7.3  Review of baselines

During the 1990s there was a clear focus on using baseline management to foster efficiency in the New Zealand public management system – primarily through the policy of a fixed nominal baseline[10], but also through setting expectations that agencies would not seek additional funding to meet capability requirements.

Schick (1996) refers to this process in The Spirit of Reform. At that point practitioners were suggesting that the process had been effective in helping to identify cost-savings within baselines. They were, however, starting to suggest that continued downward pressure on baselines might result in a reduction of capability within agencies. Anecdotal evidence suggests that the majority of savings within votes have now been identified and that is timely to find other mechanisms by which baselines can be managed in a way that minimises costs to the Crown whilst also ensuring that agencies are appropriately resourced.

The Managing for Outcomes process provides an avenue by which regular reviews of baselines could be undertaken, within the context of examining the needs of an agency in working towards the strategic direction identified at the beginning of the process. Such a review should focus on ensuring that the agency will be both effective and efficient moving into the future.

7.4  Reallocation of resources

The processes that underlie New Zealand’s budgetary system mean that increased spending at the margins is considered at each budget round, rather than a comprehensive revisiting of baselines. Some attempts have been made to provide for value-for-money exercises across the public sector [see OECD, 2003:1].

The most recent attempt to provide for a comprehensive value-for-money review was undertaken in 2002. The results of this process have been identified by officials as mixed – essentially some reallocation of resources was apparent within votes, but there was no significant cross-vote reallocation.

In a report to the OECD (2003) officials identified the key lessons of the 2002 exercise as: the need for strong support of Ministers and departments; a lack of a fiscal imperative will reduce the incentives on actors to assist in finding “savings’; and the lack of good information about the efficiency and effectiveness of interventions will hamper the ability of Ministers and chief executives to make reallocation decisions.

Assuming that a managing for outcomes environment will be characterised by the shifting of resources to support interventions that have been proven to better support the achievement of outcomes it would appear that all of these lessons need to be addressed – potentially be creating incentives for key players.

7.4.1  The creation of incentives

Currently Ministers are unable to retain any savings they identify within their votes. One incentive for reallocation may be created if Ministers are allowed to retain all, or a component, of the savings they identify. In the first instance this would encourage a culture of reallocation within votes. Coupled with more strategic groupings of Ministers it may be that the ability to retain savings could also lead to reallocation of savings within portfolios.

Incentives could also be provided by reassessing the role of multi-year appropriations. The recent central agency review of Managing for Outcomes project support found that chief executives are finding that the annual budget process can be difficult to reconcile with longer-term strategies (Managing for Outcomes Formative Evaluation Team, 2003). If chief executives were provided with more flexibility in this area they might be more comfortable with the concept of looking at different ways in which resources can be allocated to support the achievement of outcomes.

Finally, greater use of multi-year appropriations might assist chief executives in allocating resources ways that support the achievement of articulated outcomes.