In his essay on Objectivity in Social Science, Max Weber pointed out that all theoretical constructs do violence to reality. The world of budgeting seems to offer no end of support evidence to support this simple but profound observation about the dangers of making overly fine distinctions. The annuality of the budget cycle in most countries ignores the fact that not all expenditure can be sliced into discrete 12 month chunks - giving rise to complementary accounting periods and carryover arrangements to address the resulting behavioural distortions. Golden Rules allow governments to borrow to fund investment but not current expenditure despite the reality that school teachers are as important as school buildings to the long-term health of nations economic and finances.
And so it is with national systems of budget classification, most of which continue to rely on the line ministry as the fundamental unit of expenditure allocation and control despite the fact that many of societies' problems cannot be neatly contained within ministerial silos. How do these systems cope the complexity of "real world" problems and the need for cooperation between line ministries in addressing them? This posting looks at three recent attempts to address inter-ministerial policy challenges through the budgeting process.
It is becoming increasingly common for countries to incorporate cross-cutting themes into their budgeting processes. In recent years Canada, France, the Netherlands, Sweden and the United Kingdom have all sought to incorporate inter-ministerial themes into the preparation, presentation, and, in some cases, appropriation and execution of their budgets. However, even in these countries, inter-ministerial budgets (i.e. appropriations that that cut across one or more ministry or agency) remain the exception rather than the rule. The remainder of this posting looks at three recent attempts to improve inter-ministerial coordination through the budget process in Canada, the United Kingdom and France and provides some general lessons from experience in these countries.
Canada's Whole of Government Framework
In 2002, the Canadian Federal Government introduced a new Whole of Government Framework for the reporting of financial and performance information. The framework provides a "logic model" for all of the activities of the Government of Canada and maps the contribution of each of Canada's departments, agencies and public corporations to the back to the Federal Government's 4 broad expenditure areas and 13 key thematic outcome objectives. The framework's overall architecture can be seen by clicking on the thumbnail below:
A key aim of this framework was to improve interagency cooperation by clearly setting out to Parliament, the public, and departments themselves how the governments various programs and interventions contribute to the achievement of these cross-cutting goals. In their annual performance reports, departments are required to identify the linkages between their strategic outcomes and spending programs to one of the 13 outcomes. Since 2006, this information has been collated centrally and members of the public have been able to use a web-based interface to track how each of the Federal Governments 400+ spending programs is contributing to each of the 13 thematic objectives.
While the Whole of Government Framework has provided an overarching structure for departmental objective-setting and performance management and improves transparency about the contribution of different departmental programs to cross-cutting aims, it is not the basis for resource allocation and planning in Canada. Budget preparation, appropriation, control, execution and audit remains on ministerial basis though the Parliamentary Estimates process.
Spending Reviews in the United Kingdom
The UK's multi-year expenditure planning exercise, known as Spending Reviews also incorporates a thematic perspective in the presentation of expenditure plans and the management of performance. The Spending Review document itself begins with 4 thematic chapters based around the Government's 4 long-term goals of: (i) sustainable growth and prosperity, (ii) fairness and opportunity for all, (iii) stronger communities and a better quality of life, and (iV) a more secure, fair and environmentally sustainable world.
Each thematic chapter summarizes progress to date against that goal, the challenges ahead, and the contribution that each government department's three-year budget settlement will make to the achievement of those goal going forward. Details on individual departmental allocations are then set out in a set of departmental chapters at the end of the document.
As in Canada, these cross-cutting goals play an important role in structuring the management and report of departmental performance. In its most recent Spending Review in 2007, all of the UK multi-year performance targets, known as Public Service Agreements (PSAs), were formulated on an explicitly thematic, interdepartmental basis and grouped under each of the four goals. The aim of these 30 inter-departmental targets was to coordinate more effectively the cross-government action necessary to meet long-term challenges such as climate change, child poverty and global conflict prevention. As one can see from clicking on the thumbnail below, each PSA was linked to one or more department strategic objectives, targets and indicators to ensure full alignment with department-level corporate strategies.
In addition to these changes at the department level, the UK government also reorganized the cabinet committee and parliamentary committee structure around each of these 30 PSAs to strengthen responsibility and accountability for their deliver at the highest political levels.
While cross-cutting themes structure the presentation of budget documentation and the management of departmental performance in the UK, as in Canada, budget preparation, authorization, execution and audit remains on a strictly ministerial basis. The UK's recent experiments with interdepartmental appropriations have been disappointing due to a lack of clear accountability for the use of those resources and were largely have abandoned in the most recent Spending Review in 2007.
Inter-ministerial Missions in France
In fact, very few countries, however, go so far as to allocate and execute expenditure on a thematic basis. The best known attempt to create thematic budgets were the inter-ministerial budget ceilings (known as missions) envisaged under France's 2005 Loi Organique Relative aux Lois de Finances (LOLF). France's 2006 Budget was the first to be prepared according to the procedures laid down by the LOLF and included a number of interministerial missions covering are large proportion of central government expenditure in areas as diverse as security, overseas aid, and research and higher education.
However, experience over the last three years with the use of inter-ministerial missions as a means of promoting joint action and collective accountability has been disappointing. While the mission was cast in explicitly inter-ministerial terms, program boundaries still coincided with those of line ministries and there was little coordination of activity of virement of resources from one ministry to another to better support the achievement of their common mission. So in recent report the French Ministry of Finance announced its intention to rationalize the number of inter-ministerial missions from 11 down to 8 in order to reinforce the principle of ministerial responsibility and accountability for expenditure in the run-up to the adoption of the country's first multi-year budget for the year 2009 to 2011.
Reflections
So it would seem that those countries that have most effectively incorporated cross-cutting themes into their expenditure planning process have done so while retaining a ministerial basis for expenditure appropriation, control and accountability. They have done so through a range of techniques including:
- specifying those themes in the budget circular, requiring line ministries to explicitly respond to them in their budget submissions, and favoring those requests that do in making budget allocations;
- introducing thematic chapters into the budget document to highlight the contribution of different ministerial programs to these shared objectives;
- initiating cross-cutting expenditure reviews in thematic areas such as child development, climate change or regional development in order to identify how different policy interventions in these areas might be better coordinated;
- creating thematic performance targets designed to incentivize inter-ministerial collaboration, typically with a lead ministry responsible for leadership and coordination of the activity needed to reach the target; and
- establishing thematic cabinet and parliamentary committees in order to strengthen accountability for key inter-ministerial outcomes which are often themselves the object of an inter-ministerial performance target.
