OECD Review of the Irish Public Service

The case of agenciesSeptember 2008

Public Governance and Territorial Development Directorate

2a: 1998-2003; b: 2002-2004; c: 1996-2005Source: OECD

Real average annual growth of GDP and of government expenditure, 1995-2005

Top of the class in economic growth over the past decade

3

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 4th to last among OECD countries in terms of motorway per 1000 m2 of area Only Norway, Poland and Finland fare poorer, but mostly due to their large surface area.

• 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).

Economic growth has outpaced public expenditure growth

Government Expenditure (c)

GNI (b)

GDP (a)

0

50000

100000

150000

200000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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

GDP (a) GNI (b) Government Expenditure (c)

Overall spending on public services remains relatively low

5Source: National Accounts

0%

5%

10%

15%

20%

25%

30%

35%

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

199

5

200

4

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] intermediate consumption [E] social transfers in kind via market producers [C]

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

As does total Public Service employment

6

0%

5%

10%

15%

20%

25%

30%

35%

NOR SWE FRA FIN BLG SK USA PL ESP NL IRL GER AUT SWT KOR

employment in voluntary schools, hospitals and universities, financed mainly by public funding

employment in the General Government Sector as a percentage of the total labour force, in 2005 (or 2004)Sources: CEPD Survey, OECDSources: CEPD Survey, OECD

Source: CEPD survey, Labour Force Survey, OECDNote: Data are in number of employees (and not in full time equivalents) except for Austria, the Netherlands, Sweden, and Switzerland (those countries would have higher numbers in number of employees)

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)

7

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.

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

8

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 regulators11

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 muchAn organisational zoo?

12

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

14

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

15

Agencies: Specific recommendations

2) Improve performance focus• Strengthen performance dialogue• Increase managerial flexibility

16

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 capacity17

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

18