High levels of ambition for the public sector in combination with slow economic growth and various economic shocks have led to increasing strain on public finances in the OECD countries during the last couple of decades. Since the tax burden is already high and under both internal and external pressure, from distortions and tax base mobility respectively, the adjustment is by no means easy. Although some policy initiatives have been taken, e.g. in EU countries that have been involved in the Maastricht process, the underlying pressure on public finances remains and is expected to grow in the future. A number of independent studies from inter alia the OECD, the EU Commission and the World Bank have highlighted the problems associated with ageing populations. Increased mobility across borders – resulting from changes in both technological change, economic structure and policy – will make it increasingly more difficult for countries that deviate from the mainstream with respect to social benefits or tax ratio. At the same time, demand for public services and social security remains strong in the industrialised countries; there seems on the whole to be little political preparedness to alter or redefine established welfare political goals.

The project leading up to the present volume started in the international discussion on future pressures on the public sector in developed industrial countries. One aim has been to appreciate the order of magnitude of these pressures, as a basis for the policy discussion.