European Commission“Budget Focused on Results”

22 September 2015

Marc Robinson

Performance-Based Budgeting:Theory and Practice

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

What type of PBB?

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.

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

Impacting on resource allocation

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)

Outcomes measurement difficulties

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

Realistic application of “add-ons”