Measuring public service benefits

Friday, 21 September 2018 00:00 -     - {{hitsCtrl.values.hits}}

By Dr. Sirimewan Dharmaratne

There appears to be widespread discontent in the public services, demanding better wages and salaries. While this is not a problem that is unique to Sri Lanka, the way these demands are handled is probably unique. There appear to be no standard or accepted procedure. Perfunctory promises are made, often by others not in the relevant Ministry. More often than not, the relevant Minister is completely out of the scene, while two or three people who appear to voice their opinion on almost anything that happens in the country take the forefront. Then inexplicably, the issue appears to be resolved, only to reappear in a few weeks or months later. 

To avoid these theatrics, it is important that a proper mechanism is put in place, so that public service pay awards can be linked to some sort of productivity measures. Rather than self-serving politicians attempting to augment their fledging profiles, by trying to placate strikers by making piecemeal or ad hoc promises, it is important that the Government adheres to a set of rules that encompass all public sector workers. This requires pay awards to be based on performance, and not simply discontent with the status quo. We would all like more pay, but the difference is that in public sector, the pay bill is funded by the taxpayer, and the Treasury has a duty to ensure that value for public funds is realised. In the heart of this conundrum is how to measure public service performance. 

The contribution of public services is difficult to measure. Public services do not produce an output that is sold in competitive or protected markets. Hence, there is no profit element. A private firm would, on the other hand, have profits that they share with workers who were instrumental in generating such profits, either though salary increases or bonuses. This is a standard model in determining salary increases when productivity is pecuniary. 

The output of public services in not that obvious. Free education produces a skilled population that would ultimately join the workforce and increase national wealth. However, this cannot be directly linked to the Ministry of Education. Public health increases the wellbeing of the population and contribute towards a healthy, productive population. The benefits of this is realised elsewhere through increased productivity, mostly in the private sector. Public services therefore act as a facilitator in augmenting productivity, but does not directly engage in the production of outputs. Increased production should result in increased tax revenue, and provide some justification to support salary increments for public servants. However, just the existence of public services is not a testament to their productivity. To warrant salary increases, it should be possible for the public service providers to show improvement in services they provide and their benefit. If such improvements are real, then it is reasonable to assume that benefits of those improvements are realised elsewhere in the economy.

Determining public 

service salaries

As public servants’ salaries are funded by taxpayers, salary scales are determined with a lot of restraint. They are never really comparable to private sector salaries, as a government is unable to show clear return to the wage bill for the reasons mentioned above. Further, job security, non-contributory pensions schemes, tax free income (unique to Sri Lanka), as well as less competitive work environment, render public sector salaries generally less than that of private sector. Further, it is more than likely that public sector appointments are not made through a competitive and transparent process. Therefore, it is unlikely that the contribution of public servants is anywhere near the compensation made. This makes it that much more important that the public in general have a clear perception of the value of the contribution made by public services. Although some Ministers may try to justify exorbitant salaries for top officials in Government departments, Banks and corporations, the only true test is whether such individuals could secure comparable employment with a similar benefit package in the private sector. Considering the debacles that have occurred in Government and affiliated institutions, it is unlikely that most of these individuals drawing astronomical salaries and benefit packages would have marketable skills outside their protected enclaves. However, in true Sri Lankan fashion of insolence and disdain towards public welfare, it is easier to justify status quo rather than fix the problem. 

The main reason for unjustified benefit packages at one end, and strikes at the other end demanding higher wages, is the lack of performance agreements or targets in employment contracts. Also, there is no set of agreed procedures to express their disagreements. This allows them to stage work stoppages at any time, with little or no notice to the public. In the UK for example, public servants have the right to strike, but such action must be discussed well in advance with the management, to minimise the inconvenience to the public. When junior doctors went on strike a few years ago demanding better work condition and contracts, it was framed in such a way that the existing working conditions would endanger public safety, due to over-worked medical staff. This led to widespread support, as the public believed NHS staff do work under extreme pressure. Also, enough staff were on duty to handle emergency and essential medical services. There was no real threat to public health, other than postponement and rerouting of operations and other non-critical medical services. Most other public sector strikes are also done while justifying benefits to the public, and not purely for personal gains. It is only with public support that public sector strikes can be justified. Railway workers striking for more pay and benefits, or medical professionals striking asking for better educational opportunities for their children, does not constitute clear benefits to the general public. 

