Expanding social protection: Social protection global policy trends 2010-2015. From fiscal consolidation to expanding social protection. Key to crisis recovery, inclusive development and social justice

4 below pre-crisis levels. 4 In terms of GDP, analysis of expenditure projections reveals that in 34 countries about one-fifth of the total, governments may be cutting their budgets excessively during 2013 –15 figure 3a. These include countries with significant development challenges, such as Eritrea, Sudan, Yemen, Iran, Iraq, Bhutan, Sri Lanka, Ethiopia, Guyana, Tuvalu, Nigeria, Madagascar, Jamaica, Guinea-Bissau, Guatemala, Burundi, Grenada and Botswana, among others. More than half 18 of these countries are expected to reduce spending by more than 3.0 per cent of GDP, on average, during this latest phase of the crisis when compared to expenditure levels during the pre-crisis period. In real terms, 17 governments are forecast to have fiscal envelopes in 2013 –15 that are smaller, on average, than those of 2005 –07 figure 3b. This is a dramatic situation, especially for developing countries where social spending is already very limited to start with. How have governments been adjusting public expenditures since 2010? A review of 314 IMF country reports in 174 countries published between January 2010 and February 2013 Ortiz and Cummins, 2013 indicates that governments are considering a combination of six main policy options table 1 and figure 4, which relate strongly to the social protection of populations see also box 1: phasing out or eliminating subsidies; cutting or capping wage bills; increasing taxes on consumption; undertaking pension reforms aimed at reducing the costs of pension systems; rationalizing and more narrowly targeting social assistance and other social protection benefits; and introducing reforms to health-care systems aimed at cost containment. These fiscal consolidation strategies are not limited to Europe, and, in fact, are prevalent in developing countries. Many governments are also considering revenue-side measures that can have adverse impacts on vulnerable populations, mainly the introduction or extension of consumption taxes such as VAT, on basic products that are disproportionately consumed by poor households. All of the different adjustment approaches pose potentially serious consequences for vulnerable populations, as summarized below. 4 For the purposes of this report, excessive fiscal contraction is defined as reducing government expenditure below pre-crisis levels average spending values during 2005 –07. The analysis does not make a judgment about the adequacy of pre-crisis spending levels, it merely uses expenditures in 2005 –07 to establish a baseline.