THE DYNAMICS OF PUBLIC SECTOR REFORM Reflections from the Italian Experience

1. THE DYNAMICS OF PUBLIC SECTOR REFORM Reflections from the Italian Experience Franco BASSANINI Member of Italian Senate Former Minister for Public Administration 2nd Quality Conference for Public Administrations Copenhagen, October 2-4, 2002 www.bassanini.it

2. The urgent needfor change • the “modern democracy” reasons • the “modern economy” reasons • the “globalisation” reasons F.Bassanini - The Dynamics

3. 1- the « modern democracy » reasons • Increasing demand of “effectiveness” of democratic values from citizens/businesses • New “public goods” besides legality (i.e., efficiency, transparency, accountability) • the sunset of the traditional “relationship of authority” (and of a “self-referential” P.A.) • the “shifting of the barycentre of Administrative Law” from the “administrative act” to the “administrative relationship” between citizens and P.A. • from the pursuance of the “legitimacy” of a public regulation or act to the pursuance of its “utility” • from an “authority-oriented” to a “consumer-” and “performance-oriented” Public Administration F.Bassanini - The Dynamics

4. 2- the « modern economy » reasons Increasing role of Public Institutions to boost economic growth, also in the “new economy” Some concrete examples of economic effects of Administrative Reform programmes: • USA – burdens of bureaucracy on business of 500 billion USD (about 10% of GDP) – Clinton-Gore “Reinventing Government” program produced savings between 42 and 54 billion USD • EU – burdens of bureaucracy on business of 540 billion Euro (about 3-4% of GDP) – Single Market, enhancing competition and substituting single national requirements with single European ones, improved European GDP by about 1,5% between 1987 and 1993 • ITALY – Citizens’ savings: annual savings for certificates and certified signatures due to “self-certification” program (in million Euros): 527 in 1998, 544 in 1999, 1128 in 2000;Business savings: after the one stop shop and other simplifications, the number of procedures needed to create a new corporation or an individual business had been reduced from 25 to 5 and maximum time needed for the whole process dropped from 22 to 10 weeks. Costs were reduced from 7,700 to 3,500 Euros for corporations and from 1,150 to 500 Euro for individual business F.Bassanini - The Dynamics

5. 3 - the « globalisation » reasons • Rapid development of ICT • Increasing role of international enterprises • Competition between “Continental-systems” (more than between “Country-systems”) decreasing importance of national borders Influence of the different performances of national public administrations: for every Country, the quality of national regulation and the efficiency of public administration are factors of competitiveness F.Bassanini - The Dynamics

6. Not a single model for an Administrative Reform, but… Not a single model (nor a single Italian recipe), but … • … some commoncharacteristics … • … some common “basic ingredients” … • … some common problems … F.Bassanini - The Dynamics

7. Not a single model, but …. some common characteristics • The sunset of the “lawyers’ monopoly” (growing awareness of the strong impact of P.A. on citizens’ lives and on economic activities) • Lack of relevance of the national peculiarities of constitutional systems towards Regulatory and Administrative Reforms • Growing attention of the main international organizations (UN, OECD, IMF, WTO) on Governance and “Regulatory Reform” issues F.Bassanini - The Dynamics

8. Not a single model, but …some common “basic ingredients”for an Administrative Reform • A specific policy (e.g., through specific P.M. delegations to the Minister for P.A.) and a sustained political support for Administrative Reform (but also emphasizing its “bipartisan” nature) • A “multidisciplinary approach” • Clear objectives and measurement of results • Involving citizens, business and other “recipients” • Creation of a public management; capacity building • Similar tools also for Regional, Local and “Independent” Authorities F.Bassanini - The Dynamics

9. The Italian case A useful experience to draw some general conclusions from

10. Public Administration in Italy in the early Nineties • An obsolete administration: no government-wide reforms since 1865 • A bureaucratic, interventionist, rigid and centralized State • An inefficient administration: islands of excellence in a sea of general inefficiency • A costly administration: crucial need to balance the budget and reduce public debt F.Bassanini - The Dynamics

