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Select Committee on Treasury First Report

4 THE NEW PERFORMANCE MANAGEMENT FRAMEWORK

Background

28. In 1998, in the first Comprehensive Spending Review, the Government introduced a new performance measurement framework based on Public Service Agreements, which sought to "bring together in a single document important information on aims and objectives, resources, performance and efficiency targets and related policy initiatives": each Agreement was expected to include an introduction setting out the Minister or Ministers accountable for achievements; the aims and objectives of the department or cross-cutting area; the resources allocated to it in the Spending Review; and key performance targets.[76] The framework and the role of Public Service Agreements within it have evolved significantly since 1998, but a number of concerns have been expressed about the operation of Public Service Agreements in evidence to this Committee and our predecessors and in reports on Public Service Agreement targets by the National Audit Office and the Statistics Commission:

that the system was too top-down and unwieldy, so that, for example, 14 Public Service Agreement targets for health in England were translated into 206 health targets and measures for NHS Trusts and Primary Care Trusts;
that the quality of data measurement and the statistical infrastructure were not sufficient to measure with accuracy the extent to which Public Service Agreement targets had been met;
that the long time-lags before data became available, coupled with the different sets of Public Service Agreement targets established under successive Spending Reviews, created confusion and difficulties for those seeking to assess performance against targets; and
that particular difficulties arose from targets held jointly between departments and that some issues which involved more than one department were not adequately captured within a framework predominantly composed of departmental Agreements and targets.[77]

29. In preparation for the 2007 Comprehensive Spending Review, the Government promised significant reforms to the performance management framework to address such concerns, including:

"a refreshed and smaller suite of 'corporate' PSAs … focused more tightly on the Government's highest priority outcomes";[78]
a requirement to publish "a single, coherent, cross-departmental Delivery Agreement for each PSA, informed by consultation with the delivery chain", Agreements which would "clearly set out the level of ambition, strategy for delivery, and the role of each organisation involved";[79] and
the introduction of new Departmental Strategic Objectives to cover the "broader business of Government", which would be defined in the Comprehensive Spending Review and would be "effectively linked to the focused set of PSAs".[80]

30. When we reported on prospects for the Comprehensive Spending Review in June 2007, we welcomed signs that the Government was seeking to learn lessons from the operation of the framework of Public Service Agreements in the years since 1998. In particular, we welcomed the commitment to fewer, but better Public Service Agreements. However, we noted that the proposed reduction had to be genuine; its value would be undermined if new Agreements simply brought together diverse topics within a single Public Service Agreement or if a reduction in the number of Public Service Agreements did not lead to a matching reduction in targets down the delivery chain. We were also concerned that some of the data measurement issues relating to targets seemed unresolved, and we recommended that, in finalising Public Service Agreements, the Government had regard to the importance of ensuring that targets were measurable, that there was clarity about the methods of measurement and that data used for measurement was of adequate quality.[81]

Public Service Agreements and Departmental Strategic Objectives

31. In announcing the outcome of the 2007 Comprehensive Spending Review, the Government outlined the new performance management framework, including "a streamlined set of 30 new Public Service Agreements … which articulate the Government's highest priority outcomes for the CSR07 period and span departmental boundaries, setting out a shared vision and leading collaboration at all levels in the delivery system".[82] These 30 Public Service Agreements supersede 110 Public Service Agreements at the time of the 2004 Spending Review.[83] Alongside the Public Service Agreements, the Government also announced a total of 103 Departmental Strategic Objectives for the period of the Comprehensive Spending Review.[84] The Chief Secretary to the Treasury rejected the suggestion that the reduction in the number of Public Service Agreements had simply been achieved by switching areas of performance from such Agreements to Departmental Strategic Objectives, and drew attention to the difference in nature between Public Service Agreements and Departmental Strategic Objectives.

