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Tom Ferris

Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and contributes blogs regularly to PAI. He was formerly the Department of Transport’s Senior Economist.

The Public Spending Code is now set for review. The commitment for a review was announced by the Department of Public Expenditure and Reform (DPER) in its 2016-2019 Statement of Strategy, published last December.[i]

The statement gives a specific commitment to “promote the optimal use of public resources, including data and State assets, and undertake a review of the Public Spending Code”.

It is five years since the current Code was first launched, so this review is timely. It is important that the code now incorporates procedures and processes that are up-to-date with best international and national practice. It also necessary to ensure that the code, which was issued when the economy was experiencing the worst of the fiscal crisis, is now adapted to meet the requirements of a growing economy.

What is the Public Spending Code?

The Public Spending Code is the set of rules and procedures that should be applied to expenditure across the Irish public service.[ii] It brings together guidelines that had been in operation in a number of areas before 2012 – see Box A. As well as consolidating earlier guidelines, the application of the Public Spending Code was widened to include current expenditure as well as capital expenditure. Changes were also made to thresholds for evaluations. Specifically, the threshold for conducting a Cost Benefit Analysis or Cost Effectiveness Analysis has been reduced from €30m to €20m.

In September 2013, DPER formally notified Departments and Offices that the new consolidated Code applied to them. In particular, it was pointed out that it was relevant to all officials in public bodies involved in activities related to the appraisal, management, implementation, and review of expenditure. In short, all managers with responsibility for public expenditure are now required to ensure adherence to the Public Spending Code.

          Box A: Guidelines consolidated into Public Spending Code
Area Title
Investment Appraisal Guidelines for Appraisal and Management of Capital Expenditure Proposals, Department of Finance, 2005
Value for Money Value for Money and Policy Review Initiative Guidance Manual, Department of Finance, 2007
Regulation Revised Guidelines for Regulatory Impact Analysis, Department of the Taoiseach, 2009

How is the Code monitored?

There are three broad areas where monitoring should arise:

  1. Public Expenditure (current and capital)
  2. Value for Money and Policy Reviews, and
  3. Regulatory Impact Analysis

a.  Public Expenditure Monitoring

A new quality assurance process was introduced as part of the Public Spending Code. This requires Government Departments to complete and publish an annual Quality Assurance Report. This annual report must also be submitted to DPER by the end of February in respect of the previous calendar year. As part of the quality assurance process, Departments are also required to publish summary information on their websites of all procurements in excess of €2m, related to projects in progress or completed in the year under review, by the end of February. An interrogation of websites shows that most Departments have been publishing Quality Assurance Reports. However, not all Departments have published Quality Assurance Reports for 2015. The levels of detail that published Reports contain varies considerably between different Departments. The Department of Transport, Tourism and Sport provides the greatest level of detail.[iii]

b.  Value for Money and Policy Reviews (VFMPR) Monitoring

DPER has developed a very useful website to track VFMPRs.[iv] The website identifies the status of each ongoing review as a way of monitoring progress. It also provides information on previous reviews. While individual Departments are responsible for carrying out individual reviews, DPER has responsibility for overseeing the process and providing support for Departments as they carry out reviews. Each Department prepares a multi-annual VFM schedule, agreed with the DPER, providing for review of strategic programmes over a three-year period. These programmes are agreed by Government. The Government agreed a programme of Value for Money Reviews in July 2015. The current round of VFMs covers 2015 to 2017. The website currently lists the stage of progress of 43 individual VFMs.

c.  Regulatory Impact Analysis

The Public Spending Code devotes a section on how to conduct Regulatory Impact Analysis (RIA). It points out that Departments have responsibility for conducting and preparing RIAs. This is comprehensively addressed in the RIA Guidance Manual, which can be found at the 2009 Revised RIA Guidelines (see Box A above). It also points out that the Central Expenditure Evaluation Unit of DPER is available to advise on some of the more analytical components of RIA; for example, in the identification and measurement of costs, benefits and impacts. However, no overarching monitoring for RIAs is provided for in the Public Spending Code.

