The public service agreements set up in the 1998 spending review, and refined in 2002 and 2004, defined targets largely in terms of operational outputs. For instance, the 2004 review set the Department for Work and Pensions targets to pay pension credit to at least 3.2 million pensioner households, and to reduce the average time taken to process a housing benefit claim to no more than 48 days. Departments’ budgets were then set in line with the activity required to deliver these outputs.
By contrast, the new PSAs focus on delivering outcomes – such as halving and eradicating child poverty (PSA 9), or securing a healthy natural environment (PSA 28). Responsibility for meeting these new targets will, in most cases, be shared across departments. This will require horizontal capability, with departments collaborating outside their day-to-day operational work.
However, the Treasury will continue to allocate funding on the same basis as under the old PSA regime, that is, to operational outputs; there is no dedicated budget to support the additional cross-government work demanded by the new PSAs. This means that departments will have responsibility for a demanding set of targets, but no dedicated funding for the work they must do to achieve them.
Clearly, this could make the new PSA targets difficult. There will be little flexibility to adjust spending based on which departments are most effective; when PSA delivery boards meet, they will not control the financial sanctions and incentives that would be the most effective levers to encourage the pursuit of shared targets.
If senior managers are to change the way they approach cross-departmental working, the means of allocating money may need to be reshaped. One way could be to allocate budgets directly to each PSA target, separate from those dedicated to business-as-usual service delivery. This would enable the minister responsible for each PSA to commission activities from departments that demonstrate the greatest impact.
This approach – what we might call macro-commissioning – could help resolve the potential conflict between departments’ budget allocations and their PSA responsibilities. Macro-commissioning would offer increased accountability, flexibility and specialisation (as funding will be more closely linked to activities that support PSAs).
Such an approach would be similar to the purchaser-provider agreements that are already operating effectively in Australia. These enable departments to buy services from other government departments that can provide them more effectively. Under this model, the Australian foreign office has acted as a provider of IT support to other public agencies, and Centrelink – an online one-stop shop for citizens to access public services – is funded by departments that pay to deliver their services through it.
The principle of departments paying each other for the activities that each does best could help to foster the horizontal capability required in delivering the new PSAs. For instance, the behaviour mentors for individual pupils proposed recently in the children’s plan are likely to have skills that could also be applied to combating social exclusion; within a macro-commissioning framework, the Cabinet Office (responsible for the social exclusion PSA) would be able to commission work from these specialist practitioners.
Similarly, Directgov might attract departments’ business if it acted more as a service provider, perhaps diversifying to include advising departments on web strategy, channel migration and online customer engagement, improving the availability of such expertise at a lower cost than the private sector can offer. This approach would be very similar to Centrelink in Australia.
At a time when, of necessity, the reins of public expenditure are being drawn tighter, perhaps the most important characteristic of a macro-commissioning approach is that it does not require any increase in overall government spending. Instead, it recognises that it is not the scale of the expenditure, but the manner in which that is allied to delivery chains, that counts. Over the next three years, senior departmental managers in the UK face some of the most ambitious targets they have ever been set; if the opportunity to achieve those goals is to be taken, it is essential that departments work within a framework that oils the wheels of government rather than stills them.
The authors are members of PA Consulting Group’s government consulting practice