Setting and 

meeting targets – the SMART principle

The underlying conundrum however is how to measure the productivity of public services? One of the most straightforward ways is for each Government Ministry/Department is to set targets or goals. These targets are both for the short-run, as well as for the period of the administration (long-run). For example, the Agriculture Ministry could set a short-term target to increase the rice production by x% in the next season, and a long-term target of increasing average income of farmers by y%, say in 5-years’ time. While the first target is measured within a pay review period, longer-term target is monitored year-on-year to see whether desired progress is being made. Both targets together, if met, justifies rewarding agriculture sector public servants. The amount of this reward and the manner it is awarded should be negotiated with the relevant unions at the outset and agreed up on. This leaves no room for dissent.

To be meaningful, these targets have to be based on SMART principle. S implies that the target should be (S)pecific and not an obscure meaningless statement. For example, increasing the rice yield is a specific target while ‘improving agriculture’ is not. It should be (M)easurable, such as increase rice yield by 5%. The target should also be (A)chievable within the current environment and it should be (R)ealsitic. Increasing the rice yield by 20% in the next season may be achievable but may not be realistic. In Sri Lanka, however these are the types of targets that we routinely come up with. Good example is make Colombo like Singapore within 5 years or so. Finally, the target is (T)ime constrained, giving a definitive period to meet the target. Therefore, a target such as increasing the rice yield by 3% in the next season may be SMART, while making Colombo like Singapore in the next five years is not.

If short-term targets are met and progress is made towards long-term targets, there should not be any controversy in awarding pay increments to employees of such a Ministry or Department. These targets should be agreed on in Parliament. After that, they become contracts between the Government and the public. In the UK for example, all such targets related on health, education, transport, etc. are made public, and Ministers are routinely quizzed on their progress towards achieving ministerial targets. 


departmental budget

Another way a department can support salary increases is to manage their budget, prove efficiency savings and justify funds from the treasury. In the UK, during the austerity period, department budgets were cut year-on-year, and these savings were used to award modest salary increases. No new funds were made available. Salary increments were entirely supported within allocated budgets with no new tax burden on the public.

In Sri Lanka, on the other hand, regardless of what the country is going through and the performance of Ministries, huge sums are allocated primarily to non-productive ventures such as importation of vehicles, building new offices, or refurbishments of old ones, and handing out even more benefits to the already over-bloated benefit packages of top public servants. The benefits of this expenditure is not clear. Generally, every rupee spent on public services should be justified by an associated benefit. 

What should not happen?

The current trend and practice of ad hoc pay agreement with a specific group of individuals is not sustainable or desirable. Invariably, another group would demand the same, leading to a new set of strikes - and without associated increase in productivity, this only leads to more inflation. In addition, these disputes should be solved by the relevant Minister, and not by the President or a Deputy Minister of another Ministry wearing a shirt one size too small! What is the point of appointing Ministers if they do not have the authority or the capability of dealing with affairs of their own Ministries? In crisis, the President and the Prime Minister should back their Ministers and require them to bring about a solution, and not undermine their authority by trying to solve the issue by themselves. This is poor management and running of public services.

Public servants should not be led to believe that salary increments are awarded on the need basis, and not related to what they actually deliver. It was reported that the loss from the recent railway strikes was over Rs. 70 million, and yet these individuals are apparently guaranteed a salary increase by the President. With this loss, there would be corresponding decrease in tax revenue, so where is the money coming from, unless they are required to make some efficiency savings? 

What innovations and improvements has the railway department taken over the last few decades? Has any of the Ministries have taken any steps to reap the benefits of ending the war? With the recent surge in the influx of tourism, there could be several profitable services that can be run all over the country. Yet we are confined to the same dingy and noisy trains and dilapidated stations. My village station has not changed in over 50 years or so, despite the rapid increase in the population and business activity. I am sure the train services are just the same. 

