public management （750words）3hours
Cissie00
PublicManagementWeek8.pptxWeek 8: Public Financing and Financial Management
Public Management
Welcome
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Outline
Week 7 recap
What's the budget?
Changing approaches to accounting
Inputs to outputs & outcomes
Accounting reforms
Fiscal
Budget rebalancing
Budgeting tools and reform around the world
Participatory budgeting
So mainly focusing on budgets, and this draws on two of the readings for this week in particular:
Hughes OE, Financial Management, Public Management and Administration (Third Edit, Palgrave Macmillan 2003)
Rubin. S & Kelly. J ‘Budget and Accounting Reforms’, The Oxford Handbook of Public Management, 2007.
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Week 7 - Recap
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Different models of scientific advice
Technocratic expert based; Decisionist experts (science) and then policy makers/public mangers make decision (based on science and other things); co-evolutionary model.
Evidence is useful to public managers
Provides evidence to improve accountability and evidence to promote improvement in policy choices.
Improves
design and develop public policy; impact assessment; implementation; identification of tomorrow’s issues
Risk is determined by probability of an event and consequences of an event
Works when you have lots of information and things are certain. Does not work well when there is uncertainty.
Risk is problem when
Assumptions, Interests, limits of knowledge. Or when things are framed differently.
Public policy
Decision making
Formal economic rationality; “Bounded rationality” – Satisficing; Instrumental rationality; Value-laden rationalities
Financial Management in Public Organisations
Limited attention to financial management in the traditional model and with limited information available to managers on things like performance and longer term plans, the process was rather incremental than strategic with agencies spending budgets with little consideration for why or whom.
Nowadays financial management has become one of the most important parts of the internal management of government.
It’s a process that is politically orientated, its much more than a narrow technical process of crunching figures.
Political choices have to be made between funding a school and a road; between a nuclear deterrent capability and reduced tuition fees. These are much more than bookkeeping issues.
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Changing scope of government
The scope of government changes over time. At some points the government will be a minimal model basically just providing security and civil order
At other times it can provide a wide range of public services, which are provided regardless of how efficient they are.
In the last few years in the US and UK we saw a shift towards the right of this diagram with Trump in particular there is an apparent shift is towards minimal government as part of the objective of dismantling the “administrative state.” Though some have been surprised by high spending in Sunak’s budget announced higher public spending and borrowing: https://www.resolutionfoundation.org/publications/spring-budget-2020-response/
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Correction’ of market outcomes to serve ‘social justice’
Defence, Civil Order, Property Rights
Public sector activities with no penalties for inefficiency
provide more equitable access
public provision is more efficient than private
Changing roles of government
This diagram doesn't reflect any real figures, just to make the point that different parties will prioritise different things, obviously Trump does not only spend in defence, but if you look at his budgets you can see how they might differ from other administrations, they reflect political priorities
The extent of involvement in different areas can also change over time. So in the US we see a massive increase in defence spending, a significant reduction in health care, education and regulation.
At other times and in other places we might see the opposite.
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Series 1 Defence and security Provision of healthcare Public transport Regulation infrastructure Policing Education 20 14 10 30 20 26 15 Column1 Defence and security Provision of healthcare Public transport Regulation infrastructure Policing Education
Series 1 Defence and security Provision of healthcare Public transport Regulation infrastructure Policing Education 50 0 0 0 20 30 5 Column1 Defence and security Provision of healthcare Public transport Regulation infrastructure Policing Education
Budget rebalancing & Trump
Prioritisation of military spending
Significant cutbacks in state, environment etc.
“We're going to cut taxes massively. We’ll cut business taxes massively. They’re going to start hiring people. We’re going to bring the $2.5 trillion that's offshore back into the country”
Trump
For example, with Trumps first budget you saw many aspects of re-prioritisation, cuts and taxation changes at play:
Trump’s director of Office of Management and Budget, Mick Mulvany, described the process of putting the budget together “by going through the president speeches and turned those words and policies into numbers.”
The budget called for an increase of $52 billion for the Defence Department above the 2017 base budget of about $522 billion.
Department of Homeland Security would get a 6.8% increase, with more money for extra staff needed to catch, detain and deport illegal immigrants.
