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Speech - ‘Challenges in coordinating and governing public services in times of crisis and reform'

European Commission - SPEECH/13/1050   09/12/2013

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Commission européenne

Maroš Šefčovič

Vice-President of the European Commission responsible for inter-institutional relations and administration

‘Challenges in coordinating and governing public services in times of crisis and reform'

COCOPS (Coordinating for Cohesion in the Public Sector of the Future) conference /Brussels, 9 December 2013

Ladies and gentlemen

As US President Woodrow Wilson once said: "If you want to make enemies, try to change something".

This, I suspect, is a sentiment that many of us here can understand.

The last few years have forced us to change as never before. The economic crisis has ushered in austerity measures, restructuring and reform on a Europe-wide scale, obliging public administrations to rethink the way they work and adapt to what has now become the 'new normal' of doing more with less.

Change in times of crisis is inevitable.

But it need not be disastrous.

As you've heard today, there are many examples of how public servants across Europe have chosen to react positively to the changes imposed on them, adapting them to their own needs and ultimately making them changes for the better.

Selling the positive aspect of change – whether it is imposed upon us or not – is of course one of the biggest challenges that any public administration faces.

And yet reform of public administration is seen as one of the five main priorities for the creation of smart, sustainable and inclusive growth across the EU – the core of the Europe 2020 strategy and the European Semester that supports its implementation.

Each year, the European Semester economic policy coordination exercise gives us a very clear snapshot of the state of play of reforms in each EU Member State, including with regards to public administration.

The Semester is designed to help Member States better coordinate their economic and structural reform programmes and their budgeting procedures to ensure that the measures they take not only help create jobs and growth at home but, just as importantly, do not impact on the economic well-being of other Member States.

The process starts with the Annual Growth Survey published by the Commission in or around November. Then the March European Council issues EU guidance for national policies on the basis of the AGS. On the basis of these, Member States submit their national plans for growth and reforms or for sound public finances in April.

Then the Commission assesses these programmes and provides country-specific recommendations as appropriate, usually in May or June, which are then endorsed by the European Council usually at the end of June or in early July.

As far as public administration is concerned, the Country Specific Recommendations are often revealing, as they show where the Commission believes individual Member States need to do more to modernise and reform to help generate growth.

This year's CSRs, published in May, highlighted issues in a number of Member States:

In Italy, for example, major reforms of the labour market are undermined by the fact that the administration of public employment services are not integrated with those responsible for unemployment benefit, making it almost impossible to develop effective strategies for helping unemployed people back to work.

In Bulgaria, meanwhile, there are significant inefficiencies in the tax collection administration, which leads to high compliance costs and significant tax evasion.

In Estonia, there are issues regarding local public administrations, which are responsible for providing services such as long-term care, family-support, health care, education and transport but have neither the administrative capacity nor the resources to so effectively.

France, on the other hand, needs to streamline its various administrative layers and competences to generate efficiency savings and gains, notably through greater decentralisation.

I won’t go through the recommendations for every country, and the four I've mentioned are by no means the only countries concerned, but I think you can see that there are still many aspects of public administration where Europe can do better.

The problem is, of course, that 'doing better' in these terms – producing a more efficient and cost-effective service that contributes to economic growth – more often than not translates in the public perception into job losses and budget cuts.

And that is perhaps why public sector reforms can sometimes be so slow to come about.

Public administrations are political organisations. It may be civil servants that actually do the work, regardless of which party is in power, but it is ultimately the politicians who hold the purse strings and make the decisions.

And as we all know, politicians are extremely sensitive to public reaction, and how they manage change can be a matter of political life or death for them.

Selling public sector reform as a positive long-term benefit to everyone – even to those people whose jobs are affected by the changes – is an extremely difficult task, as any politician who has tried to introduce new taxes, merge services or downsize administrations can easily testify.

So why does the European Commission continue to call for reform of public administrations across Europe? There are plenty of people who might think that the Commission is unpopular enough without going down that route as well!

Well, the answer is simple enough: because it works!

But let's be quite clear about this: reform and change does not necessarily have to mean jobs cuts, it does not necessarily have to mean slashed budgets. It is possible to square the circle, to cut costs at the same time as fostering growth and competitiveness.

