One of the key features of the Programme for Government, and highlighted in a previous newsletter, is the introduction of a Comprehensive Spending Review Process. The CSR is now well advanced and we can expect to see the initial fruits of the exercise in the forthcoming National Investment Plan and the 2012 budget. To a limited degree the thinking behind a CSR was reflected in the review of last year’s local government expenditure, albeit that this tended to be relatively restricted when benchmarked against similar exercises in other OECD countries where CSR has been a central feature of budgetary management since the 1990’s.
The over-riding point however, about a CSR is that the budgetary process moves from a traditional bottom-up approach to setting expenditure priorities at central government departmental level, to a top-down approach where national political priorities drive the determination of expenditure proposals. This involves the setting, within a multi annual budgetary framework, of national expenditure ceilings based upon national political priority or as will be the case for several years in Ireland, the agreement with the EU/ECB/IMF Troika.It also means that the national political process must take increasing responsibility for setting direction and following through on delivery…some thing that has perhaps been missing in the past in Ireland.
The model proposed for Ireland is based on the application of CSR in Canada but it is a process which, in general terms, is applied in many of the OECD members including Sweden and Denmark…traditionally seen as highly devolved countries where, for example, local government would have played a relatively active role in national budgetary decision-making. The motivation behind the move towards top down budgetary management was and is for most of those using it is similar i.e. efforts to control ballooning budget deficits in the 1990’s across the OECD drove the need for more integrated budgetary management in countries like Sweden, Denmark and Canada. This was in order to control spending at a central political level and ultimately across the public sector. In a similar fashion to the economic conditions we now find ourselves, countries such as Canada, Denmark, Sweden and others, found that having your finance department getting caught up on unnecessary details is not really the best way to run exchequer policy. The key, it seems, is to set the ceilings for expenditure with expected policy outcomes underpinned by targeted outputs and performance evaluation. Public service managers then have the responsibility to deliver…in other words to do what they are getting paid to do and not what they think that they should be doing. The similarities between Ireland now and Sweden in the early 1990’s are in some ways remarkable. In Ireland we failed to learn from their particular experience…to our cost. Had we had the foresight to embed the control practices applied in Sweden following the lessons learned from its bubble in the 1990’s we might have been better placed to confront the challenges of the past three years. We could very well have avoided many of the problems we now have to face. Sweden let me remind you went from a budget deficit of over 11% of GDP in the mid 90’s to a balanced budget perspective by the start of the century. Canada and Denmark were not that different.
So what is involved? In broad terms a CSR based on the Canadian model will see the setting of all expenditure by the public service within the political framework and Troika Agreement for the next three years. It will be the pre-cursor to a rolling programme where those programmes falling outside of the priorities set at national/international level will wither away. In Canada all direct programme spending was subject, and remains subject, to rolling reviews to ensure that national priorities are met. Within the CSR the programmes must meet with specific performance objectives which are subject to both internal and external review. Annual ceilings were and are set with the objective of reducing spending generally. This has resulted in the setting of priorities for specific programmes on the basis that higher performing programmes within the main political priorities nationally become the ultimate basis for expenditure allocation. This means of course that low performing programmes with a low political priority come to a rapid halt.
There are six overall criteria applied when it comes to the strategic setting of priories in Canada. These include:
• Consideration of programmes on the basis of their meeting political priority in serving the needs of the citizens of Canada;
• Underpinning the appropriateness of public service involvement in the policy area concerned or could such involvement be limited to regulation of private provision;
• The government layer at which programme provision is most appropriate…federal, province or local?;
• Extent to which provision of public service could be delivered by contracted out provision;
• Levels of efficiency to be derived within the budgetary framework, and
• The capacity of the exchequer to fund programmes even if they meet with priorities set by the political process and if funding is not available how might existing programmes be abandoned with minimum financial and social fallout.
One of the lessons from the more successful CSR processes generally, is that individual ministers and senior public servants across the layers of public management become more identified with budgetary responsibilities. The idea of looking for a budgetary extension therefore becomes less common due to that greater peer review being put in place. In addition, the evolution of management identifiable performance measures is resulting in a greater capacity to delegate specific responsibilities on decision-making in regard to programmes. This allows the central finance ministry to take a step back from day to day detail and allows them to focus on the bigger picture…something sadly, Ireland could have done with a lot more in the last decade.
In Canada this has allowed the federal government to shift its role from ownership and operations to core policy development and regulatory responsibility. The move to the top-down budgetary process has therefore ironically allowed for greater local devolution… but devolution set within clear targets, public service standards and identifiable outcome measurement. A key challenge however, something evident from experience in Canada. There is the need to change the culture of the remaining public organisations and their managements to take responsibility for devolved budgetary management. The experience of Canada suggests that where this willingness to take responsibility is not demonstrated, those at national level charged with monitoring expenditure will have to take decisions about the value of continuing with managements elsewhere in the public service that are failing to meet their obligations. Equally in the Nordic countries there has been a recognition that if the culture of the public service does not change, no amount of renewal of budgetary management will make things better… a truly thorny challenge therefore lies ahead for the Irish public service and more particularly the political leadership now in place. Perhaps the big stick from the Troika might prove handy afterall!
