Implications for New Zealand
New Zealand has not made a great deal of progress in introducing new measures of government output since the introduction of the real output measures for education and health in the 1990s. Including the public sector in official measures of productivity is part of the long-term agenda for Statistics New Zealand, but currently this remains a “distant goal” (Statistics New Zealand 2006).
New Zealand needs to investigate wider use of government output measures.
Progress on this front is needed in the near future to ensure the continuing comparability of New Zealand’s national accounts data with other members of the OECD. This is particularly pertinent given the European Union decision to require members to produce output measures for individual government services from 2006 and given the amount of time it takes to develop robust measures. Public service output measures are also crucial for the evaluation of the performance of these services. Robust output and productivity measures from Statistics New Zealand would assist in providing evidence of how government services are performing, although such measures will not provide conclusive evaluations of performance.
There are a number of individual services where progress could be made by applying the methodologies used in the United Kingdom. For example, a survey of fire service annual reports shows that the measures used in the United Kingdom national accounts may be available here in New Zealand. Similarly, the New Zealand Police record statistics on the number of cases investigated in various categories with rates of resolution, which could provide a quality adjusted measure of output for part of police expenditure. Data is also collected on road policing, including data such as the number of fines issued and breath tests administered, which could be included in output measures. However, aspects such as crime prevention by police services will remain difficult to measure, as will the output of our defence forces. Other justice system output indicators, including the number of prisoners and people held in remand, and the number of cases heard at different levels of the courts, should also be considered for the national accounts. On the welfare side, measures of the number of claims for various benefits and the number of interventions made could be considered.
New Zealand should be able to learn quickly from overseas research.
Once true output measures for the public sector replace input measures, then measuring quality improvements is the next important step. Education and health are the government’s biggest spending areas and adjustment for quality could make significant differences to the measures of output for these sectors, as it has in the United Kingdom. New Zealand could experiment with using the quality adjustment methods the ONS has used and is in the position to learn quickly from the United Kingdom’s recent research.
At this stage of development, significant problems are likely to occur with the amount of data available to be used for output volume measures and quality adjustment. Data sets often take a considerable period to set up and collection of data needs to be done over a reasonable time period to be useful for national accounts and for analysis of changes in productivity. It is therefore vitally important to plan early so that if appropriate data is not available, steps can be taken to ensure future availability. The experience of the Review of Government Services in Australia shows that it is important not to be put off by lack of data quality, as the publication of provisional data often encourages improvement of data quality and timeliness, resulting in a “journey of continuous improvement” (Banks 2002). Australia’s government services review started with very limited data but, over successive publications, data availability significantly improved. By placing great importance on the development of indicator frameworks and then, over time, filling the gaps in the data collections, a “more accurate and complete picture” of the performance of public services can be developed.
Progress will also depend crucially on cooperation between service departments and statisticians. Measurement of output and productivity is most useful when service providers have contributed to developing measures they feel are appropriate. The building of solid relationships is very important and will take time. Ownership of the process by all involved will be essential for the production and development of meaningful statistics.
It will be important to consider the political sensitivity of producing productivity measures. Measurement of output by itself is not overly sensitive, but when outputs are compared with inputs, these statistics become politically charged. A great deal of care will be required in developing robust and comprehensive measures of input and output for government to avoid producing bad measures that could damage the reputation of national statistics. Any productivity measures that are produced must not be used alone but in concert with outcome measures and micro-level indicators to build up a comprehensive productivity story.
