11 July 2013

Highly Diffused Government #nlpoli

By now, plenty of people in Newfoundland and Labrador have likely heard finance minister Jerome Kennedy’s comments about his party’s last election platform.

“You used the word promise,”  Kennedy said to the Telegram’s James McLeod.  “I’m not sure that the Blue Book can be described as a promise.”  Kennedy said that the platform contained a bunch of what he called “initiatives” that his party planned to implement between 2011 and 2015.  Everyone had to bear in mind that “there’s always the caveat that the commitments will be made having regard to the fiscal situation of the province.”

Make out of that what you want.  Some people have already made fun or harrumpfed through the odd Tweet or two.  McLeod noted in an story on Wednesday that Kennedy’s new warning about calling them “promises” is at odds with the Conservative during the election.

What’s more interesting thing to what McLeod might call a political uber-nerd is what the transcript reveals about how the Conservatives operate.

For starters, there’s his description of the process the cabinet goes through to decide on how much the government will spend every year. 

How high will we go?

Around October every year, departments decide how much they’d like to spend, according to Kennedy.  over the next few months a non-descript group called “we” come up with a general idea of how much spending will rise.  They might put a specific figure on it or talk about a percentage but it is a “notional figure” according to Kennedy.

Things don’t start getting specific until sometime in January when they get oil production estimates.  Then they can be more specific about how much more they will spend.
“…so it’s a process that continues for a period of four or five months until, at the end of the day, at the end of the budget process, we say we set a target of new spending of $100 million, we’re at $110 million. Can we live with that? Or we’re at $90 million; do we want to add $10 million more of initiatives that we previously decided may not have the same priority?”
Basically, Kennedy is describing a fairly open-ended approach to budgeting.  The only question the Conservatives answer every year is how much more than the previous year they will spend. 

In the interview, McLeod points out that the Conservatives had committed to set a ceiling on spending.  He logically describes it as a number cabinet would sett.  The challenge for cabinet would be to decide what to lop off in order to stay under that ceiling. 

The Treasury Board System

This is not only a logical issue, it’s basically the way people ought to budget in life.  Essentially it is how cabinets across the country have worked for decades. It’s called expenditure management and within any soundly managed government, treasury board has historically been one of the most hated but important cabinet committees. It’s the internal management board for all government, responsible for everything from staffing issues to spending controls.

By September or October of any given year,  cabinet would have a broad idea of what the revenue projections are for the following year.  They come – typically from the finance department since they are the people whose job it is to manage the income side of government’s budget.  Cabinet can set some broad targets, like setting a maximum increase or putting a cap.  The job of sorting out the details would normally fall to treasury board.

Departments would develop their plans based on the likely income,  the spending targets and any other direction from cabinet. By Christmas and certainly by early in the new calendar year,  departments would make the parade in front of the senior ministers who make up treasury board. One department after another,  the minister and his or her senior officials make their pitch on how they want to spend money. This can be a hated process because it often involves hard decisions.  The final decision on everything belongs to cabinet as a whole but in practice, treasury board has usually been the place where the big fights happen.  The stuff that went to cabinet was all done in four-inch wide brush strokes while at treasury board they were using very sharp pencils.

To help make the system run,  treasury board used to be a separate department on its own, distinct from finance, with its own deputy minister. Even in administrations with a single minister of both, they kept a separate deputy. That helped to ensure that the income and the spending sides of the government house had separate people to fight the side. 

If you think about the process just outlined, you can appreciate that the treasury board ministers would have a complete view of the entire government, right down to the last penny.  A minister like Kennedy, who has served on treasury board for some years ought to be able to answer every single question on everything.
Notice, though, that when McLeod talks about the things Kennedy should know in detail – spending priorities – Kennedy automatically points to the minister for the department.  When McLeod asks about things that happened before Kennedy took on the finance job for the second time, he says he knows nothing about that. 

Now Kennedy could be just bullshitting big time, but frankly he has said this sort of thing before.  Other ministers, including ministers who sit on treasury board,  have done the same thing.  He seems sincere enough that we should take Kennedy at his word.  More than that, though, the process Kennedy has outlined is so different from the historic operation of the treasury board system that he sounds plausible when he sloughs off responses on some issues to other ministers. 