On the other hand you had a 31% reduction in EPA budget resulting in the elimination of 3,200 EPA employees, or 19% of the current workforce,
Other thing trump did was propose the reduction of taxes: “We're going to cut taxes massively. We’ll cut business taxes massively. They’re going to start hiring people. We’re going to bring the $2.5 trillion that's offshore back into the country,”
Specific mention of a reduction in taxes for corporations, from 35 percent to 15 percent.
This was controversial.
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Budget rebalancing & Trump
https://www.washingtonpost.com/graphics/2018/politics/trump-budget-2019/
2019 budget not dissimilar
2019 budget not dissimilar, health getting a boost, EPA still in decline - See https://www.washingtonpost.com/graphics/2018/politics/trump-budget-2019/
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What is a budget?
The main economic functions of the budget can be thought of in three ways:
Determining the level of public activity in the economy, something done through allocating resources in specific activities –
so for example increasing allocation of funding; that is, increasing government spending on road construction it stimulates the private sector construction companies working in this area. Political because you can allocate to constituency groups
Distributing wealth, that is the attempt by some governments to perceived redress inequalities through
provision of social welfare or tax benefits to particular sectors, such as farming. Political because you can choose groups to tax and subsidise
To provide control over the stability of the economy by the identification of fiscal policies Political because creating instability is (often) associated with getting kicked out of political office
Put otherwise the budget is a “…a series of goals with price tags attached” (Wildavsky, 1979, p.2) and these goals are based on political choices of elected governments which shape society.
This is not number crunching and technical, it is reflects political choices.
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Allocation
e.g. Allocation of funds for road construction
Distribution
Tax benefits for farmers
Stabilisation
Development of fiscal policy.
Welfare
The budget process (UK)
In the case of the UK the budget process has four major dimensions:
The first is formulating the budget this involves:
Setting up the fiscal targets and the level of expenditures compatible with these targets. Effectively this is preparing the macro-economic framework.
Formulating expenditure policies.
Allocating resources in conformity with both policies and fiscal targets. This is the main objective of the core processes of budget preparation and sets out the overall level of government activity and the distribution of funds. This is also often a contentious element of the budget formulation.
Finally there is the step of addressing operational efficiency and performance issues.
Then there is the process of getting Parliamentary approval. This involves:
Debate tax increase/decrease
Justifying spending plans.
This doesn’t always go smoothly. IN 2017 the UK government had to back track on a proposed increased to national insurance contributions for self-employed folks - https://www.theguardian.com/politics/2017/mar/15/philip-hammond-ditches-national-insurance-rise-for-self-employed
Then the budget is carried out through process of spending money, collecting taxes and making cuts as required.
Finally there will be a process of evaluation.
Arguably the budget is made accountable through the process of parliamentary approval where it is often subject to close scrutiny although not necessarily “accountability” depending on definitions.
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Preparation
Setting up the fiscal targets and the level of expenditures
Formulating expenditure policies.
Allocating resources in conformity with both policies and fiscal targets.
Addressing operational efficiency and performance issues.
Review and Adoption
Spend money
Collect taxes
Make cuts
Evaluation
How much money was spent and where?
How much tax was collected?
How much money was saved from cuts?
Debate tax increase/decrease
Execution
Justify spending plans
The budget process (China)
Five Year Plan
Similar structure but operates on strategic plans of Five Years rather than a continuous incremental adjustment process.
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Changing Approaches to Accounting
The budget performs the economic function of allocating, redistributing, and stabilising the economy but also an accounting function.
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The UK Budget forecast
Chart 1: Public sector spending 2020-21
Chart 2: Public sector current receipts 2020-21
In the case of the UK the key thing in financial management in the public sector is the budget, which is presented by the chancellor each year. Presented recently but obviously quite different circumstances than usual, more spending, mainly due to coronavirus crisis, but also brexit.
The budget is a document which outlines:
The envisaged sources of income (mainly taxation) In 2020-21, Uk is expected it to raise £873 billion.
The envisaged public expenses for certain activities; In 2020-21, we expect it to spend £928 billion.
So in the UK forecast for 2020-21, there is expected to be a budget deficit of £55 billion
Source https://www.gov.uk/government/publications/budget-2020-documents/budget-2020
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Public sector spending & revenue
For comparison here is the 2019-20 budget
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Cash Accounting in the traditional model
Advantages
Enables control
Basing budget on previous year sensible?
Degree of flexibility in making across the board cuts.
Makes budgeting relatively easy and manageable.
