Performanceoriented budgeting in Sweden

1
Performance-oriented budgeting in Sweden

• Eivind Tandberg
• IMF

2
Outline

• History
• Reform objectives
• Budget structure
• Example Policy area Enterprise
• Performance and budget linkages
• Results of the reform
• Strengths and challenges

3
History

• 1970s Program budgets in 30 agencies
• 1980s Focus on other PFM reforms
• Improve management capacity
• Accrual accounting for agencies
• Reduce budget line items
• Carry-over of unspent budget funds
• 1988 91 POB system for all central government
  agencies

4
Reform objectives

• Help Cabinet and ministries define policies and
  budgetary priorities
• Allocative efficiency
• Help agencies implement policies and priorities
• Effectiveness
• Productive efficiency

5
Budget structure (2007)

• 14 ministries
• 51 policy areas
• Some cut across different ministries
• About 150 activity areas (programs)
• 270 agencies
• 486 line items (sub-programs) in budget
• Policy areas have 1 80 line items
• Most line items are very small
• No economic breakdown of line item

6
Policy area Enterprise

• Vision Sweden shall be one of the best places in
  the world to start and run a business
• 5 programs
• 11 agencies, 9 public corporations
• 23 line items in budget
• 6 large line items

7
Policy area Enterprise

• Main objective Promote sustainable growth and
  increased employment through increased
  competitiveness, more companies and larger
  companies
• 5 Program objectives
• Strengthen entrepreneurship
• Promote innovation
• Stimulate competition
• Improve knowledge about policy area
• Improve business climate and simplify regulations

8
Companies registration office

• Agency objective 5. Improve business climate and
  simplify regulations
• Operational objective 1 Business registration
  applications finalized within 7 business days
• Operational objective 2 Applications for
  financing of company liquidations decided within
  14 business days
• Service level requirements Phone request
  response within 45 seconds in 85 of cases

9
Performance indicators

• Detailed result chains established for all
  government programs and agencies
• Clear specification of objectives, numerical
  targets
• Includes efficiency and productivity measures, as
  well as quality assessments
• Standardized procedures for monitoring and
  reporting of results

10
Performance and budget linkages

• Budget discussions
• Performance data included in budget proposals
• Historic data and future targets/projections
• Annual letter of instruction to agency
• Lump-sum allocation of funds
• Specification of required results
• Annual report from agency
• Financial and performance data
• Audited by parliamentary auditor

11
Annual results dialogue

• Formalized, structured discussion between
  Minister and Agency head
• Discusses performance compared to plans in past
  year
• Deviations must be explained and justified
• Agency heads can be dismissed or demoted
• Discusses future changes in objectives, targets,
  indicators and budgets
• Alternative to contracting

12
Other important features

• Budget estimates for three years
• Appropriation for one year
• Changes in out-year estimates have to be
  explained in next years budget bill
• Efficiency dividend
• Administrative costs reduced 10 88 91
• Similar reduction in mid 1990s
• Annual productivity charge 1.5 of wages

13
Results of POB

• Improved effectiveness and productive efficiency
• Clarification of accountability
• POB has had limited impacts on allocative
  efficiency
• Influence on cabinet decisions is unclear
• Difficult to discontinue programs
• Limited use by Parliament

14
Strengths of Swedish system

• POB part of broad management reform
• Strong political commitment
• Appropriate timing and sequencing
• Extensive support to budget agencies
• Financial management agency
• Well-defined program structures
• Clear definition of result chains and related
  indicators for agencies
• Budget rules create hard budget constraint

15
Challenges

• System is not particularly transparent
• Complexity, information overload
• Particularly in budget documents
• Objectives and indicators still not final
• How to increase impact on allocation?
• How to increase use by parliament?