11. Italian public debt up to 1994(% of GDP) Source: Italy - Ministry of the Treasury F.Bassanini - The Dynamics

12. Public Administration Reformin Italy 1996-2001Reasons of interest A Government-wide Reform • based on a “multidisciplinary approach” • completely achieved in its laws and decrees, still partially implemented • that has produced remarkable changes • Up to now, recording many successful experiences and some failures F.Bassanini - The Dynamics

13. Public Administration Reformin Italy 1996-2001Reasons of interest Positive returns: some examples F.Bassanini - The Dynamics

14. Customer Satisfaction:% of Positive Opinions about Italian Administrations’ Efficiency: 1997-2001(Source:ISPO)

15. Revenues from Privatization in OECD Countries (1993 - 1999) Source: OECD F.Bassanini - The Dynamics

16. Progress in regulatory capacity indicators, 1998-2000 Source: OECD, The Regulatory Reform in Italy, 2001. F.Bassanini - The Dynamics

17. Effects of Regulation on Competitiveness Better Competitiveness = 0 (down on the left) Source: OCDE 1999 et 2001 F.Bassanini - The Dynamics

18. Costs of public employees (% of GDP) Source: OECD and Minister of Treasury F.Bassanini - The Dynamics

19. Public employmenta comparison between France and Italy F.Bassanini - The Dynamics

20. Public Deficit (% of GDP) Source: ISTAT F.Bassanini - The Dynamics

21. Public Debt (% of GDP) Source: ISTAT F.Bassanini - The Dynamics

22. SimplificationNumber of Certificates issued per year Source: Italy – Department f Public Administration F.Bassanini - The Dynamics

23. SimplificationNumber of Certified Signatures requested by the Public Administrations (per year) Source: Italy – Department f Public Administration F.Bassanini - The Dynamics

24. Simplificationthe People’s Opinion Do you know that in most cases all you need is a self-declaration? Do you think it is useful? F.Bassanini - The Dynamics

25. Italian Administrative Reform Lessons learned

26. 1- Totally inefficient Administrations are easier to reform • The need for change drives large calls for reform and consequently a large consensus on radical projects of reform among: • Public • Business • Trade Unions • Parliament (a bipartisan reform) • States with efficient administrations (e.g. France) usually face greater difficulties in projecting radical reforms (the more inefficient an administration is, the easier is to have consensus for reforming it) F.Bassanini - The Dynamics

27. 2- Comprehensive reform efforts are more effective than piecemeal processesSectional reforms are most likely to fail The Italian case During XX Century • any attempt of reform in Italy failed because of its gradualist approach • the system had grown only by “adding layers” In the late 1990’s • the first Government-wide Reform since 1865 succeeded for its comprehensive character F.Bassanini - The Dynamics

28. Italy 1996-2001 A Comprehensive Reform Wide range of approaches • Reshaping of the State • Modernisation of organisational structures and functions • Innovation in the delivery of public services • Renewal of the culture of public institutions • Reinvention of the mission of public bodies F.Bassanini - The Dynamics

29. Refocusing public sector’s mission (devolution, outsourcing and “administrative federalism”) Simplifying regulatory and administrative burdens Reorganization of Central Government Civil Service Reform Towards a performance-oriented public sector management New Public Budgeting A more transparent and comprehensible Government Reshaping Government through ICT (e-Government) Italy 1996-2000A comprehensive Reforminvolving radical changes in the following main areas: F.Bassanini - The Dynamics

30. The Main Legislative Tools of Reformin the Italian Experience • A broad “delegating law” (legge delega) n. 59 of 1997: Parliament delegates Government the power to adopt “legislative decrees” (primary level regulation) in defined areas, pursuant to the principles set by the law • The “delegislation” mechanism: Parliament authorizes Government to substitute primary laws with Governmental decrees (secondary level regulation) in two main sectors: administrative procedures and organization of public offices • A Constitutional Reform shaped following the model of the federal States F.Bassanini - The Dynamics

