Treasury and Budget Reform

Transcription

1 2013/SFOM11/016 Session: 5.1 Treasury and Budget Reform Purpose: Information Submitted by: World Bank 11 th Senior Finance Officials Meeting Manado, Indonesia May 2013

2 Treasury and Budget Reform APEC Finance and Central Banks Deputies Meetings Manado, Indonesia May 23, 2013 Theo Thomas Senior Public Sector Specialist

3 Outline Sections 1. Introduction to Policy-based Spending Reviews 2. Application of Policybased Spending Reviews 3. Impact of Spending Review Key Questions What are Policybased Spending Reviews? How do they fit in with the budget cycle and other processes for monitoring and evaluating public spending? What would a Policy-based Spending Review involve? What is the institutional framework and underlying institutional issues in the key spending areas? Reprioritization and fiscal space (spending on the right interventions) Improving technical efficiency (the quality of implementation and effectiveness of the intervention) within key spending areas?

4 Crisis has strengthened focus on budget evaluation Summary measures incorporate a wide range of performance information into one or more overall performance ratings for the program, e.g. US PART, Korea, Thailand Program reviews Review consistency in design, execution and reporting Based on logical framework Often performed internally within line ministries Impact evaluations Assess program effectiveness on basis of impact measures Methodology includes extensive data collection, sophisticated evaluation techniques (CBA, CEA) Often performed by experts - consulting firms, universities etc. Spending reviews Assess consistency of portfolio of programs within and across sectors Set ex-ante (multi-year) budget / resource ceilings Coordinated at the center, but strong partnership with departments/programs themselves Value-for money /efficiency reviews consider the scope for efficiency savings across public expenditure. Often centrally driven, but may use independent resources, while supreme audit agency also considers on a case-by-case basis

5 Spending Review: a specific type of evaluation Spending review is an institutionalized process for the review of baseline expenditure Looking not only at effectiveness and efficiency under current funding levels, but the consequence for outputs and outcomes under alternative funding levels Identification of savings options is an essential part of the spending review process although process might identify options for increased as well as reduced funding Spending review is a process that is explicitly intended to feed into budgetary decisions Spending review is necessarily a process that is directed and managed at the bureaucratic level by the central agencies that play a key role in budget preparation (e.g. MOF, Prime Ministers Dept) Source: Adapted from Robinson, M, 2012, Spending reviews in OECD Countries, World Bank

6 Emphasis depends on the dominant fiscal objective Source: Typology and implementation of spending reviews, OECD SBO Discussion Paper, 27-October 2011

7 Often multiple techniques are used Spending review objective is often to realize expenditure reductions through more specific / efficient savings. But approach is often combined with Across-the-board cuts: application of a standard percentage reduction to all spending ministry budgets on a one-off basis (e.g., cutting all ministry budgets for the coming year) Productivity dividend: efficiency dividend, a small percentage (e.g. 2 percent to each ministry s operating budget), based on the justification that ministries should in general be able to improve efficiency by at least that rate annually

8 Basic purpose of a spending review is to improve the quality of public services (including savings) Focus on the objectives of programs, their relevance to current government priorities, the outcomes being achieved and at what cost Are necessarily about changing programs and thus require that choices are made All spending ministries are typically expected to develop an agenda of spending reviews and undertake some review activity regularly Are most effective if target programs where there is reason to believe that cost effectiveness can be substantially increased and savings realized No mechanistic link between performance and resource allocation within spending review

9 Expenditure Processes focus on existing expenditures and consider breadth and depth (selective) New Initiatives Approach focuses only on new policy not on existing spending Often need two track focus on existing expenditures Policy-based Spending reviews could look intensely at the past performance of a policy, institution, or sector, i.e. examine in detail Baseline review is across the board monitoring of past performance - but light New Initiatives Baseline review or comprehensive Policy-based Spending Reviews Institution / Program

10 Spending Reviews: sequence of activities Analysis of Expenditure by Program/Objective Breakdown of expenditure by program, historic costs, current expenditure and forecast trends (i.e. baseline) Identify Areas of Highest Priority/Return Identify relationship with government priorities and scope for improving value for money in programs or processes Reprioritization of Expenditure Revise forward estimates based on savings/new money and revised performance framework (indicators etc.) Delivery Planning and Implementation Actions required to refocus expenditure on objectives identified and remove obstacles

11 Requires cross government coordination, analysis and data is important an intensive process Although the center of Government usually leads the process, the line ministries have the better information Good analysis, policy design, and policy implementation requires extensive data (good IFMIS and analytic tools, e.g. DEA) Data should cover all public entities, including central and local governments and other public sector institutions. Includes Data on detailed cost and functional expenditure components; Requires performance information for programs Data needs to be collected in a timely fashion.

12 Reprioritization and fiscal space under the Spending Review Process. UK demonstrated capacity to achieve major shifts in expenditure Large shift in priorities toward health, education and transport: share in total public expenditure increased from 28 percent in to 34 percent by Since helping to manage significant budget cuts, while protecting heath and ODA budgets Australian Expenditure Review Committee (ERC) targeted expenditure cuts at low-priority programs to create fiscal space in 1980s and 1990s Softened the pain of expenditure cuts, but also made fiscal consolidation more sustainable More efficient than across the Board cuts Many crisis hit countries are following suit (e.g. Greece 2008)

13 Canada s Strategic reviews are program-based and results-informed All direct program spending reviewed - 25% each year Treasury Board and its Secretariat set terms of reference: Comprehensiveness assessment of mandate, departmental objectives, program effectiveness, efficiency and alignment to government priorities Reallocation proposals options for program reductions or eliminations to reallocate to government priorities and support overall spending control Reinvestment proposals options to better support government priorities Departments review the relevance and performance of their spending, identify lowest performing/priority 5% of programs, seek outside expert advice and report to the Treasury Board Privy Council Office identifies review departments every year and assesses, with Treasury Board and the Department of Finance, the departmental proposals

14 Significant variation in design of spending reviews Scope: discretionary or mandatory expenditures; sectors reviewed; level of government Level of review: all of government; sector programs; organizations; horizontal policies Institutional arrangements who leads Time frame/periodicity: fixed period or rolling basis Resulting savings options: in terms of staff or funding; in absolute or percentage terms (claimed or realized?) 2011 OECD Performance Budgeting Survey to review spending reviews Comparison of country experiences

15 THANK YOU