Robert Watt, Secretary General, Department of Public Expenditure & Reform, speaking at the Whitaker Conference on How (Not) to Do Public Policy, NUI Galway

Introduction

Good Afternoon.

I am delighted to be here today to talk to you about making better public policy. Today we have seen academics and researchers debating the evidence and looking to learn lessons from how policies have been designed and implemented.

The comments and discussion on the research launched today is the kind of conversation that we need to be having on public policy. Thank you to Jim O’Leary and the Whitaker Institute for a thought provoking report – although it makes for difficult reading at times!

We need to broaden this conversation on public policy and that is why I welcome the opportunity to speak at this event.  My Department – and the policy community in the Irish Civil Service – is in the business of evidence informed policy making. Because we are ambitious to have better public policy and better outcome for our citizens.

But what do we mean when we call for better public policy? We mean policy decisions which lead to better outcomes for citizens; more effective policy which achieves its objectives. We mean feasible policy – evidence informed, in the right place at the right time, implementable, and affordable in the medium to long term. We mean fair and coherent policy which is situated within an agreed political framework of the kind of society within which we want to live and the kind of economy we want to have.

Critically, we mean policy which ensures value for money for our limited public funds. And which ensures we use our limited public funds to achieve the maximum positive impact for our citizens.

The Institute for Government in London wrote a recent Report on how government can work. In thinking about policy, it argues that policy making does not follow the rational models that we often think about. Instead “In real life policy making is messy. It is created through a complex interaction of Ministerial, Departmental priorities, public attitudes, media, civil service capacity and other factors in addition to evidence and expertise. Policy officials act as ring masters pulling together input from these multiple sources.”

So how does better public policy making seek to deal with the reality behind this Quote. That is what I want to talk about today – the challenges policy makers face, what we are doing about it and where we go from here.

Why Policy is Difficult and Complex?

Making policy is hard. Making good policy is even harder. Why is it so difficult?

It is difficult because it is complex and broad; Government policy encompasses many aspects of people’s lives from the cradle to the grave. It is about the delivery of services now and planning for the long term prosperity of the State.

It is also difficult because good policy can’t deliver gains for everyone and should be targeted.  This requires effective implementation –and good communication – key ingredients for effective policies as we heard earlier.

But policy is not just about providing a specific public good or service – it is about improving sectoral outcomes. It is about improvements across a range of areas and interventions. For instance,

  • Improvements in life expectancy outcomes[1] to allow people to live longer and fuller lives.
  • Improvements in literacy and education outcomes[2] to improve quality of life and access to employment.
  • The provision of adequate and appropriate income supports to support living standards.
  • The availability of effective social supports to ensure that the necessary infrastructure is in place for social development.
  • The identification and development of measures to play our part in both climate change mitigation and adaptation.

At its core, this is what policy making is about. The delivery or provision of a project or service is not the end goal. The end goal is making progress with the social or economic objective of an intervention.

It is also important to note that services need to be flexible. To take a simple example – the average size of a primary school class is 24 children but the needs and supports required for each child are different. The design, delivery and implementation of services and policy has to cater for the requirements of each of these children as best we can.

If we look at the size, scale and nature of what the Government does it is easy to identify this complexity.   This year the State will spend just under €62 billion of taxpayers’ money.   Of this total expenditure, almost 78% of the total is accounted for by four policy areas: social welfare, health, education and justice[3].

Much of this is delivering public services – free at the point of use – or social transfers based on eligibility to almost 5 million people in Ireland. The services are delivered by over 300,000 public servants through a range of public bodies at national, regional and local level.  And also by non-public servants working for bodies funded by the taxpayer. Some of the facts for 2017 are interesting:

  • There were 910,000 pupils at primary and second level education in Ireland – an increase of 8.5% since 2011/12[4].
  • Within the third level sector there were around 180,000 students enrolled in full-time third level courses[5].
  • There were 1.28 million attendances at hospital emergency departments[6].
  • The passport office issued a total of just over 780,000 passports in 2017[7].
  • Last year, the Revenue Commissioners dealt with 5.9 million electronic returns, 2.3 million electronic payments and 2.5 million calls to their telephone service[8].
  • There were 252 million journeys on the main public transport services, an annual increase of 7%[9].

These statistics highlight the breath and scale of services and interventions across a range of areas. Of course, the State wasn’t always so large and all encompassing. The extent of the Irish state’s role has changed considerably over time along with other developed economies.

Scale is one aspect. But there are myriad drivers or inputs into policy coming from all directions: citizens at a local level; through local government and planning for local and regional issues; encompassing national concerns; arising from international obligations and coming from stakeholders such as the EU and the UN.

Challenges to Decision Making and Resource Allocation

In making decisions Government must deal with various trade-offs, assessments of costs and benefits and many other issues that I will briefly discuss.

