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Performance budgeting and efficiency

Performance budgeting and efficiency. Raphael Debets MoF The Netherlands OECD meeting 2 May 2006. Aristotle “Man is a goal seeking animal. His life only has meaning if he is reaching out and striving for his goals”. Budget reforms in Netherlands. 1970’s Top-down approach

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Performance budgeting and efficiency

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  1. Performance budgeting and efficiency Raphael Debets MoF The Netherlands OECD meeting 2 May 2006

  2. Aristotle“Man is a goal seeking animal. His life only has meaning if he is reaching out and striving for his goals”

  3. Budget reforms in Netherlands • 1970’s • 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

  4. 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

  5. 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 …

  6. Negative: unreadable documents

  7. Negative: unclear policy objectives

  8. Negative: contribution of government intervention is unclear

  9. 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?

  10. Perverse incentives • Indicators don’t address certain crimes • Example: ‘Sticky fingers” • Art thefts

  11. Perverse incentives

  12. 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

  13. 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)

  14. 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 it’s much more interesting to live not knowing than to have answers which might be wrong”

  15. The (long) way ahead • Efficiency must be promoted with other instruments • Interdepartmental policy reviews • Evaluation of effects of policy • “Demand-driven” reforms

  16. Example:social assistance • City councils receive “objective budget” • Big success: reduction 25%

  17. Too important to lose touch with reality!

  18. "This is not the end."

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