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16 April 2014

Value For money

 - Tuesday, 11 January 2005, 00:00 , by Alfred Sant

Tax hikes, government spending and price increases gobble most of the time available for political debate. Still, another question merits equal attention. Are we receiving value for money in the delivery of public services? For after all, higher taxes and higher public expenditure, even when they generate inflation as is happening now, would perhaps be excusable if they allow us to get a better deal from the government.

As it is, the indications are that while spending more, government is delivering less. Some years ago, Labour pushed hard the slogan that the government should do more with less. It seemed to me then, still does now, that the tax liras which we pay can be spent more wisely. That attitude was derided as government by calculator. Instead, post-1998, the slogan “money no problem” prevailed once again.

Some people try to calibrate how government works by comparing it with the private sector. The fashionable claim has been that in the private sector, things are done differently, better. I do not agree. Or at least, I do not subscribe to the view that when things are done under private sector, “free market” aegis, they are done necessarily better. Better for whom? For the owner or shareholder? Perhaps yes.

But certainly in terms of service to the consumer, in Malta at least, numerous instances can be given of how private sector delivery is hardly better than the public one. Just consider the experiences many of us have had with private sector delivery in such areas as lift maintenance, car purchase and repair, construction work, household goods and toys that do not conform with the promises made at points of sale, provision of holiday apartments, aftersales service.

Bad deal

So the real argument cannot be: look at how bad the public system is compared to private operators. The latter can be just as bad as, sometimes worse than, government in taking consumer needs seriously. To be sure, there have been people to tell us that membership of the European Union will bring all commercial operations in line with the norms that prevail in Europe, all to the benefit of the consumer. Private services are bound to improve. We will wait to see this happen.

But again, that is not the real point. I, for one, could not care less if the private sector is operating well or badly under the free market system, when considering how the public sector is faring. Taxes have been increasing at a horrendous rate of some Lm60 million or more a year over the past years. For a small island, that is quite a chunk of spending. Over six years or so, the burden of indirect and direct taxes on families has increased per year by over Lm300 million. Where are all these funds going?

You do not have to dogmatically believe in the virtues of private enterprise in order to request that the government delivers with efficiency. Comparing government performance to that of the private sector might be good for polemics but it leaves us clueless about whether tax funds are being well and wisely spent.

Three main sets of reasons account for the bad deal we are getting over public funds. First, there is too much political patronage and interference in government administration.

Secondly, the structures through which the government works have, over the years, not coped well with the challenges faced by our society.

Thirdly, the solutions devised to cope with the first two sets of problems have not been a success, indeed have made the situation worse.

Favourite culprit

Political interference is everybody’s favourite culprit for government mismanagement. The truth is that, especially in recent years, government politicians have strengthened their personal grip on those areas of decision-making which they consider crucial to their political standing. The official rhetoric of course proclaims the opposite. Though well camouflaged, recruitment and promotions in the public service and in government agencies have come under tighter political control than ever before.

Two negative effects are evident from this development. The pool of talented people available to the government comes from only a half of the political spectrum. People believed to favour the other half are shunted aside, no matter how able they might be. To compound the problem, discrimination also prevails within the ruling party. Some people are excluded not because they are perceived as having a pro-Labour orientation, but because they are perceived as having a

personal allegiance to this or that politico.

Since the PN has been in power for a long time, the nets of patronage are now very deeply embedded in the government system. They extend through all the major ministries and departments, from Finance to the Police, and go over to all the quangos, not least the major ones, like Mepa and the infrastructural corporations.

(Notice that here we are ignoring a very important component of the problem, namely the openings that patronage provides for corruption, bribery and influence-peddling. This too must be taken into account.)

Political patronage generates unforeseen blockages in public decision-making. Little to no questioning of decisions and strategies takes place. New ways by which to achieve results are glossed over, at best. The people who should be making things shake and move are too bound by ties of friendship, tactical allegiance and political orthodoxy. They cannot go beyond policies that mean more of the same. Whence the extraordinary phenomenon of past months, by which the whole power elite clamoured to defend decisions, like the purchase of Dar Malta in Brussels, which the rest of us, including people supportive of the government, know are disastrous.

Or on another tack, consider the way by which the committee to review university stipends and spending was structured. At its heart, as a “consultant” was placed the very person who had originally designed the system… So no wonder that the committee decided the university system had been a victim of its own success.

No wonder too that many people feel they are being manipulated and are now protesting. Actually, similar discrepancies had emerged in previous years. But at the time, there was a closing of ranks on the right. The over-riding aim of getting Malta into the EU dampened emerging controversies. That approach weakened, once the EU issue was “resolved”. Also, the financial margins available to screen gross blunders have narrowed.

Administrative failures

Beyond the problems created by political interference, the lack of value for money in the public sector follows from the failure of the state’s decision-making system to cope with complex economic and social processes. Since independence, this country, like all others in the same situation, needed to handle developmental projects that cover many areas of social and economic life. These could not be singly carried out by individual

departments of the classic sort, since many other organisational foci had to be developed and had to be involved one way or the other. Coordination and management of complex processes by public decision-makers need to be effective and swift if forward momentum is to be maintained. That clearly is not happening.

