Performance Info, Management & Budgeting, and PSAs

1. Performance Info, Management & Budgeting, and PSAs Zafar Noman Performance & Efficiency Team [DRAFT]

2. Why care about performance information? • Good performance information: • Indicates how well an organisation is performing against aims/objectives • Helps identify which policies and processes work – and why they work • Improves organisational performance • Enhances [public] accountability • Value for money? – Significant investment in the public sector– Real terms increases in public spending of 4.1% (05/06), 2.7% (06/07), 2.8% (07/08);

3. UK in context • Total Managed Expenditure c. £500 billion (c. $900 bn) • Around 40% of GDP To improve the quality and cost-effectiveness of public services whilst maintaining sound public finances.

4. Public sector reform (1998) • Introduction of 3 year plans • Move to resource based accounting and budgeting • Separate budget for capital spending • Proper asset management • Underpinned by outcome focused performance targets (through Public Service Agreements)

5. Principles of Public Service Performance • Clear long-term strategic goals; • Independent audit and inspection; • Maximum local flexibility and discretion to innovate; • Transparency about what is being achieved.

6. TARGETS AND BUDGETS SET IN PARALLEL

7. SR2002 SR2002 plans set Year 1 Year 2 Year 3 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 SR2004 plans set Year 1 Year 2 Year 3 SR2004 The Spending Review Cycle

8. Structure of PSAs

9. Efficiency Targets Target Key Measures Public Service Agreement Accountable Minister(s) Aim Objective Objective Target Target National Standards Technical note How measured Efficiency Technical note How measured Note: ETNs and TNs can be revised – but PSAs cannot!

10. Why set targets? • a clear statement of what government is trying to achieve; • a clear sense of direction; • a focus on delivering results; • a basis for monitoring what is and isn’t working; • better public accountability.

11. Public Service Agreement targets • Examples • DH: reduce health inequalities by 10% as measured by infant mortality and life expectancy at birth. • CJS: reduce crime by 15% and further in high crime areas. • Defra: Eliminate fuel poverty in vulnerable households in England by 2010 in line with the Govt’s Fuel Poverty Strategy objective.

12. Performance Management (Through accountability and transparency)

13. Internal monitoring • Departmental monitoring; • Delivery and Performance monitoring by Treasury / Prime Minister’s Delivery Unit; • PSX (Cabinet Committee); • PM stocktakes for key areas.

14. Public reporting • Departmental reports provide backward look of expenditure and performance • APRs provide six-monthly performance update • Treasury performance portal (www.hm-treasury.gov.uk/performance)

15. Accountability of individuals • Named Secretaries of State; • Permanent secretaries; • BUT… • No mechanistic link between performance and resource allocation in Spending Review.

16. Evolution of the framework

17. That interact with services affecting results OTHER EXTERNAL INFLUENCES INPUTS OUTPUTS OUTCOMES Resources that contribute to delivery such as labour and physical assets Final goods and services produced for delivery to the consumer Impact or consequences of these activities for the community Inputs, outputs, outcomes RESOURCES (£)

18. OTHER EXTERNAL INFLUENCES LIFESTYLE CHOICES, HOUSING, POVERTY Example - health RESOURCES (£) DEPT OF HEALTH SPENDING REVIEW SETTLEMENT INPUTS DOCTORS/NURSES, HOSPITAL EQUIPMENT OUTPUTS OPERATIONS, CONSULTATIONS OUTCOMES LONGER LIFE EXPECTANCY, BETTER HEALTH

19. Comprehensive Spending Review (1998) CSR 98 Spending Review2000 SR00 Spending Review2002 SR02 600 targets 160 targets 130 targets 110 targets First set of PSAs published Significant changes to CSR model Greater continuity, architecture refined Increased consultation Introduction of standards Focus on outcomes Evolution of PSAs

20. Choose the right targets • Not too many… • Real measures of success… • Which are owned by deliverers • Outcome-focussed and SMART…

21. SMART targets are… • Specific – avoiding vague targets which might lead to uncertainty; • Measurable – underpinned by a sensible and reliable quantitative data source; • Achievable – whilst at the same time setting a stretch, or step-change in performance; • Relevant – to what the organisation is trying to achieve; • Timed – with a clear end date, and supported by timely data.

22. Lessons learned • With respect to: • Taking a top-down approach • Delivery • Measurement

23. Top-down: Issues & responses • Lack of consultation – 2007 Comprehensive Spending Review • Too command & control – Increasing focus on outcomes address this criticism; • Too many targets – Less than 1 PSA target for every £5billion of expenditure; • Distortion – increased use of evidence and consultation.

24. Delivery: What’s the connection with Performance Information? • If you can’t measure how you are doing (or the lags are too large), you can’t get delivery better • A weak delivery plan and low understanding of delivery chain may signal low understanding of data system • Highlights importance of rigorous delivery planning & reporting

25. Delivery issues - education • CSR (1998) ..an increase in the proportion of of those aged 11 meeting the standard of literacy for that age (level 4 in key stage 2) from 63% to 80% by 2002 ..an increase in the proportion of of those aged 11 meeting the standard of numeracy for that age (level 4 in key stage 2) from 62% to 75% by 2002

26. Targets set Delivery issues - education

27. Delivery issues - education

28. Delivery issues - education Necessity of timely performance information for management intervention

29. Measurement • Consider measurement issues when attempting to link perf. Info w/ management & budgeting • Systematically assess data quality risks • Consider carefully potential for ‘gaming’ • Perverse incentives / Distortion of activity • Cascading • Kent County Council

30. Data systems validation • How did we do? • SR2002 targets: “77% of data systems provided a broadly appropriate basis for measuring progress”

31. How did we do? PSA 2003-06 Validation Ratings Not fit for Broadly purpose appropriate, 12% but systems need Not strengthening established 30% 7% Broadly appropriate, but disclosure needs Fit for purpose strengthening 30% 21% Note: for 5% of systems it was too early to form a view

32. Further Issues to Consider • Performance management should reflect local priorities; • Key agents: Consultation and ownership; • What will the effect be on the frontline • Should be informed by evidence and analysis at the outset (performance evaluations); • X-organisation co-operation • Performance information should permit decentralised decisions (measure outcomes)

33. 2007 Comprehensive Spending Review - I • “a fundamental review of the balance and pattern of public expenditure” informed by: • Reviews of the long-term challenges • Consultation with public, experts & front-line • Identifying efficiencies • Zero-based reviews of department’s baseline expenditure

34. 2007 Comprehensive Spending Review - II • ? • (Performance framework; SR process and use of information for budgeting; reform)

35. Useful websites • PERFORMANCE WEBSITE: • http://www.hm-treasury.gov.uk/performance/ • “On Target? Government by Measurement” • (Public Administration Select Committee, 22 July 2003) • http://www.publications.parliament.uk/pa/cm200203/cmselect/cmpubadm/62/6202.htm • “2006 Survey Report - PSA targets: Performance Information” • http://www.nao.org.uk/publications/nao_reports/05-06/Acting_on_Information.pdf • “Second Validation Compendium Report: 2003-2006 data systems” • http://www.nao.org.uk/pn/05-06/0506985.htm

36. www.hm-treasury.gov.uk/fabric

37. www.hm-treasury.gov.uk/agencytargets

38. Performance Info, Management & Budgeting, and PSAs Zafar Noman Performance & Efficiency Team zafar.noman@hm-treasury.gov.uk