OECD Review of the Irish Public Service

The case of agencies

September 2008

Public Governance and Territorial Development Directorate

Top of the class in economic growth over the past decade

1 0 -1 4 3 2 Real average annual growth of GDP and of government expenditure, 1995-2005 8 real average GDP growth 7 6 real average public expenditure growth 5 2 a: 1998-2003; b: 2002-2004; c: 1996-2005 Source: OECD

But growth has created its own pressures

• More foreign-born: 15 % of the Irish were foreign-born, compared to the OECD average of around 8 %. This places Ireland in the top third of OECD countries with foreign-born populations. • Infrastructure is insufficient: Ireland ranks 4 th to last among OECD countries in terms of motorway per 1000 m 2 area Only Norway, Poland and Finland fare poorer, but mostly due to their large surface area.

of • The population expects more efficient services: The WEF 2006-07 Global Competitiveness report ranks Ireland 55/125 in terms of wastefulness of government spending; the report also lists “Inefficient government bureaucracy” as the second most problematic factor for doing business in Ireland (though this is only cited by 14% of respondents to the WEF survey).

200000

Economic growth has outpaced public expenditure growth

Ireland: GDP, GNI and Public Expenditure - Evolution 1995-2005 GDP (a)

150000

GNI (b)

100000

Government Expenditure (c)

50000 0 1995 1996 1997 1998 GDP (a) 1999 GNI (b) 2000 2001 2002 Government Expenditure (c) 2003 2004 2005

Overall spending on public services remains relatively low

Indicative production costs in the public domain as a percentage of GDP, excluding cash transfers, debt and investment

35% 30% 25% 20% 15% 10% 5% 0% SWE DK NL FIN FRA BLG UK NOR CZ GER AUT USA PL SK ESP ITA LUX IRL SWT KOR

compensation of employees [A+B] Source: National Accounts intermediate consumption [E] social transfers in kind via market producers [C] 5

As does total Public Service employment

Employment in the General Government Sector and for Ireland in voluntary schools, hospitals and universities, as a % of total labour force, in 2005 (or 2004)

35% 30% 25% 20% 15% 10% 5% 0% NOR SWE FRA FIN BLG SK USA PL ESP NL IRL GER AUT employment in voluntary schools, hospitals and universities, financed mainly by public funding SWT KOR employment in the General Government Sector as a percentage of the total labour force, in 2005 (or 2004) Source: CEPD survey, Labour Force Survey, OECD have higher numbers in number of employees) 6

At current taxation and debt levels, service improvements require increased Public Service efficiency

• Growth is slowing: over the period 2000-2005, real GDP growth has declined from almost 10 percent to around 5 percent annually; OECD forecasts GNP growth over the long term to decline from an average of 7.1 percent for the period 1995-2005 to 4.6 percent for 2005-2010 and to further decline over the next 20 years to an average growth rate of 3.4 percent.

•

Slowdown in economic growth means that a slower growth of public expenditure is required post-2007:

After having grown by 8 percent from 2000-2006, total government receipts are estimated to drop in 2006 by 1 percent and to remain stable in 2007.

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OECD assessment

• Overall progress is on track: many mechanisms are now in place • Keep focus on whole of Public Service in order to avoid fragmentation of interests and vision • Performance orientation: embedding change requires ownership and not just direction • Remaining challenges: – Taking a whole of Public Service view of capacity needs, especially in decentralisation context – Developing a common language and understanding of performance – Consolidating successes, learning from them, and extending reforms throughout the Public Service

Overall recommendations

• Focus on delivering societal goals – Continue move from input control to performance management – Develop clear vision of the type of Public Service that matches objectives and aspirations – Strengthen oversight and performance dialogue between departments and agencies – Build up reform skills for robust implementation • Improve Public Service coherence – Link up and streamline reforms to reflect overall vision – Focus on leadership development and create a Senior Executive Service – Promote mobility within and across the Public Service • Strengthen citizen-focus – Communicate reform goals; consult on means – Build up capacity to bring services closer to citizens 9

Agencies in Ireland: CONTEXT

Agencies have been used as

• A means to increase public sector capacity • In a centralised government • With local government of limited jurisdictions 10

Agencies in Ireland: POLICY GOALS

The creation of agencies has corresponded to the need to:

• Signal and embody new policy priorities • Involve stakeholders • Provide bodies with managerial flexibility and

allow more performance focus

• Coordinate policies at the local level • Respond to EU requirements related to the

independence of regulators

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Agencies in Ireland: GOVERNANCE (1)

A mismatch between the organisational forms and the reasons for agency creation?

• Performance focus and representativity • Differentiated top governance structure and

management autonomy

Agencies are meant to achieve too much An organisational zoo?

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Agencies in Ireland: GOVERNANCE (2)

Difficulties with focus on performance:

• Limited managerial autonomy • But managerial capacity is not fully developed • Difficulties with performance dialogue What is the point? 13

Agencies: Overall conclusions • Opacity and ambiguity : i) tight managerial

control and representative boards; ii) policy independence and little management autonomy

• Inefficient coordination at the local level • Participates in the difficulties with integration

of the public service

• Strengthening of agency system is a two way

process between departments and agencies

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Agencies: Specific recommendations

1) Review the governance system of agencies

•

Rethink organisational form of service delivery

•

Match governance structure with agency objectives

•

Establish guidelines and criteria for agency creation

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Agencies: Specific recommendations

2) Improve performance focus

•

Strengthen performance dialogue

•

Increase managerial flexibility

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Agencies: Specific recommendations

3) Improve HRM and strategic capacity in HRM

•

Increase agencies capacity in strategic management, financial management, auditing and accounting

•

Enhance capacity for developing performance measures

• •

Strengthen departments’ capacity to carry out a long term dialogue on performance management Improve board capacity

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Agencies: Specific recommendations • •

4) Wider reforms in the public service should help strengthen the agency system

•

An integrated public service

•

An open public service A strengthened centre A focus on performance

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