31. 3- The Reform must reinvent the Government’s Organisation but also (or before) reconsider the Government’s Missions Horizontal Subsidiarity and Devolution for a leaner but more efficient State

32. Horizontal subsidiarityfor a leaner but more efficient State focusing Government on its core business: • closing unnecessary Government activities • outsourcing and/or privatizing activities that can be more efficiently undertaken by the private sector (business and non-profit organizations) • liberalization of public utilities F.Bassanini - The Dynamics

33. Liberalization and Privatization (Italy) • Liberalization. Some examples: • 231 fixed telecommunication licenses and 174 telephone operators instead of Telecom Italia monopoly • unbundling of local loop from end 2001 • from ENEL (public owned company now partially privatized) monopoly of electricity market (90% in 1990) to free competition (Enel obliged to drop under 40% in 2003) • Liberalization of commercial activities and of 30 other productive activities (no more licenses or authorizations) • Privatization of public utilities: TLC, banks, gas and electricity system, iron metallurgy etc. • world largest privatization program (total revenue up to end 1999: 103 billion Euro) F.Bassanini - The Dynamics

34. Privatizationtotal stock market cap/GDP The privatization program has contributed to foster the growth of the Italian equity market F.Bassanini - The Dynamics

35. 4 - Devolution: Vertical subsidiarityMoving public service nearer to the citizen The Democratic Governance of the Modern Complex Society, in the Age of Globalization and ICT, requires a wise division of labour, tasks and responsibilities between local, regional and central administrations and a stronger and more efficient local government The Net economy does not eliminate the value of social and cultural proximity Globalization has not reduced, indeed it has increased the role of local government institutions Furthermore the need of coordination that in the past could only be adequately satisfied by centralising decisions on public policies at a higher territorial level, finds an adequate response today in the new possibility of peer to peer coordination allowed by ICT. The plurality of deciders is no longer a source of anarchy. On the contrary, it guarantees adherence to needs and demands of citizens. The internet functioning model, based on an effective and experimental combination of autonomy and co-operation, suggests analogous models for government

36. Devolution: Vertical subsidiarityItaly – The parallel ways of the Reform Connection between Constitutional and Administrative Federalism In 1996-2001 (Center-Left Governments Prodi, D’Alema, Amato) the Reform of the State followed two parallel ways: • Reform of the Constitution • Reform of the State and its Administration through primary and secondary sources of law Same objectives, different actors, different ways F.Bassanini - The Dynamics

37. Devolution: Vertical subsidiarityItaly - The Constitutional Reform • The Constitutional Reform partly failed because of the Centre-Right opposition, that blocked the project drafted by the Committee for the Reform of the Constitution. Nevertheless: • In 2001, Parliament and Italian voters (with a referendum) approved the federal reform of the State (still to be completed with the reform of the Senate, following the French model) • The Constitutional reform reinforces the decentralisation reached through primary law (administrative and fiscal federalism), otherwise bound to remain incomplete and precarious F.Bassanini - The Dynamics

38. Towards the Federal Statethe general strategy • Strengthening stability of local Governments direct election of Mayors (since 1993), Presidents of Provinces (1993), Presidents of Regions (2000) • Strengthening financial autonomy of local Governments: the “fiscal federalism” transformation of State financial transfers to Local Authorities into local taxation or participation in main State taxes (VAT, Income tax…) • Strengthening sovereignty of Local Governments transferring general legislative powers to Regions (constitutional bill approved by the Parliament) • Strengthening efficiency of Local Administrations reform of control mechanisms, “city managers”, local public managers chosen also from private sector, salaries linked to performance F.Bassanini - The Dynamics

39. Devolutionthe “administrative federalism” The Italian route to decentralize (administrative federalism) • Identification of a mandatory (and “closed”) list of Central tasks and planning the devolution of all other tasks to Local Authorities • Identification in detail of the tasks to be transferred from Central to Local level of government • Transferring NOT ONLY groups of tasks BUT ALSO the related human and financial resources to Local Administrations (strengthening efficiency and financial autonomy of public administrations “on the territory”) F.Bassanini - The Dynamics