The process of determining the budget and more widely financial management in the public sector has changed with a shift from the traditional model of public administration to the public management orientated models and with the rise of NPM.
With public administration (the traditional model) in the days of old it was perhaps a much simpler approach with a focus on:
Funding inputs (how much is needed to cover requirements). Traditionally this was done based solely on the expenditure during the previous year on things like staff or equipment. So it was effectively using past budgets makes incremental adjustments taking into account inflation. This model is known as incremental budgeting in that the budget represents a series of incremental increases on the previous year. Traditional budgets were operationally focused in the sense it deals with the day to day requirements and short term (1 year focus)
Had a number of benefits to this incremental budgeting approach.
Quite a good means of controlling expenditure, as every bit of the budget is allocated for a specific purpose.
Using the last year as a basis for the next is quite a sensible approach as it means you don’t start from scratch and have dataset to work from.
Perhaps adaptable to changing economic circumstances for example if cuts are required across the board.
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Inputs
Money allocated to particular types of expenditure i.e staff, equipment.
Incremental adjustments
Incremental increase on previous years budget taking into account inflation
Operational orientation
More about day to day functioning of department.
No link with performance
Short term
With a focus on inputs no particular expectations of performance.
Designed for the next year based on the previous one.
Inputs
Money allocated to particular types of expenditure i.e staff, equipment.
Incremental adjustments
Incremental increase on previous years budget taking into account inflation
Operational orientation
More about day to day functioning of department.
No link with performance
Short term
With a focus on inputs no particular expectations of performance.
Designed for the next year based on the previous one.
Cash Accounting in the traditional model
Disadvantages
Does little for efficiency and effectiveness
Managers more concerned with spending all the money ‘correctly’.
No indication of what departments do or whether they do it well.
Short term fails to consider long term spending factors.
Inadequate critical appraisal.
Rather rigid spending plan
Departments & Agencies need to spend all their budget by the end of the year.
Lose the money saved
They get less next year
Budget directors criticise them for requesting too much.
However there were several problems with this model that became evident.
Does little for efficiency and effectiveness, as it is often not clear what a department is doing or whether they are doing it well.
Public managers can become more concerned with spending all the money ‘correctly’ rather than efficiently. – “no no no, we have five pounds for pencil, we cant spend that on anything else”
Short term approach which fails to consider long term spending factors
Inadequate critical appraisal in the process but rather number crunching – who cares whether it’s efficient or effective and does anything useful, the maths is good”.
The process can generate rather rigid spending plan with clean lines of spending that are hard to deviate from.
The other problem that proponents of NPM have been particularly critical of is that Departments & Agencies came under pressure to spend their entire budget by the end of the year. Otherwise they might risk:
Losing any money saved
Getting much less next year
And getting criticised by Budget directors for requesting too much.
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Inputs
Money allocated to particular types of expenditure i.e staff, equipment.
Incremental adjustments
Incremental increase on previous years budget taking into account inflation
Operational orientation
More about day to day functioning of department.
No link with performance
Short term
With a focus on inputs no particular expectations of performance.
Designed for the next year based on the previous one.
Focusing on:
Funding outputs - Aims to direct funding towards the achievement of objectives and outputs
Devolution of responsibility - Shift towards managerial use of discretion and initiative in achieving targets.
Strategic orientation - Encourages forward planning and thinking beyond day-to-day operational requirements.
Link with performance - Funding outputs allows the evaluating of effectiveness and performance.
Long-term orientation - Planning years ahead provides clearer appreciation of the ongoing costs of pursuing a policy.
Moving toward NPM…
Accounting Reforms
Move towards “accrual accounting” rather than cash accounting in the public sector.
Driven by:
Recognition of the limits of cash accounting
Development of international standards
Professionalisation of public sector accountants
Trend towards computerised financial management
Cavanagh, J., Flynn, S., & Moretti, D. (2007). Implementing Accrual Accounting in the Public Sector. Technical Notes and Manuals.
Accrual accounting as opposed to cash accounting has been the norm in the private sector for some time.
Recently “a growing number of governments have begun moving away from pure cash accounting toward accrual accounting”
For four reasons:
Limits of cash accounting
Development of international standards of accrual accounting.
Professionalism of government accountants
Computerised financial management.
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Accrual vs Cash Accounting
Cash and accrual accounting are different things:
Cash accounting:
“Transactions are recognized only when the associated cash is received or paid and economic events are not reported if there is no immediate exchange of cash”.