Public Interest

The first challenge is defining the public interest. What do we mean? This is often a contested space where public interest reflects values and is determined by the outcome of the political process. Within any policy area, these values need to be clarified around what is trying to be achieved. Often, defining the public interest within a particular policy area is fraught.

Take the issue of competitiveness. It seems obvious that a macroeconomic policy goal – and one clearly in the public interest – is to improve competitiveness of the Irish economy. Every sector in Ireland, especially this time of the year, argues for some expenditure measure, tax relief or regulatory change with a view to improving its competitiveness and, hence, its growth prospects.

This makes sense at a firm or sectoral level – even allowing for the fact that each measure has an opportunity cost.  But when moving from a partial analysis to an economy-wide perspective this makes little sense.  If we try to grow every sector at an aggregate level we run out of resources – or worse create imbalances, which as we discovered, are painful to unwind.  While each sector is arguing that their interests coincide with the public interest this is not the case.

One could expand this argument further and suggest that there are times when losing competitiveness – i.e. a sustainable Real Exchange appreciation is exactly what a Small Open Economy in a monetary union may require.

Thus, regarding the definition of the public interest, it becomes increasingly clear that there is no consensus on what this is. Ditto for fiscal policy. All groups are in favour of counter-cyclical fiscal policy until we debate what this means and what the consequences might be for spending and taxation proposals.

Nature of Intervention

Of course, even if we agree on the policy goal there is a lively debate about the potential tools and measures to achieve a given outcome. For a given policy objective, Government may take one or more different policy steps. One can identify three levers through which Government intervention can occur:

  • Public expenditure, whether current or capital, can achieve specific policy objectives through the delivery of public goods or services and programmes or through investment in infrastructure and assets;
  • Taxation measures are, of course, needed to fund these initiatives. And can also be used to achieve certain policy objective by changing incentives and behaviour;
  • The introduction of regulation and laws is also a tool to impact and influence social outcomes and behaviour.

We can look at these options through a variety of lenses. Welfare economics, with its assumptions about rationality, can point in a certain direction. From a behavioural economics standpoint, we would focus as much on appropriate design to influence agents in a particular way.

However, we can never be certain about outcomes. We live in a world of uncertainty and there are many views – valid or otherwise – on the likely impact of different proposals.  The critical question – and challenge – is to reduce this uncertainty through analysis of these options. An important question is do we understand all the direct and indirect consequences of policy decisions to the greatest extent we can? Do we have the best possible evidence?

Housing policy is an interesting example. In the short-run housing supply is inelastic. Excessive credit conditions, for example, will be reflected in price expectations.  In the short-run at least, such measures will be primarily reflected in the price of development land.  There is much Irish and international evidence to suggest that macro prudential rules, for example, are essential to avoid the build-up of credit and financial risks that we saw in the 2000s.

But yet hardly a day goes by without a vested interest arguing that looser prudential rules or tax breaks will deliver the desired increase in housing supply!

Opportunity Costs

The notion of opportunity costs is central to many of our discussions.  Tax break X above might have merit but what of the alternatives foregone.  It might be a good idea but that in itself is not sufficient. In implementing any one decision it is the case that we may crowd out another idea. This opportunity cost of policy choices is mostly not considered by the promoters of a certain course of action.

Timing and Incentives

A final challenge which I would like to highlight is timing and incentives. Often there can be a disconnect between the period when a decision is or needs to be made and the period when an impact is felt. This can present issues with incentives and delay the necessary policy impetus. Weighing up both the short and long term impacts of a policy is important.

An example of a policy area where all of these challenges are prevalent is climate change. In terms of developing an appropriate policy response, there are a number of difficulties. Firstly, the goal itself is challenging – not just to reduce emissions but to reduce emissions at lowest cost. Within this, uncertainty reigns.  What are the Marginal Cost of Abatement of different options? Have we done the work?

Beyond the analysis and assessment that needs to be carried out, there are also competing priorities. Sectors responsible for emissions can be focused on other goals that aren’t compatible. For example, there is no real consensus on the trade-offs between economic goals for specific sectors and the need to reduce emissions. The development of any targeted policy response could adversely affect specific groups. But the benefits of action are societal and longer term.

Actions and Reforms 

As leaders in the Civil Service we accept that policy making and implementation needs to get better… What has been done and what more can be done?

Strong Institutions and Public Interest Values

First, we need strong institutions with the right values and people to produce the best evidence. And to argue strongly for what is in the public interest.  Critically, we need organisations that are not swayed by shorter-termism or tomorrow’s headlines. Nor should they be too close to sectoral or sectional interest.

In 2014 we launched a Civil Service Renewal Plan focused on reforming how Government Departments function. These included many initiatives to strengthen the capability and performance of Departments.

