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Stop “Use it or loose it” culture in public sector

Comment 6th July 2010

1) Change the process so that it no longer incentivises budgets to be fully spent.

2) Incetivise public sector staff and managers through bonus and appriasal to underspend on their budgets whilst appriasing them on the delivery of service.

Why does this matter?

Currently, public sector staff and managers are allocated budgets out of their department's budget.  They are generally appraised on deliverging service but not on what they spend.  They do get appraised on overspending on budget but are not rewarded if they come underbudget.  In theory this should maximise the service delivered for a set budget but in practice it results in waste and inefficiently made discretionary spending to close out annual budgets.

Further, budgets are carried over from year to year so if someone underspends in one year then they know next years budget is cut.  Therefore they make sure they spend their budget in full.

Consequently, the public sector is heavily incetived to make sure they spend all allocated budgets and neither to over spend or under spend against budget.  This has engrained inefficiency over many years.

There is strong evidence of there use it or loose it culture e.g. you can see it through tracking through spending behaviours in COINS – departments generally spend to budget.

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