Chapter 3: Our Mandate and Approach

We have referred briefly to some elements of the Commission’s mandate from the government and some of our thinking as we approached this task. Before moving on to our detailed analysis of government programs and recommendations for change, however, we want to elaborate on both our mandate, parts of which were open to interpretation, and our thinking on several issues that cut across all ministries and agencies of the government.

The Commission’s Mandate

There are five parts to our mandate:

1. Advise on how to balance the budget earlier than the 2017–18 fiscal year.

Given the deterioration in the economic outlook since the 2011 Budget, we believe it is neither practical nor desirable to set an earlier official target for balance. Rather, we recommend an approach that will solidify the prospect of balancing in 2017–18 through cautious economic assumptions and the use of appropriate reserves. If we have been too cautious, and events prove more favourable than our assumptions, the government should use any upside — that is, higher-than-assumed revenues or lower-than-assumed spending — to balance the budget earlier.

2. Once the budget is balanced, ensure a sustainable fiscal environment.

Our proposals are aimed at keeping the budget roughly in balance on a sustainable basis after 2017–18. We attach great importance to this goal, which would significantly alter the government’s approach to budget balancing in comparison with some previous exercises. We are unimpressed with the track record of such common techniques as deferring expenditures to some undefined future day; the usual outcome is that spending pressures fester and grow until they can no longer be resisted, regardless of their affordability. At the same time, we place more value on reforming programs rather than simply cutting costs because cuts without reform may be unsustainable.

3. Ensure that the government is getting value for money in all its activities.

This extends our mandate beyond a straightforward fiscal one. The Commission interprets this as a requirement to recommend ways of ensuring that all programs and services are achieving the best possible outcomes within available resources.

4. Do not recommend privatization of health care or education.

We interpret this to mean that health care must be kept within the public payer model. We do not interpret it as denying opportunities for private-sector delivery of services, if that is more efficient. Education is somewhat different, since tuition fees account for 40 per cent of university revenues. So in the case of education, we interpret our mandate to mean that we will not advocate any shift to educational institutions that are predominantly financed from private revenue.

5. Do not recommend tax increases.

We interpret this to mean that we cannot recommend tax rate increases or an expansion of the core tax bases. However, we examine whether more revenue could be generated from existing tax structures without adjusting tax rates. We also examine some tax preferences that for all intents and purposes operate as substitutes for spending programs. Nevertheless, most of the actions we recommend to achieve budget balance fall on the program spending side. Of course, the government can always pursue tax options, but the Commission does not address this avenue, in line with our mandate.

Broad Guidelines for Actions Aimed at Balancing the Budget

Generally, the government should work to change a culture in which broad-based efforts to improve efficiency occur mainly as part of a major budget restraint exercise and are either discarded or forgotten when stronger revenue growth returns. Since we do not believe that the customary rates of revenue growth will return any time soon, this cycle of restraint and laxity must end. Simply put, government ministries and agencies should strive for efficiency gains at all times. This goal should apply not just to the Ontario Public Service, the core of the provincial government, but also to the broader public sector, which includes municipalities, universities, colleges, school boards, hospitals, long-term care facilities, community care access centres and Children’s Aid Societies. Aside from episodes of overall budget restraint, inefficiencies appear to be tackled only when unearthed by the Auditor General or exposed by a spending scandal. Unfortunately, the resulting Opposition party attacks and intense media attention too often provoke an overkill response that in the end impairs efficiency.

All governments have faced this problem and many have tried unsuccessfully to implement systems that encourage continuous efficiency improvements, so this goal may be impossibly idealistic. Even so, the norm surely should be that ministers and officials and their ministries and agencies are always careful with the public’s money, always seeking ways of doing things more effectively and efficiently, and always looking for programs or tax expenditures that are outdated (and should therefore be scrapped) or not working as well as they should. Government organizations should be able to exercise such discipline not just in hard times, but also in normal and good times.

