not apply to social programmes such as pensions and unemployment benefits, nor to municipal services. Since its adoption ten years ago, the Danish Parliament has exempted several other areas of public spending from the automatic rule, including cultural institutions (museums, theatres, art and music schools), exempted since 2020, universities and other higher education institutions, for which annual cuts were suspended after the 2021 budget, and security agencies such as the police intelligence service, the armed forces and the tax agency, which were exempted in 2023.

Automatic prioritisation is a fiscal, not a programmatic, measure: it does not target specific public sector activities or programmes and relies on productivity gains at a departmental level. As the base budget for public administration shrinks annually, the cumulative reduction after ten years is 16% in nominal terms and over 25% in real terms, accounting for inflation. Exemptions have increased over time, so the effect is smaller in later years, the analysis says.

The Fiscal Council looks at how such a measure would affect the budget expenditure in Bulgaria, pointing out that for 2025 the central government's operational expenditure is worth BGN 31.2 billion. This does not include transfers to municipalities, state social insurance, the National Health Insurance Fund, etc. If applied, the automatic cut of 2% would amount to BGN 624.9 million, the analysis says.

The Ministry of Education, with a transfer of BGN 2.783 billion, the automatic cut of 2% would save BGN 55.7 million. The Culture Ministry with a transfer of 403 million and an automatic cut of 2% would save 8.1 million leva. 

If cultural and educational institutions are exempted, then the savings would amount to 561.2 million leva, the analysis said.