There are many, many examples from across Europe of how public administrations have managed this change effectively; how they have seen the challenge as an opportunity to do things better.

You've seen several examples today, but there are plenty more to choose from.

Earlier this year I had the privilege to take part in the European Public Service Awards ceremony here in Brussels, where I saw just how creative many of our public administrations have been.

It's interesting I think to see that some of the most innovative and creative solutions are coming from the countries highlighted in the CSRs as needing to reform more effectively.

One of this year's winners at the EPSA award ceremony was the Italian public administration, whose 'Compass of Transparency' project, which gives citizens the chance to check online in real time how effectively laws are being implemented across the country.

The compass has already led to significant efficiency gains, helped reduce corruption and cut costs, through the simple use of 'people power': as there are more than 20,000 different public administrations across Italy, checking their progress by a more traditional verification system would have been cumbersome and costly; making their progress open for everyone to see not only keeps the pressure on the administrations to do their jobs more effectively but also does so at a very low cost!

Perhaps part of the problem with 'selling' the necessary changes that have to be made to our public administrations across Europe is in fact the word 'reform'. As I said before, it is certainly a term that has almost entirely negative connotations, which in the public perception at least tend to overshadow the potential benefits that reform may also bring.

So why don't we use a different word, a more positive word?

How about 'innovation'?

It is perhaps ironic that while we live in a society that is resistant to change, it is also happy to welcome innovation with open arms! Innovation is seen as finding new ways to do things better – which is essentially the same as the reform process, but without those negative connotations!

And there is plenty of public sector innovation to be found across Europe, as the Commission's new European Public Sector Innovation Scoreboard clearly shows.

The Commission launched the scoreboard earlier this year to try to improve our ability to benchmark the innovation performance of the public sector in Europe. It is based roughly on the same principle as the well-established Innovation Union Scoreboard which focuses on national innovation performances, with the ultimate ambition to encourage and facilitate innovation activity across the public sector.

This first EPSIS report does not provide a ranking of countries’ performance, since the availability of data is still limited and does not fully capture all parts of the public sector or all aspects of innovation. However, it is sufficient to give a sense of the strengths and weaknesses across countries.

The initial results show that:

European public administrations are highly innovative, with two out of three public administration organisations having introduced at least one service innovation.

The involvement of managers and employees makes it more likely that a public administration develops process innovations.

The presence of internal barriers to innovation (such as a lack of management support, staff resistance or a risk-averse culture) not only has a negative effect on innovation but also on the government’s effectiveness in general.

The introduction of new and improved public services has a significant impact on business performance. For example, by investing in advanced ICT infrastructure, governments have managed to considerably increase the online availability of public services for businesses.

Companies that report benefits from using improved public administration procedures (such as online completion of government forms or access to online information on government services) are more likely to be an innovator in their own right, and to have increasing sales.

Even from the small sample of public administrations questioned in this first EPSIS report, I think it's abundantly clear that innovative and high quality public services act as a driver of business performance.

In countries where governments manage to provide improved public services for innovation and create a more business-friendly environment, companies show improved economic and innovative performance.

This is precisely why the Commission continues to place so much emphasis on the need to modernise public administrations as part of the Europe 2020 strategy and the European Semester.

The public sector plays a key economic role as regulator, service provider and employer, and accounts for around 25% of total employment and a significant share of economic activity in the Member States. If we want to build an economic recovery in the EU, then the public sector needs to play a major part.

Feedback from public officials interviewed as part of the pilot EPSIS report suggests that further efforts to develop the measurement and benchmarking of public sector innovation would be of interest to most if not all Member States and that this is an area where European policy should continue to show leadership.

And the EU is doing just this in other areas as well.

Many European countries already use electronic procurement to make tendering of public sector contracts simpler and more efficient, but most of these solutions are implemented solely on a national or regional level. PEPPOL (Pan-European Public Procurement Online), a pilot project run by the European Commisison and 17 partners in 11 different EU countries from 2008-2012, was designed to develop and implement technology standards that would effectively bridge the gap between the various national eProcurement systems.
Let me give you an example of how it works:
A French hospital issues a call for tender in the field of specialised microscopes. A small Danish supplier wishes to take part in this tender.

