Logo: economic & stretegy group


Channel Nine

Channel Nine contains information, commentary or research results that may be of interest to clients and colleagues of the ESG. Although every effort is made to ensure the accuracy and topicality of these contributions, the ESG is not responsible for any errors or omissions. The views expressed in Channel Nine are not necessarily those of the Principals of ESG, its associates, or any affiliated company.

New Appointment

21 Jan 2017

The Kapiti Coast District Council have appointed David as the Independent Chair of the new Kapiti Economic Development Leadership Group. This is a part-time, governance role that which will see David, together with other members of the Group, providing key strategic guidance and leadership role on economic developments for the Kapiti Coast region. The appointment is effective for one year (renewable) from January 2017.

Fiscal Policy Coordination in the UAE

21 Feb 2014

The federal government of the United Arab Emirates has requested technical assistance from the ESG Ltd in improving fiscal coordination between the federal and emirate governments. David will be advising the Ministry of Finance on expenditure policy coordination policies, opportunities and needs during 2014.

The first mission under this contract was conducted during February 2014. It builds on work David has undertaken on macro-economic management with the Federal Government in recent years and is being conducted in conjunction with an IMF team working on fiscal data issues.

Wellington International Airport (Dominion Post 29 October 2013)

30 Oct 2013

David has proposed for several years establishing an international airport for the Wellington region in north Kapiti. His ideas and arguments were published by the Dominion Post in the business section of the paper on Tuesday 29 October 2013.

A copy of the article (unedited, but very similar) is attached here for readers who may have missed the paper edition.

Click to download attached document

Policy analysis and development on child abuse claims

21 Jun 2013

ESG Ltd has been contracted by the NZ Ministry of Social Development (MSD) to assist it with the development of an improved approach to managing historic claims of child abuse.

MSD currently assesses a large volume of claims lodged by persons who, as children, suffered abuse while in state care. The challenge is to respond to these claims in ways which are fair, just and fiscally affordable. There may also be a need to point some of these people in directions, or to services, which enable them to get on and improve their lives.

David will undertake the work in two parts. The first part is analytical: estimating the extent of potential claims still outstanding and when they might be submitted in future. The second part of the task involves recommending new policy approaches that could be taken by MSD in managing existing and potential future claims more effectively. The work is expected to go through until the end of August 2013.

Brunei Government Renews ESG Contract for 2013/14

21 May 2013

The Government of Brunei has renewed for a further year their contract with ESG Ltd for technical advice and oversight of that country's public expenditure management (PFM) reform programme.

The second year of the PFM Action Plan will see further developments in fiscal strategy, medium term budgeting, program and performance budgeting (PPB) and expenditure reporting and control.

Brunei has made substantial progress over the last 18 months in adopting a comprehensive PFM modernisation program. It is now leading many other S.E. Asian countries in this respect.

David will continue to lead the technical advisory support team in designing and implementing the next stage. He is likely to be assisted by Alex on the roll-out of the PPB initiative in particular in the second half of 2013.

ESG Supports Fiscal Management in Brunei

24 Apr 2012

The ESG has been commissioned by the Government of Brunei to assist it in the design and implementation of a substantial programme for improving fiscal policies and budget management.

During 2011, David provided technical assistance to the Ministry of Finance in designing a fiscal reform "Action Plan". The ESG have now been re-commissioned to support the implementation of these measures during their first phase in 2012.

The Government of Brunei maintains a healthy fiscal surplus due in large part to significant oil and gas revenues. However, the public sector plays a major role in the economy and the efficiency of government services are a key factor in economic performance.

The ESG will act as technical advisers to the Government in improving fiscal analysis and strategy development, in modernizing budget management practices and in tightening financial controls. David is leading the assistance through specialised teams set-up and trained within the MoF.

Innovation Policy Article (Dominion Post 18 July 2011)

20 Jul 2011

The attached article by David was published in the "Dominion Post" newspaper on 18 July 2011. It addresses some of the main reasons for the poor performance of NZ Government policies in stimulating commercial innovation over recent years.

Click to download attached document

Analysing the effectiveness of innovation policies

10 May 2011

This study, by David and evaluation staff from the Ministry of Economic Development, was undertaken in support of the New Zealand Government's economic growth agenda.

The team's final report provides a comprehensive survey of the evidence from more than 60 studies on New Zealand's innovation policies and funding programme performance over the last ten years (2000-2010).

