Institutional Reform, MacGill Summer School 2010

The Challenge of Institutional Reform

Ed Walsh

The political leadership of ‘nouveau riche’ Ireland failed during
the past decade to make policy based on evidence; opportunity and public
resources were squandered.  Now, as
Ireland stares bankruptcy in the eye, we have no option but to abandon the
irresponsible fiscal philosophy of the Ahern and McCreevy era:   we
don’t have it, so we can’t spend it.

We must search for something rational and get the words and
policy right.

While expenditure on road infrastructure has clearly been
beneficial, in other areas throwing money at problems has not worked.  The most glaring examples are found in education
and health, where extraordinary funding increases have resulted in
deterioration rather than improvement.

Investment in the school system grew by 300% in the past
decade, yet there has been a corresponding 15 percent decrease in the ability
of the educational system to meet the needs of a competitive society. [1]
The McKinsey report that analysed school
systems in OECD countries concluded that the quality of the teachers, rather
than expenditure, is the key factor that determines the effectiveness of a school
system[2].
We need to take steps to ensure that
teaching is made an elite profession by admitting only the exceptional and
dedicated and moving to sort out the underperformers already ensconced.

An even greater increase in health expenditure, than in
education, (330% per capita during the decade) has had a still more perverse
effect: a 24% decrease in the ability of the health infrastructure to meet the
needs of Irish society[3].
If ever evidence was needed that throwing money at a problem is unlikely to
solve it, this must be it.  The HSE has
not been short of money it has been short of effective and courageous
management.  Hopefully Cathall Magee, its
new chief executive, has the background necessary to do the job in the way
Christoph Mueller is at Aer Lingus: facing down selfish vested interests with a
steely nerve, and sidelining the kind of management who tend to propose cutting
front- line services before cutting the flab.

Only when the outturn becomes so depressingly awful is the
electorate provoked into raising questions.
In most cases it is too late.  The
course has been set, the infrastructure has been built, the staff has been
recruited, the expenditure has been committed and those who took the political
decisions are elsewhere and unaccountable.

The most spectacular example of this is the so called
‘decentralisation’ decision. It was not made on the basis of evidence and
analysis; it notoriously bypassed normal cabinet procedures. It was plucked out
of the air for blatant political reasons by Ahern and McCreevy, and the
consequences for national governance have been profound.  The leadership of government departments has
been distracted;  corporate memory
fractured. One senior official is reported[4]
as being faced with the arrival of some
40 new replacement staff that were unable to deal with the issues and many were
at an age when they had little interest in finding out.

The absence of evidence-based policy-making has produced a
succession of dire results. Despite the economic crises the lessons have not
been learnt and policy continues to be driven by ideology and party-political
consideration.   Without justification on
competitiveness grounds Minister Eamon Ryan proclaimed that Ireland would
generate 40% of its electricity from renewable resources by 2020[5]
and €4 billion was blithely  committed to
restructure the electricity grid and €22 billion for the ESB to ‘decarbonise’
its power generation.  A decade ago
Ireland’s electricity prices were at the EU average; since then they have climbed
to become amongst the highest.

The global energy situation has gone through a major transformation
in the past year as a result of the application of new technology to  fracture shale (‘fracking’)  and release gas. The process has opened up
vast new gas reserves globally, there is a gas glut in the US and Europe[6]
and the bottom has fallen out of the market, bringing prices down to half the
equivalent of oil[7].   By good fortune Ireland has a large
installed capacity of gas-fired electricity plants and these, not uncompetitive
renewables, are helping to bring Ireland’s electricity prices into line.  But it will take 5 to10 years before the tragedy
of the government’s current energy policy and imprudent capital investment in grid
and generating plant becomes evident.  The
Energy Standing Committee of the Irish Academy of Engineering has analysed the
situation and has shouting stop[8]
but this is being ignored and capital expenditure is being rolled out as if the
economic crisis had not happened or the global energy situation had not altered.  Enterprise and consumers will be saddled for decades
with the energy equivalent of many Terminal 2s; but measured in billions rather
than millions.  Capital investment plans in
grid and generating capacity made some years ago, in another era, should be immediately
suspended and reviewed in light of diminished electricity demand and a new global
abundance of cheap gas that will be available for the decades ahead.

The cost of waste disposal in Ireland has also risen to
become amongst the highest in the world.
It is three times more expensive than in the US east coast, twice as
expensive as in Scotland and 20% more expensive than Denmark.  Yet our waste disposal policy is driven by ideology
and local constituency considerations rather than evidence.  The key issue of competitiveness is sidelined.  Minister Gormley boasts that his approach to
waste disposal will require more staff, and classifies this as job creation.  He overlooks the fact that increasing waste disposal
costs makes Ireland less competitive and this contributes to plant closure
decisions and job losses.

Well governed, environmentally concerned countries such as
Denmark, Sweden and Switzerland all put their waste to good use through
incineration.  As an example Switzerland runs
28 incinerators that produce enough energy for 250,000 homes and avoids the
importation of some 215,000 tons of oil each year[9].
Switzerland’s competitive position continues to improve and is now ranked
fourth in the world.[10]

In contrast Ireland’s competitive position has fallen from 4th
to 21st    in the decade[11],
while the efficiency of government has dropped from 5th to 19th.