32. The Chief Secretary explained that the new Public Service Agreements were "a distilled expression of the Government's over-arching and main priorities".[85] Those Agreements "set the big goals, the areas where as a Government we want to see the kind of social progress that we believe in".[86] The Agreements were by their nature cross-departmental, involving a commitment from more than one Government department in each case, although there would be a lead department for each such Agreement.[87]

33. The Chief Secretary said that Departmental Strategic Objectives, in contrast, were intended to cover the range of business that was carried out by a particular department.[88] They reflected a decision to "operationalise" certain targets to which the Government had been committed for a number of years.[89] Departmental Strategic Objectives were, according to the Chief Secretary,

34. We pursued the difference between Public Service Agreements and Departmental Strategic Objectives by reference to the requirement to meet the Government's fiscal rules, a commitment that was formerly the subject of a Public Service Agreement, but is now to be subsumed within one of HM Treasury's Departmental Strategic Objectives.[91] The Chief Secretary told us that meeting the fiscal rules had "become pretty much entrenched in the way the Treasury works in terms of how established they are as a guide for the way in which the macroeconomic framework works".[92] Mr Dave Ramsden, Managing Director, Macroeconomic and Fiscal Policy, HM Treasury, pointed out that

Outcome indicators and the burden of measurement

35. Alongside a division between Public Service Agreements and Departmental Strategic Objectives, the Government has made a commitment to streamline the performance measurement framework and reduce the burden of data collection by:

Introducing "a small basket of national, outcome-focused indicators to support each PSA … with a significant reduction in the overall number of priority indicators attached to PSAs";[94] the Chief Secretary told us that there were 150 indicators underpinning the 30 new PSAs, compared with 500 indicators for the 110 PSAs during the period covered by the 2004 Spending Review;[95]
Establishing "a single aligned framework for the performance management of outcomes delivered by local government working alone or in partnership, with a much smaller and more focused set of 198 performance indicators, down from an estimated 1,200";[96] and
Committing to a reduction by 30% by 2010 in the total amount of data that central departments and agencies request from the frontline.[97]

36. Professor Talbot pointed out that the range of outcome indicators required as part of the new performance measurement framework was not yet clear, because the number of indicators associated with the new Departmental Strategic Objectives had not yet been published. Based on information provided to this Committee on the proposed indicators for the Treasury's Departmental Strategic Objectives, he suggested that there might be about 1,400 indicators for Departmental Strategic Objectives across Government.[98] The Chief Secretary confirmed that the indicators to accompany Departmental Strategic Objectives remained to be finalised, and would be "later in the year", but he assured us that he would be working hard to reduce the number of indicators and to ensure that the overall number of indicators associated with the new framework would fall compared with the previous total: "if that is not the effect in reality of the system we create then it will be a big disappointment to me".[99]

Conclusions

37. It is not possible to draw definite conclusions about the new performance measurement framework on the basis of the information published alongside the outcome of the 2007 Comprehensive Spending Review. In particular, the nature of Departmental Strategic Objectives, and the extent to which they have become different in kind from Public Service Agreements, will not be evident until the outcome indicators associated with those Objectives have been published. The decision to distinguish between Departmental Strategic Objectives and Public Service Agreements which are cross-departmental in nature is in principle a welcome one. We also welcome the clear assignment of a lead department in respect of each Public Service Agreement. However, the cross-departmental nature of all new Public Service Agreements poses a challenge for a system of accountability currently based on departmental reporting and the work of departmental select committees. We recommend that performance against outcome indicators in new Public Service Agreements be reported on in new cross-departmental publications on a bi-annual basis in relation to each such Agreement, separate from departmental annual reports and Autumn performance reports. These new publications could encourage more effective cross-cutting scrutiny of Public Service Agreements between select committees concerned.

76 HM Treasury, Public Services for the Future: Modernisation, Reform, Accountability, Cm 4181, December 1998, p 5 Back

77 HC (2006-07) 279, para 89 Back

78 Ibid., para 90 Back

79 HC (2006-07) 279, para 91 Back

80 Ibid., para 92 Back

81 Ibid., para 95 Back

82 Pre-Budget Report and Comprehensive Spending Review 2007, Box 3.1, p 36 Back

83 Q 61-63 Back

84 Q 62 Back

85 Q 49 Back