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Unit Cost Budgeting: The Uncertainty Problem (3/4)

In this blog piece – the third in a series of four – I look at why budgeting based on unit costs doesn’t work well for services where there is a lot of uncertainty about the quantity of output which government will need to deliver. This is one of the key reasons why unit cost […]

When Unit Costs Don’t Work (2/4)

In this blog piece — the second of a four-part series on unit cost budgeting — I look at why unit cost budgeting cannot be applied to outputs which are highly “heterogeneous,” of which there are many in government. This is one of the main reasons why unit cost budgeting should be viewed as a […]

Unit Cost Budgeting? (1/4)

Funding public services based on output unit costs is a great idea. However, it only works for selected government services. The idea that the entire government budget should be based on output unit costs is therefore misguided. This series of four blog pieces looks at why this is a tool with strictly limited application in […]

The Illusion of Outcome-Based Budgeting

The notion that performance budgeting means budgeting based on outcomes is surprisingly widespread. It is, however, a misconception – a misconception which has led to confusion and missteps in PFM reform in some countries, particularly in the developing world. Outcome-based budgeting refers to the idea that governments should budget by deciding the outcomes they wish […]

Making Spending Review Fit for Purpose

Spending review, as I wrote recently, will be needed more than ever in the post-pandemic era. Surely, then, it is encouraging that there has over the past decade been a major expansion in the number of countries practicing spending review? Well, yes, but there is a problem. The problem is that in some countries, the […]

Don’t Confuse Indicators and Targets

One of the problems which bedevils performance budgeting – and performance management more generally – is the failure of some to clearly distinguish between performance indicators and performance targets, and to properly understand the roles of each. Take the often-repeated mantra that “performance indicators must be SMART.” I’d love to have a dollar for every […]

blue and yellow measuring tape

Non-Performing Performance Indicators

It is shocking that, in quite a few countries which embarked on performance budgeting reforms years ago, performance indicators remain awful. Performance indicators are, after all, a basic building block of any performance budgeting system. Yet OECD surveys – most recently in 2018 – have repeatedly shown that in half of member countries, available performance […]

three bicycles parked in front of building

Population Aging and Public Expenditure: Lessons from Japan

I’ve commented previously on the widespread tendency to exaggerate the impact of population ageing on public expenditure. Sure, it is an important source of upward spending pressure, particularly on long-term care and pensions. However, by far the biggest single area of spending pressure in coming decades will be health, and population ageing plays only a […]