We may have some of the loneliest highways in the world. Highways should be busy transporting goods to and from Colombo Port, which is an outward sign of increased economic activity. The pleasure trips taken by the rich during the weekends do not create new economic activity, but simply redistribute expenditure from one area to another. Recently the Prime Minister admitted that we need an export-driven economy. If he is serious about this, without just mentioning the building of new roads and grandiose village transformation initiatives, he needs to ask each Ministry/Minister to come up with specific targets and hold them responsible for delivering them. New roads by themselves do not generate new wealth. Venezuela has some of the best roads and immense oil reserves. Yet today, it is facing a crisis of epic proportions with an exodus of its citizen to countries that were even poorer. 

Delivering a capable 

public service

This requires sensible Ministries headed by capable Minsters who are intelligent managers and not afraid to take decisions. They do not need to be subject matter experts, but should be supported by efficient and capable civil servants, who have the expertise to analyse various policy scenarios. There should be senior civil servants who advise the Ministers, and it is the duty of the Minister to take appropriate decisions to achieve set targets within the given political environment.

Unlike several decades ago, today we have a much-educated workforce. But they are stuck in places where there is little opportunity to contribute. We need to harness the capabilities of these individuals and train them to be capable technicians. They should be depended upon to make appropriate analyses and recommendations, based on facts and figures, and not cater to the whims and fancies of Ministers or their cohorts. Ministers or their staff should be prohibited from approaching these civil servants or influencing them in anyway. This way, Ministers are given impartial objective advice and it is up to them to make the appropriate decision. 

None of this costs a great deal of money. All we need is the willingness to reorganise the functioning of the Government in a sensible way. Create a few, manageable Ministries covering broad and sensible subjects areas such as transport, health, education etc. Just look at some of the Ministries that we have. Minister of Science, Technology, Research, Skills Development & Vocational Training and Kandyan Heritage! Does this make any sense? What is Kandyan Heritage has to do with science and technology? Then there are two Ministries - Minister of Irrigation and Water Resources & Disaster Management and Minister of Fisheries & Aquatic Resources Development and Rural Economic Affairs. I guess there is some difference between water and aquatic resources that is not discernible to the public. Then there is the Ministry of Agriculture and there are other Ministries with some elements of agriculture, including development. The purviews of these Ministries and how they function without cross-conflicts on jurisdiction should be a matter of significant public interest. Then, I believe, there are other several other layers of administration at regional and local level. How does all this bureaucracy function effectively?

Can we make the Government much simpler? This is the crucial first step in delivering an efficient public service – reduce the size of the Government and eliminate all redundant layers of administration. At the end only a few, sensible Ministries should exist with clear-cut responsibilities.

Then it is necessary to recruit and train capable civil servants. They should, at the minimum, have a university degree, and should be taught relevant skills to carry out their duties. These should include technical skills such as economics, statistics, and policymaking, as well as softer skills on presentation and communication, as well as person and management skills. Ministers should be proven managers. They will naturally be politically affiliated, but they should be sworn to serve the public, not just those voted for them. Recruitment of all levels of civil servants and officials of other Government bodies should be externally monitored and qualifications made public at top level. 

Clearly, Sri Lanka is at a crossroads. It is clear that unless significant social changes occur, the future of the country will be under the influence of foreign governments, and Sri Lankans will merely be pawns of foreign chess games. There are already indications of this transition, where foreigners have increasingly become belligerent, knowing that their governments keep us afloat. This would not have happened even a few years ago. This has already happened in many African countries, where massive foreign investments have enslaved the local population. However, there are other countries, similar to ours, who have not sold their independence to others. I recently saw an interview of a very intelligent Philippines Foreign Minister. He said, Philippines does not consider any country to be their friends or foe. They will have relations with USA, Russia, or China, as long as it benefits them. They are not going to bend over back to appease any country at the expense of a beneficial relationship with another. Despite the controversial actions taken by their President, he has the support of 70% of the population, and respect of other leaders. On the other hand, our leaders are hell-bent of handing over our resources to foreign governments to appease them. Their management approach appears to be that if you give one piece to one country, something else has to be given to be given to the other country to keep them on the good books. Running the country this way does not require such a large Government. All we need to do is to outsource the management to foreigners, and sit on our backsides and just enjoy the scraps that they throw at us.

(The writer is a Senior Analyst at HM Revenue and Customs, UK.)