1. Training Workshop on Education Policy Formulation & Monitoring UNESCO Bangkok May 27 th -31 st, 2013 Bangkok Office Asia and Pacific Regional Bureau for Education United Nations Educational, Scientific and Cultural Organization

2. The Linkages Between Policy, Planning and Budgeting Le Thu Huong Programme Specialist Education Policy and Reform Unit Bangkok Office Asia and Pacific Regional Bureau for Education United Nations Educational, Scientific and Cultural Organization

3. 1.Budgets and Budgeting: Some Concepts 2. Linking Policy, Planning and Budgeting 3. Experience and Lessons from Nine Countries in Asia Outline

4. Budgets and Budgeting: Some Concepts

5. General terms: A statement of the estimated income and expenditure of a country, an organization, or an individual over a given future period National budget: “Act according to which the annual income and expenditure of the State are estimated and authorized”  Legal dimension (Legal regulations, legally-binding)  Economic dimension (Instrument for macro-economic policy)  Functional dimension (Contribution to achieving objectives, collective utility, optimization of the utility under constraints). Budgets: A definition

6. Roles of the budget  Planning instrument  Real short-term programming  Policy instrument  Translation of policy choices  Management tool  Distribution of resources  A budget is a law  Imposing legislative framework

7. The budget as a policy instrument - How? budget is the means by which the government A budget is the means by which the government exercises the policy goals through:  ‘Fiscal discipline’, i.e. controlling overall government spending so it does not go beyond what money has been raised  Allocation of resources in line with the government’s policy goals, i.e. good budgets should start with an assessment of what needs have to be met, followed by plans of how to meet those needs, followed by a budget.  The efficient and effective use of resources in achieving policy goals  A budget guides policy implementation through informing public institutions how much may be spent for what purpose

8. What information can be obtained from a budget?  Adequacy – how much is budgeted? Is it enough to cover the cost of carrying out the policy?  Priority – how does the budget for education compare to resources spent in other sectors/areas?  Progress – is the government’s response to meeting education needs improving?.  Equity – are resources being allocated fairly? Is funding being used to even up the differences in education provision, or is it being allocated in a way which maintains these differences or even makes them worse?  Efficiency – is the money being spent efficiently? Is there a big difference between allocation and actual expenditure?  Effectiveness – is the money being spent on the right things? E.g. if the objective is improved levels of education achievement, where should spending be allocated to have the biggest impact on learning achievements? Classrooms, teachers, teacher training…?

9. Development vs. Regular budget Development / Investment budget  often linked to external funding (in aid dependent countries)  often based on list of projects  implementation can be outside the budget  often involves longer spending time  low implementation rate Regular / Recurrent budget  domestic funding  subject to national budget rules for implementation

10. Budget systems Budget System Budget Policy Budget Outcomes The system by which resources are collected, allocated, recorded, monitored and accounted for. Policy to ensure that total spending is affordable, that resources are spent on priorities and are spent well, not wasted on inefficiency and corruption Can be assessed based on the information on: How much money is spent? On what is it spent? How well is it spent? Transparency and accountability

11. Characteristics of a good budget system  Transparency  Accountability  Comprehensive  Predictability  Flexibility  Contestability

12. Budgeting Process of expressing quantified resource requirements  amount of capital  amount of material  number of people into time phased goals and milestones Income Expenditure

13. Some approaches in budgeting in education  Traditional method - Structure based on spending units and nature of expenditure - Incremental method for budgeting - More concern with control and accounting  Programme budgeting - Structure by programmes and activities - Costing based on resources required for an activity - Budget decisions based on utility - More concern with policy choices  Results- based budgeting - Linking allocations with outputs - Structure can be by programmes and activities - Clearly defined indicators for expected results - Reporting on the results of spending using performance indicators - More concern with performance and effectiveness of public spending - Can involve a contract between government and an implementing agency

14. Linking Policy, Planning and Budgeting

15. Policy, plan and budget Policy  Guiding principles  Policy making  Abstract  Legally or not legally binding Plan  Guiding document  Planning  Concrete  Not legally binding Policies are concretized through planning, reflected in plan document and implemented through the budget approved for plan implementation Budget  Guiding policy implementation  Budgeting  Concrete  Legally binding Three different concepts but closely linked

