The new expenditure management system announced by the Harper government is not a surprise – it has been more than a decade since the 1995 Program Review cut deeply into the ongoing base of government expenditures, resulting in a level of program spending which, compared to the size of the economy, was similar to that of the post-World War II period.
The lofty promises of “a continuous culture of reallocation” by the Martin government were not achieved and the excessive preoccupation on accountability by the Harper government has only served to strengthen financial watchdogs at the expense of spending ministries and expenditure guardians.
The new expenditure management system, spear-headed by the Treasury Board Secretariat (TBS), rests on four principles:
- Departments and agencies will manage their programs to clearly defined results, and assess their performance against those results
- TBS will oversee the quality of these assessments
- Cabinet will review all program spending to ensure that it is aligned with government priorities and responsibilities
- Cabinet will undertake a rigorous examination of all new spending proposals.
What is surprising is the low profile and tentative manner in which the outlines of this new system have been publicly released. Neither the president of the Treasury Board nor the Prime Minister is anywhere to be seen. Indeed, the entire system is contained to a single page, deeply buried in a voluminous 300-page budget document supporting the March 2007 budget. More words were devoted to the expansion of truckers’ meal expenses than to the new system.
According to one TBS official, the essence of this new system is to change the focus from “what the spending is on” to “what the spending is for.” In short, the performance and results of programs will inform and shape expenditure decisions.
The extent to which this actually happens is dependent upon three conditions: the ability, interest, and incentives for cabinet ministers to regularly review new spending proposals in light of existing programs; the extent to which ministers will make use of performance and results information in undertaking such reviews; and, the extent to which officials – spenders, guardians, priority setters, and financial watchdogs – can produce performance and results information that can be readily digested by ministers, and is reliable, relevant, and timely to their decisions. To date, reforms by the Treasury Board have focused almost exclusively on the third condition – producing more information.
Experience in Ottawa, however, has indicated that determining the overall level, allocation, and management of public money depends on much more than information. The most critical requirement is the strength and quality of the interaction across the key players in the budgetary process – spenders, guardians, priority setters, and financial watchdogs. Simply providing more information in the absence of creating stronger incentives for some of these players will not lead to the self-organizing interactions across these players that are necessary for effective budgeting.
In addition to more information, there is a requirement to:
- establish an expenditure review committee of cabinet
- restore a TBS role in expenditure review and allocation
- link priorities, expenditure programs, and performance.
Unlike countries such as Australia, Canada has never had an expenditure review committee of Cabinet chaired by the prime minister. Rather, the ad hoc and temporary machinery associated with expenditure review committees chaired by individual ministers has served to deal with particular problems as they arose – the needs for an expenditure gatekeeper in the mid 1980s, for program review in the mid 1990s, and for modest expenditure reallocation a decade later. Furthermore, on budget matters prime ministers – and Harper is no exception – have preferred to avoid cabinet colleagues and to deal exclusively with their finance ministers. But as surpluses have grown, along with new and changing priorities, the requirements for expenditure reallocation, and the necessity of ensuring performance; this tight bilateral approach to budgeting has surpassed its limits and there is a need for significant change.
An expenditure review committee of cabinet should be established as a permanent feature of the cabinet decision-making machinery. To be both successful and feasible, there are a number of requirements. First, like the Cabinet Committee on Priorities and Planning it needs to be chaired by the prime minister. No one else can do the job. Second, it should consist of a small group of ministers, including the finance minister, the president of the Treasury Board, the chairpersons of the two or three policy committees of cabinet, and several senior ministers to ensure regional balance and priority representation. Third, it should be responsible for the annual review of multi-year expenditure plans and proposals of departmental spending ministers. Fourth, as is the case in Australia, it should function as the budget committee of cabinet, working within the broad themes and priorities of the prime minister and the finance minister to advise the finance minister on expenditure increases and reductions to be contained in the upcoming budget. Fifth, it should be supported by a permanent secretariat, consisting of senior officials of the Privy Council Office, Finance, and TBS. Sixth, the president of the Treasury Board should be re-established as a “budget player,” participating with the finance minister and the prime minister in their pre-budget meetings and thereby strengthening guardianship within the ministry.
The institutionalization of a permanent support secretariat to this Cabinet committee will be especially important for its ongoing success. It should comprise a nucleus of top-level officials from PCO, Finance, and TBS, and a rotation of senior departmental officials to work effectively with the three central agencies and with the diversity of spending departments and agencies.
Restoring a review role
Over the past decade the role of TBS in the budget process, particularly with respect to budget allocations, has been significantly diminished. The focus on the deficit by the Department of Finance, the transformation of the Treasury Board to a management board, the elimination of central policy and operating reserves, and the increasing delegation of authority to departments and agencies coupled with the promulgation of numerous government-wide management frameworks have all contributed to this diminution. As a consequence, TBS has lost its capacity to challenge departmental requests for new funding and to rigorously review the expenditure base of existing programs. Regular and ongoing interactions between central guardians and departmental spenders over the budgets, allocations and detail design of programs have greatly diminished. As a result central guardians no longer have in their filing cabinets, let alone at their fingertips, detailed program budget information and analysis.
Current attempts by TBS to put in place a centralized “management resources and results structure” will not, on its