This “has a number of weaknesses from the point of view of government financial transparency, integrity, and accountability… Governments have been tempted to exploit this weakness by deferring cash disbursements or bringing forward cash receipts as a means of artificially inflating their financial balance. Moreover, governments that follow cash accounting tend to not maintain comprehensive and up-to-date records of the value of their assets and liabilities. This enables them to transfer assets (such as land or mineral rights) or incur liabilities (such as pensions or public-private partnership contracts) to third-parties without disclosing their financial implications for the government and taxpayer.
Accrual accounting
Records “both cash transactions and non-cash flows in financial statements,” as such “accrual-based fiscal reports provide a more comprehensive view of the government’s financial performance and the cost of government activities” amongst other things. However as noted, by Cavanagh, to be effective “governments need to establish a well-functioning cash accounting system before contemplating a move to accrual accounting”
Cavanagh, Joe, Suzanne Flynn, and Delphine Moretti. Implementing Accrual Accounting in the Public Sector. IMF Technical Notes and Manuals, 2007.
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Cash
transactions are recognized only when the associated cash is received or paid and economic events are not reported if there is no immediate exchange of cash.
Governments exploit this weakness by deferring cash disbursements or bringing forward cash receipts as a means of artificially inflating their financial balance.
Accrual
… revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid.
Governments that follow cash accounting tend to not maintain comprehensive and up-to-date records of the value of their assets and liabilities.
… “provide[s] a more comprehensive view of the government’s financial performance and the cost of government activities”
… “can help focus greater attention on the part of policymakers and the public on the acquisition, disposal, and management of government assets, liabilities”
Changing approach to accounting (NPM)
So governments moved away from this model and it became replaced overtime with focus on:
Funding outputs - Aims to direct funding towards the achievement of objectives and outputs
Devolution of responsibility - Shift towards managerial use of discretion and initiative in achieving targets.
Strategic orientation - Encourages forward planning and thinking beyond day-to-day operational requirements.
Link with performance - Funding outputs allows the evaluating of effectiveness and performance.
Long-term orientation - Planning years ahead provides clearer appreciation of the ongoing costs of pursuing a policy.
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Inputs to outputs
From money allocated to particular types of expenditure
Operational to strategic orientation
From day to day functioning of department
Linked to performance
Short term to long term
From a focus on inputs no particular expectations of performance.
From designed for the next year based on the previous one
To direct funding towards the achievement of objectives and outputs
To forward planning and thinking beyond day to day operational requirements.
To funding outputs/outcomes allows the evaluating of effectiveness and performance.
To Planning years ahead provides clearer appreciation of the ongoing costs of pursuing a policy.
… incremental to decentralised spending
From incremental increase on previous years budget taking into account inflation
To mangers use of discretion and initiative in achieving targets and decentralised budgeting
Cash accounting
To
Accrual accounting
Outcome/Output focused Accrual accounting
More flexibility to use resources in a way that is more efficient and effective
Shifts the role of legislators (elected officials) from micro-managing input to considering policy goals and implications
Increases the transparency and accountability of government
Weeds out ineffective programs
Goals have to be clearly articulated
Performance has to be monitored and information conveyed to budget decision makers who need support to analyse performance reports (otherwise they are disempowered).
Holding public managers responsible for results that are sometimes outside of their control
Agency being judged provides data.
Advantages
Disadvantages
Most dramatic reform has been shift from line items to measurable outputs and outcomes. Key part of New Public Management.
This is often linked with performance contracts, which spell out expected results (outcomes) or quantity and quality of services (outputs).
Program officers are then held to account for achieving those outputs and outcomes.
Advantages and disadvantages to this model:
Advantages are that it:
Allows program officers to be more flexibility to use resources in a way that is more efficient and effective
Shifts the role of legislators (elected officials) from micro-managing input to considering policy goals and implications
Increases the transparency and accountability of government
Weeds out ineffective programs
Disadvantages can be that
Goals have to be clearly articulated which is not always easy as discussed previously.
Performance has to be monitored and
That information on performance information conveyed to budget decision makers who need support to analyse performance reports (otherwise they are disempowered).
Also this requires holding public managers responsible for results that are sometimes outside of their control
There is a further issue in that in many cases the agency or department being judged is also the one that provides data to it needs to be accurate and transparent.
