European Commission Budget Focused on Results 22 September

European Commission “Budget Focused on Results” 22 September 2015 Performance-Based Budgeting: Theory and Practice Marc Robinson

What type of PBB? � Multiple models of PBB � But for government-wide application, one core model ◦ ◦ Programme budgeting Programme performance informs budget decisions Better prioritization, more pressure to perform Selective “add-ons” (e. g. targets) possible (see later) � No mechanical link between performance & funding ◦ Case-by-case consideration � Challenge: ensure budget takes performance into account PBB means funding mechanisms which use formal performance information to link funding to results (outputs and/or outcomes), with the aim of improving efficiency and effectiveness.

Impacting on resource allocation � PBB is too often a paperwork exercise ◦ With no significant impact on the allocation of resources ◦ Notion of “presentational” PBB is nonsense � Challenge of making performance information count � Performance scrutinised during budget preparation ◦ “Performance dialogue” between MOF & spending agency � Reduce barriers to resource re-allocation ◦ Rigidity in many budget systems (“non-discretionary” spending ◦ Job protection & other barriers to shifting funds ◦ Funding conditional on performance in selected cases

Outcomes measurement difficulties � Outcomes matter most, but often hard to measure ◦ E. g. research, national security, economic development ◦ External factors, complex (non-standardized) outputs � MT and LT time frame for achieving some outcomes � Vagueness about intended outcomes � What to do? ◦ ◦ ◦ Greater clarity about intended outcome Improve outcome measurement, recognizing often MT and LT More impact evaluation (but selective) But acknowledge that some outcomes can’t be measured Enhance output quality measures (including user satisfaction)

Realistic application of “add-ons” � Formula funding has quite limited applications � Target-setting ◦ Clearly distinguish between objectives and targets ◦ Targets need to be “SMART”, and agencies held accountable for achieving them ◦ Caution in setting targets for things over which one has very limited control