How new technologies help alleviate the pressure on public finances

EY can support the public sector to alleviate pressure on public finances.

In brief

• New technologies help public administrations mitigate cost increases and respond to dynamic framework conditions.

Public debt has remained high in many countries since the global financial crisis in 2008. Compared to the Eurozone or the United States, Switzerland’s debt was relatively low before the Covid-19 pandemic. However, the measures taken to cope with the pandemic have placed pressure on public finances in Switzerland, too. Covid-19-contingent debt is expected to increase to CHF 30 billion by the end of 2022.

The pandemic has shown that public sector processes only sometimes have the necessary traction to handle public finances in a crisis. Innovative solutions can enable the state to respond more effectively to financial challenges. In the public sector, preventing rising public finance expenditures is emerging as a strategic priority.

Economists dispute whether Switzerland should reduce its debt ratio. There is broad consensus, however, that debt must be kept from increasing. New technologies can be crucial in making more efficient use of public sector resources. Two examples can illustrate this:

Example 1: The state can promote the proactive and transparent management of public finances by using new technologies such as artificial intelligence or blockchain.

Austere financial management includes, among other things, proactive cost controls and fraud detection procedures. For example, artificial intelligence can help with these by analyzing social welfare or healthcare datasets. In the United Kingdom, technology is already being used to detect unauthorized withdrawals of welfare benefits in a timely manner.

Tax administrations are trying to automate and simplify tax collection by linking existing databases within the administration (big data) and new technologies. Thanks to big data, taxpayers in eight countries no longer have to complete their tax returns from scratch themselves. In Estonia, for example, it takes a few minutes to file a tax return. The public administration has merged the data of its citizens in such a way that a pre-filled form can be made available to taxpayers via text message or digital assistants. All Estonian public services, except for marriage and divorce, are digitized and made available online.

EY has demonstrated the potential of Blockchain for Public Finance to improve efficiency and effectiveness in projects. The EY Blockchain for Public Finance solution bridges silos and establishes transparency and traceability on a continuous basis.

For example, EY teams have used this approach to help a North American city improve the tracking and management of public spending. EY teams worked with the city to reduce the delay in reporting from over 30 days to near real-time while significantly reducing manual input and errors. EY optimized the city's ability to track and demonstrate asset usage and status.

A dedicated EY Government & Public Sector team of 20 people helps public administrations identify and implement the potential of new technologies and advanced digitalization measures to modernize their processes. In Switzerland, this team works with 2,780 colleagues with a wide range of business, legal and technical expertise. Globally, our public sector network connects more than 20,000 partners and colleagues from over 100 countries. We are all passionate about supporting the public sector in digitalization, sustainability, international collaboration, and infrastructure projects.