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Fiscal decentralisation
Essentially granting taxing and spending powers to local or regional governments.
| Advantages Allows locals greater control over spending Local governments know local needs, service can be tuned to local requirements. Implementing democracy Local national governments should spend what they raise prevents ‘gaming’ | Disadvantages inexperienced local governments might misspend funds local governments in poorer areas will have less resources National governments may run out of money. Economies of scale in ‘centralisation’ |
Essentially granting taxing powers to local or regional governments.
Works with political decentralisation and brings government closer to people and allows them greater choice in how money is spent.
Local government know better than national ones about local needs
Advantages
Allows locals greater control over spending
Local governments know local needs
Implementing democracy
Local national governments should spend what they raise prevents ‘gaming’ i.e. trying to extract extra money from the national government beyond what a local government can raise. So it can control local spending as local governments will be less willing to spend money if they have to raise taxes to get it.
Disadvantages
Fears that inexperienced local governments will misspend budgets
Some local governments in poorer areas will have less resources (can be difficult to redistribute) to counter this you can develop formulas for the distribution of funds from rich to poor areas but getting the balance correct can be difficult.
Also a risk that national governments may run out of money.
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Australia
Australia used accrual accounting to estimate the full cost of program delivery and have a consolidated statement of assets and liabilities
Method was based on status quo and existing inaccuracies transferred into new figures.
Ministers ‘flummoxed’ by new information and recommended a return to cash based approach.
Public managers lacked sufficient grounding in accounting theory to understand the new figure.
Outcome focused
Outcomes became the basis of parliamentary control and the basis of decisions about resource allocation.
Unclear how to apportion funding or responsibility in respect to outcome.
‘too great a level of generality to be useful’
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Accrual accounting
Used accrual accounting to estimate the full cost of program delivery.
Consolidated statement of assets and liabilities
Outcome focused
Unclear how to apportion funding or responsibility in respect to outcome.
Outcomes became the basis of parliamentary control and the basis of decisions about resource allocation.
‘too great a level of generality to be useful’
Method was based on status quo and existing inaccuracies transferred into new figures.
Ministers ‘flummoxed’ by new information and recommended a return to cash based approach.
Public managers lacked sufficient grounding in accounting theory to understand the new figure.
Try this short quiz…
Imagine a situation in which you have:
Sent out an invoice for £5,000 for a project completed this month
Received a bill for £1,000 in developer fees for work done this month
Paid £75 in fees for a bill you received last month
Received £1,000 from a client for a project that was invoiced last month
Class quiz
Imagine a situation in which you have:
Sent out an invoice for £5,000 for a project completed this month
Received a bill for £1,000 in developer fees for work done this month
Paid £75 in fees for a bill you received last month
Received £1,000 from a client for a project that was invoiced last month
How much profit would you have made in cash and accrual accounting methods.
Cash accounting would ignore the invoice and bill received and look at how much was actually paid and received and would come out at £925
Accrual accounting would discount the paid and received and focus on the invoice and bill unpaid.
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Budgeting Tools
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Budgeting approaches
Four key approaches to budgeting in public management.
The line-item approach
Governments have always had some form of line-item budget - simple and easy for anyone to understand, which is the main reason it is so popular.
PPB
Emerged as a result of the unwieldiness of and dissatisfaction with line-item budgeting
ZBB
Maurice Stans, Budget Director under Eisenhower “Every item in the budget ought to be on trial for its life each year and matched against all other claimants to our resources.”
Ibrahim M, ‘Comparative Budgetary Approaches in Public Organizations’ (2013) 4 Research Journal of Finance and Accounting 88
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The Line-Item Budget Approach (LIB)
The Program and Performance Budget Approach (PPB)
The Zero-Base Budget Approach (ZBB)
The line-item approach
Resources are allocated according to the structured lines of departments and by categories of expenditure or line-items
Also called “traditional budget approach”, “incremental budget approach”, “object expenditure or object approach”
Advantages
Simple and easy to understand.
Easy to justify ‘that’s what we needed last year’
Disadvantages
No incentive to save
Assumes activity were performed efficiently.
Risk of a spending rush
The line-item approach
Governments have always had some form of line-item budget - simple and easy for anyone to understand, which is the main reason it is so popular.
Resources are allocated according to the structured lines of departments and by categories of expenditure or line-items (like personnel, operating, and capital outlay).
