Getting the most out of public spending is a challenge that ministries of finance, education and health grapple with daily. Much of this relates to sector-specific policies such as what health services should be delivered. However, how public spending is managed also matters for the efficiency, equity and accountability of service delivery. The fact that service delivery is highly decentralised in many countries means that how public spending responsibilities are arranged across levels of government is an important aspect of this. There are numerous, often complex, different inter-governmental configurations, and their effect on service delivery financing tends to be underappreciated.
Over the last decade, international organizations have increasingly focused on the link between public financial management (PFM) and service delivery. The retreat of bilateral donors from general budget support has led them to pay greater attention to how PFM reforms can better support service delivery, rather than improving the quality of public spending more generally. At the same time, the importance of aid for financing service delivery has been declining across many countries. This has prompted organizations such as the World Health Organization and the World Bank to focus more strongly on domestic systems for managing public funds for service delivery.
But while the understanding that PFM matters for service delivery has grown, its direct impact has proven hard to pin down. There is a burgeoning literature on PFM and service delivery that has raised important issues. These include the need to understand trade-offs between different PFM objectives (e.g. reforms that promote fiscal discipline may unintentionally damage sectoral operational efficiency) or how government-wide PFM reforms, such as programme budgeting, are implemented in specific sectors.
But blind spots remain. While PFM is important, it does not operate in isolation, and more attention needs to be paid to the interaction of PFM systems with other public sector systems. Moreover, even within PFM, a focus on the budget cycle can be too constraining. Important issues such as longer-term policy processes for setting allocation formulae, or how inter-governmental fiscal relations are structured can be missed. The growing focus on establishing diagnostics that compare systems to best practices risks overlooking the institutional diversity of government systems for delivering basic services, in particular with regards to the roles of the multiple levels of government involved. Service delivery usually happens at the local level close to the users, but the key role of sub-national government structures in delivering services is often overlooked.
A new working paper series on public finance and service delivery
New research is needed to further unpack these complexities. The Overseas Development Institute (ODI) aims to provide a platform for promoting this new research by launching a Working paper series on public finance and service delivery. This series seeks to draw a wider set of professions, disciplines and country voices into the debate to explore the complex challenges involved in improving spending on public services.
The series will look beyond the budget cycle to understand how resources are allocated, and how incentives for using those resources are shaped across a range of public sector systems. This does not mean abandoning the budget cycle. Rather, just not assuming that it should be the central focus for conversations about improving public spending on services. It will also mean examining PFM as part of the broader system of governance for service delivery. We believe that sharing lessons learned across sectors on specific issues or sub-systems that matter for service delivery will be valuable here.
The series also aims to generate in-depth country case studies that delve into the institutional arrangements around financing and managing public service delivery. It seeks to promote a greater understanding of the diversity of institutional workings, rather than relying on good practices drawn from a handful of international experiences. Here particular attention will be paid to the intergovernmental architecture and the role that local governments and intermediate tiers play in the financing and delivery of public services, in particular in enabling and overseeing local service providers. Studies that can exploit within-country variation in performance across local jurisdictions to shed light on these issues are particularly welcome.
Lastly, ODI seeks to better understand how the relationship between public finance and service delivery is also shaped by broader political considerations. We hope that the series will explore the politics of public spending choices and financial management reforms, and the incentives this creates.
Soliciting contributions to build this new agenda
ODI is calling for proposals and papers for the working paper series. We welcome these from a wide range of PFM, sector finance, and fiscal decentralization experts, practitioners, and researchers from all disciplinary backgrounds. As well as more conventional qualitative, quantitative or mixed research, we welcome submissions from practitioners, such as advisors or government officials, who are intimately familiar with the service delivery and financing systems and have valuable insights and lessons to share.
Successful submissions will be offered financial support to carry out their research project or write up their insights into a working paper. More detail on the series, and the agenda animating it, are set out in the first working paper, Public finance and service delivery: what’s new, what’s missing, what’s next?