Canada’s recent history offers plenty of episodes in which governments have tried to eliminate their deficits and keep their budgets in balance once the deficit was gone. From that experience, we can draw several lessons from what has worked and what has not. We have also drawn upon lessons learned from private-sector restructurings that have worked. We have turned these into guidelines that have helped us in framing our more detailed recommendations. We believe the government should adopt them as it decides how to proceed on all fronts. For those whose job it becomes to implement specific reforms, we suggest that, when in doubt, test a proposal against these ground rules.

These maxims fall naturally into a series of “dos and don’ts,” which we will set out in reverse order.

Our list of “don’ts” consists of proposals that are commonly heard and sound easy. They are neither easy nor productive; more often, they are actually harmful. As American journalist and social critic H.L. Mencken once said: “There is always a well-known solution to every human problem — neat, plausible and wrong.”

Recommendation 3-1: Do not simply cut costs. The imperative to restrain spending should instead be an opportunity to reform programs and service delivery. Simple cost-cutting can be effective in hitting near-term deficit reduction targets, but it does not encourage longer-run fiscal stability or allow for reforms that will generate more value for money spent.

Recommendation 3-2: Avoid across-the-board cuts. Such a blunt tool treats equally a valuable, efficiently run program and one that is outdated and sloppily managed. This is dumb. Spending should be aligned with government priorities so that high-priority initiatives are adequately funded while lower-priority programs are either cut substantially or eliminated outright. Across-the-board cuts represent an abdication of the government’s responsibility to make real, and often difficult, decisions.

Recommendation 3-3: Avoid setting targets for the size of the civil service; instead, set targets for outputs, not inputs. Focus on the cost of programs and services and on value for money. A smaller and leaner civil service will be an inevitable result of reducing the cost of programs and achieving greater value for money.

Recommendation 3-4: The government should not rely unduly on hiring freezes and attrition to reduce the size of the civil service as a result of any spending restraint. Such approaches typically weaken the quality of the civil service for years — even decades — to come.
Lower-priority and less efficient programs and services must be targeted for reduction; the result will be fewer employees working in these areas. More generally, the focus must be on retaining good employees while letting go of those who are not performing well. All employee appraisal and bonus schemes must be aligned to these objectives; for example, the government should continue to offer performance bonuses to those who exceed job requirements.

Recommendation 3-5: Do not hang onto public assets or public service delivery when better options exist. Consider privatizing assets and moving to the private delivery of services wherever feasible. We suggest pursuing this course only where the public can get better value for money spent without compromising access to services, not for ideological reasons. In budget planning, do not count chickens before they are hatched. If assets are to be sold, never incorporate any revenue from such planned sales into a budget before the fact; there is always uncertainty over the timing, accounting treatment and ultimate market value of any sale. Instead, simply record any sale in the appropriate manner if and when it is completed.

Recommendation 3-6: The length of time it will take to return to balance in a sustainable fashion significantly changes the nature of the approach. Traditional “short-term fixes” will not be adequate or even, in many cases, appropriate. Examples include asset sales solely for the purpose of a one-time cash injection; freezes to wages or managers’ bonuses; and deferrals of capital investments and other necessary spending. Kicking the can down the road is no solution. Spending restraint must be thoroughly and consistently tied to permanent reforms in how government operates so the results of the restraint exercise can be sustained over a long period.

Our list of “dos” begins with several themes that have emerged from our consultations and from our own experiences and observations. These apply across the entire public sector.

Recommendation 3-7: Once it has decided how to respond to this report, the government should begin with a good road map — a formal document of its vision and the path to the goal. There are precedents for such a tool. In 1984, the Mulroney government published its Agenda for Economic Renewal, an extensive paper that laid out in one place all the government’s plans. The Chretien government did the same in 1994 with two documents recalled more for their colour — the Purple Book and the Grey Book — than their titles. Each of these documents not only informed the public about the changes that lay ahead, but also became a script for all bureaucrats, who saw how their own programs and activities fit into the broader picture.  

Recommendation 3-8: Higher priority should be assigned to programs and activities that invest in the future as opposed to those that serve the current status quo. This is never easy: the status quo has plenty of advocates; the future does not. It is up to government to fill this breach. As Massachusetts Institute of Technology economist Lester Thurow once suggested, “The proper role of government in capitalist societies is to represent the future to the present.” 