Also known as the “traditional budget approach”, “incremental budget approach”, “object expenditure or object approach”, “commodity approach”, “line-item”
The basic assumption existing in this approach is that the activities making up the historical base (or line items) are not only essential to the ongoing mission of the entity, but they must be continued through the next budget year.
Also, this approach assumes that current activities are being performed in a cost-efficient and optimum manner and will be cost effective in the upcoming budget year.
It does not provide an incentive to save money also the risk of a spending rush (end of year)
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The Program and Performance Budget Approach (PPB)
Response to the limitations of line-item budgeting.
Budget is based on line-items plus:
activities of the whole organisation (program)
listing of specific work in return (performance)
Advantages
Overall clear picture of activities & easy to review
More rationality in spending
shifts the politics from the budget … to the objective priorities
Disadvantages
Hard to set up standards
Difficult to measures performance.
Requires participation at all levels.
Have to define objectives which is not always easy.
Emerged as a result of the unwieldiness of and dissatisfaction with line-item budgeting
Idea is that proposed money distributed to different departments according to specific types of expenditure . . . (line-item), be spent,
secondly, according to the developed, detailed listing of all activities of the whole organisation or department . . . (program);
in order to perform –thirdly—a listing of specific work in return . . . (performance).
Starts with the Identification of the goal of the agency
Identification of objectives leading to that goal
Development and classification of programs, subprograms, and work units serving each objective
Determination of inputs (money, manpower, and materials, etc.) for each program. This is where the system of accounts and financial management are utilised.
Setting up standards or indicators to determine outputs or performance. This step provides a total perspective for effective budget managements.
Establishments of a reporting and control system.
Measurements of performance or output are established for all sub-categories of each program.
Advantages
Overall clear picture of activities
More rationality in spending – if you have request for money with what the money is going to do it is easier to justify or not such spending.
Shifts the politics from the budget … to the objective priorities – so rather than elected individuals micro managing in budgets, they can concentrate on the bigger picture.
Clear and easy to review – provides more information to make an assessment of
Disadvantages
Hard to set up standards
Difficult to measure performance.
Requires participation at all levels.
Have to define objectives - not always easy.
Ibrahim, Mukdad. “Comparative Budgetary Approaches in Public Organizations.” Research Journal of Finance and Accounting 4, no. 15 (2013): 88–99.
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Zero-based budgeting
Program activities and services must be justified annually during the budget development process.
“Every item in the budget ought to be on trial for its life each year and matched against all other claimants to our resources.”
Stans
Advantages
Makes managers prioritise
Eliminate programs existing through inertia
Strengthens the planning and analysis roles
Disadvantages
Very time-consuming process
Hard to implement on a very large scale
Considerable amount of paperwork
Maurice Stans, Budget Director under Eisenhower “Every item in the budget ought to be on trial for its life each year and matched against all other claimants to our resources.”
“A management process that provides for systematic consideration of all programs and activities in conjunction with the formulation of budget requests and program planning.”
Entails a periodic re-evaluation of the whole budget, dollar-by- dollar evaluated from a “zero-base”
Advantages
Makes managers prioritise
Eliminate programs existing through inertia
Strengthens the planning and analysis roles
Disadvantages
Very time-consuming process
Hard to implement on a very large scale
Considerable amount of paperwork
Ibrahim M, ‘Comparative Budgetary Approaches in Public Organizations’ (2013) 4 Research Journal of Finance and Accounting 88
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Participatory Budgeting
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Participatory Budgeting
“A decision-making process through which citizens deliberate and negotiate over the distribution of public resources.” (Wampler, 2007; p.21)
Began in 1989 in Porto Alegre, Brazil
1m citizens in city
Helps poorer citizens get a larger share of public spending
Allows for more transparency in budgets and heightens democratic accountability
Also serve as “citizenship schools” which teach participants about their rights and responsibilities as well as the duties of governments
In 1989 the Workers’ Party of Brazil gained control of the Porto Alegre municipality and instituted participatory budgeting to allow poorer citizens to argue for more spending in their neighbourhoods.
