1. Fiscal constraints and budgetary reform - implications for IT investment in public sector An External Perspective Fergal O’Brien Chief Economist, IBEC 30 th June 2011

2. Outlook for public spending (voted current and capital € bn)

3. Budgetary reform – the current model  Economic crisis and comparisons with best practice expose flaws in budgetary model  Focus remains on annual cash accounting  No effective multi-annual fiscal planning  Limited resource reallocation  No coordination of capital and current spending  No performance budgeting

4. Budgetary reform – plans for a new model  EU semester system  Reform of the fiscal framework  Genuine multi-annual budgeting  Full cost allocation  New review mechanisms  Performance budgeting

5. Multi-annual budgeting  Elements already applied  Capital expenditure on 5 year rolling envelopes with 10% carry-over provision  Three-year Administrative Budget Agreements  Multi-year Employment Control Frameworks  Key advantages  Reinforce medium-term fiscal discipline  Allow a more strategic allocation of expenditure  More efficient inter-temporal planning

6. Outline for a new Medium-term Expenditure Framework 1.Aggregate expenditure levels – top down limit 2.Governmental Expenditure Assessment – regular evaluation 3.Ministerial Current Expenditure Envelopes – cash ceilings 4.Continuity and Effective Medium-term Control – challenge is to get balance right between control and flexibility 5.Numbers Policy and Administrative Budget Agreements

7. The new Framework in practice  Will differentiate between ‘demand-led’ schemes; pay commitments and ‘other’ expenditure  Will allow for sensible approach to reallocation  Carryover proposed to be max of 3% - capital is 10%  Overruns treated as advance from following year and will require re-prioritisation  Expenditure allocations not automatic – target of 2-3% efficiency dividend arising from IT and management improvements

8. Some lessons from private sector change programmes  Productivity and workplace change as important as nominal cost reductions  IT investment has played major role in transformation programmes  Investment needed to deliver savings  Embracing new technology essential to success of change programmes  Balance must be struck between need for cost savings and maintaining productivity enhancing investment in technology and in people skills

9. Update on Croke Park Agreement progress  Some good progress made on eGovernment and Ireland compares very well internationally  Implementation report urges focus on  More shared services  Greater availability of on-line services  Shared services progress weak in relation to  Application processing  HR systems  General sharing of information across Depts.

10. Connecting capital and current spending plans  Current spending efficiency requires capital investment  Investment can be a combination of private sector and public sector  Private sector can make capital investment to provide technology platform for outsourced services  Potential for current spending savings should be key criterion for capital spending decisions  New budgetary approach must deliver coordination of current and capital spending plans

11. IT as a building block for better policy making  Performance budgeting initiative will bring significant data challenges  Focus shifts to effectiveness  Wide range of output, outcome and impact indicators needed  Indicators must be integrated into expenditure sub-heads  Maximising potential of administrative datasets  Major untapped potential in drive for more effective evidence based policy

12. Looking beyond austerity