16. Medium or long term plan 10 years, 5 years, rolling,… Guidelines, policy documents Targets desirable situations, what would be good Low legal value, not compulsory PlanningBudgeting Short term, annual High legal value, budget is a law Takes into account financial constraint, what is affordable National budget, sector budget Planning and budgeting

17. The policy, planning and budgeting link in education --> Poor budget outcomes often result from failure to link policy, planning and budgeting

18. From policy to plan… Possible reasons for missing link:  Inadequate target setting (unfeasible plan targets)  Vague implementation strategy (unclear actions)  Lack of a financing framework (plan is not costed)  Inconsistent policies and plans in scope and time  Failure to reach a consensus among stakeholders  Misalignment of different policies and initiatives within a wider development framework  Lack of coordination among different concerned departments / agencies

19. From plan to budget… Possible reasons for missing link:  Inconsistent plan and budget in scope and time  Overly ambitious actions while financial capacity is limited  Divergence of priorities among involved parties  Technical capacity in budgeting and financial management of education ministry

20. From policy to impact: The problem with budget Policy Budget Institutions and structures for implementing the policy Service delivery Impact of policy

21. Why budget problem? Mismatch between what is promised in policies and what is affordable  Lack of good information and accurate diagnosis of the problems  Variation of priorities (budget preparation is often separated from planning with different priorities)  Failure to direct government expenditure towards the priorities  Lack of good feedback mechanisms  Lack of accountability  Difficulties in building the budget from the bottom up and to ensure that grassroots priorities and resources are taken into account

22. Medium term approach as a solution… 22 Need for a budgeting tool  To reconcile planning and budgeting  To meet the requirements for a good budget system Then a medium-term approach provides  linkages between policy, planning and budgeting  through expenditure programmes  driven by policy priorities and  disciplined by budget realities In addition, if policy and budget are put in a medium term framework, it is likely that the mismatch (missing link) problem can be solved with the following advantages: - Predictability - Result orientation (performance based) - Continuity- Efficiency - Transparency

23. Sector level medium-term framework Developing this kind of framework requires:  Agreement on sector objectives and policies  A combined bottom-up/top-down process to develop a clear vision for the sector  Sector priorities and objectives identified and/or revised  An effective cost projection tool, e.g. education simulation and projection model  Definition of sector resource envelope  Assessment of expenditure implications of policies  Coverage of all sector activities and organisations and focus on whole of sector expenditures

24. Sector level medium-term framework (cont’d…)  In aid-dependent countries there is often separation between foreign aid and domestic policy, and management and budgeting.  A sector medium-term framework seeks to remove the separation by emphasizing all activities and overall expenditures

25. Medium-term Expenditure Framework (MTEF) 25 What is MTEF?  A whole-of-government strategic policy and expenditure framework, including a rolling plan of budgets, constructed for each year of a future time frame, usually between three and five years How does it work ? MTEF consists of:  A top-down resource envelope  A bottom-up estimation of the current and medium-term costs of existing policy,  The matching of these costs with available resources. The matching of costs should normally occur in the context of the annual budget process

26. Experience and Lessons from Nine Countries in Asia

27. Issues common to MTEF implementation in the education sector  Capacity limitations and the implications for change management  The span of MoE control and MoE sector leadership  The relationship between the MoE and the MoF  Integration of MTEF with the annual budget – Lack of a hard budget constraint and unrealistic bottom up budget  Inadequate data for budgetary analysis and poor financial information flows  Lack of solid political commitment

28. Lessons 28 Successful implementation of MTEF requires:  Engagement and commitment by MOE politically with the process, i.e. identifying real, quick-win benefits and downplaying unrealistic legal and/or political commitments  Need for MOE to actively engage and partner with ministries of finance and other central planning agencies to make MTEF work, avoid meaningless game playing and work to align fiscal transfer and information flows to the needs of sector development.  Good management of donors  Strengthened technical capacity in order in terms of staff and information in order to engage in and internalize the process.

29. Better prioritisation helps win bigger budgets Slide 29  In Vietnam, the savings from the reduced salary budget resulted from the increase made in the PTR at primary and secondary education levels (2006-2008) were used to fund other quality improvement activities

30. Thank you

31. In practice….. PolicyPlanResult Gap