Institutions, as we know, are all about people. And much of our efforts have focused on improving the capacity of individual Civil Servants.  How do we ensure that those collecting the evidence are looking at the public interest as a whole rather than focusing on sectoral interests? Do they have the skills to analyse problems, develop options and evaluate costs and benefits? Do we have best implementation skills?

We now invest more in Learning and Development that we ever did. We have targeted programmes. In my Department, the equivalent of some 3.3% of the paybill was invested in L&D in 2017 focusing on supporting staff in their day to day jobs and helping them to reach their full potential.

We have open recruitment so that people at different stages of their careers with different experiences can join the Service.  The traditional closed shop approach to promotions is over. This has refreshed our skills base and brought in new approaches – particularly in relation to project management skills.

We established a Senior Public Service[10] which is working to strengthen senior management and leadership across the public service through development and mobility opportunities and networking. The newly created Civil Service Management Board[11] and Public Service Leadership Board[12] provide overall leadership for public service development and innovation.

Irish Government Economic and Evaluation Service

The establishment of the Irish Government Economic and Evaluation Service has been an important part of this. Created in 2012, it is a key initiative in capacity building to support evidence informed policy making and better public policy making. It is an integrated cross-Government service that aims to support better policy formulation and implementation in the civil service.

Through IGEES, Departments are supported to ensure they have the skills and knowledge to produce research and analysis in a timely manner that feeds into policy as it is needed. With the IGEES initiative, we are building on existing analytical expertise through recruitment, training, events, and networking opportunities offered by the new Irish Government Economic and Evaluation Service[13].

The strength of IGEES is that it is working to be embedded as a core support service for policy makers in each Department. IGEES staff are working on analysis to support the annual budgetary process, producing research on core economic challenges such as Brexit, appraisals and evaluation.  In addition, we are building broader capacity within the Civil Service by inviting all interested policy makers to its events and learning and development opportunities.

My Department is also developing new initiatives to better target expenditure and to support the funnelling of analysis into policy decisions. The spending review is a three year rolling review which will see Departments review Government spending over a three year period up to 2019.  IGEES is core to delivering the work on the Spending Review.

The spending review process operates within the wider budgetary architecture. Its purpose is to allow for existing spending to be reprioritised between programmes to ensure that the State’s constrained resources have the greatest positive social and economic impact. The best method to ensuring that reprioritisation is carried out effectively is to focus on enhancing the evidence base in developing policy options, particularly in advance of the annual budget process.

This year’s Spending Review[14] culminated in the publication of over 25 analytical papers, published alongside the Mid-Year Expenditure Report in July.  This builds on the output from 2017 with almost 50 Spending Review papers published to date. The papers can be found on the PER website and on the IGEES website.

Better Data, Research & Evidence

We are driving an evidence informed agenda – better data, more research, more analysis and more evidence.

To ensure better data, the Central Statistics Office is leading on the development of the National Data Infrastructure supported by all Government Departments. My Department is encouraging the interoperability of data and free data flow. Under the Open Data Initiative[15], we are focusing on making high value government data publically available on the national open data portal, data.gov.ie, and freely reusable. We are engaging with a broad community of stakeholders to promote the use of data for the benefit of all sectors of the economy.

To reinforce the value of evidence, we have created a framework to support policy makers and drivers to build value for money into policy design and roll out. The Public Spending Code[16] was published in 2013 and sets out and enhances the value for money arrangements for the public sector. It provides policy makers with guidance on how to gather evidence, analyse options to achieve policy objectives, and weigh the risk of implementation options.

My Department is currently reviewing and updating the Public Spending Code to ensure that it continues to reflect current best practice in project appraisal and evaluation.

Culture of Inquiry and Open Culture

These initiatives, driven as part of our ongoing agenda of public service reform, feed into the culture of inquiry that we are trying to foster. A culture where we are constantly asking questions, seeking more efficient and effective ways to achieve our goals.

I would also suggest that a culture of challenge is critical.

In his closing remarks to the National Economic Dialogue, Minister Donohoe spoke about economic dialogue as being intrinsically a public good. It is important to have a culture of open dialogue in which all the voices of all stakeholders in our society, particularly when they disagree, can be heard.

I am a champion of engagement: engagement between researchers and policy makers; engagement with academia; and engagement with stakeholders in fora like the National Economic Dialogue and Open Policy Debates. As set out in a previous address to the Statistical and Social Inquiry Society of Ireland in 2011[17], I believe the interaction between policy and research flows in two directions – research responding to and influencing Government objectives.

As part of this we need a more informed and civilised debate.  We need to be able to debate options that may be unpopular or adversely affect certain groups but which are in the public interest. Hysterical commentary and scare stories too often characterise our debates – maybe this period in our public life (which is not unique to Ireland) will pass but I am not convinced.

