Performance & Accruals Budgeting
OECD Senior Budget Officials Meeting, Vilnius
David Dipple
Parliamentary Estimates Clerk, HM Treasury, UK
20-21 March, 2007
Performance and Accruals Budgeting
Departmental Expenditure Limits
Resource
Admin
Programme
Annually Managed Expenditure
Resource
Capital
Capital
DEL: Policy driven spending
(£330bn in 2006-07)
AME: Demand led spending
(£230bn in 2006-07)
Performance and Accruals Budgeting
 For information purposes we also use:
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Spending by function (education, defence, etc)
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Spending by region
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Spending by economic activity (pay, grants, etc)
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Spending by sector (central/local govt, public corp)
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Funding authority
Performance and Accruals Budgeting
The UK moved to accruals budgeting in 2001-02
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New accruals data was in AME for first two years
It was moved into DEL in 2003-04
Allocated at organisational level (but some provision is
allocated to cross-cutting functions across-departments)
Performance budgeting introduced in 1999-2000
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Provide a focus on outputs (‘delivery’)
Some are shared between departments (eg, criminal
justice)
Number of targets has fallen (600 in 1998, 110 in 2004)
Performance Budgeting
The UK experience
Choose targets carefully:
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Outcome focussed
Achievable
Readily measurable
Relevant
Timed
UK currently has 110 for 20 departments
Performance Budgeting
The UK experience: what works
Where targets align with public & political priorities
All parties are signed-up and understand the delivery
mechanism
Education targets seem to have worked well, eg:
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..an increase in the proportion of of those aged 11 meeting
the standard of literacy) from 63% to 80% by 2002
•
..an increase in the proportion of of those aged 11 meeting
the standard of numeracy from 62% to 75% by 2002
Performance Budgeting
85
80
Targets set
75
Eng tgt
70
Mth tgt
65
English
Maths
60
55
50
1996
1997
1998
1999
2000
2001
2002
Performance Budgeting
85
80
75
Eng tgt
70
Mth tgt
65
English
Maths
60
55
50
1996
1997
1998
1999
2000
2001
2002
Performance Budgeting
85
80
75
Eng tgt
70
Mth tgt
65
English
Maths
60
55
50
1996
1997
1998
1999
2000
2001
2002
Performance Budgeting
The UK experience: what doesn’t work
Where targets aren’t genuine priorities
Perverse incentives:
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Lack of measurement data:
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National Health Service 4-hour A&E wait time;
Access to GP within 48 hours.
Reducing childhood obesity
Where exogenous risks impact on outcomes
Performance Budgeting
The UK experience: what doesn’t work
Where the target is unclear
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Home Office: ‘Reduce race inequalities and build
community cohesion’,
FCO: ‘Play a leading role in the development of the
European Security Agenda, and enhance capabilities to
undertake timely and effective security operations, by
successfully encouraging a more efficient and effective
NATO, a more coherent and effective European Security
and Defence Policy operating in strategic partnership with
NATO, and enhanced European defence capabilities’
Accruals Budgeting
The UK experience
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Accruals applies to expenditure but
not to revenue
Continue to control cash – ‘near-cash’
controls introduced in 2005-06
Accruals Budgeting
The UK experience: the purpose
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Inter-generational fairness
Inform decision-making
Provide incentives
Identify cost of decisions
Accruals Budgeting
The UK experience: what is needed
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Technical understanding
Monitoring and control mechanisms
Freedom to make, and benefit from,
decisions:
Accruals Budgeting
The UK experience: issues
“Shifting to the accrual basis transfers
budgetary power from elected leaders to
technical experts” (para 81)
Tinkering:
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Capital grants
Impairments