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Conversation with Gord Evans on integrated planning system
Napodano:
For our second conversation on the Board, it is a big pleasure for me personally to have Gord Evans, a colleague and a friend whom I met in Albania. He is a free-lance with extensive experience in public administration reform, in particular on strategy planning.
His experience is especially important for us PFM Boarders, when discussing the fundamental links to policy of medium term expenditure frameworks (MTEF's). This aspect of the budget reform is often referred to as Integrated Planning System.
If you are a registered member of the Board, you have the possibility to pose a question to Gord by making a post (REPLY button) to this topic. The time allotted for questions is Monday 7th to Wednesday 16th March 2011. After this period the interview will be closed and remain in the archive for future reference.
Gord, welcome on the Board. Let me kick off the conversation by asking
Question 1 how would you define "integrated planning”, when did it take hold as a concept, and what is its relevance as a development strategy?
Question 2 can you contextualize the integrated planning system within a couple of countries where you have provided your advisory services?
Guillaume Barraut:
Dear Gord,
Question 3: I would be very interested in getting your views on possible / reliable links between integrated planning system and MTEF (as budget tool). Mainly regarding the timeframe on outter years (from 3 to 5?)
Guillaume Barraut
Gord Evans:
Greetings PFM nation. First to Mauro's lead questions.
Answer to question 1 - Broadly, the concept of integrated planning emerged in the late 1960s with the introduction of PPBS in the United States. Although PPBS was ultimately found to be overly complex, it did set in motion an acceptance that political and/or policy (same word in most languages) decisions needed to be directly linked to fiscal decisions and vice versa. Basically, integrated planning is the attempt by governments to do just that. Of course, what sounds eminently logical and practical in theory has proven enormously complex to implement in practice. Over the succeeding decades, numerous variants of PPBS have tried to bridge this gap, some with more success than others. A good summation of the dilemma can be found in Allen Schick's 2004 presentation title: "Why efforts to integrate planning and budgeting usually fail...and why it is important that they succeed."
The most common problem is that, too often, the institutional worlds of policy/politics (i.e., the government led by a president or prime minister) and finances (led by the Minister of Finance) operate more like parallel universes than two parts of a whole. For instance, an MTEF can very adroitly set out the sector priorities and fiscal envelopes within an aggregate expenditure envelope, receive favourable comments from the IMF and World Bank, and even pass through the Government with barely a word changed. However, this does not mean that the MTEF will actually be implemented. For one thing, it is typically a very long document that few Prime Ministers or Ministers will have read; second, the way in which the weekly business of government/cabinet meetings is structured (most of their time is spent reviewing individual draft laws or policy proposals) does not seem to connect to the MTEF in any tangible way. We can explore this disconnect further another time, but it is at the root of non-integrated planning.
Answer to question 2 - Integrated planning has increasingly been looked to as a development strategy in response to frustrations with unimplemented national development plans/strategies, unfunded mandates for numreous approved laws, and ever-increasing fiscal pressures from cabinet decisions that were not properly vetted for fiscal impact.
Two examples of countries that have implemented integrated planning include Lithuania, which implemented a strategic planning system in 2000 that was tied directly to budget planning and Albania, which implemented a similar approach in 2005. Neither system is perfect, but those who work at the centre of government would agree that this approach did significantly improve the capacity of the government to plan and spend more realistically. In Lithuania's case, a 2006 World Bank Report (Administrative Capacity in New Member States: The Limits of Innovation) observed that this reform had been a key reason why Lithuania was able to avoid the decline of administrative capacity that had occurred in other new member states. So let's leave this here for now. It would be interesting to hear from other countries how their governments link (or not) policy/political decision-making with macro/fiscal decision-making and whether any of this actually affects policy or program implementation.
Gord Evans:
Answer to Question 3
We have dealt a little with MTEFs already, but this question raises the interesting point about the link between policy/political decisions and the outer (3-5) years of the MTEF. Most significant policy decisions do not have an immediate (i.e., within the current budget year) fiscal impact since they typically set out a medium to longer-term path for changes to a particular sector or sector program. To implement these changes may involve a multi-year process requiring the approval of a law, then implementing regulations, then start up activities (e.g., hiring staff); and finally implementation. Major changes, for example to health care, education or legal systems, can be very costly although the fully annualized cost may not be realized for several years following the approval of the policy. In poorly integrated systems, the fiscal consequences are addressed through the budget process when they become relevant to an upcoming budget year. Basically, the ministry points out in their budget submission that they need the money to implement what is now a legal obligation. The Ministry of Finance then responds as expected (sorry there is very little or no money for that) and an unfunded mandate begins. Compound this across multiple sectors and dozens of laws and a serious credibility problem for the government begins to exist (they cannot keep their promises or adhere to the law).
In a more integrated system, the potential multi-year fiscal impact is assessed at the time a policy is approved by government and revisited again as it progresses through the legal approval and implementation stages. In this way, the Ministry of Finance can continually adjust their medium-term fiscal plan to accommodate future cost pressures. To ensure the government is onside, there will be a regular mechanism where these impacts are discussed at the political level. To give one example (from Ontario Canada), the Minister of Finance would present a quarterly fiscal update to a small committee of senior ministers chaired by the Premier that indicated the individual and cumulative fiscal effect of actual government policy decisions, potential government policy decisions (i.e., public political commitments) and other cost pressures looking several years forward. In this way, the government would then decide how best to manage it; i.e., changes in revenue policies; adjustments to implementation time frames; imposition of savings targets in low priority areas; etc. Although these deliberations did not appear in a public document (i.e., Canada's equivalent of the MTEF), they did serve as a continuous unofficial MTEF that looked up to 5 years ahead and anticipated and managed potential shocks that would otherwise have appeared in the public document (published semi-annually). If there was one factor that made this work, it was that the Premier and the Minsiter of Finance, along with senior ministers, were in the same room, working with the same information, and agreeing on a path that was sustainable in both financial and political terms.
John Short:
Question 4
Gord,
Greetings from Pristina
In a non IPS system do you think Spending Reviews which cover the next three years as in the UK would somehow act as a half (or three-quarter) way house? They should review individual sectoral policies, plans and programmes in the context of some resource constraint and get thrown into the overall horse-trading at the MoF level without necessarily benefiting from the whole of the IPS process.
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