Posted by Jon Sell1
As the international trend towards the adoption of performance budgeting systems continues, the models regarded as benchmarks in advanced countries come under increasing scrutiny. Emerging and developing countries quite rightly want to investigate all possible options. ‘What lessons can we learn from what went well and what failed?’ ‘Which systems have proven most effective?’ ‘How sustainable did the systems created in the economically good times of the late 1990s prove to be?’ ‘Can these systems accommodate our own national political and administrative characteristics?’
Two such benchmark systems recognised by emerging and developing countries are those of the U.K. and France. These two models share both common elements (such as a programmatic approach to resource planning, and accusations from critics that performance budgeting generates a profusion of data and an increase in bureaucracy without tangible benefits)2 and also some important differences. Indeed, there may be as much to learn from the ways in which the two systems diverge, and the reasons for this, as from their common elements.
Consider the following example. The U.K. system of Public Service Agreements (PSAs) was a strong, comprehensive approach to public services performance management. The government published PSAs alongside the medium-term Spending Reviews, and each PSA set out high-level objectives and performance targets for relevant areas of the public service.3 These PSAs were submitted to Parliament alongside the medium-term spending plans. PSAs were embedded within the daily work of ministries and delivery agencies, managed by a tightly coordinated administrative center (the Prime Minister’s Delivery Unit) in the Cabinet Office (and in the later years, from within the finance ministry, H.M. Treasury), reporting directly to Cabinet and the Prime Minister. In the early years, the then Prime Minister (Tony Blair) felt personal ownership of, and political investment in, the performance budgeting framework, seeing it as a key tool for central direction of the policymaking process, and for ensuring delivery of the priorities the government had been elected to deliver – a quid pro quo that ministries were expected to implement in return for the additional resources the public services would receive.
But the integration of a performance framework with spending choices in the U.K. system was managed through a kind of ‘adjacency’, rather than by formally embedding a programmatic, performance-led budgeting process within the triennial Spending Reviews and annual Budgets. This was a system that drew its authority not from a legislative requirement to integrate performance within the allocation framework, but rather from the demand of Cabinet (and the leadership of the Prime Minister, in particular) and from the commitment of the senior civil service to implement a performance system alongside the fiscal planning process. In other words, the performance framework and the budget process worked in parallel, as two pillars of public services management, rather than as one integrated and legally constituted whole.
In France, a very different approach has been taken. The performance system, launched by the 2001 new budget organic law, in the form of ‘policy areas’ (missions) comprising several ‘programs’ ‘with associated outcomes, outputs and delivery plans, was in fact part of an overall reform of the budget process, rather than a separate pillar of performance management. Financial allocations are made to ministries at the level of the programs within the budget, where it is possible to see a rather direct link between the priorities of the government and the spending choices that have been made. As a result, France has achieved a greater degree of formal integration between the performance framework and the budget process than has been the case in the U.K. On the other hand, it has been much less developed as a tool of performance management than in the U.K.
Emerging and developing countries need to assess the pros and cons of these different approaches. Should they aim to develop a performance-led, programmatic model for resource allocation, embedding performance priorities within the budget process (as in France), or build a more comprehensive performance management framework for government, but which does not operate as a structural component of the budget , but works alongside resource allocations to maximise pubic services efficiency and effectiveness (as in the U.K.)? Of course, in time it may be feasible to achieve both of these objectives within a single system, but neither France nor the U.K. have succeeded in realising this ambition to date (and in fact the U.K. has moved further away from realising this aspiration since 2010).
Before making such choices, emerging and developing countries should take account of their legal framework and traditions. In some countries the formal requirement of the law is the primary driver of administrative practices and is used as the main ‘exogenous’ tool for ensuring compliance and behavioural change. In countries where this is the case, a model closer to the French model, backed up by a system of legislative requirements, is clearly important. One of the main characteristics of the U.K. model, by contrast, is that it emphasises the ‘endogenous’ drivers of public sector reform, seeking to build consensus around the outcome priorities, and drawing authority from political and senior civil service decision-making. This is a model based on ‘managerialism’ rather than legal compliance, and has its own advantages. However, it requires a great deal of confidence in civil service capability and motivation, and an existing culture receptive to such an approach.
A helpful framework for thinking about such questions is provided by Jack Diamond.4 He suggests that we can divide the factors affecting performance budgeting implementation into three tiers:
• Conditioning factors: the highest level environmental factors within which PFM reforms must operate, such as political and economic conditions;
• Institutional design factors: the (middle level) characteristics of the PFM system itself, including its relationship with the primary central and legislative institutions responsible for its implementation; and
• Process factors: (the lowest level) including the PFM process design, managerial behaviours and organisational culture.
As the example I have given above shows, emerging and developing countries need to carefully review the options presented by ‘benchmark’ models to weigh the advantages and disadvantages. Diamond’s framework might be a useful starting point for assessing the successes and failures countries such as France and the U.K. have experienced in implementing performance budgeting systems; ensuring that emerging and developing countries design approaches that best meet their own legal, administrative and cultural context.
1 PFM Consultant. Jon formerly worked in the U.K. civil service at the Prime Minister’s Delivery Unit, H.M. Treasury and the Cabinet Office. The author is grateful to Richard Allen and Benoit Chevauchez for their comments.
2 For a good overview of lessons from the U.K. system see Richard Hughes, Performance Budgeting in the UK: 10 Lessons from a Decade of Experience (IMF, 2008).
3 For an example of a PSA published alongside the 2004 Spending Review: http://webarchive.nationalarchives.gov.uk/20071204130111/http://hm-treasury.gov.uk/media/A/2/sr04_psa_ch5.pdf
4Jack Diamond, The Non-technical context of PFM reform (IMF, July 2011) http://blog-pfm.imf.org/files/the-non-technical-context-of-pfm-reform-2.pdf
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