The nature and quality of public debate can often present a challenge to good policy making process. To support good policy making, we need good debate. In this sense, debate around choices needs to be mature and evidence informed.

Policy-Making

Objectives and Goals

I also think there are further measures we can take to improve policy outcomes – and draw from recent examples.

In my experience we can often expect too much from a specific policy intervention. We can try to achieve too much and have numerous objectives and goals.  Sometimes those goals are not clearly defined or merely aspirational.

Goals should be measurable, tangible and where there are numerous goals for a policy or project, the order of priority should be articulated and clear. Too often we see policies and project which want to be all things to all people.

In relation to water charging, I agree with Jim’s conclusion that policy tried to achieve too many objectives.  We also tried to do too much too quickly.

I believe one of the objectives of better policy making is to reduce the complexity of the system and not add to it. And therefore reduce risk.

Take finance as an example. The complexity of the financial system added to its vulnerability when the sub-prime losses started to mount in 2007. As none of the market participants could establish the institutions most at risk the system as a whole faced a liquidity crisis. Reducing this complexity has been a goal of regulatory policy.  Future events may show whether these efforts have been effective.

Hence, a focus of policy making should be to reduce complexity. Let’s focus on fewer goals and better targeted instruments.

As part of this we need to be focused on the correct policy but also implementation. And devote sufficient time on implementation plans and proper risk assessments.  We know many of the risks – particularly for policies that are dependent on large infrastructure or IT systems to ensure delivery.  And we need to minimise these risks where policy.

Once again in the Civil Service we have introduced new approaches to project planning, management and risk appraisal to address these concerns.

Conclusion

In 2010, the former ESRI Director Frances Ruane identified three key observations in a paper on the state of the policy making process in Ireland;

  • The policy-making process in Ireland could benefit from being more informed by research evidence;
  • The availability of policy-focused research depends on both institutional factors and on funding; and
  • Our policy process could be improved by researchers and civil/public servants interacting more regularly[18].

As detailed, significant progress has been made since in relation to developing the interface between policy and research through initiatives such as IGEES and the Public Spending Code, and we will continue to drive this agenda.

Policy making is complex but is done best when supported adequately by relevant and robust research and analysis. Ensuring that the interface between policymaking and research is strengthened is challenging but is of importance in continually developing the evidence base and ensuring that policy decisions consider value for money, efficiency and effectiveness. These challenges fall to both policy makers and researchers.

Greater collaboration between Institutes such as this and the Civil Service should be one of our goals for the future. Thank you.

END

[1] Life expectancy in Ireland increased from 72.9 in 1980 to 81.1 in 2013. Campbell, T. (2016) ‘Long Term Trends in Irish Healthcare’. DPER Staff Paper. https://igees.gov.ie/wp-content/uploads/2014/11/Long-term-trends-in-Irish-healthcare.pdf

[2] In reading, Irish 15 year olds ranked 2nd among EU countries, 3rd out of 35 OECD countries, and 5th out of all countries participating in PISA 2015. In Maths, Irish 15 year olds ranked 9th among EU countries, 13th of 35 OECD countries, and 18th out of all countries participating in PISA 2015. https://www.education.ie/en/Press-Events/Press-Releases/2017-Press-Releases/PR17-03-14.html

[3] DPER (2018) ‘Trends in Public Expenditure’. Spending Review 2018.

[4] DPER (2018) ‘Pay Expenditure Drivers at Primary and Second Level’. Spending Review 2018.

[5] 2016-2017 Academic Year. DPER (2018) ‘Understanding the Funding Needs in Higher Education’. Spending Review 2018.

[6] Lawless, J. (2018) ‘Hospital Inputs and Outputs: 2014 to 2017’. Spending Review 2018.

[7] D/FAT Statistics – https://www.dfa.ie/passporttracking/passportstatistics/

[8] Revenue Commissioners Annual Report 2017. https://www.revenue.ie/en/corporate/press-office/annual-report/2017/ar-2017.pdf

[9] DTTAS (2018) ‘Transport Trends 2018’. http://www.dttas.ie/press-releases/2018/transport-trends-2018

[10] https://sps.gov.ie/

[11] https://www.per.gov.ie/en/civil-service-management-board/

[12] https://www.per.gov.ie/en/inaugural-meeting-of-the-public-service-leadership-board-pslb/

[13] https://igees.gov.ie/

[14] https://www.per.gov.ie/en/spending-review/

[15] https://www.per.gov.ie/en/open-data/

[16] https://publicspendingcode.per.gov.ie/

[17] Watt, R. and Hearne, E. (2011) ‘Research and Policy Making – Strengthening the Link’. Journal of the Statistical and Social Inquiry Society of Ireland Vol. XL. Symposium: Research Capacity and Policy Making, April 2011.

[18] Ruane, F. (2010) ‘Research and Policy Making’ ESRI Working Paper No. 354.