Principles of Policy Design and Evaluation

Below is the relevant section from the McCarthy Report on principles that should guide policy design and evaluation in Ireland. It is important that this blog discusses the extent to which the econometric and behavioural literature in this field can actually improve public policy. The work of Heckman on the evaluation of public programmes and the nature of life-cycle inequality is particularly important in my view.

From Chapter 2 of Volume 1.

(i) Every proposed new spending programme should be accompanied by a Public Service Performance Charter, which sets out clearly the business case for the programme, the resources that will be required and output / impact indicators that can be used to measure success or failure of the programme;

(ii) Cost-Benefit Analyses (CBAs) should be conducted for all significant programme proposals, both current and capital, and should be routinely published. All such analyses should routinely include the true cost of the proposed spending including capital, accommodation, overheads and accrued pension costs; and an assessment of other lower-cost means of achieving the same policy objective;

(iii) All capital projects above €30m should be subject to a ‘look-back’ evaluation within a reasonable period of their entry into use to check realised costs and benefits as against the original CBA projections;

(iv) All expenditure programmes should have a ‘sunset clause’ after which the scheme is wound down, unless the programme shows clear positive results on the basis of a rigorous evaluation exercise, including VFM & Policy Reviews. We need a decisive move away from the existing system whereby resources are assigned once and, in effect, retained indefinitely with little regard to results or alternative priorities;

(v) Particularly in the case of grant schemes, the cash allocation should be capped at the outset, so that the Exchequer exposure is limited to the amount envisaged by the Government. The Group understands that Government accounting arrangements already provide for “cash limiting” of this nature;

(vi) The annual Estimates of Expenditure should be produced on a programme-by-programme basis, fully consistent with the Annual Output Statements and our proposed Public Service Performance Charter, with full allocation of administrative and staffing costs; and

(vii) The competency should be developed to allow expenditure programmes to be challenged and tested, on the basis of independent and publicly-available evaluation of value-for-money and effectiveness. This competency should be developed through enhanced VFM & Policy Reviews that are more tightly woven into the resource allocation process, and through a stronger role for an independent body such as the Comptroller & Auditor General (C&AG). In the same way that the Appropriation Accounts are audited by the Comptroller & Auditor General (C&AG) each year, the Annual Output Statement should be subject to independent audit / verification by the C&AG in respect of the outputs actually delivered in the previous
year; the efficiency and effectiveness of delivery; and the quality and measurability of the outputs selected for the year ahead. This initiative would also facilitate the Dáil Committees in the exercise of their independent role in holding Government expenditure up to scrutiny.