The findings from this work are challenging and support the findings from econometric analyses undertaken by MED during 2010/11. The innovativeness of New Zealand individuals and firms is well recognised internationally, but substantial eexpenditures by government agencies to turn New Zealand’s innovative and entrepreneurial talents into significant investment and business growth have had mostly disappointing results. This work identifies the considerable limitations of the “science push” approach to innovation, plus other difficulties facing NZ policy makers in transforming innovative ideas, or capacity, into commercial investment and economic growth.

Nonetheless, the study suggests that there are good opportunities for the Government to improve the effectiveness of innovation policies while also spending less.

Full copies of the team's report may be requested from MED.

Click to download attached document

Program & Performance Budgeting - Europe

22 Sep 2009

During 2008 and 2009 David worked with Leszek Kasek of the World Bank office in Poland to produce a comprehensive review of recent experiences with program and performance and medium term budgeting in six European countries.

The publication is titled: "Performance-based Budgeting and Medium-Term Expenditure Frameworks in Emerging Europe".

The book comprises a collection of contributions from World Bank economists in the Bank's offices in Central European countries and the Baltic States. Leszek and David have edited these chapter summaries and added comprehensive analyses and an overview of the relevant lessons and experiences.

The result is a collection of detailed, first-hand, discussions on the implementation of MTEF and PPB initiatives. The aim of the study was to find what works well, and what doesn't, under different economic, political and institutional conditions. This publication should be of considerable value to other governments looking to adopt similar reforms and to PFM consultants and advisers working in this field.

The book is available free for download at: www.siteresources.worldbank.org/INTECA/Resources/WBperformanceBudgetingTEF.pdf

NZ Monetary Policy - Submission to Parliamentary Committee

02 Aug 2007

The Finance and Expenditure Committee of Parliament (FEC) has called for options and ideas concerning the future conduct of monetary policy in New Zealand. This Inquiry has arisen directly out of the problems created by rapid appreciation of the NZ dollar against all major currencies in recent years. This appreciation has hit hard the profits and competitiveness of most export industries. Currency appreciation is largely a consequence of the Reserve Bank's management of base interest rates in pursuit of the price stability objective.

David's submission to the FEC proposes, amomgst other things, better sharing of the responsibility for managing inflationary pressures between the monetary and fiscal authorities. It is suggested that this could be achieved through "price stability" legislation in which both the Government and the RBNZ had clearly specified responsibilities.

The main points of David's submission are:

i. Recent inflationary pressures have been attributed incorrectly to temporary influences on prices arising from the housing market and domestic incomes and expenditure. This mis-specification of the inflation problem has skewed appropriate monetary policy responses.

ii. More significant, long term, influences on inflation have come from successive relaxations of the Policy Targets Agreement raising inflationary expectations, international price movements (especially energy) and poor quality fiscal expenditure decisions.

iii. Low inflation helps to improve price signals, resource allocation decisions and hence competitiveness. However, there is a risk, under the present monetary policy regime, that monetary policies may not give adequate recognition to impacts on the exchange rate and hence to relative competitiveness and producivity improvement objectives.

iv. Over the last 20 years, periods of high interest rates and uncompetitive exchange rates in NZ have been neither rare nor temporary. The damaging impacts on incomes and economic growth from the current approach to managing inflation may well increase in the future, particularly in periods of major economic or financial sector upheavel. Sooner or later, the demand for a more effective monetary policy regime will return. This new regime must include the maintenance of a competitive exchange rate as a key policy priority.

v. As a small open economy, New Zealand needs to develop a unique and more effective approach to monetary policy that affords greater recognition to the development of the export sector and to the importance of complementary macroeconomic policies, including fiscal polciy settings.

vi. Currently, fiscal policies provide insufficient support for the price stability objective. This suggests that new institutional measures may be required to more effectively bind the Government into attainment of this objective. This could involve changes to the price stability legislation which would place specific inflation control responsibilities on both the RBNZ and the Government.

vii. Under this framework, responsibility for monetary policy decisions might be assigned to a “council” in order to better utilise available expertise, improve monetary/fiscal policy coordination and to help spread the burden for inevitably difficult policy choices.

Integrating Recurrent and Capital Budgets - OECD paper

04 Apr 2007

Effective integration of current and development budgets is one of the hallmarks of a developed budgetary system. For this reason, presenting an integrated (or “unified”) government budget is commonly recommended by international financial institutions as a priority task for improving resource allocation and public financial management in most developing, transition and post-conflict countries.

