Transcript EXPENDITURE REVIEW

EXPENDITURE REVIEW:
The Canadian Experience
Munir A. Sheikh
Secretary, Expenditure Review Committee
Government of Canada
March 3, 2005
Some Canadian Facts
In the International Context
Financial Balances
Total Government Financial Balances (National Accounts Basis)
% of GDP
2004 (OECD estimate)
2005 (OECD projection)
2
1
0
-1
-2
-3
-4
-5
-6
-7
Italy
United
Kingdom
Germany
France
United
States
Japan
Canada
Canada is again expected to be the only G-7 country to record a surplus in 2005
and 2006.
Program Spending
Program Spending
per cent of GDP
60
1992
2004 (estimate)
50
G-7 average in 2004
40
30
20
10
0
G-7 avg.
United
States
Japan
United
Kingdom
Italy
Germany
France
Canada
Canada’s program spending as a share of GDP is now below the G-7 average.
Financial Liabilities
Total Government Net Financial Liabilities
(National Accounts Basis)
per cent of GDP
120
1995
2004 (estimate)
2005 (projection)
100
80
G-7 average in 2004
60
40
20
0
G-7 avg.
United
Kingdom
United
States
France
Germany
Japan
Italy
Canada
Canada’s debt burden has declined from the second highest to the lowest
among G-7 countries.
Financial Balances
Total Government Financial Balances (National Accounts Basis)
per cent of GDP
Canada
3
United States ("on-budget" balance)
2
1
0
-1
-2
-3
-4
-5
-6
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Estimate
The federal government in Canada has maintained a budgetary surplus since
1997-98, unlike the U.S.
Financial Balances
Total Government Financial Balances (National Accounts Basis)
per cent of GDP
Canada
60
United States
50
40
30
20
10
0
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Estimate
The federal market debt-to-GDP ratio in Canada fell below that of the U.S. in
2003-04.
Given this Performance
and the Fiscal Situation,
the Question is:
Why Expenditure Review?
Why Expenditure Review?
… and the answer is
• It is good public policy
• Eliminating/reducing programs which are not high
priority would save money
• Improving efficiency, reducing cost of programs that
remain would save money
• Such savings can be:
• Either spent on high priority programs, or
• Used to cut taxes
• The outcome is REALLOCATION that will improve:
• Economic outcomes
• Social outcomes
But there are Challenges
Political Challenge
• Interest groups
Bureaucratic Challenge
• Continue existing programs
The Canadian Approach
The government:
Is committed to the expenditure review concept
Announced an Expenditure Review Committee of seven senior
Ministers to operationalize it
Set up a small secretariat of civil servants to support ERC
Gave ERC 6 months to find first tranch of savings for Budget 2005
(TRACK 1)
Asked ERC to develop a permanent system of expenditure review as
part of annual budget cycle (TRACK 2)
ERC PROCESS
TRACK 1
Overcoming Challenges
Political Challenge
• Prime Minister’s commitment
• ERC to look at programs not in an absolute sense but
relative sense
• Focus on program efficiency and administrative efficiency
• Reallocate
Bureaucratic Challenge
• Prime Minister’s commitment
• The 5% method for identifying priorities
Role of ERC Secretariat
• Collected all the facts
• Undertook analysis of different programs
• Developed options with pros and cons
• Provided support to ERC Chair, followed his guidance
• Presented options to DM group chaired by the Head of the
Public Service to get concurrence
• Secretary presented work to ERC for discussion, decision
Role of ERC Ministers
Reviewed every proposal in a relative context from the perspective of:
• Public policy
• Political Impacts
• Regional Impacts
Met once or twice a week for 4 months
Made tough decisions, took ownership of package
Chair played a key role
Recommended package to Cabinet, Prime Minister, Minister of Finance
Role of Cabinet
Reviewed package from:
• Public policy perspective
• Political perspective
• Regional perspective
Package in Budget 2005
Key Elements of ERC Package
Savings ramping up to 7% of base by year 3
89% improved efficiencies in program delivery, corporate overhead
Service Canada
Procurement practices
Property management
Departmental cuts
Key Elements of ERC Package
SERVICE CANADA
• “One Stop-Shopping”
• Rationalize regional offices
• Increased use of new technology
• Workforce to be reduced initially by 20%
PROCUREMENT PRACTICES
• Cost of purchases 5-35% higher than others
• Target of 7% savings
• Changes made:
• New contract rules
• New governance structure
• Coordinated/bulk purchases
Key Elements of ERC Package
PROPERTY MANAGEMENT
• Enforce existing space rules
• Outsourcing
DEPARTMENTAL CUTS
• Cut off lower priority spending
• Enhanced program and administrative efficiencies
• Examples:
• Pooling of innovation funds (ACOA)
•
•
•
•
Electronic coding of tax returns (CRA)
Centralization of administrative services (NRCan)
Elimination of subsidies for export promotion (Agriculture)
Reduced assistance internationally in cases where it is ineffetive
or not needed (CIDA)
Sources and Uses of the Expenditure
Review
Total ERC savings
Service delivery
Procurement
Property management
Departmental initiatives
Employee benefit savings
Total
1
Examples of priorities funded by ERC savings
(billions of dollars)
3.1
2.6
1.0
3.9
0.3
10.9
Defence
National security
Environment
Aboriginal Canadians
Research and development
Program integrity1
Reduce EI premiums/
increase benefits
Improve CPP account balance
Investments needed to address departmental service levels in key areas of federal
responsibility and to maintain capital property.
Permanent System of Expenditure Review
Track 2:
Preliminary Thoughts
Optimal Expenditure Review System:
“What we Have and What we Don’t”
BUDGET
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System part which
already
exists and works
NEW
System part which exists
now but needs
strengthening
System part that is
needed but not in place
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D P
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EXPENDITURE REVIEW:
The Canadian Experience
Munir A. Sheikh
Secretary, Expenditure Review Committee
Government of Canada
March 3, 2005