Fiscal Advice for Governments

The TD Bank reported today that the cumulative deficits of the Federal, Provincial and Territorial governments will add up to $90 Billion this year. And today, the government of Ontario announced a record-breaking projected deficit for this fiscal year of $24.7 Billion and projected deficits of $21.1B in 2010-11 and $19.4B in 2011-12.

These numbers are staggering and governments will not be able to return to balance in the next 5-10 years unless they take a different approach than has been done in the past. Past expenditure management initiatives have traditionally been "across the board" in nature with a strategic approach being an exception rather than the rule. But what is facing governments across Canada is quite different than in the past.

So what is a government to do today? Well here are some thoughts to assist in dealing with this situation to add to my previous blog....

1. Focus on the core activities of government - decide on what is the function of government.

2. Get out of activities that are not part of the core responsibilities of government. For example, is it a core function of government to issue cheques? Why can't that be done by the private sector under a stringent service level agreement?

3. Review remaining functions of government to ensure that they are being run as effectively and efficiently as possible. Implement a lean approach to these activities - there are lots of examples in the public sector of organizations that have implemented a lean approach to it processes resulting in higher productivity, quicker turn around times and increased through-put.

4. Ensure that the tax regime raises the funds required to deliver the services that society has decided is needed from government. It is a fallacy to believe that you can have gold plated level of government services with a very low tax rate.

5. Use evidence to make your decisions and set up measurable outcomes to track progress on your activities.

6. Don't spend your time on little nickel and dime amounts. Remember that it takes just as long to review a small program with very limited spending than it does to look at major expenditure areas.

7. Be careful of unintended consequences of your actions - take a systems approach when looking at spending as a reduction in one area may result in a new pressure in another area.

8. Continue to invest in your staff - put your money where your mouth is when you say that your staff are your best "resource". If you truly mean that, then they also need to continue to develop their skills and share experiences with peers across Canada.

This will not be easy and will require for government to act courageously (as Sir Humphrey would say) and look to the long term.