APPENDIX 6

Memorandum by Mr Des McConaghy

COMMENTS ON Cm 4181, Cm 4315 and "THE GOVERNMENT'S MEASURES OF SUCCESS" (HMT: 31 MARCH 1999)

  In 1999-2000 UK Government Departments will produce their first sets of audited Resource Accounts and their first set of Output and Performance Analyses (OPAs). This marks a fundamental change in the way the Government reports to Parliament and the public.

  The innovations are therefore of major constitutional importance. The process was initiated in 1994 but the new Administration has added fresh determination to the definition of its priorities and measuring outcomes. There is no doubt the Government wants to be judged by this initiative when next going to the country. So the reputation of the Government and a major constitutional innovation both hang on getting it right.

  Why then has it not attracted commensurate public interest? Certainly there has been widespread concern about the centralisation of power and the associated fragmentation of public agencies; a concern amounting to a "crisis of legitimacy". Some may now see the Treasury's new interest in outcomes as simply an extension of central diktat - with devolution as a somewhat unresolved anomaly. Then, too, Public Service Agreements and their OPAs have for the most part been presented to us as technical instruments to improve "the economy, effectiveness and efficiency of services". While these remain important objectives the enormous potential of OPAs for bulwarking democratic accountability has been either underestimated or played down.

  It is viewed primarily as an internal departmental process. Thus "formal external validation is not required" but departments "should be able to justify the figures to Parliament or the NAO as part of any value for money study"[5]. My paper attempts to redress this imbalance. In the meantime OPAs already face profound technical dilemmas which will continue to threaten progress (paras. 1-7) The only way through these endemic technical problems is to assert the primacy of the validation process in the rules for the operation and control of OPAs. My proposals therefore unite the technical and political definitions of OPAs by:

-  "customising" OPAs in a manner analogous to the private sector retail market; ie by ensuring the disaggregation of expenditures to the point of delivery and the continuous feedback of local and/or sectoral impacts (paras.8-11).

-  promoting user-friendly programmes whereby Parliamentary Committees, Elected Members, public authorities and citizens can all access OPA information across departmental boundaries at any appropriate level of aggregation (paras.12-15).

TECHNICAL PROGRESS

  1.  The original 1994 Green Paper on Resource Accounting advanced simplistic proposals for output and performance measures (Cm 2626). Many commentators pointed to the conceptual and practical difficulties; it is traditionally a problematic area of work because it is not wholly amenable to static analysis. The NAO echoed this concern, warning that departments would have" great difficulty in achieving meaningful measures" in the way then set out by the Treasury (HC 123 1994-95).

  2.  That concern must be set against the wider anxieties expressed by the Treasury and Civil Service Committee about loss of detail in the reformatted Supply Estimates. It was part of their ongoing and very serious worry that Parliament and the public would have insufficient information following the shift from the traditional cash based system of government accounting to resource accounting.

  3.  Then, in 1995, the White Paper (Better Accounting for the Taxpayers' Money; Cm 2929) allocated just one paragraph to output and performance measures. It seemed as if Treasury staff were becoming overwhelmed by their topic; a fair reaction given the intractable nature of a purely technical approach. In any event while the earlier Green Paper had shown objectives against costs there was now some distancing of output and performance measures from formal accounts. OPAs were and are threatened by any isolation of performance data from financial data.

  4.  At this point your Committee's Specialist Adviser Professor Heald warned, "The provision of improved performance data is the quid pro quo for Parliament's acceptance of a reduction in the amount of detail traditionally presented within the Estimates cycle. Concrete improvements in the quality and consistency of output data are necessary if fashionable rhetoric about buying outputs rather than inputs is to be anything more than a good line in rhetoric" (HC 186 (1996-97), page 36).

  5.  Much remains unresolved. The recent Treasury publication "The Government's Measures of Success" confirms the constitutional centrality of OPAs; they "provide the basis for the Government to report its performance to Parliament and the public annually". But this "work in progress" still resembles a large shopping bag of diverse outputs (specific and abstract) or codes. It begs questions about the need for robust principles for operation and control, about the precise "read-across" to the financial data and about the validation process.

  6.  We should beware, too, of tendencies to concentrate on programmes that seem more obviously measurable. As in the closely associated "electronic government" initiative, "progress" is mainly made in agency business applications (where the management criteria seem relatively clear) or in the field of personal transfers (where delivery principles appear to raise no conceptual problems). The danger here is of creating a serious imbalance in the overall corporate response. It can lead to a progressive loss of the core competencies for dealing with the great mass of governmental business where decision-making is more subjective and inherently complex[6].

  7.  Any important new system of public accountability should respect these complexities. The limits of a purely technical approach will also become clearer when judging the impact of government policies on local or semi-autonomous levels of government and those that are directly elected-as well on private sector industrial and commercial interests. In general, therefore, one must conclude that a very robust validation process is required as an integral part of the OPA methodology. We now turn to this solution.

