In the past, performance budgeting was presented as a kind of panacea, a reform so obviously righteous in its ambitions that there could be little reason to refuse to implement it.
That way of thinking is no longer au courant, and a more modest consensus has emerged, encapsulated in Donald Moynihan and Ivor Beazley’s 2016 review of performance budgeting in the OECD. Likewise, when the International Budget Partnership looked at program-based budgeting in our 2018 review of low- and middle-income countries, we also arrived at more modest expectations for the benefits of performance information in budgets.
And yet…the dream lives on.
In their intriguing new book, Alfred Tat-Kei Ho, Maarten de Jong and Zaozao Zhao align themselves with this trend toward humility, while also offering glimpses of surprising possibilities when we set ambitious but realistic expectations.
A litany of failures?
This book covers a lot of territory, both in terms of geography and time. It rather rapidly reviews decades of progress (or the lack thereof) in many contexts, from Afghanistan to the United States. At times, the text can feel repetitive, since nearly every country suffers from similar challenges: low capacity to implement a reform that everyone thought (again!) would be simpler than it turned out to be, an oversupply of performance information that is also of dubious quality and remains unused, and so on.
Consider this description of challenges in the Philippines: “There was a lack of understanding by key officials…Performance measurement was inadequate…the Budget Commission had failed to sustain the initial rigor of the reform through training….the legislature continued to require the parallel submission of a line-item budget.”
This is particularly depressing because it is a description of the results of the first Philippines performance-based (PB) reform—in the 1950s. It is not clear that things are much better six decades later. Reviewing more recent reforms, the Philippines chapter notes: “Any performance budget system is only effective if it is understood and used by those who make budget decisions and implement government programs, and by those who hold the government to account, but there is limited evidence” of this.
Even in rich countries, the book documents familiar performance-related challenges. In Australia, a focus on “vertical” performance management undermined ministerial collaboration, and pay-for-performance reforms demotivated the public service corps. In the Netherlands, outcome-focused performance indicators could not be connected effectively to budgets, while input information, which officials and legislators considered crucial for overall budget management, disappeared from the budget presentation. In 2007, the minister of finance argued that the system was prone to “numerical fetishism”; in other words, not everything that was important could be measured.
This is not to say that the book is all gloom and doom. In fact, the authors find something positive to say about nearly every experience with performance budgeting, no matter how dismal. Sometimes, this amounts to little more than a modest increase in transparency or encouraging public officers to focus more on the results of spending. But as they rightly argue, such modest advances should not be dismissed in the chaotic world of public administration reform.
The authors also identify some exciting, emerging practices in surprising places. For example, the Chinese cases they cite showcase the rise of independent, third-party review of performance, particularly at the local level. This practice also has emerged in Mexico. The basic premise is that independent contractors can provide an objective assessment of performance that may be used by finance ministries to review agency performance and decisions about future funding.
Local officials in China also have designed performance evaluations to assess citizen perspectives through surveys and town hall meetings, and they have published budget information on electronic billboards in train stations and other public venues. While the overall political context in China might limit the effectiveness of such transparency and citizen engagement, the case study suggests that the desire to avoid public embarrassment has subtly altered the incentives facing government agencies toward performance. This indicates that, even in rather unlikely environments, PB can change the budget conversation and enhance stakeholder accountability.
In Tunisia, PB has been part of the overall political reform agenda since the so-called “Arab Spring,” with the goal of enhancing public and parliamentary scrutiny of the budget. The authors write that both a professional civil service and “continuous demand for more transparency and accountability by civil society have provided PB reform with renewed legitimation and kept it on the political agenda.” Members of civil society have used performance information to push for improved government practice—another example of the value of PB in promoting accountability in a somewhat unlikely context.
A role for citizens and legislators?
Nevertheless, the role of citizens and legislators remains a basic and unresolved tension in the book. On the one hand, the authors stress the “management” role of PB, arguing that it is generally not successful in altering the political aspects of the budget process, and does not normally change the behavior of legislators or involve the wider public. On the other hand, as suggested by the China and Tunisia examples, as well as some of the other cases cited (for example, the Netherlands and Kenya) and even other writings by these same authors (see Ho 2018), there seem to be quite critical roles for the public and legislatures in PB reforms.
Ultimately, if PB is designed to change the conversation about the budget to focus on the goals of spending, it cannot be centered on a technical management reform alone. The goals of spending are political, and if we are not bringing citizens and legislators along, then something is missing. Ironically, it is the Chinese and Tunisian examples that seem to have the most to tell us about addressing the democratic deficit in performance reform. Surprises like this one are what make this book worth reading.