To clinch it, Kennedy describes the finance minister’s role in a rather curious way. It’s worth quoting another big chunk:
“…the ministers develop their requests and their proposed budgets for the year. They come to the minister of finance who goes through them with him or her. The minister of finance then takes it to cabinet and cabinet engages in an extensive process reviewing the requests and determining priorities. So the minister of finance is simply what I would describe as the quarterback for the budgeting process, and not the decision-maker. The decision-maker is the cabinet in the final result.”
Anything Goes

Cabinet as a whole is always the final arbiter of everything.  What makes the Conservatives different is that they appear to have systematically eliminated or neutered all the mechanisms cabinets have traditionally relied on to keep control of spending within government.

If we take Kennedy’s comments at face value, the Conservatives use the entire cabinet to make the decisions.  Given the size of government and the amount of work done at cabinet,  they can really only deal at a very high level.  They will focus on gross totals and leave it to departments to sort out the fiddly bits.  Cabinet doesn’t seem to be the place for much detailed discussion with specific departments being left to Kennedy’s idiosyncratic coaching.  That would explain, for example, how Darin King could make such a monumental failure of budgeting this year. In the proper treasury board system,  King would be the minister but he would have support from his colleagues who would test him, question him and his officials and fix problems before they got out into public.

Collective management should support the collective decision-making of cabinet by intervening before problems hit crisis proportions.  A proper treasury board system would also have prevented the sort of fiasco in health care administration the Auditor General described in 2012.  SRBP  discussed the treasury board issue at the time.

What seems to happen these days is that ministers are pretty much left to their own devices in the Conservatives’ post-2010 incarnation.  The sort of spending approach Kennedy describes is also consistent with a cabinet where everyone is doing their own thing with only a modest amount of co-ordination.  It is also consistent with a cabinet that has apparently eliminated one of the main ways of keeping everyone on the same page:  they have done away with the planning and priorities committee of cabinet. This sort of loosey-goosey approach, complete with the lowest common denominator decision-making inherent in spending that only goes up also fits with a cabinet that can’t co-ordinate communications effectively.

After 2003 and before 2010, the Premier’s Office ran everything.  Danny Williams and his personal staff kept control of everything, even at the expense of being able to do only one big thing at a time.  This was serial government.  You can see a sign of this degree of centralization in an incident that came to light during the Cameron Inquiry.  The deputy minister of health sent a briefing note to the Premier’s Office and didn’t show it to the minister. Such an incident would be unthinkable in a world of the sort described by former Clerk of the Privy Council  Gordon Osbaldeston in his 1988 book Keeping deputy ministers accountable.  The Premier picked deputies and assistant deputies by prerogative, but the cabinet appointed them so that they were accountable to cabinet as a whole.

But keeping the minister out of the loop was perfectly consistent in the sort of administration in which the deputy minister was appointed by the first minister and was, in truth, accountable only to him or her.  The deputy minister in that situation delivered a report to his boss that his boss had requested. He knew where power lay.  When he testified at the Cameron inquiry, Danny Williams may have gone to lengths to claim he controlled little.  Nothing was further from the truth.

No one was overly concerned with controls on spending because they had too much money to spend any way.  In Williams' wake, though, the Conservatives selected less of a leader and more of a designated spokesperson. In the process, the Conservatives appear to have gone from overly-centralized decision-making to what is arguably the most diffused power arrangement ever seen in Canada. “I’m not aware who wrote this, who put this in the Blue Book, what exactly they meant,” Kennedy told McLeod about a key part of the Conservatives’ financial commitments in their platform.  Unthinkable before now, even when Williams made decisions like the initial budget freeze in 2004 without telling the whole cabinet.  Part of Williams' control was making sure everyone sang from the same hymnal of talking points.   These days, guys like King and Kennedy are on their own, making it up as it comes to them.

What Kennedy describes for McLeod is the budget system as he found it in 2007.   When McLeod gives Kennedy the chance to discuss anything else, Kennedy just mentions the budget process.  Kennedy says it is “a well-thought-out process, one that’s been utilized over the years and involves the committees of Treasury Board, Economic Policy and Social Policy.”  The thing is that the system Kennedy described and his role in it just doesn’t look like what the provincial government has utilized for years. It's just bizarre.

It's not surprising Kennedy would have such a misunderstanding. Kennedy likely has no idea how things used to run in 1997 or 1992 or 1982.  Kennedy apparently assumes that what he and his colleagues do is much the same as what everyone before has done.

Truth is that these guys apparently are doing things very differently from the way cabinets before now have run government. In the system they pieced together after Williams’  shockingly swift departure, Kennedy and his colleagues may have kept the trappings of their old set-up but key elements  - like actual control - are missing. The all-too-obvious result is that they have a hard time setting plans and sticking to them.  Jerome Kennedy's interview on Tuesday has helped us understand why.