CUSTOMISATION OF OPAS

  8.  Customisation means disaggregating expenditures to the point of delivery so that the continuous feedback of local or sectoral impacts becomes an integral part of the measurement exercise. This "continuous assessment process" is efficient and flexible - and both are essential requirements of modern macro management. But the greatest merit of this approach is its compatibility with positive scrutiny styles of government and the necessarily subjective nature of the political process.

  9.  It is already normal practice in there tail market. Of course the private sector analogy breaks down if you push it too far; the word "customer" cannot possibly encompass the great variety of relationships between government and the public. What cannot be denied, however, is the relevance of the model for combining sensitive communication and effective action - and that seems to be the whole ethos of the new Public Service Agreements.

  10.  Of course it is "transparency" which distances the public sector model from the private sector model. Fortunately the technology which can now facilitate the disaggregation and feedback of data can also, simultaneously, facilitate the widespread dissemination of this information. This then opens up OPAs to a framework of debate in a very objective and informed way. It is worth repeating these objectives as a principle for the operation of OPAs: The framework of debate is just as important as the measurements used and successful validation depends on this interaction. This is where IT now offers us all a truly "customised" solution.

  11.  Does the innovation imply significant additional costs? In the first place modern information technology has made the process a fairly simple operation - as we found in a voluntary pilot project over a decade ago[7]. Secondly it is difficult to see how individual departments will be able to devise a better way of testing results rather than validating existing bureaucracies. Thirdly any marginal extra costs in dissemination and in feedback will be progressively reduced with the inevitable adoption of Electronic Data Exchange at all levels of the public sector[8].

USER-FRIENDLY PROGRAMMES

  12.  Other important benefits follow. Automated systems which disaggregate expenditures to the point of delivery can just as easily aggregate or disaggregate them by function. This is a godsend for "joined up government". Governments do need a capacity to co-ordinate action when and where co-ordination is absolutely necessary and the machinery to decide when that is the case. The Cabinet Office has taken the lead in this but the provisional answer still seems to be new special purpose units or quangos (eg, SEU, RDAs). The danger is that to co-ordinate for one thing is to unco-ordinate for another. But the above principles ensure effective staff work across jurisdictional or territorial boundaries whenever that is required.

  13.  These principles were tested in a pilot project between 1983 and 1986 which disaggregated the then Supply Estimates (England). This gave a unique picture of overall public services for any one area. User-friendly interactive programs were also devised whereby any lay-person could access information in their local area or in comparison with other areas across the country. Anyone could cross geographical and departmental boundaries at will and this was such an exceptional facility that it was also accessed by numerous public and private sector agencies-including your House of Commons Library[9].

  14.  New rules imposing a departmental duty to seek the maximum financial return on official data put an end to voluntary efforts to cover a wide range of national programmes. But the experience generated useful insights on the potential for official initiatives. Since then there have been many examples of local community networks, resource centres and local community-based IT projects. But they all lack a national framework. They are handicapped because local government and community based information projects rarely have access to the data of central government departments (or their appointed agencies). Yet it is the central government which controls most public action and all "life-chance" services[10].

  15.  OPAs should provide this national framework. If and when they do then both Parliament and the public will be able to enjoy user-friendly access throughout the system. Recently the Chief Secretary referred to the great importance of public participation in this venture and he specifically mentioned "citizen's juries"[11]. The citizen's juries - and the "Peoples' Panel" - will have their uses. But the first obligation of "external validation" is for Parliamentary scrutiny and for innovations commensurate with a major constitutional reform.

Des McConaghy

25 April 1999

notes:

[5]   Treasury OPA Guidance, December 1997, para 3.2. Back

[6]  The parallel loss of core competencies in pursuit of "electronic government" is well detailed in "Information Technology in Government", Helen Margetts, Routledge 1999. Back

[7]  "Connect: Area Information" (AIS) was funded by the MSC&Rowntree Charitable Trust under the charitable umbrella of Charities Aid Foundation. Back

[8]  The "Modernising Government" WP usefully extends the arbitrary 25 per cent target for the introduction of electronic government. In 1986 AIS disaggregated to LA district only but, for example, by 1992 the DES (now DfEE) was using EDI for the transmission of teachers' individual school records to the ministry using Dialnet. AIS coverage of financial data could now similarly be extended to individual schools, housing associations, etc. Back

[9]  AIS was a small voluntary project but disaggregation of national programmes across the board encouraged access by diverse agencies including Government departments, Audit Commission, AMA and local authorities, the Housing Corporations and associations, HC Library and the media. A one year coverage of NI was also completed before the Whitehall charging policy halted ongoing access to official data. Back

[10]  The importance of national information framework is highlighted in my evidence in Third Report from the Public Administration Committee, Session 1997-98, HC 398-II, pp 150-152. Back

[11]  The Rt Hon Alan Milburn, Speech to the TUC (IPPR), 3 March 1999. Back