Using PEPPOL, the Danish company can send all the necessary documentation safely and correctly to the hospital, meeting the necessary legal and technical requirements. And, if the Danish company is successful in its bid, the French hospital would be able to send orders and receive invoices in terms of a common set of defined business rules and processes.

This system not only makes it easier for companies and public authorities alike to benefit more effectively from the single market, it also has significant impact on costs. In fact, if such a system was in use across the entire EU, European countries would save about €50bn per year in the procurement of goods. Small and medium enterprises would make an additional saving of approximately €40bn in transaction costs! In times of crisis, when budgets are under pressure, this is a highly compelling argument in favour of change!

The Single Market is arguably the greatest single achievement in the history of the EU – a market of more than 500m consumers, with the freedom to choose what they want where they want.

And yet 20 years after it was first agreed in the Treaty of Maastricht, there are still plenty of barriers to a truly single market.

Efficient exchange of information across borders is one of them.

Moving countries for work, study or retirement brings about certain administrative requirements. When moving across borders, individuals or businesses have to provide information and documentation – often issued by their home country’s administration – to public administrations, both national and local, in their new place of residence.

But this exchange of information poses a challenge. European public administrations are not yet geared up to transfer information electronically in an efficient manner. National eGovernment systems differ in style and function and primarily tend to address internal needs. But as more and more people and goods move within the EU, public administrations must start to provide efficient cross-border electronic public services.

This is where the Commission's ISA programme (Interoperability Solutions for European Public Administrations) comes in.

ISA has been designed to help public administrations meet this challenge by enabling the availability, interoperability, re-use and sharing of common solutions between public administrations.

For example, one of the projects within the ISA programme is called ePrior, an e-Invoicing system developed by the Commission. ePrior is a free open-source solution and available to any interested public administration, that is designed to save money for both businesses and governments.

The Belgian Federal Government is the latest to start using ePrior, and predicts that it could save companies as much as €2m a year and government as much as €7.5m! And the Belgians have also taken the innovative approach to allow the public services that use ePrior to invest half of the savings that they make in improving their services – a real win-win situation!

ePrior, and the wider ISA programme as a whole, are good examples of how a little smart thinking at EU level can have a major impact on the everyday life of citizens the length and breadth of the Union. And how the innovative use of modern technology can help public administrations do more with less.

EU level support for public administrations is not solely in terms of infrastructure and advice, however. There is also financial support, primarily through the European Social Fund.

As I am sure you all know, EU cohesion funding, of which the ESF is a part, is designed to help reduce the gaps between the various regions of Europe.

These gaps are often economic and social, but can also be in terms of administrative capacity, which is where the ESF comes in.

In less-developed Member States and regions, the public services responsible for developing employment-related strategies and their implementation may lack the capacities to do so in the right way and cost-effectively.

For this reason, ESF-funded projects are helping strengthen the efficiency of public administration in delivering public services in all sectors.

There are projects in a wide range of areas, from skills training for civil servants in both ‘back office’ and customer-facing roles to promoting the use of IT to facilitate information sharing

ESF support to better public services also includes modernising labour market institutions such as employment offices and services as well as health sector institutions and others.

So as you can see, the EU has a raft of policies aimed at helping public administrations through the difficult times, and that in turn have a highly beneficial effect on the EU 's efforts to boost economic growth and jobs.

And yet the wider perception is that EU laws stifle growth and make life harder for citizens and businesses. In fact, 74% of Europeans believe that the EU generates too much red tape; tackling this issue will not only improve the EU's image among citizens but, more importantly, help to create the kind of innovative and job-creating environment I've been talking about.

As President Barroso said in his State of the Union address on 11 September "the EU needs to be big on big things and smaller on small things– something we may occasionally have neglected in the past".

Let me give you a few examples of how we are trying to do this, in particular to help SMEs. More than 99% of all European businesses are SMEs, and they provide two out of three of the private sector jobs and contribute to more than half of the total value-added created by businesses in the EU. Being smarter in the way we regulate is a major factor in helping SMEs to operate more successfully.