Popular expectations are raised by the changing circumstances around us, fed too by extensive political promises and by the media. However, delivery on such expectations lags because the organisational structures, mindsets, procedures and managerial skills remain tied to the past. Naturally, the official rhetoric denies that this is so. And the techniques of modern PR have been deployed to make people believe that the government system is delivering, when it is not. Successes touted in IT, tertiary education, dealings with the EU, VAT compliance, industrial promotion and support, development of tourism, improvement in health services turn out on close inspection to be deeply flawed, when not illusory.

Back in the late 1980s to early 1990s, a “reform” programme was announced for the public service. A commission was set up to oversee structural changes regarding how the civil service would function in the future. Broadly speaking, there were to be two main fronts to the exercise: salaries and wages were to be adjusted (upwards) to reflect changes in work functions and added responsibilities; and duties were to be redefined in a managerially flexible way. The emphasis was claimed to be on the weakening of political “interference” in the running of the public system, declared by the Reform Commission to be the root cause of government’s failure to deliver.

What happened though was that the salary part of the Reform Commission’s recommendations was implemented, while the restructuring of jobs and grades got stuck in the sand. Except, that is, for a system of renewable contracts for top posts in government departments that is cosmetic in scope, and has served to provide another lever for political patronage.

For instance, the system by which percentages are given at year end to assess performance in top contract positions is hardly serious. The percentage is then applied to the salary of the office holder and he/she is given a bonus as a reward for his/her services. I remember when in government, how the then top civil servant presented his recommendations for the assignment of percentages to permanent secretaries, including his own, which he had placed already at the maximum. I demurred at how the gradings had been set. So this top civil servant circulated a memo telling all permanent secretaries that the Prime Minister believed they should have a lower rating to the one he originally proposed.

Most of the time, the system reduces itself to one where you scratch my back and I’ll scratch yours… a typically Maltese situation one could argue.

Just as importantly, the skills of decision-making and of doing are equated with those of memo-writing. You solve problems by writing a letter-circular and then wait to see what happens before taking another step. Decision-making by committee has remained an art form in which immobilism and

fudging responsibilities is rife. The lowest common denominator always emerges on top.

And this does not apply just to the “old fashioned” departments. It also holds for other government agencies, including those most recently set up. Just read through the review report of the Malta Tourism Authority

presented by De Loitte. The report gives a

picture of indecisiveness, top heavy structures, paper-shuffling and lack of go that is mind-boggling. Yet this is an organisation which was set up only four to five years ago.

Quangos

Here we come to another aspect of the problem that the government has never taken seriously. To be fair, finally it gave some signals with the last budget that it might start doing so.

The fact is that the “solutions” adopted to face – we were told – the difficulties caused by political interference and by the weakness of the old civil service structures, have too often made the whole situation worse. New government agencies called authorities, foundations or what have you, would, we were assured, help to cut through bureaucracy. They would free administration from political interference, and mobilise talent for government, comparable to that of the private sector.

The assumptions that underpinned this development were fallacious. To make matters worse, the introduction of a whole set of new quangos was flawed right from the start.

The setting-up of government organisations outside the central bureaucracy has a long history the world over. But there is no universal law which tells us that with quangos you become more efficient, less corrupt, more coordinated. In Malta, as quangos multiplied, it was easy to foresee that so would problems, leading to a multiplication of costs.

Behind the boards of foundations, ministers could hide their patronage and manipulations more easily. So could other interested parties. The freedom given to boards to set remuneration scales and conditions of work created further cost burdens on the services that

quangos were supposed to deliver. Account-ability, always weak, became weaker.

The fissiparous and uncoordinated nature of government delivery, resulting in delays, bumbling, financial slackness and outright bad decisions, was magnified by the new quangos. The bottlenecks at Mepa, the manoeuvrings with a purpose at the Communications Authority, the mysterious happenings at MIMCOL all show that the proliferation of quangos bred less and less transparency in public affairs. Under the rising clouds of confusion, ministers and their lieutenants can deploy much better than before their clientelistic games.

Nor is it the case that quangos inhibit corruption. Indeed, a good argument can be made that they increase the opportunities for it. It is not as if only politicians are corruptible. Give bureaucratic power with minimal accountability to a technician, a professional or a plain office worker, and the chances are that there will be some technocrats prepared to make money out of that power. Quangos promote that kind of situation. In Malta, they have.

Moreover, the way by which quangos have been launched multiplied the disbenefits. On top of the people who were already employed by the government to carry out certain functions, others were brought in to do the same thing. And they were engaged at higher rates than the existing incumbents. So we are paying twice for the same thing, which all too often is still being done badly. Meanwhile, a steadily increasing portion of the government’s budget goes to feed quangos.

Politics and value

It is no surprise, therefore, that as public spending grows, there is no real improvement in value for money. This is an essential part of the crisis in our country’s affairs that can no longer be swept under the carpet.

People ask: is there a way out? Yes, there is. We will need to turn upside-down certain assumptions that are usually considered to be self-evident. For instance, the claim that political “interference” in how the government runs must be curtailed needs to be revisited. It seems to me that politics can best be useful in our situation if it serves as a catalyst and coordinator of the top managerial roles within the public system. Is this just a paradox? Can it be done?

In next month’s long essay we should consider perhaps how genuine politicians could take the leading role to promote a better management practice within the public system, and so ensure that Maltese citizens truly get value for the huge amount of tax they pay.

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