Recommendation 3-9: Policy development and the public service in general should be more evidence-based. This requires setting clear objectives based on sound research and evidence. The government should collect data and use it to evaluate whether objectives are being met and how efficiently. Managers should be accountable for achieving these objectives. Where objectives are not being met, programs and services should be adjusted. Reporting should be transparent and audits conducted. The evidence-based model should be applied to the success of individuals and departments in meeting objectives. At the same time, ministries, as well as agencies and entities accountable to the government, should be given some latitude to conduct their affairs in an efficient manner.

Recommendation 3-10: This raises a tricky issue that faces all governments. On the one hand, they need to minimize the cost of operations; on the other, they need rules and reporting to ensure that taxpayers’ money is not being abused. All governments must strike a balance between these competing obligations. We believe the pendulum has now swung too far towards excessive rules. Government operations have trouble responding quickly and consistently, often because it takes so much time, for example, to process minor requests for proposals (RFPs) or to get consistent supplies when everything is broken into discrete RFPs. When there are too many rules, as there are now, government employees and private suppliers are forced to divert people — or even add new staff — to ensure that compliance and reporting requirements are met. This is the case even though the information reported is often not used at the other end to influence changes in policy or service delivery. Although it is impossible to get a full accounting of the costs of monitoring compliance relative to the benefits gained, we believe there are simply too many layers of watchers at the expense of people who actually get things done. The government must find a new middle ground.

Recommendation 3-11: Boundaries between public- and private-sector activities should be shifted and, in many cases, removed. For the most part, policy development needs to remain in the realm of the government, though various stakeholders and community groups could and should be more involved. External groups should even be involved in advising the most senior government decision-making bodies, including the Cabinet.

  • Ministries, and in some cases particular programs, should be informed by external advice. Advisory panels of executives who have led reform/restraint exercises in their own organization, both public and private, could share their experience. Ministries should also seek expert input at a more technical level to help assess options for making their operations more efficient.
  • Service delivery should be moved as close and convenient as possible to the clients. It need not always be solely in the public domain. Services can often be delivered more efficiently by the private sector, or through a separate agency of government (such as ServiceOntario), but clear objectives and accountability mechanisms are needed. In many cases, public-private partnerships could deliver services, as is done with alternative financing for infrastructure. This could be extended to operations requiring capital for information technology; private-sector entities could provide some of the capital and assume some of the risks in return for which they would get a stake in the revenue or savings flows. For example, the private sector could be asked to participate in the management of difficult files, such as the heavy concentration of health costs in a small portion of the population, in return for a share of any cost savings. In all cases, the choice between public- and private-sector delivery should be driven not by ideology but by considerations of quality-adjusted cost.

Recommendation 3-12: Within their operations, public-sector service providers should assign people to jobs where they are most effective, efficient and affordable. Physicians should not perform tasks that could be done more efficiently and at a lower cost by physician assistants, registered nurses, nurse practitioners or pharmacists. Case workers need not deal with all aspects of social assistance, employment or training matters when some clients are willing and able to receive services by telephone or through the Internet. In the policing sector, non-core services such as data entry could be done by clerical staff rather than officers whose time and training are better deployed elsewhere.

Recommendation 3-13: Seek common themes across the reforms to achieve economies of scale in action and simplify communications. Common themes would include a shift towards evidence-based policy development and service delivery; more efficient service delivery models for all areas interacting with the public; the efficient use of and appropriate rates of return on Crown assets; and consolidation of such backroom operations as information technology and human resources.

Recommendation 3-14: Reform must be pervasive and speedy. There is an understandable tendency to approach any set of reforms piecemeal and over an extended period. This tendency must be resisted, in part because the record is not kind to such an approach and, more importantly, because it runs contrary to our fiscal mandate to balance the budget by 2017–18. First, the government will need to implement all the reforms we recommend — or at least some reasonable facsimile in fiscal terms — to restrain the growth of program spending enough to achieve balance by 2017–18. This is not a smorgasbord from which the government can choose only the tastiest morsels and ignore the less palatable. Second, the restraint process will succeed only if the public believes the reforms are fair. Broader action favours such a perception as opposed to a view that a handful of programs were unfairly targeted. Third, we can all agree that change is disruptive, but the medicine does not go down more easily if it is dragged out over a long period. Indeed, such delay merely discourages people — public servants and those receiving government services — and postpones the day when a new system is operating efficiently. Although there may be limits to the capacity of the public service to instigate, execute and monitor change, once the financial parameters are set, first for ministries and then for programs, many of the reforms will be handled by people further down the chain.