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Participatory Budgeting Needs
Strong Mayoral Support
A Civil Society willing and able to contribute
Supportive/protected political environment
Financial resources available to budget
Mayor needs to delegate authority and provide logistics, information, and financial support
Civil Society needs to be willing to engage and able to negotiate together; pre-existing networks and social movements can deepen commitments to PB
Legislators needs to be either supportive of participatory budgeting or the PB process needs some protection from legislative power being leveraged
The principal purpose of participatory budgeting is the allocation and redistribution of funds so needs a solid financial base to allocate/redistribute and creates a lot of room for policy options and experimentation
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Participatory Budgeting in China
Small-scale programmes in 90s
Experiment in Huinan township in 2004
Xinhe and Zeugo in 2005
By 2010 “thousands of PB projects in place” (He 2011, p.123)
In China, PB has been widely implemented
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Participatory Budgeting in China
Operates under three logics:
Administrative – PB makes admin more efficient and effective PB therefore limits citizen involvement by having public oversight, not decision-making
Political – PB makes public services more legitimate, transparent, and trustworthy PB is often given more control when it aligns with legislative priorities
Citizen Empowerment – PB fulfils a right to participate in public government/governance PB is given high levels of autonomy and control of budgets with as much information as possible
In China, as elsewhere, there are three distinct rationales that motivate PB. Administrative logics see PB as a way to improve the effectiveness of public services and making administration more efficient; political logics see PB as a legitimation exercise by increasing transparency and reducing corruption; Citizen Empower logics see public participation as a right and democratically just. Each come with different PB processes.
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What would you do?
Pay Faculty/Staff (£7m)
Buildings’ Overheads (£3m)
Student Marketing (£1m)
Research Overheads (£2m)
New building (residences, £10m)
New building (teaching & research, £15m)
Research seed funding (£1m)
Pensions (£2m)
Research Impact Office (£1m)
Teacher Training & Quality Assurance (£1m)
REF Offices (£1m)
Expected Income: £30m
Fees £10m
QR £10m (based on REF/TEF/KEF scores)
Research £10m
“We need state of the art facilities”
“No, no we need more admin staff so I can focus on my research”
“I just wish I had more contact hours and lectures not being at 9am!”
What would you do?
Pay Faculty/Staff (£7m)
Buildings’ Overheads (£3m)
Student Marketing (£1m)
Research Overheads (£2m)
New building (residences, £10m)
New building (teaching & research, £15m)
Research seed funding (£1m)
Pensions (£2m)
Research Impact Office (£1m)
Teacher Training & Quality Assurance (£1m)
REF Offices (£1m)
Expected Income: £30m
Fees £10m
QR £10m (based on REF/TEF/KEF scores)
Research £10m
| 2017/2018 Budget | 2018/2019 Budget |
| Pay Faculty | Pay Faculty |
| Building Overheads | Buildings Overheads |
| Student Marketing | Student Marketing |
| Research Overheads | Research Overheads |
| Pensions | Pensions |
| New residence building | New Building Teach & Research |
| £5m Surplus | Balanced |
Reflections on budgetary reform
“No one size fits all” different approaches chosen by different countries at different times.
A number of tools that can and have been used as part of budgetary reforms:
Accrual accounting, fiscal decentralisation, outputs and outcomes budgeting, cutbacks and prioritisation
Many of these tools are associated with NPM (but they need not be).
They have strengths but also weakness and NPM associated approaches are not a panacea.
No one size fits all - different bits used at different times in different countries.
Some counties experimented with bits and then changed their mind
Countries will look at reforms elsewhere and adapt them for different reasons. Privatisation sometimes for efficiency; sometime to raise money - which may be spent poorly or well; sometimes occurs because it is imposed from above.
Reforms designed for one set of conditions may not work well or long in other countries.
Trade off between increased accountability for outputs and decentralisation. Hard to realise both.
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Recap
Financial management
One of the most important parts of the internal management of government; political rather than number crunching.
Budgets
Outline the envisaged sources of income and the envisaged public expenses. They allocate resources, distribute wealth and control economic stability.
Traditional budgeting approach
Inputs, Incremental adjustments, Operational orientation, No link with performance, Short term
Traditional
Advantages: Enables control, Basing budget on previous year sensible? Degree of flexibility in making across the board cuts, Makes budgeting relatively easy and manageable
Disadvantages: Does little for efficiency and effectiveness; spending all the money ‘correctly; Inadequate critical appraisal; rigid spending plan
Changing approach to budgets associated with NPM
Inputs to outputs; Operational to strategic orientation; Linked to performance; Short term to long term; incremental to decentralised spending; and cash to accrual accounting.
Participatory budgeting
Including citizens in budget processes to improve transparency and democratic accountability.
