Public Expenditure is succeeding where Finance failed – merging the two again would be foolish

MEDIA reports that Social Protection Minister Leo Varadkar is advocating reintegration of the Department of Public Expenditure and Reform into the Department of Finance are troubling.

When the Fine Gael-Labour coalition government was being formed in 2011, the Department of Public Expenditure and Reform was established for the very good reason that the Department of Finance had failed for decades to do anything about fulfilling its responsibilities for public service reform. While it suited the politics of the situation to provide a senior finance ministry for each party, thereby enabling Ministers Noonan and Howlin to present in public as a team of equals, the new department was established for compelling, substantive reasons. Numerous investigations into the causes of the crash of 2007-8 revealed serious shortcomings in the structures, technocratic competence, culture and systems of accountability of the public service.

The Department of Finance itself was found to have failed abjectly in discharging its responsibilities for maintaining the health of our public finances and in carrying out its role in ensuring the stability of the banking system. Also, as the host department for the HR function of the public service, it had allowed all kinds of problems to develop and fester – high absenteeism, annual increments regardless of performance, wage growth at several times the rate of inflation, total lack of personal accountability, huge skill gaps and many other HR-related problems. At the time of the banking collapse, for example, there were just three people with diplomas in banking in the department. ‘Gifted generalists’ ruled the roost.

It can be argued that politicians were ultimately to blame for the economic crash and implosion of the banking system. While there is merit in this argument – one only has to think of Bertie Ahern telling the moaners to commit suicide while the economy got “boomer and boomer” and Charlie McCreevy saying he would spend it while he had it – subsequent inquiries found that public servants had failed in

their duty either to notice, or if they did, to warn of the impending catastrophe.

At best some warnings were uttered – but not loudly enough. We learned later that middle-ranking officials like Marie Mackle and Robert Pye had repeatedly sounded warnings but, like all whistleblowers, they were ignored and effectively side-lined. Senior public servants who in our system of governance are meant to act as a bulwark against mad and bad policies failed in their duty to ‘speak truth to power’. Instead, they ‘went along to get along’; they had become politicised.

Since its establishment in 2011, the Department of Public Expenditure and Reform has made significant progress in addressing many of these inherited shortcomings in our public service. Under the tenacious leadership of Robert Watt, secretary general, and with political support at the Cabinet table from Brendan Howlin, the department’s team of career public servants and specialist external hires have mapped out and largely implemented rolling three-year reform plans. In a departure from the prevailing civil service culture, these plans have been published and progress reported regularly for all to see.

The department’s website sets out a long list of achievements to date – for example, the appointment from outside of the first chief human resources officer; open recruitment for all grades and specialist posts; civil service excellence and innovation awards; a comprehensive ICT strategy to drive efficiency and better service to citizens; major improvements in risk management; and the establishment of a common standard of governance for the civil service.

Apart from initiatives emanating from the department itself, its leadership in implementing change in a disciplined way has caught on in other parts of the public service, giving rise to many local modernisation and reform projects.

While acknowledging all of this progress, the job is by no means finished. For example, the core objective of establishing a mature performance management system that distinguishes between good and poor performers, with consequent differential rewards and sanctions, still eludes the department. Much work remains to be done on the culture of the public service.

Reform of any large organisation, if led by 20 to 30-year career insiders, is virtually impossible, as we see graphically illustrated in An Garda Síochána or the Catholic Church, for example. At a minimum, a structure like the Department of Public Expenditure and Reform, staffed by a mix of hand-picked insiders and a critical mass of external people, is essential.

The remit and daily concerns of the Department of Finance are to ensure stability of the public finances; a well-governed, globally competitive financial services sector; a functioning domestic banking system and supply of credit to business and personal customers; a fair, efficient, broadly based taxation system; a price environment consistent with competitiveness; a climate conducive to employment growth; and other matters of vital national importance. These enormously complex tasks are rendered even more challenging by the uncertainly created by Brexit, US President Donald Trump’s policies and other factors.

Should the Department of Public Expenditure and Reform be subsumed back into Finance and its current responsibilities assigned to a second secretary in Finance, one thing is certain: the sustained focus needed to consolidate the new, still embryonic reforms and to continue building a high-performing, accountable public service that delivers value for public money will weaken. The constructive tension that existed between the Department of Public Expenditure and Reform and spending departments will be lost.

Such a merger would be a retrograde step. Reform would end up playing second fiddle to Finance and lose the administrative focus and political power needed to drive reform of the public service, a system that is culturally averse to change. The Department of Public Expenditure and Reform was created for a very good reason and that reason persists.