1 This paper provides information on the Government's proposals on the second phase of the Enhanced Productivity Programme (EPP) as a basis for the Panel briefing on 21 December.


2 Enhanced Productivity Programme aims to achieve an appropriate response to the current economic situation, offering reassurance to the community that the Government is achieving the best value for money from public sector expenditure at this difficult time. The Chief Executive has asked the Chief Secretary for Administration to lead the overall programme, which is being pursued as two phases :

  • The first phase will deliver short-term quantified productivity gains. This phase is led by the Secretary for the Treasury and co-ordinated by the Finance Bureau, and is the subject of Agenda item IV on which Finance Bureau is providing briefing.

  • The second phase will address fundamental issues so as to secure a sustained improvement in public sector productivity. This phase is led by the Public Services Policy Group chaired by the Chief Secretary for Administration and co-ordinated by the Efficiency Unit.

This paper focuses on the second phase.

3 Both phases have already commenced. Although some of the elements in the second phase will take longer to deliver results, the potential gains are significant and we need to make a start now or they will remain out of reach. The two phases are therefore being pursued in parallel.


4 For some time Government has been pursuing improvements in the management and delivery of public services through the 'Serving the Community' programme. EPP is the next step in this process and will seek to :

  • Achieve a sustained improvement in public sector productivity.

  • Contribute to a shift in the resource management culture, ensuring that civil service managers continually review their use of resources to ensure that they are used to best effect in delivering the Government's policy objectives and priorities.

  • Provide managers with the resource management flexibility they need to operate in this way, whilst also ensuring clear accountability for delivering results.

Activities within the second phase

5 The main activities within the second phase are :

  • Improving accountability and performance review.

  • Fundamental expenditure reviews.

  • Tailored management frameworks.

  • Re-inventing front-line services.

  • Transforming support services.

  • Reviewing and developing human resources flexibility.

  • Communications.

This paper now briefly describes each area.

Improving accountability and performance review

6 Alongside this year's Policy Address the Government published policy objectives covering all its activities. These policy objectives specify the outcomes and outputs that Government is aiming to deliver for the community, the steps we are taking to achieve these outputs, and the basis for measuring success. These policy objectives will now form the basis of results driven performance review within Government.

7 To date public sector financial arrangements have focused on line by line voting and control of expenditure. Whilst maintaining effective control of overall expenditure is vital, this level of detailed control can prevent managers from making the most effective use of resources.

8 The traditional approach to control has flowed in part from the limited developments in defining and measuring what is being achieved from expenditure. The new policy objectives provide an overarching structure for defining and measuring outputs (and eventually outcomes), allowing us to strike a better balance on accountability, which is currently focused on inputs.

Fundamental expenditure reviews (FERs)

9 There will be a phased programme of FERs to examine major areas of Government activity. The FERs will be top-down, policy driven and will consider fundamental issues. This will include whether policy objectives could be achieved more efficiently and effectively by alternative means, and whether activities still need to be carried out by the Government. The FERs will start from the Government's published policy objectives. The outcome of each FER will be a rigorous picture of the policies, activities and resources devoted to the policy objective, together with agreed proposals to maximise the impact achieved from those resources.

Tailored management frameworks

New trading funds and increased flexibility for the trading funds

10 The challenge at the heart of EPP is to shift the resource management culture so that managers continually review and challenge their use of resources in order to maximise their contribution to delivering the Government's overall objectives. The introduction of trading funds has already been successful in engendering a more proactive and entrepreneurial management culture in the funds created to date. The funds have been given additional flexibility in managing resources in exchange for sharper accountability for delivering results, and this has led to increased productivity. As part of EPP the Government will be examining the benefits of giving additional flexibility to the trading funds (for example on staffing and procurement), and the creation of additional funds. One group of candidates is the internal service departments, following the precedent of Electrical and Mechanical Services Department where trading fund status has led to significant improvements.