 

Ireland has been having a mixed RIA performance according to the OECD. It carried out a survey of how well the OECD Member States and the European Commission scored in producing RIAs for primary legislation in 2014[v]. In the survey, Ireland achieved an overall score of 2.12 (out of a total of 4), which placed it in 17th place out of 34. As regards the constituent parts of the survey, Ireland performance varied considerably. It performed very well in terms of the quality of RIA methodology (with a score of 0.72 out of a total of 1, and 13th place), and the systematic application of the methodology in Ireland (with a score of 0.8 out of a total of 1, and 12th place). As regards transparency, Ireland achieved a low score of 0.41 (out of a total of 1) and 17th place. The lowest score for Ireland was recorded for “oversight”, where the score was only 0.19 (out of a total of 1) and 27th place out of 34.

 

 Box B: OECD Survey of RIA Performance, for Primary Legislation, 2014
Aspect Score, maximum 1 Position (out of 34*)
Systematic adoption of Regulatory Impact Assessment, Primary laws 0.8 12
Methodology of Regulatory Impact Assessment, Primary law 0.72 13
Transparency of Regulatory Impact Assessment, Primary law 0.41 17
Oversight of Regulatory Impact Assessment, Primary law 0.19 27
Score, maximum 4
Aggregate score for Regulatory Impact Assessment, Primary laws 2.12 17
*Survey embraces 33 OECD Member States and the European CommissionSource: OECD, 2014, available here.

 

 

Three suggestions

  • Wider consultation: No doubt DPER will be consulting public bodies to learn from their experiences of operating under the Code. Public bodies are not the repository of all wisdom regarding the workings of the Public Spending Code. Arranging for a wider consultation process could generate useful comments about changes that might be made to the Code and the way it operates.
  • Quality Assurance Reports: At present there is no summary report published of the Quality Assurance Reports that have been completed by individual Departments, and submitted to DPER. It should not be too onerous a task for DPER to publish an overview table, on a regular basis, on its website, listing the status of the Quality Assurance Reports that have been submitted by Departments.
  • Oversight of RIAs: The OECD, in a paper in 2015 on “Indicators of Regulatory Policy and Governance”, lays heavy emphasis on the importance of oversight:

“Oversight bodies that review the quality of impact assessments and the publication of reports on the performance of RIA can help to improve RIA quality by returning inadequate impact assessments for revision and pointing to existing gaps in RIA implementation”.[vi]

Ireland’s low score for oversight of RIAs registered in the 2014 OECD Survey would suggest that resources should be directed to introducing an oversight system at Central Government level that includes the publication of an overview table of RIAs that  have been completed by individual Departments.

 

Conclusion

It is important that the Public Spending Code continues to encourage a more thorough, long-term and analytical approach by public bodies to planning, appraisal, evaluation and monitoring of public expenditure. The Code in itself is not a panacea. There is a responsibility on Departments and State Bodies to apply the Code in the course of their work of rolling-out public expenditure. There is also a necessity to have regular reports published to demonstrate that the Code is being fully-operated. In this way, Irish taxpayers can be assured that they are getting real value for money from public expenditure.

Notes


[i] Statement of Strategy 2016—2019 can be found here: http://www.per.gov.ie/en/publication-of-the-department-of-public-expenditure-and-reforms-statement-of-strategy-2016-2019/

[ii] Public Spending Code website: http://publicspendingcode.per.gov.ie/whats-new-in-the-code/

[iii] Department Quality Assurance Report for 2015 can be found here: http://www.dttas.ie/search/node/Quality%20Assurance

[iv] Details can be found here: http://igees.gov.ie/publications/expenditure-reviewandevaluation/vfmr-initiative-fpas/value-for-money-review-initiative/

[v] OECD survey can be found here: http://stats.oecd.org/Index.aspx?QueryId=69796

[vi] Paper can be found here: http://www.oecd-ilibrary.org/docserver/download/5jrnwqm3zp43-en.pdf?expires=1484512199&id=id&accname=guest&checksum=AE1EA3233AA44465C0B31B1CD55D1CBF

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