There needs to be a cultural change as to how public funds are allocated and projects are monitored, argue Gerry Boyle and Jim O'Leary. That change should affect not just officials and ministers but also lobby groups and the broader public
Each of the main political parties has published a five-year budgetary framework with its election manifesto. These contain projections of government spending, receipts and borrowing, and incorporate the costs of election commitments.
The practice of publishing such projections is welcome. It imposes financial discipline on election promises and sheds some light on the costs involved. However, we have some misgivings about the way in which this aspect of the campaign has played out to date. There has been too much attention paid to the arithmetic of the public finances and too little to the more fundamental questions that lie behind the numbers.
Despite the din of mutual recrimination, the manifestos of the main parties show a great measure of agreement. They all promise to observe the Stability and Growth Pact. They all favour big improvements in the quality of public services.
They all accept, albeit with varying degrees of enthusiasm, that the tax burden should not be raised. As a result, they all accept that government spending growth must be sharply reduced.
This begs two crucial questions: how precisely is it proposed to restrain the growth of public spending? And how is it proposed to deliver the promised improvements in services within this constraint?
As far as the first question is concerned, it is plain that verbal commitments, however vigorously or frequently expressed, are not enough. As for the second question, as a country we have hardly got off first base. We have pitifully few decent measures of the quality of public services or the outputs of public spending programmes. The prevailing instinct is to measure quality by reference to the amount of money spent.
Public expenditure control in Ireland is hugely deficient. This is not something that has arisen as an issue in recent years. It is a deficiency that has characterised the term of almost every government over the past 30 years. That said, if there was the political will to control spending, it could be controlled. It is a matter of putting in place the right practices and procedures.
Possibly the most important element in an effective system of public expenditure control is the continuous promulgation of two basic principles. The first is that public resources are the property of the citizens of the State and not of politicians, civil servants or interest groups.
The second is that, however buoyant tax revenues are, resources are scarce: their application in one area implies forgoing other spending options or levying higher taxes.
Apart from providing the process with a philosophical foundation, the significance of these principles is that they imply the need for transparency and accountability in decision-making.
The second element of the system is the setting out of a medium-term macro-economic framework. The purpose of such a framework is clear: it is to provide a consistent and realistic basis for the exercise of political choices.
Such a framework would allow an expenditure profile to be derived that was consistent with objectives in relation to the tax burden and government debt.
This is where political choices enter the equation. In this regard, it is remarkable how tight the range of options on offer in this election is. The three biggest parties are advocating policies that produce virtually no change in the overall tax burden over the coming five years.
Consequently, each of them is projecting current spending growth in the range 8-10 per cent over the 2002-2007 period.
A key issue relates to how such an expenditure "envelope" would be implemented. In the first instance, it is almost certainly a requirement that the Minister for Finance not be the sole sponsor.
If he is, it becomes all too easy to isolate and neutralise him.
Ideally, the envelope should be proposed by the Taoiseach and the Minister for Finance. In this scheme of things, the Taoiseach would be an enforcer rather than an arbitrator. Line departments would be compelled to adhere to the envelope, other than in exceptional circumstances.
Exceptional breaches might be resolved by a cabinet sub-committee, the composition of which would be of critical importance. Specifically, in order to minimise collusion, it should comprise ministers without portfolio or ministers with very small budgets.
It is not suggested here that each government department should be subject to the same limit on spending growth. For a wide range of reasons, differential spending requirements are likely to arise across departments. There would be no difficulty in allowing for this within the overall envelope.
The existence of a limit on spending growth does not guarantee the efficiency or effectiveness of spending programmes. An obvious shortcoming is that it adopts the previous year as the base for the current year's spending. Ideally there should be a zero-based approach to determining the spending outcome for every programme every year. This is probably excessively demanding. A reasonable compromise would be to take a zero-based approach to all major programmes every five years.
THE kind of value-for-money evaluation that we have in mind here could usefully take the evaluation system used in relation to the EU Structural Funds as a template. This would require that, in respect of each government spending programme, a set of quantifiable objectives, input, output and impact indicators would be identified in order to facilitate monitoring. It would also require that the system be transparent, with the evaluations published and open to parliamentary and broader public scrutiny.
The system of expenditure control might usefully incorporate a number of carrot-and-stick mechanisms to encourage compliance.
For instance, it might be decided that no new spending proposal would be entertained unless accompanied by detailed proposals on how it was to be paid for. Or it might be a requirement that each government department/agency deliver annual productivity gains of 1-2 per cent, with a proportion of the savings thus secured being retained to finance new spending initiatives.
Much of what we have suggested above might be regarded as essentially procedural in nature and correspondingly unlikely to galvanise support. Yet, what we think is required is an institutional change that will alter the entire culture of public expenditure decision-making, and fundamentally change attitudes not just among officials and ministers but also among lobby groups and the broader public.
We touched on the kind of cultural change involved in our brief discussion of the core principles that should infuse the whole process. We think there is a strong case for incorporating these principles and the guidelines that should flow from them in legislation.
Among the principal objectives of such legislation would be:
(i) to increase the transparency of policy intentions and the economic and fiscal consequences of policy;
(ii) to bring a long-term focus to budgeting;
(iii) to facilitate parliamentary and public scrutiny of economic and fiscal information and plans; and
(iv) to put value for money criteria at the heart of public spending decisions.
Much of the debate about the budgetary proposals of the main political parties has centered on the consistency of their arithmetic. We think this misses the point. The point is that there are not controls in place that are capable of restraining public spending growth to 8-10 per cent per annum.
Absent such controls and none of the political parties would be capable of delivering on its election promises in government.
• Gerry Boyle is head of the economics department at National University of Ireland, Maynooth. He worked as economics adviser to John Bruton as Taoiseach.
Jim O'Leary lectures in economics at NUI Maynooth. He is a former economics adviser to Garret FitzGerald