New agency frameworks

11 Government is also considering a proposal for a new managerial framework for selected departments (for convenience called an Agency framework in this paper) combining increased flexibility in resource management (both financial and staff), with sharper accountability for delivery. Financial flexibility might include proposals such as end of year flexibility, multi-year budgets and budgets net of revenue. Staffing flexibility might include proposals such as making greater use of contracts and varying normal employment terms and conditions. Clearer accountability would be achieved through a requirement for output statements linked explicitly to policy objectives and targets for measuring success. These outputs statements and targets should be the centrepiece of business plans linking resources to outputs.

12 The Agency approach could operate in selected, volunteer departments that met the criteria for improved accountability, rather than being applied across the board. Some of these changes might involve legislation. To minimise disruption, the change could be introduced through a separate ordinance, rather than an amendment to the Public Finance Ordinance, thus following the precedent of the Trading Funds Ordinance. Such tailored management frameworks draw on overseas developments, where many governments, including New Zealand, Australia, the US, Singapore and the UK, have introduced new management frameworks to reflect the different operational and managerial requirements within the executive arms of government.

Re-inventing front line services

13 The use of technology and streamlined operational processes can improve productivity significantly by allowing services to be delivered in new ways. For example, significant effort goes into handling telephone and other enquiries from the public and following them up. It can be difficult for the public to know which department to call, and the process of dealing with enquiries is much less efficient if calls are passed from department to department. A different model is to set up call centres to deal with particular issues. Such call centres would provide one-number convenience for the public and improve efficiency by dealing with most queries at the first point of contact. Call centres could use technology not just to make sure that staff have the right information at their fingertips, but also to deploy resources to respond to a problem. The Efficiency Unit is currently carrying out a feasibility study on call centres.

Transforming support services

14 Support services inevitably represent a significant part of total government expenditure. Whilst effective support services are essential to front line delivery, we must ensure that they are delivered in the most cost-effective way. Often support services are managed as an add-on to other duties, and represent a distraction for already stretched managers. In the private sector and other governments there are moves to manage support services differently, for example by bringing together support processes in one location, using specialist managers and staff. Sometimes this is linked to outsourcing the work. Often it is necessary to take a cross government or at least cross-departmental view of support services to realise the potential of such improvements. Recent work on records management has given us a good indication of the potential benefits from this approach and we see similar opportunities in many other areas, including personnel records, some financial processes and despatch services. These are being worked up into more detailed proposals.

Review and develop human resources flexibility

15 The Civil Service Bureau is leading developments on increased human resources flexibility for managers. As staff are the largest and most important resource for delivering services to the community, increased financial management flexibility will mean little unless matched by flexibility in managing staff.


16 In order to kick-start the programme and ensure that bureaux and departments know what they need to do, the early focus of communications has been on the short-term phase. As we move forward it will be important to give the broader messages, and in particular to set EPP in the context of the Government's on-going efforts to improve the management and delivery of public services. To achieve this we will be organising a second Serving the Community Conference early next year. We will follow up the conference with a series of seminars on selected topics to assist bureaux and departments in achieving productivity gains.


17 Through EPP we are seeking to secure lasting improvement in public sector productivity. It is the latest step towards achieving our aim of a world class public sector, one that sees us recognised as :

  • Accountable and responsive to the community's needs.

  • Focused on delivering clear outputs and outcomes.

  • More concerned with ensuring needs are met, but less concerned with meeting all needs through in-house services.

  • A provider of efficient and effective public services.

  • Economic in the use of resources.

  • Customer friendly.

18 We are not underestimating the difficulties associated with this latest step, not least the need to balance control of inputs and economy with broader accountability for outputs and outcomes.

19 This raises issues that will need to be debated and addressed, not least the scale of the managerial flexibility to be offered and the timing of any proposals. That is why the proposals have been included in the second phase. LegCo's views and comments on the proposals will be important in helping us shape the development of the proposals.

Efficiency Unit
December 1998