1. Budget reform: making it happen Owen Barder United Kingdom

2. Reform in the real world Budget problems in the real world Budget Reform and the MTEF Key steps in introducing the MTEF Lessons

3. South Africa is different Apartheid inequality distortion of public services Human capital & financial administration New quasi-federal structure Co-operative governance

4. Budget problems in the real world Unrealistic budgets unaffordable, undeliverable, deferred No link to behavior no buy in, cash controls, hidden budget, overspending, link to policy proposals Allocation doesnt reflect priorities no choice, short termist, distorted, enclaves Spending inefficient low productivity, poor management, corruption, poor planning

5. Unrealistic budgets unaffordable, undeliverable, deferred No link to behavior no buy in, cash controls, hidden budget, overspending, link to policy proposals Allocation doesnt reflect priorities no choice, short termist, distorted, enclaves Spending inefficient low productivity, poor management, corruption, poor planning Budget problems in the real world

6. Elements of budget reform Medium Term Expenditure Framework Budget Policy Statement New intergovernmental system Public Financial Management Act Improved financial management Wider public sector Budget Reform White Paper

7. MTEF: rapid success First plan April 1997 MTEF published March 1998 Compare eg Malawi since 1994 Compare South Africa 1994-96

8. First MTEF 1994-1996 Spreadsheet model Sectoral analysis Cross-sectoral links Cabinet away-day Sank without trace

9. Why did it fail? No political buy-in No emphasis on choice No link to budgets No link to budget process Too technical

10. MTEF 1998 Persuaded Government Treasury, Cabinet, Departments 3-year spending plans all departments Analysis to improve over time MTEF replaced budget process

11. Persuasion Three goals of budget aggregate fiscal discipline allocative efficiency technical efficiency MTEF delivers all three especially the first two … Target the message

12. Persuading Cabinet Political control of the budget Better prioritization Choices at budget stage More certainty: better planning More delivery More cooperative Less central interference Cheaper borrowing More spending State of the art

13. Persuading Departments More cooperative Less central interference Choices at budget stage More certainty: better planning More money (borrowing costs; unspent funds) Better prioritization

14. MTEF 1998 Persuaded Government 3-year spending plans all departments Analysis to improve over time MTEF replaced budget process

15. Benefits of 3 year plans Better prioritisation Better planning Transparent and credible Financial discipline More spending & delivery Affordable policy development Immediate

16. Benefits of analysis Identify choices & quantify Link to outputs and outcomes Accountability Benchmarking Better outcomes Over time

17. MTEF 1998 Persuaded Government 3-year spending plans all departments Analysis to improve over time MTEF replaced budget process

18. Replacing the process Every department involved Competing for same resources 3 year horizon for everything Renaming eg committees MTEF to Cabinet, not Budget Increased financial discpline

19. Lessons Obtain political commitment emphasise empowerment, choice, delivery involve in process Keep it simple 3 year plans for each department get out of the detail Make it matter replace budget process link to financial discipline plans as baselines

20. Did it succeed? Too early to tell © Zhou En Lai

21. Did it succeed? Political buy-in Reprioritisation Budgets matter Disciplined policy-making Better analysis Co-operative governance

22. How to do Budget Reform Obtain political commitment Keep it simple Make it matter After the break: how SA does the MTEF

23. The MTEF in practice

24. What is the MTEF? Affordable totals Putting the budget together Lessons

25. South Africa is different Quasi federal structure Cooperative Governance Good administrative capacity

26. What is the MTEF? growth and inflation revenues, deficit and spending debt interest costs division between tiers of government spending plans by department statement of main outputs contingency reserve Three year projections of: Available Funds } Spending allocations }

27. MTEF process Agreeing affordable totals Identifying policy options Building consensus MTEF process aimed at:

28. Affordable totals % GDP

29. Affordable spending % GDPR billion

30. Getting totals right Keep projections simple Make public fiscal commitments Decide totals before allocations

31. Building consensus Review Teams Ministers Committee Cabinet Implications of baselines Policy options Recommended allocations Policy choices Treasury Affordable totals Menu of choices Recommendations MTEF BaselinesMembership

32. Review teams What? Health, Education, Welfare, Crime, Personnel, Infrastructure Who? Treasury, line departments, subnational government, consultants What? expenditure trends implications of baseline costed policy options benchmarking

33. Review teams Unique to South Africa Cooperative governance Better understanding Treasury of policy challenges Departments of financial implications Consensus building Ongoing work programmes

34. Ministerial Committee Powerful minority Identifies options Evaluates proposals Recommends to Cabinet

35. Cabinet Forum for competing policies Implications of plans Menu of policy options Collective agreement Most important decisions

36. Timetable Apr June July Aug Sept Oct Departments submit baselines MTEF Review Teams identify spending trends and policy options Other departments plans evaluated MinComBud discusses priorities Officials discuss budget proposals Treasury updates projections MinComBud hearings

37. Timetable Oct Nov Dec Jan Feb Mar Spending totals proposed Cabinet agrees totals published in MTBPS Departments allocate funds Budget documents prepared Cabinet approves allocations Treasury summary of policy options MinComBud discusses allocations Budget

38. Implementation lessons Include, but control Listen to departments Involve politicians throughout Avoid information overload Decide totals first Dont over-prescribe Focus on priorities Promote transparency

39. Contact information Owen Barder email: owen@owen.org Department of Finance, South Africa Private Bag X115, 0001 Pretoria, South Africa website: http://www.finance.gov.za/

40. The End Owen Barder