Select Committee on Liaison Scrutiny Unit Review Memoranda

6  Target setting under the 2004 Spending Review

6.1  Background

78.  The Government argues that targets set as part of departments' PSAs play a multiple role:

• they form a statement of intent, helping communicate the Government's priorities and providing a strategic direction for departmental planning;
• they allow the performance of a department to be monitored by Parliament and the public, and therefore provide accountability; and
• they allow the performance of a department to be monitored internally and therefore create a focus on results which causes departments and individual staff to be concerned with outcomes rather than inputs. Therefore, within a wider performance management framework, targets can allow departments to identify weaknesses and drive improvement.

79.  PSA targets were introduced in the 1998 Comprehensive Spending Review and have been reviewed and developed over time. The Public Administration Select Committee considered how well PSA targets were working in July 2003 and concluded that in many cases the Government's aims were not being fulfilled.

80.  The Committee recommended that the Government introduce greater local autonomy so that more meaningful and relevant targets could be constructed. As part of this reform, the Committee suggested that the Government reduce the number of targets and focus on key outcomes. The report also recommended that there be a shift in emphasis from absolute targets to measures of progress in performance, so as to reduce the pressure on front-line staff and ensure that movement in the right direction is celebrated even if specific targets are not met.[35]

81.  The Government's Devolving Decision Making review reached many similar conclusions and specifically proposed that:

• PSAs should continue to focus on the Government's highest priority outcomes;
• there should be more active consultation with regional organisations, the front-line and the public, in the setting and measurement of PSA targets;
• there should be a reduction in the top down, subsidiary input and process controls associated with the delivery of PSAs to allow more differentiated approaches to local delivery;
• the number of targets or controls imposed on local organisations not related to the priorities set in PSAs should be reduced; and
• in the longer term - as performance improves, ambitions are met and inequalities in outcomes decline - PSAs should move towards setting clear national standards rather than ever more stretching targets, so that over time the overall number of explicit PSA targets gradually reduces as ambitions are achieved.[36]

82.  Accordingly, the Government sought to devolve responsibility to public service providers during the SR04 process. The number of PSA targets agreed across government fell to 110 at SR04 from 125 at SR02. At the same time, the obligation on departments to produce Service Delivery Agreements, which constituted over 500 subsidiary targets focussed on the process of delivery at SR02, was dropped.

6.2  Absolute and directional targets

83.  The SR04 PSA targets are listed in each of the 2005 DARs and we have identified improvements in target setting associated with the reforms introduced by the Government. Problems remain however, not least related to the inconsistency in target design which creates varying levels of accountability. Examples of these variations are detailed in Box 19 in relation to the Department for Education and Skills (DFES).[37]

BOX 19: ABSOLUTE AND DIRECTIONAL PSA TARGETS UNDER SR04 (DFES)

84.  Where targets detail specific and measurable required levels of performance, it is easy to determine whether the department has realised its objectives or not. The question arises, however, as to how these figures have been settled upon: are they simply arbitrary or are they the result of detailed modelling? The fact that most of the targets are round figures creates a suspicion that it is more probably the former.

85.  Where targets are directional only there is no danger that the favoured level of performance has simply been plucked out of the air. Instead it is clear that the desired outcome is the movement of performance in one direction (reduction or increase), with the level of success being dependent upon the magnitude of that movement. In this instance, however, it is more difficult to hold the department to account, as success can legitimately be claimed for even the smallest of changes in performance.

86.  In considering PSA targets established by the Home Office under SR04, the Home Affairs Select Committee identified three reasons why it felt it would be appropriate for a higher proportion of targets to contain "realistic but stretching" quantitative elements as part of the next spending review:

• First, properly set quantitative targets can and should motivate towards better performance.
• Secondly, the risks of quantified target-setting are already being mitigated by the moves taken in SR04 to reduce the complexity and volume of targets.
• Thirdly, quantified targets make it easier to hold Government to account.

87.  The Committee argued that, in relation to directional targets, there is an asymmetry of information that places the Department in a better position than Parliament or the general public to judge what would constitute a substantial success. As such, the Committee concluded that the use of quantitative targets carries an advantage, as long as these targets are set in a way that "faithfully reflects strong analysis of existing data rather than on an arbitrary basis".[38]

88.  While we do not wish to enter the debate regarding the relative merits of different forms of targets in this report, we do believe that it is important that departments set out their reasoning at some point. Without explanations for why directional targets are adopted in some instances and absolute targets in others, the DAR reader can only guess at the department's thinking. Confidence in targets might be undermined if the public were to reach the cynical conclusion that directional targets are introduced where departments are least confident of their ability to deliver real improvement.

89.  In addition to setting out why one form of target is chosen over another, departments should also make clear how specific figures have been arrived at in absolute targets, and provide clearer definitions of what is meant by phrases such as "significant improvement" in relation to directional targets.

6.3  Reconciliation of targets

90.  Alongside the evolution of its system of targets, the Government accepts the need for continuity in delivery and focus. As presented in the DARs, however, it is sometimes difficult to determine how objectives and targets have evolved. For example, the DFES report details only those SR02 targets for which a final assessment was not provided in its Autumn Performance Report 2004, making it difficult to compare the SR02 set of objectives and targets with those for SR04.[39]

91.  In addition, it can be difficult to reconcile targets to higher level objectives. In several instances objectives exist without any corresponding targets. For example, the DCA has four objectives in place under SR04, but its five PSA targets monitor performance on only two of these objectives.

92.  While the Department argues that Treasury guidance states that targets should cover only key aspects of a department's work rather than providing the comprehensive coverage required of objectives, it is not clear to what extent priorities are communicated in the absence of targets nor how the Department expects to drive improvement.

93.  Box 20 details the uneven distribution of PSA targets across DCA's objectives. In this instance, the reader might conclude that the Department is more serious about Objectives I & II than Objectives III & IV.

BOX 20: UNEVEN DISTRIBUTION OF TARGETS ACROSS OBJECTIVES (DCA)

Source:  DCA, Delivering justice, rights and democracy: DCA Departmental Report 2004/05, June 2005

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35   PASC, On Target? Government by Measurement, HC 62-1, 22 July 2003, pp3-4 Back

36   HM Treasury, 2004 Spending Review: Public Service Agreements 2005-2008, July 2004, para 1.12 Back

37   DFES, Departmental Report 2005, June 2005, Section B Back

38   Home Affairs Committee, Home Office Target-Setting 2004, HC 320, 22 February 2005, paras 47-50 Back

39   DFES, Departmental Report 2005, June 2005 Back

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Prepared 19 May 2006