Saturday, January 9, 2010

Can the private sector do it?

There was some interesting back and forth through the fall about whether the private sector could fulfill the role of the PBO. I argued no.

But, in the UK, it strikes me that many aspects of what the PBO does in Canada are currently covered very well by something called the Institute for Fiscal Studies. The IFS doesn't do macro forecasting, but they do look at the budget balance on a monthly basis. They also do extensive evaluations of the annual budget, and of particular policies. The IFS is a registered charity, with very diverse funding sources.

We have lots of thinktanks in Canada, and some really interesting and well-done work comes out of them now and again. But, I think even people from our leading thinktanks would agree that none in Canada reaches the combination of academic and policy credibility that has been accumulated by the IFS. Some might come close on particular items, but not with the scale or depth of the IFS.

So, why don't we have an IFS in Canada?

In my view, an important aspect is geography. In London, you have the business, academic, and political centres of the country all accessible by a short tube ride. (Even Oxford and Cambridge are only an hour by express train.) Someone could hold office hours with students in the morning, attend a workshop over lunch at the IFS, then give a presentation to government or business officials in the afternoon--and then be home for dinner. Hard to do in Canada.

By the way, when I visited the IFS for a couple of days in the Fall I heard that the Canadian PBOfficer had been in London the previous week. The Conservatives have proposed a similar institution for the UK should they win the next election expected this year, and people in the UK are interested to hear the Canadian experience. It will be interesting to watch what happens in the UK.

(Speaking of elections in the UK, wouldn't it be cool to announce results with all candidates together in person like they do in the UK? Love those big party ribbons they wear. It would be so fun to watch the daggers emanating from the eyes of the losing candidates.)

So, to sum up, the IFS experience suggests that it might be possible for the private sector to perform many of the roles now allocated to the PBO. However, we might have to geographically shmoosh Ottawa, Toronto, and Montreal together in order to get the required convergence of factors. Moreover, the PBO is clearly doing things now that were not being provided by the private sector pre-PBO, so I don't know why we would expect the Canadian private sector to suddenly change what they do in the absence of the PBO.

An upside to not being independent?

This week, we learned that the Parliamentary Budget Officer will continue to report even though Parliament has been prorogued. In the Globe, it was reported that this is possible for the PBO because it lacks independence.
The fact that Mr. Page is able to release such reports is due to the unique structure of his office. The Parliamentary Budget Office operates as a division of the Library of Parliament. Mr. Page has expressed concern about this arrangement, arguing that he should be an independent Officer of Parliament. There are currently eight such officers – including the Auditor-General, the Privacy Commissioner and the Conflict of Interest and Ethics Commissioner.
This is a cute quirk, but it doesn't change my mind that on balance there is more to be gained from independence than being a vassal of the Library of Parliament.