Although the integration of the current and development budgets is sound in principle and seldom controversial, this step is often more complex in practice than is widely understood. Recommendations to governments to proceed down this path are often made without clear guidance on how and where to begin. Moreover, integration is often proposed without recognising particular institutional and policy constraints in a government’s budgeting system or without reference to the capabilities of their public finance officials for managing this important reform. For all of these reasons, the process of achieving full budget integration often proceeds more slowly and with greater difficulty than expected.

This paper by David Webber aims to assist governments and public finance managers in understanding the process and requirements for budgetary integration. It starts by discussing how and why separate current and capital budgets have evolved and what is meant by their integration. It proceeds to describe the various “dimensions” of this task as it applies to most developing administrations. This includes identifying a number of inter-related steps, and potential challenges, which will need to be addressed in achieving full and successful transition to a unified budget.

The paper is being used to assist budget management reforms in several Middle East and developing countries. It is published by the OECD in the Journal On Budgeting, Volume 7 No. 2, 2007.

A MS.doc version of the paper is attached below

Click to download attached document

Alex: Some issues and ideas from recent work

12 Dec 2006

Alex has been engaged in a number of public management consultancies, both in New Zealand and internationally during 2006. Here is a sample of recent projects and some issues and ideas arising from them.

• Ministers and mandarins - a research paper on the political administrative interface. How do developed countries ensure that public administration is carried out fairly and without party political bias? Interesting findings are that governments are finding it increasingly important that the public service be responsive to their political programme. Political responsiveness is not however the same thing as politicization. Within Westminster system countries, politicization is contained by independence in the appointment and management of senior public servants. While this independence has been weakened somewhat by term contracts, in some cases transparency and managerialist administrative law gives more direct responsibility to public servants - e.g. the “accounting officer” role in the UK. Outside the Westminster system, politically unbiased public administration is assured not so much by apolitical appointment - indeed in many countries, such as Sweden, such appointments are unashamedly political - but rather by the oversight of either the Judiciary (where policies are specifically defined in law) or the Legislature.

• Steady, Fire, Aim - strengthening governance in post Soviet transitional countries. While modern ministerial systems formally replace the highly centralized direction of the Soviet era, their operation is often stymied by echoes of the old administrative culture. In Moldova, an endemic reluctance to consult across ministries before policy decisions are made means that the real negotiations must take place after the policy is adopted. This opens up a murky gap between the policy in theory and the policy in action. In Albania, the dissolution of the old party politburo and the creation of ministries has left the Cabinet with very little public service advice on whole of government matters. In both countries a priority is to strengthen collective decision-making and cooperation, including creating a modern Ministry of Finance with a strong whole of government perspective.

• A post post-conflict phase? Recent work in East Timor and Cambodia suggests that the development community should be cautious about what they push on governments just emerging from their post-conflict phase. The core reason is that the immediate problems are huge and the administrative capacity very slender. But the deeper problem is that there is little public experience of trustworthy or successful government. Public institutions in these countries have very little credit in the bank and little public understanding or support for the sophisticated end of western governance – e.g. Official Information Legislation or highly targeted social transfers. It may be that donors should recognize that after the fighting is over and the formal governance institutions are basically in place, there should be a phase in which the main focus is building government legitimacy not only by sound democratic process but by effective action in a limited number of areas of practical importance to the public interest. And perhaps donors should hold back on the full “good governance” agenda until there is some depth of legitimacy to the very idea of central government.

• Public procurement by “Trade me?” The government of the state of Sao Paulo in Brazil has had success in both reducing corruption and the cost of procurement, by establishing an open e-based auction system for many of its purchases.

• “A budget director’s only friend is another budget director”- international finance networks and development. University College at Oxford is running a project on Developing Country Finance Networks as part of the Global Economic Governance Programme. A paper we prepared for this programme looks at the history of networking amongst Senior Budget officials in OECD countries and identifies the factors which have made this network a positive influence on financial governance in OECD countries. This paper along with others on the same general topic will be published in a book in 2007.

Assessment of Budget Transparency in NZ

08 Nov 2006

New Zealand scores highly on budget transparency in an assessment conducted by Murray Petrie for Transparency International New Zealand (TI-NZ) - but there are some areas that require strengthening.