40. Devolutionopinions of the public Has the “Bassanini reform” improved the efficiency of local Governments? Source: unicab – sole 24 ore F.Bassanini - The Dynamics

41. 5 – Cutting the red tape: a fundamental Pillar of the Reform A comprehensive strategy for reducing bureaucratic costs and administrative burdens on citizens and businesses based on: • Simplification • Better regulation F.Bassanini - The Dynamics

42. SimplificationSome common problems • Key role of Regulatory systems to boost economic growth • Weaknesses of the traditional “command and control” regulatory style in the last decades • Deregulation  (and <) High Quality Regulation F.Bassanini - The Dynamics

43. Some common phenomena • Regulatory Quality is becoming an “autonomous public interest”, beside sectional ones … • Concrete consequences: - in the Governments (ad hoc Units, specific PM delegations) - in the Parliaments (ad hoc Committees) • Some interesting characteristics: - scarce relevance of the peculiarities of constitutional systems - the sunset of the “lawyers’ monopoly” F.Bassanini - The Dynamics

44. Simplificationstrategies and tools to reduce burdens • Not a “one shot” policy, but a process: • need of rolling simplification programs (e.g., through annual simplification laws or through multi-annual plans), enabling Government to abolish or simplify existing procedures, authorizations and licenses • Some common simplification tools: • “Self-declarations” replacing most of the certificates, and severely punishing those who do not self-certify the truth • “Notification of the beginning of an activity” and silent-consent replacing most authorizations and licenses • One “combined services conference” replacing many administrative acts • Importance of: consultation, measurement, ex post monitoring F.Bassanini - The Dynamics

45. Simplification in Italythe problems • Regulatory inflation: over 35,000 primary laws (of State and Regions) • Regulatory costs: unnecessary burdens on the public, on businesses and even on public administrations • Regulatory pollution: ambiguity, contradictions, overlapping, layers of rules generate uncertainty on the existing law F.Bassanini - The Dynamics

46. Simplification: two examplesfrom the Italian experiencea) for citizens: simplification of certificates • All the norms on administrative documentation and on electronic documents are collected in one single text “code” on administrative documents • More than 95% of certificates have been substituted by “self-certifications”: a signature of the citizen on “simple white paper” (without any tax) • The new regulation can be used also by privates sector (banks, post offices …) • Use of electronic instruments and faxes is always admitted • It is forbidden for P.A.s to require a certificate when a self-certification is possible • Severe punishment for false self-certifications, but till now only 0,4% of the ex-post controls have resulted positive • Towards a complete “de-certification”: total elimination of the need of certificates through the electronic exchange of data among P.A.s F.Bassanini - The Dynamics

47. b) for business: the “one stop shop” for the start up of productive plants • “Not only a single access, but also a single answer” • Since 1999: a single procedure to start up a new business, replacing 43 authorizations previously needed • Previously: 2-5 years to get a final answer • Presently: normally no more than 3 months in most cases, max 11 months (average time: 57 days in a sample of 100 one stop shops) • One single office to deal with businesses and a new role for Municipalities in the development of their territory • Turn-key contract (within an ad hoc training program) for the supply of 109 one stop shops serving 785 municipalities (small municipalities can pool together) • An e-structure, accessible through the net F.Bassanini - The Dynamics

48. One stop shops The difficulties • Half of the municipalities are not equipped with them (40% of the Italian population) • Lack of collaboration of many central and local administrations The answers • Simplification, acceleration, a unique proceeding and a unique person in charge • Government action plan for spreading and improving one stop shops F.Bassanini - The Dynamics

49. Deregulation in Italy1996-2001Regulations introduced / Regulations cancelled reg. introduced reg.cancelled F.Bassanini - The Dynamics

50. Simplification in Italy 1996-2001Number of procedures needed to set up new companies Source: OCDE, Service de la gestion publique, 2000 F.Bassanini - The Dynamics