Ambitious for Excellence: A Larger Vision

These are all practical suggestions for using the current fiscal challenge as an opportunity to transform the way the Ontario government delivers public services. Perhaps, though, we can shoot for a grander goal — a province that provides the best public services, delivered in the most efficient manner, in the world.

This sounds impossibly ambitious — an aspiration that borders on fantasy. But put the question another way: why not? We are forever goading our business sector to take on the world by developing new products and using imaginative marketing to win new customers worldwide even in the face of stiff global competition. Why not apply the same goals to our government? Why not give our public servants an objective that can turn the task of transformation — which will at times be a very tough slog — into a project that becomes a source of real pride? Is such a goal even possible? Let us be blunt: the competition is not all that stiff and this province has plenty going for it. Ontario has the best-educated population in the world. It has a history of stable, democratic government. It has a terrific reputation for good public-sector management among one of the toughest audiences in the world — the bond buyers who lend us money at relatively low interest rates. No jurisdiction in the world has any advantage over Ontario when it comes to delivering public policy and services.

What Does Being the Best at Public Policy and Services Look Like?

Public service would be an honourable calling that would draw the province’s best and brightest people into the government and its agencies, where they would be offered appropriate incentives and rewarded with compensation tied to performance, outcomes and productivity.

The best public service would set clear objectives, use proper metrics to measure progress and provide clear accountability for those expected to meet those objectives. In many areas, we recommend that the government develop long-term plans for key programs.

The best public service would benchmark itself against the best in the world — both in the private sector and in the public sectors of other jurisdictions.

The best public service would constantly evaluate priorities. If a new priority is identified, then by definition existing priorities would move down a place. Some at the bottom of the heap, once useful but now outmoded, would be discarded. New priorities cannot just be stacked on top of existing ones; otherwise, the array of government programs begins to look like a junk pile. In other words, there would be continuous “program review.”

The best public service would drive relentlessly towards effectiveness and efficiency, goals that complement each other. Objectives, metrics, accountability and benchmarking would drive effectiveness. Governments typically struggle with achieving efficiency. The common explanation is that unlike the private sector, government organizations lack the discipline imposed by a bottom-line profit motive and by shareholders who hold their feet to the fire. We cannot help but observe that in recent years we have seen enough dreadful performances in the private sector that we cannot blindly put the business model on such a high pedestal. Besides, does the public sector really have no external sources of discipline? The Ontario government has more than 13 million stakeholders — Ontario’s residents, most of whom pay taxes. Those taxpayers have made it very clear that they do not want to pay more taxes and do not want their government to run persistent large deficits. Pressures for efficiency are not totally lacking in the public sector. Yet this report is full of recommendations for where we think efficiency could be dramatically improved, where programs wastefully overlap, where backroom operations could and should be consolidated. These opportunities for public-sector improvement are not unique to Ontario. Nothing we have found suggests that Ontario’s public sector is less efficient than public sectors elsewhere. More needs to be done and more should be expected from the best.

As an example of how the best public service would operate, take an employment service whose task is to help an unemployed man, who is perhaps receiving social assistance, find a job that will stick. That is the objective. It would be clear who will help him and in what manner, so he is not left to navigate alone a mystifying jumble of programs offered by three levels of government. The success and cost of providing the service would be tracked. Did he find work? What resources did the government devote to helping him? In effect, what was the public cost of finding him a job? Taking into account the likelihood that he will keep the new job and switch off social assistance, did the benefits (he is no longer receiving social assistance and is perhaps paying taxes) exceed the cost of helping him find a job? The best public service would know the answer to this question.

