Cost-effectiveness
The Treasury is very focused on achieving cost-effectiveness, both with its own outcomes and across the wider State sector. The gains from policy advice are, by their nature, realised incrementally over a period of years from a cumulative series of interventions, making direct cost-effectiveness analysis difficult.
This year we have worked towards developing a framework for measuring the quality of policy advice, Treasury Quality Standards for Policy Advice. The framework is based on the principle that to achieve quality our policy advice should be “fit for purpose”. Therefore, regardless of whether our advice is accepted by government, its underpinning quality is essential.
Our measurement is aimed at testing the quality of our advice, whether it is analytically rigorous and is set in a wider strategic context, the timing reflects the necessary imperatives, it is customer focused and persuasive, and our internal control processes (for quality) have been effective. The framework will be used to measure our policy advice results using the agreed dimensions of quality and by applying a measurement process. We will also be using a continuous improvement approach, including reviews and case studies. The details of this framework are presented at the end of the Statement of Intent.
Stakeholder feedback provides an important measurement contributor regarding our delivery of policy advice. Our success is measured by feedback from the Minister of Finance, who is asked to indicate whether we are providing quality and timely advice (as defined in our quality measures), are managing within our delegated authority constraints, and are meeting our annual target objectives. We receive this feedback formally three times a year.
To assist us to demonstrate our value-for-money approach, the measures selected for our outcomes are oriented towards demonstrating impacts and progress towards desired changes over time. Where there is an indirect relationship and where other State sector agencies are also working towards a similar outcome, we will continue to collaborate and we may use similar measures of change.
Our focus is on how we will know the outcomes are being achieved, and because it is hard to measure our particular contribution we:
- have identified the deliverables we think will enable us to contribute most effectively to achieving these outcomes
- will include quality as a proxy for our contribution
- will target our resources to the four Strategic Results Areas identified for our medium-term focus
- will use skills and capability planning to ensure we can contribute most effectively.
Management of the Crown's debt
One of the areas in which the Treasury is able to demonstrate the cost-effectiveness of its work is in the management of the Crown's debt by NZDMO. The goal is to maximise net returns while reducing risk as much as possible. A set of measures has been developed to highlight trends in performance in key results. We will use these to explain changes over time. The measures are:
- profit generated (value added) for the Crown – annual profit
- market risk (interest-rate and foreign-exchange rate risk) – average monthly value at risk
- accuracy of settlement.
Management of export credit
NZECO measures the value of new exposure for:
- medium- to long-term credit insurance
- US contract bonds
- non-US contract bonds
- working capital.
The number of new policies is also monitored.
Measuring and monitoring economic growth
Sound information about economic growth is a lever for the government in decision making, to achieve the best value-for-money spending choices. Therefore it contributes to cost effectiveness for the State sector as a whole.
Best practice measurement of economic growth and productivity is important for informing the Treasury's policy advice to government. The Treasury's aim is to ensure there is ongoing best practice measurement of productivity (including in the service and public sectors) and that decision-makers have access to better information about aggregate growth performance.
