Taxpayers like to know where their money is spent. Most importantly they want to know if their money is being spent well. Although there are no simple ways of providing all-embracing answers to these questions, the Government uses several different techniques to examine public expenditure. They include Value for Money Reviews, Focused Policy Assessments and Spending Reviews. From a study of the relevant Government websites, it is clear that Spending Reviews are currently the most popular kind of evaluation. Accordingly, this blog confines itself to looking at Spending Reviews. The most recent reviews were published last December. The then Minister for Public Expenditure and Reform, Michael McGrath, commented at the time of publication that – “The Spending Review process is a crucial part of the ongoing assessment of the impact and effectiveness of investment in public programmes and services. I welcome today’s publication of 5 papers, which brings the number of papers published this year up to 12 spending reviews”. https://www.gov.ie/en/press-release/328a8-minister-mcgrath-publishes-the-third-tranche-of-the-spending-review-papers-for-2022/
The OECD encourages Spending Reviews
The Organisation for Economic Cooperation and Development (OECD) is of the view that – “…spending reviews have proved to be an important tool for governments, not only to control total expenditure by making space for more resources, but also to align spending allocations with government priorities and to improve the effectiveness of policies and programmes”. Box 1 provides a neat summary, according to the OECD, of what a spending review should embrace: –
Box 1: OECD Statement on Spending Reviews
“Spending reviews are a collaborative process of developing and adopting policy options by analysing the government’s existing expenditure within defined areas, and linking these options to the budget process. The purposes of a spending review are to
1) enable the government to manage the total level of expenditure;
2) align expenditure with government priorities; and
3) improve effectiveness within programmes and policies.
The terms of reference… will differ but typically include standard elements such as context, objectives, governance, scope, preparation of guidance and reference materials, access to information, deliverables, budgets, and timetable and milestones”.
Source: ‘Government at a Glance 2021’, OECD, Paris
The OECD points out that there is a need to have a commitment from the top to ensure that robust spending reviews are undertaken in a timely manner. Specifically, the OECD argues that – “Political ownership and commitment is crucial to the effectiveness of spending reviews, both to ensure co-operation across government throughout the process, and to take decisions on the objectives and scope of reviews and the recommendations to adopt. In most countries, there is high-level political involvement in these key decisions”.
The number of countries undertaking spending reviews has been increasing. In fact, it has almost doubled over a decade – from only 16 OECD countries in 2011 to 31 OECD countries in 2020. Of the 31 countries, 20 (65%) do so annually and 11 (35%) periodically. According to the latest OECD information, a further four countries are considering using this technique in the future (Belgium, the Czech Republic, Switzerland, and Turkey). The data can be accessed from the following OECD website: – https://www.oecd-ilibrary.org/sites/1c258f55-en/1/3/5/3/index.html?itemId=/content/publication/1c258f55-en&_csp_=10e9de108c3f715b68f26e07d4821567&itemIGO=oecd&itemContentType=book
Spending Reviews in Ireland
The process started in 2017 in Ireland. Since then it has been broadened in recent years to encompass policy analysis and evaluation in support of the service-wide agenda of evidence-informed policymaking in addition to the focus on expenditure re-prioritisation in the context of the Budget. The process is overseen by the Irish Government Economic and Evaluation Service (IGEES) which is an integrated cross-Government service that was set up in 2012 to enhance the role of economics and value-for-money analysis in public policy making. The IGEES Development Strategy for 2020-2022 points out that – “The analysis completed through the Spending Review provided a platform for different forms of analysis to be more tied to the budgetary process and led to the development of a wide-ranging evidence base to inform policy development and implementation”. https://igees.gov.ie/wp-content/uploads/2020/04/IGEES-Medium-Term-Strategy-2020-2022.pdf
The process is overseen by a Steering Group of senior-level officials from across the Civil Service. The group is responsible for providing high-level oversight of the process; meeting regularly throughout the spending review cycle to ensure analysis is policy-relevant, impactful and supports the achievement of spending review objectives. All the reviews are published on a Department of Public Expenditure and Reform website: – https://www.gov.ie/en/policy-information/7dc2b1-spending-review/
The Latest Spending Reviews
In 2022, reviews were published covering eleven policy areas; embracing most Government Departments. Box 2 lists the areas covered.
Box 2: Spending Review areas examined in 2022
- Children, Equality, Disability, Integration and Youth
- Enterprise, Trade and Employment
- Foreign Affairs
- Further and Higher Education
- Housing and Property
- Public Expenditure and Reform
- Rural and Community Development
- Social Protection
- Tourism, Culture, Arts, Gaeltacht, Sport and Media
It is interesting to take a recent review to see what kind of policy recommendations are made. The one chosen is ‘The Public Spending Code: Planning, Appraising and Managing Capital Investment Programmes’ which was written by Mark Connolly and Frank Newman of the National Investment Office at the Department of Public Expenditure and Reform. This review sets out to assess appraisal and planning guidance for capital investment programmes used in other jurisdictions and identify shortcomings in the existing Public Spending Code guidance. The review does not shy away from criticism of the current Code. For example, the authors note that, while capital investment programmes have the potential to help Sponsoring Agencies in Ireland deliver some of the public capital investments outlined in the National Development Plan – “…existing capital investment appraisal guidance in the Public Spending Code does not sufficiently address how these types of intervention should be planned, appraised, and managed”. The paper also discusses shortcomings in the existing guidance relating to capital investment programmes and sets out several recommended guidance updates for each stage of the existing Public Spending Code Project lifecycle. Box 3 summarises the recommendations for updating the Code. The full set of recommendations can be accessed from: –
Box 3: Summary of Key Recommendations for Updating Public Spending Code
- The Public Spending Code should provide a clear definition of programmes and outline potential different programme structures.
- The Preliminary Business Case stage of the project lifecycle will need to include a substantial portion of the recommended guidance updates for programmatic interventions.
- Other challenges should, if possible, be addressed, including potential issues of double-counting, the impact of interdependencies, the use of different appraisal metrics and methodologies and setting appropriate appraisal time horizons for the projects within a programme.
- Provisions should be made to allow for the submission of a single programme Strategic Assessment Report and programme Preliminary Business Case. Bundling of projects for submission and approval should also be allowed at Decision Gates two and three where timelines and resources allow.
- While several spending reviews, examining capital grant schemes have been conducted, there is a lack of a readily accessible overview of all such schemes being operated by public bodies. In addition, there is a lack of information on the different sectoral appraisal and evaluation methodologies used in the decision-making processes for these schemes.
The Spending Review Process provides a valuable evidence base to assist Government in making decisions about public expenditure from the short-term to the long-term. It also provides the baseline for Departmental expenditure and the starting point for examining budgetary priorities by the Oireachtas. Further, it provides a basis for encouraging a wider debate regarding how public money is allocated and the inherent trade-offs and choices that need to be addressed in the process. The real test is seeing evidence that resource allocation decisions are influenced by the published research, and that decisions made are delivering the best value for money from the public purse to meet the needs of the public.
Tom Ferris, Consultant Economist.
Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and blogs regularly for PAI. He was formerly the Senior Economist at the Department of Transport, Ireland.