Public sector performance: introduction.
Stevens, Philip
The performance of the public sector affects us all. There are at
least three reasons why we should be interested in how well it
functions: it is big; its outputs are special; and it is getting bigger.
The public sector represents a sizeable portion of most industrial
economies. In the UK public sector current expenditure represented 38.5
per cent of GDP in 2004/5 (1) (HM Treasury, Public Finances Databank)
and it is projected to rise to 39.6 per cent in 2006/7. A malfunctioning
public sector affects overall economic performance both through its
direct contribution to the goods and services produced by the nation and
through its indirect impact on other sectors through the provision of a
well educated and healthy workforce, quality infrastructure (both
physical and institutional) and so forth.
The public sector has been getting bigger in recent years. Real
public sector current expenditure in 2004-5 was over one-quarter higher
than in 1998-9, after several years of negative or zero growth. The
country's citizens are entitled to ask their government whether
this extraordinary increase was worth it.
Finally, the outputs of the public sector are special. Health,
education and policing affect the whole of society and its more
vulnerable members in particular. Often the private sector cannot be
relied upon to produce these outputs efficiently and/or equitably. But
the very reason why these services are provided by the public sector
makes their management and the assessment of their performance
problematic.
Three of the papers in this issue of the Review come out of the
first phase of the Economic and Social Research Council's
'Public Services: Quality, Performance and Delivery' Programme
and all four were presented at NIESR's fourth Public Sector
Performance conference. They cover a number of topics, from the general
issues relating to specifying targets in the public sector to the
usefulness of specific techniques to public sector performance
assessment, and illustrate them with examples from three rather
different areas: the health sector, local government and tax offices.
Gwyn Bevan's article considers the problems faced and created
by a central agency laying down a set of targets and levels of
performance that are identical across delivery units. He considers this
in the light of the recently deceased (or at least transformed)
'star ratings' system for primary care trusts. As well as
creating a framework for considering such systems of central control,
Bevan provides useful insights into the way the system evolved that come
from being involved in the process itself--having lead responsibility at
the Commission for Health Improvement for agreeing the basis of star
ratings for 2003 with Secretary of State Alan Millburn. He concludes
that, whatever faults the system had, it did at least deliver reductions
in waiting times. Nevertheless, it is perhaps a system that has had its
day and he sets out a 'mixed' alternative to the
central-command model and considers the issues this raises for
governance of health care performance.
Philip Stevens, Lucy Stokes and Mary O'Mahony stay in the
health sector with star ratings, but shift their application to acute
hospital trusts in England. They argue that the many attempts at
performance measurement and assessment in the public sector have often
been created on an ad hoc basis, with little consistency. Some targets
are set without a clear idea of how to measure them, and others are
designed for one purpose (for which they may or may not be fit), but are
pressed into alternative uses. In order to create a framework in which
to set the various measures, Stevens et al. outline a typology of
performance indicators and a set of desiderata for them to be useful. In
this context, they compare the outcome of a performance management
system with an alternative measure--a productivity measure analogous to
those used in the analysis of the private sector--and find that the two
are almost totally unrelated to each other. Whilst the narrow focus of
the star ratings system might explain this, it does raise questions as
to the appropriateness of such indicators of performance.
Dirk Haubrich and Iain McLean shift the empirical focus to another
composite indicator of performance: the comprehensive performance
assessments (CPAs) for local authorities in England. In a study that
echoes the call in Gwyn Bevan's paper to consider the specific
circumstances of organisations, they appraise three different studies
that have investigated the link between an important influence on local
authorities' provision - deprivation--and their performance under
this measure. Haubrich and McLean use the natural experiment created by
Scottish and Welsh authorities to contrast their more flexible approach
to the assessment of local authority performance to the rather more
prescriptive English system. Interestingly, early evidence suggests that
far from relishing the flexibility of their systems, stakeholders in
Scotland and Wales hanker for the certainty and clarity of the CPA.
In the final paper, Finn Forsund, Sverre Kittelsen, Frode Lindseth
and Dag Fjeld Edvardsen provide a very concrete example of the analysis
of public sector performance using an important development of a common
assessment technique. Data Envelopment Analysis has now become a common
technique for the assessment of public sector organisations which is
particularly appealing to analysis because it places so little structure
on the technology of provision. However, a crucial assumption is that
the data are measured with certainty. Forsund et al. show that once one
accounts for potential random variation in the data, the ability with
which one can make practical comparisons of organisations is
considerably reduced, although broader categorisations into 'best
practice' and low performers are still possible, which may be
enough for the technique to be useful for policymakers.
NOTE
(1) Total managed expenditure (including public sector net
investment and depreciation) runs at around 41.5 per cent,
