Kiwi Cure for Adscam

Frontier Centre, Public Sector, Uncategorized, Worth A Look

Contrary to conventional wisdom, the Commons Public Accounts committee did achieve something in the course of its hearings into the Adscam affair, notwithstanding the obstructionism of its Liberal members, the barefaced dishonesty of several of the witnesses who appeared before it, and the indecent haste of the Martin government to put a stop to the committee’s inquiries, a third of the way through its witness list, in time for an indecently hasty election.

For instance, it has been established beyond doubt that there was indeed detailed and direct political involvement in the sponsorship program, not only from the minister of Public Works, but all the way up to the Prime Minister’s Office. Most of this came out, oddly enough, in testimony of such exquisite ambiguity — notably from Jean Chretien’s former chief of staff, Jean Pelletier — that it was widely reported as having denied there was any political interference.

On the other hand, it is probably a good thing that the committee never got around to drafting a report on its findings. To be fair, members seem to have recognized the affair cannot be written off to a few bad apples, but stems from structural failings, namely the obvious latitude for politically-minded ministers to meddle in the departments they head. But the sorts of remedies we have heard suggested to date — tighter accounting controls, making deputy ministers accountable to Parliament, or Alfonso Gagliano’s memorable advice that what was really needed was more political interference — do not begin to address the problem.

You can slap on all the controls and accountability mechanisms you want, that is, but so long as ministers have the means, motive and opportunity to interfere, interfere they will. Adscam, after all, is hardly an isolated incident, but follows on a string of similar scandals, from Lawrence MacAulay’s interventions on behalf of his brother to the widespread politicization of departmental spending exposed in the HRDC fiasco to Mr. Chretien’s famous phone calls to the president of the Business Development Bank. But while removing the Liberals from power is probably part of the solution, the longer-term remedy is to remove from ministers the authority to intervene in the day-to-day operations of departments.

As it happens, there is a model for what I am suggesting. Naturally, it is to be found in New Zealand. Many people will be familiar with the radical program of deregulation of the private sector carried out by the former Labour government in the 1980s. Less well known, but perhaps of more profound importance, were its pioneering reforms in the public sector. In brief, the government did three things. First, it “unbundled” each department, sorting out which of its responsibilities were essentially commercial activities that could be hived off into Crown corporations and later privatized, and which were core functions of government. Second, it devolved the delivery of most government services to autonomous government agencies, known as Crown entities. Third, it transformed its relationship with its own departments, and between ministers and deputy ministers, from a pseudo-hierarchical one in which it was often difficult to tell who was the master and who was the servant (think Yes, Minister) into a contractual one.

The deputy minister — or permanent secretary, as they were called, following the Westminster usage — was transformed from a tenured position, the last rung on the bureaucratic ladder the occupant would have been climbing all his professional life, into a chief executive officer, hired for a fixed, five-year term. It sounds like a formality. In fact, it was a revolution. Formerly constrained by any number of controls over how he allocated resources within his budget, the CEO now has almost complete managerial freedom: to hire and fire, to buy and sell assets, and so on. In return, he is required to negotiate a contract each year with the responsible minister, specifying what goods and services the department will provide to the government, and at what price.

This arrangement achieves several important objectives. First, it focuses attention on outputs, rather than inputs. So long as he lives up to his side of the contract, it is up to the CEO how he does it. Second, by specifying what the department is expected to achieve each year, it provides a benchmark against which to measure performance. Third, it clarifies responsibilities. The terms of the contract are public, and subject to Parliamentary scrutiny and debate. While the CEO is responsible for delivering the required goods and services, the minister remains responsible for the broader social goals these are supposed to serve.

Last, and most important for the present discussion, it requires the minister to remain at arm’s length from the department — a formal, institutionalized separation of powers between the minister, as the purchaser of government services, and the department, as the provider. It is simply not possible for a minister in New Zealand to indulge in the kind of political micro-meddling with which we are all too familiar in this country. While the minister of transportation, for example, is responsible for framing the broad objectives of transportation policy, he can have no part in deciding which riding a particular road would go through. Ministers might not find this limit on their discretion totally unwelcome: it would soon become clear to special pleaders they were wasting their time, freeing the minister to focus on making policy. Which is supposed to be his job.

Sound far-fetched? We already have a version of this: the Bank of Canada. The Governor and the minister of finance agree on an inflation target. Then the governor gets on with the job, without having to answer to the minister every time he raises interest rates. It works there. It should be applied more generally.

© National Post 2004