Memorandum from Professor Colin Talbot
BUDGET 08—EFFICIENCY
AND PERFORMANCE
ISSUES
This memo covers four areas:
— Efficiency in Government—Impact
of Gershon
— Efficiency in Government—CSR07
and Budget 08
— Performance in Government—CSR07
and Budget 08
— Public Value Programme—Budget
08
EFFICIENCY IN
GOVERNMENT—IMPACT
OF GERSHON
The government continues to make claims about
achievement of the Gershon efficiency targets set out in SR2004
and the Gershon Report which are not substantiated by independent
verification. Given the doubts the NAO has expressed previously
and the fact that some of the issues they have identified are
probably irresolvable (due to absence of historical data and baselines)
there will continue to be substantial doubt as to whether "Gershon"
really met the targets.
I continue to have further doubts. Firstly,
it is difficult to reconcile the outcomes of the ONS's work on
productivity of the health service with the reported efficiency
gains from the "more productive working" stream of the
Gershon programme. ONS reports a fall in NHS productivity whether
measured purely quantitatively or even if quality improvements
are included.
One possible, generous, explanation for this
is that whilst ONS is trying to measure the productivity of the
whole system, the Gershon reported savings are based on a "project"
basis. It is quite possible for "local" efficiency to
improve within a particular "project" or area whilst
overall efficiency or productivity of the system is declining.
The worst-case is that local savings actually produce systemic
reductions in productivity/efficiency. A private sector example
might be where purchase of an inferior part produces local savings
but causes consequential production or quality failures which
cost more than the local saving.
The irony of this situation is that, as I have
pointed out several times, the Gershon programme probably has
produced substantial savings and these are probably bigger than
any similar programme in the past 20-30 years but the combination
of questionable reporting and over-ambition has undermined the
public credibility of the effort.
There is now evidence to support this assertion.
A recent IPSOS-Mori survey (March 2008) asked the following question:
"Do you think a Labour or Conservative Government
would be most effective in getting good value for the public money
it spends?"
In 2005 (shortly after Gershon started) the
responses to the same question were:
Labour 41% Conservative 30% Other 4% None 13%
Don't Know 12%
By 2008 these figures had changed to:
Labour 27% Conservative 29% Other 3% None 22%
Don't Know 19%
These figures are bad news for governments in
general as well as the Government: the decline of the confidence
in the current Government is notable, but perhaps more worrying
is that the combined "none" and "don't know"
categories have increased from a quarter to getting on for half
(41%) of voters.
In other words, voters have not switched their
confidence to the Opposition (who's figures are static) but to
doubting anyone's ability to achieve VfM. This is worrying for
continuing confidence in public administration and services generally.
EFFICIENCY IN
GOVERNMENT—CSR07 AND
BUDGET 08
The challenge set in CSR07 is much stiffer than
Gershon for several reasons:
— The Gershon savings (whatever they
have actually been) have already been made; they are now net of
investment;
— They are now all cashable (making
this £30 billion in effect twice the cashable savings under
Gershon);
— Despite there not being formal targets
for non-cashable savings other Government initiatives on improving
services, and especially quality improvement and "personalisation",
means there is still pressure for these types of improvements.
Given that any reasonable observer would conclude
that the Gershon targets were not fully met it is difficult to
see how the new targets can be fully achieved.
Doubts about the new programme are compounded
by the manner of its implementation:
— The shift of responsibility for overseeing
the programme into HMT in the name of "mainstreaming"
removes what was clearly a useful "check and balance"
in the semi-independent role which OGC played. (Incidentally,
the physical move of OGC into Treasury was reported at a recent
public event to have mainly been to reduce HMT's occupancy cost
to space ratio, which was previously and embarrassingly the worst
of any Whitehall department.)
— The introduction of the new "Value
for Money Delivery Agreements" on a department by department
basis has been patchy at best.
— An initial scan of the new documents
suggests that some departments are struggling to implement the
new guidelines and that measurement problems in particular seem
acute.
— Given these "agreements"
are heavily dependent on those outside of the civil service, there
is little evidence they have been in anyway involved in their
development and are therefore likely to be much less committed
to their implementation. This suggests that top-down command and
control will yet again be used to force implementation.
PERFORMANCE IN
GOVERNMENT—CSR07 AND
BUDGET 08
CSR07 set out the new "performance management
framework" which included "whole of government"
Public Service Agreements (PSAs) alongside Departmental Strategic
Objectives (DSOs). The government made great claims for a reduction
in performance reporting which are not at born-out by the facts.
The combined number of PSAs and DSOs are similar to the number
of PSAs in SR2004.
Serious doubts remain about the new system:
— The relationship between PSAs and
DSOs remains to be clarified—whilst HMT clearly sees PSAs
as the most important, high-level priorities and DSOs as the "business
as usual" objectives of departments, this view is not universal
across Whitehall.
— Even if it were, public explanation
of how trade-offs between these two systems are to be handled
is conspicuous by its absence.
— There is a clear view—how widespread
I cannot say—in spending departments that DSOs are at least
as important, if not more so, than PSAs—especially those
for which a department is only a "partner" and not the
lead agency.
— There is little evidence that the
ambition of some in government to link resources clearly to objectives
(in both PSAs and DSOs) has been anywhere near achieved. Work
is apparently now underway to look at this within some departments
(supported by NAO and HMT) but there is a very long way to go.
Without such a link, performance management as opposed to just
performance reporting will remain elusive.
— Performance management of long-term
outcome based PSAs (which most are) is in any case always problematic.
Complexity of causation, long-time horizons, external factors
and measurement problems all conspire to make management of such
outcomes very difficult. Whilst a focus on outcomes may be laudable,
a focus on management of resources and outputs is at least equally
necessary. The new system does not yet provide this.
PUBLIC VALUE
PROGRAMME—BUDGET
08
Finally, Budget 08 announced the new "Public
Value Programme" which is apparently to look at "all
major areas of public spending to identify where there is scope
to improve value for money and value for money incentives."
Given that CSR was supposed to have just made
"zero-based" reassessments of all spending and has put
in place a new £30 billion "value for money" programme—what
is this new initiative for? There is no further information available
about the nature of this programme, who will run it, how it fits
with the other systems put in place, etc, etc.
There has been a persistent tendency for Governments
in the past 30 years to launch multiple, overlapping and often
insufficiently coordinated and integrated initiatives of this
type. There is a very real danger here that departments struggling
to deal with the new VfM Programme and new Performance Management
Framework, alongside in many case challenging budget restrictions,
will find this additional "Public Value Programme" at
best a distraction and at worst a positive hindrance. The Government
needs to urgently clarify this new initiative and not—as
Budget 08 indicates—wait until Budget 09 (page 79).
19 March 2008
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