The following
observations are made arising from informal discussion with a number of highly
regarded former senior civil servants who share my concern about the
deteriorating state of national governance and public administration.

If Ireland is to manage its affairs prudently and recover it
must get the words right in legislation and in regulation so that ministerial initiatives
that are not in the interests of the country are intercepted or frustrated at
source.  Aficionados of ‘Yes Minister’
are well aware how an effective civil service can, when necessary, delay,
moderate or frustrate the implementation of some of the dafter ministerial gambits
by using established cabinet procedures.  These procedures were designed to protect
against implementation of such ideas.  Since
the Haughey era, our civil servants have been inhibited from effectively using
the procedures that were designed to intercept potential disasters before they
happen.  Cabinet procedures are simply
not working or being allowed to work.

During the past decade a weakened civil service has failed
to intercept the implementation of a succession of bad and damaging polices that
have contributed much to the creation of our national crisis.  Five developments have combined to seriously weaken
the civil service;  the increase in the
number of political advisers,  decentralisation,  the Public Service Management Act, 1997, Mr
Haughey and a less-confident Department of Finance.

  1. When political advisers dominate so does a short-term
    and party-political approach to policy formulation. They have weakening the one-to-one
    relationship between secretary general and minister that used permit the ‘facts
    of life’ to be clearly outlined in a confidential way when the minister was considering
    a daft gambit.  In the case of some ministers,
    I understand, they are now so cocooned by their political advisers that they
    are virtually inaccessible and tend not to give due regard to the
    evidence-based policy guidance from their senior civil servants.
  2. Decentralisation has disoriented the civil
    service, distracted the leadership and fractured corporate memory.
  3. The Public Service Management Act, 1997 has had unexpected
    perverse consequences; the legislation has actually created pressure not to go
    against the minister for fear of being “hung out to dry” by the political system.
  4. The Haughey era took its toll:  since then senior civil servants have tended
    to aligned themselves more with their minister and are now more inclined to do
    whatever a minister wants – irrespective of whether this is in the best long-term
    interest of the country or not.
  5. A less-confident Department of Finance, denuded
    of specialist expertise, has been less effective in recent years in acting as
    the ultimate backstop.

Change is necessary to restore an effective system of
‘checks and balances’ to ensure that a secretary general,  who is concerned that a minister is embarking
on an unwise policy,  is equipped with a
legally effective means of  having it
modified or intercepted without placing his own career in jeopardy. Best
practice may be found in the New Zealand[12]
contract-based system introduced with their reforms of the early 1990s, or in
Hong Kong[13].  Achieving an independent and accountable civil
service requires radical change; not cherry picking and applying a few ‘
bolt-ons’ as Ireland has done so often in the past.

Former civil servants in Ireland do not have a habit of
getting involved in political debate unlike the UK where, when Blair made a
decision to enter the Iraq war, many former senior civil servants wrote
publicly to the newspapers expressing their strong reservations to his actions.
A similar involvement by former civil servants would be a welcome addition in
Ireland.

While reform of the Irish civil service is needed, a la New Zealand perhaps, the most crucial
change is required at the very top; at Cabinet level. ‘Movers and shakers’ and
people with proven experience and records of remarkable success are generally
absent from government; Ireland needs them.
Introduction of the ‘list system’, or provision for co-option of
significant numbers of ministers from the exterior, is essential if Ireland is
to govern itself effectively.

The quality of governance cannot exceed the quality of those
who govern.

 

 

 

 

 

 

 

MacGill Summer School

Glenties, Co. Donegal

19 July 2010

 

 

 

 

 

Dr Edward Walsh is
founding president of the University of Limerick

oakhampton@gmail.com
+353 87 2376357



[1]
World competitiveness report. IMD. Switzerland. 2010.

[2] How
the world’s best –performing school systems come out on top. McKinsey & Co.
Sep 2007

[3]
World competitiveness report. IMD. Switzerland. 2010.

[4]
Molloy, Eddie. Seven things the public service needs to do. Irish Times. 9 Apr
2010.

[5] http://www.eamonryan.ie/category/energy/

[6]
Adria LNG slips to 2017 on European “gas surplus”.  ICIS Heren. 28 May 2010.
http://www.icis.com/heren/articles/2010/05/28/9363403/lng/glm/adria-lng-slips-to-2017-on-european-gas-surplus.html

[7]
Economist, 11 Mar 2010.

[8] http://www.iae.ie/news/article/2010/mar/04/new-report-energy-presentation-iae-oireachtas-join/

[9] http://www.swissworld.org/en/environment/waste_management/incineration/

[10]
World competitiveness report, 2010. IMD, Switzerland. http://www.worldcompetitiveness.com.proxy.lib.ul.ie/OnLine/App/Index.htm

[11]
World competitiveness report, 2010. IMD, Switzerland.

[12] http://www.jsscs.gov.hk/en/publications/pwc/appendix_c.htm

[13] http://hub.hku.hk/handle/123456789/32044

MacGill Summer School

19 July 2010

 

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