The assessment is part of a multi-country project, The Open Budget Initiative 2006, led by the Center on Budget and Policy Priorities in Washington D.C. and released on 18 October. Murray also served on the project’s international advisory group.

The study was compiled by fifty-nine civil society organizations from around the world, and produced the first index of how open the budgets and budget processes are to citizens in these countries. The countries were selected to provide a balanced sample across geographic regions and income levels. The Open Budget Index is intended to provide citizens, legislators, civil society advocates, lenders, and those in the development community with the comprehensive and practical information needed to gauge a government’s commitment to budget transparency and accountability.

In brief, the study finds that in only six of the fifty-nine countries surveyed does the government provide the extensive budget information necessary for government accountability. In ten countries, government accounts are closed books; twenty-four countries fail to hold public hearings on the budget; and in sixteen countries the executive can fire the head of the country’s external auditing body without the consent of the legislature or judiciary. Full information on the results, including the completed Questionnaire on New Zealand, is available at www.openbudgetindex.org

Not surprisingly in a study comprising mainly developing countries, New Zealand scores highly on the survey, and is in the group of only six countries assessed as providing the extensive budget information necessary for government accountability.

There are, nevertheless, one or two areas where the assessment suggests that some attention is required. The most important of these is the lack of a formal mechanism for Parliament to consider, and for the Executive to respond to the Auditor-General’s recommendations and findings. The current arrangements leave it to relevant subject committees of the House to decide whether to consider the reports, and then to decide whether to ask for a government response. The only exception is in cases involving unlawful expenses, where the Auditor-General can direct a Minister to report to Parliament (a mechanism introduced in the Public Finance Amendment Act 2004 and activated by the Auditor-General earlier this month in his report on unlawful election expenditures).

In other Westminster systems, such as the United Kingdom and Australia, there are formal mechanisms in place to ensure active Parliamentary engagement with, and executive response to issues raised by the Auditor-General. For instance, in the United Kingdom the Public Accounts Committee examines each report from the National Audit Office and makes recommendations to the government where it considers action is required. In Australia, federal departments must report to Parliament every three months on the status of actions to remedy problems identified by the Auditor-General.

The New Zealand Auditor-General’s Office has itself expressed concern about this issue in the past. It is also an issue over which TI-NZ expressed concern in the New Zealand National Integrity Systems Country Study Report 2003 (pp. 21-22, available at www.transparency.org/activities/nat_integ_systems/country_studies.html).

Both international and New Zealand experience suggests the importance of ensuring prompt and full attention to the findings of the Auditor-General. For instance, it is arguable that, if proper attention had been paid by Parliament and the Executive to the Auditor-General’s previous reporting on election spending, the most recent fiasco may have been at least somewhat averted.

Institutional design is complex in this area, but early action is required to strengthen and formalise the current arrangements.

One option would be to reactivate the sub-committee of the Finance and Expenditure Committee, formed in 2000 specifically to deal with Audit Office reports. The sub-committee lapsed with the 2002 general election, and no longer exists. It could play an important role in overseeing consideration of Auditor-General reports by subject select committees, and could consider regular (e.g. quarterly) reports from the Auditor-General on the status of his recommendations and responses by the Executive.

A further issue arising from the study is the lack of comprehensive information in NZ on tax expenditures. While, with the passage of the Public Finance Amendment Act 2004, an annual statement of tax policy changes (including any new tax expenditures) is now provided with each annual budget, there is no information on the current stock of tax expenditures. It is true that, by international standards, there are relatively few tax expenditures in New Zealand, and that defining tax expenditures is not straight forward. Nevertheless, policy transparency would be usefully improved by producing at least a one-off report on the stock of such provisions. International fiscal transparency standards (e.g. those promulgated by the IMF and the OECD) require publication of information on tax expenditures with each annual budget. The IMF has in fact set this as a basic requirement that all 180-plus of its member countries should meet. There is no good reason why New Zealand does not meet this standard.

Appointment to Research Infrastructure Advisory Group

15 Dec 2005

David Webber was recently appointed to the newly-formed Research Infrastructure Advisory Group (RIAG).

This Group was set up by the Ministry for Research, Science and Technology (MoRST) to advise the New Zealand Government on the arguments for and against public investment in major research infrastructure.

The appointment is for three years. Details on the role and composition of the Group are available on the MoRST website (www.morst.govt.nz/current work).

