Public sector organisations need to come clean on how they spend our taxes. Progress has been made but too many still obfuscate. An example of good practice is the Scottish Fire Service. You can see their spending here.
While the press like shock-horror reporting on absolute amounts, this is often pointless; much more useful is proper analysis that dissects trends and examines variances between public entities, particularly in service overheads.
Enabling cross comparisons between entities is vital for public policy analytics. Bureaucrats always find it easy to defend their missions by explaining them as political aspirations – safer travel, better social support, a cleaner environment and so on. While it is easy for them to find reasons for continuing and expanding their goals, it is much more difficult to generate proper objective analysis of the prices to taxpayers of these supposedly beneficial activities.
For example, within the Fire Service figures above are travel expenses of board members. We find highly paid officials repeatedly traveling from Edinburgh to London at fares much higher than ordinary economy. There are also hotel stays to catch early flights.
These are what I call presumptive activities: tax-funded officials adopting expensive spending habits in their daily operations; presuming that this is the way top people operate in business and that they will never be called on to defend them. The reality, especially in Scotland where 95% of businesses are small, is that private business would never allow this gravy-plane; they know this money would be far better spent elsewhere.
Public officials choose to spend money on an entirely different basis than private individuals. They gain nothing from self-restriction; and too often they prefer feeling important over actually being productive. Transparent cost reporting therefore opens up an enormous potential for cost reduction in the public sector.
To achieve that potential requires a key institutional change: all public sector functionaries should be made to work within what the private sector would call profit and loss accounting centres. Overheads might be corporately shared but responsibility for any share should be enumerated to each specific function. And while “profits” may in fact be net costs, a calculation can always be made on cash gains or losses in operations that can then be adopted as a control.
Combined with transparent cost centre reporting, the huge gain would be to allow taxpayers to see that function “A” in entity “X” was a known percentage more or less efficient than entity “Y and “Z”. Properly reporting that, and tying it via performance agreements to top official salaries, would weed out presumptive activities, including the easy resort to expensive travel, which are in fact poor productive choices for our communities.
Eben Wilson is the Director of Taxpayer Scotland, and a Fellow of the Adam Smith Institute.