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What is the Public Spending Code?

The Public Spending Code is the set of rules and procedures that are applied to expenditure across the Irish public service. The opening webpage for the Code points out that –“All Irish public bodies are obliged to treat public funds with care, and to ensure that the best possible value-for-money is obtained whenever public money is being spent or invested” http://publicspendingcode.per.gov.ie/.

The Code was initially introduced in Budget 2012. In September 2013, the Department of Public Expenditure and Reform formally notified Departments and Offices that the new consolidated code applied to them. In particular, the circular 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. As well as consolidating earlier guidelines, the application of the Code was widened to include current expenditure as well as capital expenditure. Box A summarises the structure of the Code:-

At the heart of the Code are the tools and processes for appraising public expenditure. They include:-

· Cost Benefit Analysis (CBA);

· Cost Effectiveness Analysis(CEA);

· Focused Policy Assessments (FPAs);

· Multi Criteria Analysis (MCAs);

· Regulatory Impact Assessment (RIAs), and

· Value for Money Reviews (VFMs).

These tools and processes have a critical role to play in assisting Public Bodies fully discharge their responsibilities of ensuring that the best possible value-for-money is obtained whenever public money is being spent or invested.

What changes have been made?

Changes have made to the Code in four main areas during the past two years. They are summarised in the following paragraphs:-

· Quality Assurance Checklists: The quality assurance checklists contained in Section A-04 of the Public Spending Code were updated in early 2018. It is important that quality assurance is undertaken and published to show that the Code is actually being complied with by those that are responsible for public expenditure.

· Post Project Reviews: In March 2018, the Department of Public Expenditure and Reform published a circular on post project reviews. This circular reiterates the requirement that post project reviews should be completed in the case of all large scale public investment projects, including Public Private Partnerships (PPPS) – https://circulars.gov.ie/pdf/circular/per/2018/06.pdf

· Value for Money Review and Focused Policy Assessment Guidelines: In January 2018 the guidelines for these evaluation methodologies were updated. The new guidelines appear as Section C-04 of the Code.

· Technical Parameters for Appraisal: In July 2019, the Department of Public Expenditure and Reform published a circular that updates the central technical references and economic appraisal parameters contained in the Code. Specifically, the Code updates the application of four main parameters, namely the Social Discount Rate, the Shadow Price of Public Funds, the Shadow Price of Labour and the Shadow Price of Carbon – https://assets.gov.ie/20001/35c13bbd055a4a09961a4ec59c93c798.pdf

Will there be more Changes?

As new information and new requirements come to the fore, the Code will need to be updated. Further changes have already been signalled in two sections of the annex to the Climate Action Plan published last June. https://www.dccae.gov.ie/documents/Climate%20Action%20Plan%202019%20-%20Annex%20of%20Actions.pdf

First, the requirement to ‘carbon proof’ Government Policy will impact on regulatory impact assessments and project evaluation processes. Specifically, the Climate Action Plan states that – “We will also ensure that all Government memoranda and major investment decisions are subject to a carbon impact and mitigation evaluation, for which a template will be developed. This will be incorporated in Cabinet procedures, in regulatory impact assessments, and in project evaluation processes”.

The second change relates to actions required to reform the Public Spending Code to increase the shadow price of carbon and introduce more robust consideration of climate impacts in project appraisal. Some of the action has already been taken with the circular issued by Department of Public Expenditure and Reform last July (see foregoing section). The scope for further environmental reform that might impact on the Public Spending Code will be examined. The full range of actions published in an annex to the Climate Change Plan is reproduced in Box B.

Conclusion

The Public Spending Code will continue to be a key document with wide-ranging relevance for the Public Sector. It is important that it continues to encourage a thorough, long-term and analytically approach by Public Bodies to planning, appraisal, evaluation and monitoring of public expenditure. It is also important that the Code is regularly updated to ensure that it contains procedures and processes that are in line with best international practice.

The Code of 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 full operated. In this way Irish taxpayers can be assured that they are getting real value for money from public expenditure.

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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.