New ESG Associate: Alex Matheson

15 Dec 2005

The ESG welcomes Alex Matheson as an Associate Consultant to the Group. Alex will further strengthen the Group's capability and experience in many aspects of public management, including our knowledge and understanding of best practices in New Zealand and internationally.

For Alex's background details and CV see the Principals section of our website.

Outcome-based Investment Evaluation

18 Jul 2005

The New Zealand Government is constantly seeking ways to improve the value derived from publicly-funded research. One of its aims, consistent with current public management objectives, is to increase the relevance of this research and its contribution to real world “outcomes”. This is usually defined as producing research outputs that can be readily and effectively translated into innovative new methods, products, services, environmental management policies etc.

In 2004, The Foundation for Research Science & Technology (FRST) introduced a new approach to funding long term research in the ecosystems sector: the “Outcome-based Investment” (OBI) model. David Webber was appointed by the Government as the Independent Evaluator for the pilot funding round.

The OBI pilot generated considerable discussion and comment within the ecosystems sector, and within the research community more generally. David presented his report to the Minister in July 2005 on the results of the evaluation, including various recommendations for improving the model. A key recommendation also involves the introduction of "negotiated funding" for long term non-appropriable (public good) research.

A copy of the report can be downloaded from the link below.

Justice Sector Budgeting and Judicial Independence

26 May 2005

Justice Sector Budgeting and Judicial Independence

The application of fiscal policies and budget rules to the funding of the justice sector, and in particular the courts system, has traditionally provided an irritant, and in some cases a direct challenge, to judicial independence. This issue has been exacerbated by the development in recent years of various forms of “performance budgeting” in the public sector that emphasise accountability for results.

Over the last 18 months David Webber has been developing program and performance budgeting methods for funding of the justice sector and courts in ways that could help meet the twin goals of improved financial management and increased judicial independence. This "results-based budgeting " approach has been well-received internationally and is being applied already in countries in Central Europe and the Middle East.

As a result, David was requested by the World Bank to prepare a detailed study of the various measures by which several developed countries, including New Zealand, are attempting to improve both financial management and judicial performance.

The resulting publication - "Good Budgeting, Better Justice: Modern Budget Practices for the Judicial Sector", is available on the World Bank website. It is widely recognised as providing a model for justice sector financial management in developing, emerging and developed countries (see Publications section of this website).

Click to download attached document

Economic Integration and the Autonomy of the Nation State

04 Mar 2005

Research now underway by Murray Petrie

Policy and institutional integration comes in many forms, entailing quite different types and degrees of constraint on autonomy. Murray Petrie is currently engaged in research to improve our understanding of the forces promoting increased policy and institutional integration, and of the relationship between economic integration and different forms of policy and institutional integration.

A further objective of Murray’s work is to develop and test a framework for analysing international integration that incorporates both the EU and other regional and multilateral integration agreements, rather than treating the EU as a special and unique case – as has typically been the case to date.

Economic integration describes the process by which two or more economies function increasingly as a single market. Some forms of economic integration can occur without any of the economies involved foregoing decision-making autonomy. For instance, a country may decide to remove all trade barriers, but may not restrict in any way its ability to autonomously reintroduce trade barriers in the future should it so decide. Or a country may peg its currency to that of a major trading partner, or even unilaterally adopt the currency of a foreign country.

Economic integration is often accompanied, however, by policy and institutional integration that entails some loss of decision-making autonomy for the individual nation states involved. For instance, a country may commit itself by Treaty to maintain certain tariff rates, either on a bilateral, regional, or multilateral basis. Or it may enter into commitments covering ‘behind the border’ policies, such as recognition of the regulatory standards of another country, progressive harmonisation of standards across countries, or a single trans-national regulatory body.

International integration, therefore, entails trade-offs between competing public policy objectives. Economic integration may contribute to higher economic growth, and to lower cost and/or more effective public goods provision. This may, however, entail some loss of ability to tailor laws or standards to specific local conditions (a loss of ‘fit’), restrictions on flexibility to change policies over time, and a challenge to existing norms of political legitimacy.

Much of the literature on international integration has treated integration as being at the same time both an economic and an institutional phenomenon, rather than attempting to clearly distinguish economic integration from policy and institutional integration, and to analyze them as distinct – although related - phenomena. There have been few attempts to account for variation in the depth of policy and institutional integration across a large number of regional integration agreements.

Website Created by Flightdec.com