The Imperative for Performance in the Public Sector

1. John Whitehead Secretary to the Treasury New Zealand September 2006 The Imperative for Performance in the Public Sector

2. Roadmap • Background on the Treasury & NZ • Why public sector performance matters • Some reflections on setting performance objectives • Current performance challenges in NZ • Conclusions

3. The New Zealand Treasury • The Government’s principal economic and fiscal adviser • Strong interest in efficiency and effectiveness of the public sector & its connection to the growth and economic well being of New Zealanders

4. New Zealand • Parliamentary democracy • Small open economy • Robust system of government and public management system • Very low levels of corruption • Intimate, open political culture

5. Public sector performance matters • Size of government & impact on economy • Public sector provides services that are not otherwise available • Major provider of infrastructure • We were forced to undertake major reforms of our economy and public sector, which have delivered major benefits ...

6. Getting Better Performance - Operating balance (less revaluation adjustments) 1980-2005 OBERAC 1980 to 2005 $ billion 9 8 7 6 5 4 3 2 1 0 (1) (2) (3) (4) 1980 1983 1986 1989 1992 1995 1998 2001 2004 Year ended 30 June

7. And it is not just the Government’s accounts…

8. What have we learnt about setting performance objectives? Setting performance objectives matters … • Clarifying the results expected • Facilitate devolved authority • Transparency

9. Setting performance objectives is a difficult task … • Cannot rely on price signals or share price to judge performance as in the private sector • Multiple objectives & ambiguity as to their relative value • The public sector can be: • Short term in focus • Risk averse • Resistant to change

10. Good performance objectives • Know what you want to do & do it well • Agree what results you want • Measure the right things well • Inform decision-making Important to note … • It is an iterative process • Risk of poor performance objectives

11. Road Deaths (1970 = 1) 2004 TARGET SETTING

12. Setting performance objectives alone is not sufficient - it requires • Visible political support • Senior management authority and commitment • Sound institutional and governance arrangements • The right incentives • Relevant good quality data and robust analysis

13. We cannot stand still … • As a small, open economy on the edge of the world we can’t afford an inefficient state sector • Government wants to know what it has got for significant extra expenditure in recent years • Less fiscal headroom • Increased public and stakeholder expectations • Long term fiscal position

14. Long term fiscal pressures…

15. …and we are still struggling to get some things right • Issues that span several agencies that matter to Ministers & citizens • Fragmentation • Getting traction on non-departmental bodies • Inconsistent information about the effectiveness of interventions • Avoiding reporting just being compliance costs

16. Response to issues • Government’s long term perspective under unifying themes • Organising the budget around themes • Lead agencies with mandate to align activities • Expenditure review • Central agencies leadership • Legislation

17. Conclusion • Setting performance objectives in the public sector is important • But only part of the story, other things matter: • Visible political support • Senior management authority and commitment • Sound institutional and governance arrangements • The right incentives • Good information and analysis • The ability to take a longer-term view • This takes time