Performance budgeting and efficiency

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Performance budgeting and efficiency

• Raphael Debets MoF The Netherlands OECD meeting 2
  May 2006

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AristotleMan is a goal seeking animal. His
life only has meaning if he is reaching out and
striving for his goals
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Budget reforms in Netherlands

• 1970s
• Top-down approach
• Goals defined by Ministry of Finance
• Disaster
• 1997
• Regulations by Ministry of Finance
• Policy objectives defined by line ministries
• Indicators also defined by line ministries
• Bottom-up approach, but questionable
• 2004
• Evaluation by committee

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Initial goals?

• More transparent budget/ annual report
• Focus on political priorities
• Better authorization and control by parliament
• Way to achieve these political goals
• More measurable goals
• Instrument to achieve efficiency

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What are our results? The budget

• Positive
• Acceleration of annual report
• September ? May
• Short and more political introduction due to
  policy agenda
• Average 60 pages ? 15 pages
• Better structure budgets instruments ? output
• Reduction number of line items 800 ? 140
  articles
• But also negative results like

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Negative unreadable documents
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Negative unclear policy objectives
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Negative contribution of government intervention
is unclear
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What are our results indicators?

• Regulation Every line item should have
  indicators
• Labour participation
• 55-65 age must increase to 40
• What about the economic cycle?

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Perverse incentives

• Indicators dont address certain crimes
• Example Sticky fingers
• Art thefts

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Perverse incentives
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IMF fiscal ROSC

• IMF conclusions on budgetreform
• Reform with potential for transparency
• Much work done, harvest still to be reaped
  (mostly)
• Recent changes in course by MoF are appropriate
• Limit and focus performance information
• Use appropriate information for level of
  discussion (main issues)
• Integrate policy analysis better in budget cycle
• Raise quality and independence
• www.minfin.nl

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Change in course the (long) way ahead

• Rigorous analysis (new policies) in policy
  documents
• Ensuring basic questions are answered
• Experiments and independent experts
• Basis task budgets authorization
• Reduce text (internet, useful indicators)

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Intermezzo uncertainty

• FT 7 April Fruitless search for certainty
• As in most walks of human life inputs and
  outcomes are imperfectly connected
• I can live with doubt and uncertainty. I think
  its much more interesting to live not knowing
  than to have answers which might be wrong

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The (long) way ahead

• Efficiency must be promoted with other
  instruments
• Interdepartmental policy reviews
• Evaluation of effects of policy
• Demand-driven reforms

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Examplesocial assistance

• City councils receive objective budget
• Big success reduction 25

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Too important to lose touch with reality!
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"This is not the end."