Monday, 24 April 2017


Just before Easter, the Minister of Finance and her officials laid out 65 pages of cuts to government expenditures. This was the result of a process known as "zero based budgeting" (ZBB), a process which requires justification for every individual expense. There is nothing inherently wrong with ZBB. Processes like this one have their place as long as their limitations are understood.

Anyone with a basic understanding of how government functions will recognize that it takes a great deal of work to perform ZBB on an $8 billion operation. While periodically necessary, if it is ill-timed it accomplishes little more than giving licence to the folks in the Treasury Board to "be busy being busy".

But it does give the public the appearance that the Minister has her "sleeves rolled up" — another euphemism for action with little purpose — and Bennett wants to create the impression that she is assiduously tackling the deficit.  

Amidst all this hurly-burly $65 million in savings is being sought as government attempts to achieve a cost reduction target of $283 million — without causing significant layoffs.

Examples of the Minister’s ZBB achievements include "a $13,000 reduction to the supply budget in the endangered species and biodiversity department and $5,000 less to the Supreme Court for property, furnishings and equipment". 

It all sounds like good stuff. So why not just get on board?

The first problem is obvious. 

It is difficult to find $65 million in $5,000 — or even $15,000 — tranches. Just do the math on the number of cuts needed to hit that mark. Equally problematic is that many of the savings are merely perceived. They are costs that will reappear next year. The permanent kind are the ones the government badly needs.

An example of “temporary” savings is the cut in the budget for furnishings and equipment at the Supreme Court. Like a worn nail that won’t stay down, it will need to be hammered again and again. Expenditures on things like equipment, meetings materials, phones, stationary, travel — the normal requirements of running programs and services — are not saved but only temporarily delayed.

ZBB is most effective when it is conducted within a stable operating business environment.
The government has gone through great pains to demonstrate that it is removing layers of management from the public service, especially at the Director level — ostensibly to re-align responsibilities and to reduce duplication.

It would make far more sense if ZBB is conducted following the paring of senior staff and the completion of Departmental changes. At that stage, managers, directors or ADMs, having assumed larger roles, would be knowledgeable enough to make assessments about their enlarged responsibilities and the expenditure reductions that can reasonably be afforded — a process that should be above just pleasing the Finance Minister.

ZBB would make even more sense if it is conducted after the really big decisions on fiscal reform having been taken — presumptuous as that may seem.

The goal of cutting $283 million from operations this year — not nearly enough, given the high risk to achieving forecast revenues — is all about crafting illusion.

In the same way that you can’t make an omelette without breaking eggs, the real deficit — over $2 billion, which the Budget papered over with a bet on the price of oil — can’t be resolved with a bunch of nips and tucks. Our problem is chronic overspending on a massive scale.

Real and lasting savings can only be achieved with a serious paring of government programs — and, ultimately, the people who operate them. Government has clearly stated that significant staff reductions have been taken off the table. Yet, when the cost of labour represents about 46% of operating costs, how can ZBB be much more than a charade?

In addition, the deficit can't be tackled only by the "core" public service. The process has to include a terribly inefficient healthcare system simply because it represents 36% of government spending. The process has to include other sectors of public spending too.

When the government gets around to making some of the big decisions to cure overspending — the surgery having been performed — then ZBB should follow.

Politicians like Bennett are elected to make those decisions — not to bamboozle us with a charade.

Zero Based Budgeting? The Minister of Finance, like many of her officials, is just busy being busy.