Download The Imperative for Performance in the Public Sector

The Imperative for Performance
in the Public Sector
John Whitehead
Secretary to the Treasury
New Zealand
September 2006
© The Treasury
Roadmap
• Background on the Treasury & NZ
• Why public sector performance matters
• Some reflections on setting performance
objectives
• Current performance challenges in NZ
• Conclusions
2
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The New Zealand Treasury
• The Government’s principal economic
and fiscal adviser
• Strong interest in efficiency and
effectiveness of the public sector & its
connection to the growth and economic
well being of New Zealanders
3
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New Zealand
• Parliamentary democracy
• Small open economy
• Robust system of government and public
management system
• Very low levels of corruption
• Intimate, open political culture
4
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Public sector performance matters
• Size of government & impact on economy
• Public sector provides services that are not
otherwise available
• Major provider of infrastructure
• We were forced to undertake major reforms
of our economy and public sector, which
have delivered major benefits ...
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Getting Better Performance - Operating balance
(less revaluation adjustments)
1980-2005
OBERAC 1980 to 2005
$ billion
9
8
7
6
5
4
3
2
1
0
(1)
(2)
(3)
(4)
1980
1983
1986
1989
1992
1995
1998
2001
2004
Year ended 30 June
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And it is not just the Government’s
accounts…
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What have we learnt about setting
performance objectives?
Setting performance objectives matters …
• Clarifying the results expected
• Facilitate devolved authority
• Transparency
8
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Setting performance objectives is a
difficult task …
• Cannot rely on price signals or share price to
judge performance as in the private sector
• Multiple objectives & ambiguity as to their relative
value
• The public sector can be:
– Short term in focus
– Risk averse
– Resistant to change
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Good performance objectives
• Know what you want to do & do it well
– Agree what results you want
– Measure the right things well
– Inform decision-making
Important to note …
• It is an iterative process
• Risk of poor performance objectives
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Road Deaths (1970 = 1)
1.4
1987
1.2
1990
1970
1
Road Deaths (1970=1)
1995
2000
NZ
Norway
0.8
2004
UK
NSW
Sweden
0.6
Victoria
0.4
0.2
0
1965
TARGET SETTING
1970
1975
1980
1985
1990
1995
2000
2005
Year
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Setting performance objectives alone
is not sufficient - it requires
• Visible political support
• Senior management authority and
commitment
• Sound institutional and governance
arrangements
• The right incentives
• Relevant good quality data and robust
analysis
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We cannot stand still …
• As a small, open economy on the edge of the
world we can’t afford an inefficient state sector
• Government wants to know what it has got for
significant extra expenditure in recent years
• Less fiscal headroom
• Increased public and stakeholder expectations
• Long term fiscal position
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43
6
41
4
39
2
37
0
35
-2
33
-4
31
Core spending
Operating balance
-6
Operating balance (% of GDP)
Core spending (% of GDP)
Long term fiscal pressures…
29
-8
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
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…and we are still struggling to get
some things right
• Issues that span several agencies that matter to
Ministers & citizens
• Fragmentation
• Getting traction on non-departmental bodies
• Inconsistent information about the effectiveness of
interventions
• Avoiding reporting just being compliance costs
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Response to issues
• Government’s long term perspective under
unifying themes
• Organising the budget around themes
• Lead agencies with mandate to align
activities
• Expenditure review
• Central agencies leadership
• Legislation
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Conclusion
• Setting performance objectives in the public
sector is important
• But only part of the story, other things matter:
–
–
–
–
–
–
Visible political support
Senior management authority and commitment
Sound institutional and governance arrangements
The right incentives
Good information and analysis
The ability to take a longer-term view
• This takes time
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