Periodically, the best public service would stand back to ask — and answer — other questions that are less straightforward. Could the job-search effort have been done more efficiently within the existing framework? Could it have been done more efficiently in a different framework? Perhaps it could have been done by a non-governmental organization (NGO) that is skilled at matching people to jobs — a private company or a not-for-profit community centre, for example. In return for applying its resources and time on aiding the unemployed, the NGO might receive a share of the net benefits of its success.

The best public service would be forward looking and take an even broader look at our employment service. It would assemble the data, study the evidence and use this research to predict which people are vulnerable to job loss. Where possible, it would make strategic interventions to head off the problem. This is not easy. The chief obstacle is that the payoff usually does not appear within the usual political cycle of a few years. Nonetheless, a forward-looking public service would take this approach.

 Such thinking can be applied to almost any policy field.

  • Health care is a prime example. The health care system on which governments lavish so much attention accounts for only 25 per cent of the population’s health outcomes, according to the Senate Subcommittee on Population Health.1 Socio-economic factors such as education and income explain 50 per cent, biology and genetics another 15 per cent, and the physical environment the remaining 10 per cent. To reduce the health care bill 20 years from now, it might be more desirable to improve the education of vulnerable young people today than make direct changes in health care. Health care today is largely a matter of patching up people after something goes wrong, but we do little to promote better health in general. Indeed, the research field is not particularly robust, so we are unclear on what exactly are the smartest health promotion strategies.
  • Targeting is another issue. A relatively small portion of the population accounts for a huge share of public spending in almost every field. We know that one per cent of the population accounts for about 48 per cent of the cost of health care. We know that a relatively small number of young people in challenging socio-economic conditions will account for much of the future cost of social assistance and the criminal justice system. The evidence is fairly clear: the government can either address welfare and justice problems when they become acute, or it can intervene strategically now to prevent those problems.
  • Consider mental health. The problems are mounting and the system is not responding. The result: many people with mental health problems end up in prison, which — aside from the fact that it is expensive — does them and society no good. We are going at things from the wrong end; we should conduct research and design programs to get at the roots of the issues.
  • Who should conduct such research? A common response is to bring in academics and consultants whose expertise and other studies have already amassed the intellectual capital needed to assess these issues. The problem is that the expertise then rests with the external researcher, not with the government and its employees. And typically, projects go nowhere in government unless there is an internal champion and people who understand the research. This means the government must strengthen its own internal policy research capacity. One reason we heard for the government’s research weakness is that ministries are hitting their limits for full-time employees, even when they have funds in their budgets that could finance such work. This surely points to the folly of targeting the number of full-time employees as a restraint mechanism.

The best public service would focus on outcomes, not inputs. Is a program delivering the objective? Is it doing so efficiently? How much is it costing? A top public service would not set multiple objectives that mix outcomes and inputs, like restricting the number of full-time employees. It would give managers the flexibility to do the job best within their budget.

The best public service would approach risk from a scientific basis. We do not want to waste taxpayers’ money; this is an understandable and noble goal. But (and this is a decidedly unscientific approach) hundreds of millions of dollars can be wasted in the interest of preventing a few dollars from being used inappropriately. The pendulum in Ontario has swung too far towards devoting massive resources to micro-manage processes such as procurement and expenses. By all means, establish rules and regulations aimed at preventing waste. Then let managers and employees do their job as efficiently as possible. Set up monitoring and audit systems to catch problems, but do not waste everyone’s time by drawing them away from important policy and service delivery objectives to attend to minute details of reporting and compliance.

The task ahead need not be dreary. Many will scoff that the business of eliminating a fiscal deficit is simply a mundane exercise of restraint, that the very idea of creating an organization that delivers the world’s best public services is hopelessly naive, and that we should not even think — let alone speak — of such lofty goals. But our reach should always exceed our grasp. High ambition should never be sneered at. Such an objective could instil in our politicians, our public servants and all Ontarians a sense of purpose that would help see us through this monumental mission.

Why not?

1. Standing Senate Committee on Social Affairs, Science and Technology, “Final Report of Senate Subcommittee on Population Health, A Healthy, Productive Canada: A Determinant of Health Approach,” June 2009, pp. 7–9, downloaded from