That's why the Commission consults widely with SMEs on the issue of regulatory burden. For example, we recently asked them to list the Top Ten most burdensome EU regulatory measures with a view to taking action on them. They cited the REACH chemical regulations, VAT legislation, health and safety at work rules, most of the waste-related legislation and the rules on the recognition of professional qualifications, to name just a few.

Helping SMEs is just part of the far wider smart regulation process – making sure that EU regulations have a beneficial effect rather than making life harder.

Trying to make sure that this happens is the guiding principle behind a comprehensive review of the entire body of EU legislation, known as REFIT.

The results of the REFIT programme are impressive:

Since 2005, the Commission has approved 660 initiatives aimed at simplification, codification or recasting.

More than 5,590 legal acts have been repealed.

The level of red tape was cut by 26% between 2007 and 2012, equivalent to savings of €32.3 billion per year for EU businesses

And there are proposals on the table that would increase that level to 33% or €41bn.

The Commission has also adapted the way it works, in particular with regard to the pre-legislative phase. There is now far wider consultation with stakeholders before proposals are put forward to try to ensure that there are no adverse effects from the proposed legislation, and comprehensive impact assessments are carried out on all new legislative proposals.

But of course, the EU law-making process is not the responsibility of the Commission: it is the Council and the Parliament, as co-legislators, who are ultimately in charge of what reaches the EU statute book.

The REFIT review shows that around €3bn of the potential €41bn in savings that could be made through cutting red tape were in fact lost in the legislative process as the Commission proposals were amended.

That's why I am happy that the Parliament has recently invested in its own impact assessment service, to verify the likely outcome of amendments to Commission proposals during their passage through the legislative process.

And since most EU law is in the form of directives – which are then adapted by Member States to meet their own specific national requirements – national governments also have a responsibility to ensure that this does not add new regulatory burdens through so-called gold plating. I am sure that Member States will rise to this challenge.

The hope is, of course, that these various changes will make a review of legislation on the scale of REFIT unnecessary in the future: if we get it right first time, there should be no need for changes! In any case, keeping track of our collective progress at European and national level in cutting red tape will also be easier from now on, thanks to an annual REFIT scoreboard that will, I hope, help to keep us all on our toes!

Ladies and Gentlemen

I've talked a lot about what the Commission and the EU in general is doing to help public administrations weather the storm and emerge better suited to the demands of our 21st century economy.

But one thing I haven't yet touched on is what we in the Commission are doing to keep our own house in order.

Once again, the public perception is that the EU civil service has remained barricaded in its ivory tower while its counterparts in the Member States have suffered.

And yet in fact, the Commission has not been spared the need to do things differently. Indeed, we are constantly looking for ways to make the European public sector more efficient, transparent and trustworthy. For example:

we have followed a zero-growth-policy with regard to staff numbers except for recruitments related to the enlargement of the EU to Romania, Bulgaria and Croatia,

we carry out annual screenings of all Commission jobs in the overhead areas

we are reviewing our IT infrastructure to make it more efficient

we have modernised the recruitment and selection process

and my services in DG HR have been carrying out a Business Process Reengineering project since 2011 with the aim of rationalising and simplifying the processes and policies managed by the European public service.

Meanwhile, the creation of the various Commission executive agencies is a response to the need for the Commission to refocus on its institutional tasks such as policy-making and strategic management, leaving the day-to-day implementation of policies to bodies better placed to do so.

The executive agencies not only improve the management of EU programmes they also do so at lower cost. The agencies allow us to create economies of scale by grouping similar programmes and activities within one agency rather than being spread between Commission services as they were in the past. This not only ensures greater organizational efficiency but also adds greater visibility to the work of the EU and its programmes.

We've agreed a Common Approach on the management of agencies with the Parliament and Council in order to harmonise the recruitment and management of the various agencies. As part of this common approach, we are also now looking at ways to make further synergies by proposing mergers and other rationalisations. Our first proposal, to merge the UK-based police training centre Cepol with Europol in the Hague, was not endorsed by Parliament or Council, which was obviously a disappointment, but we will continue to try to find cost-savings within the agencies and hope for greater support from the legislators in the future.

As you know, with the start of the next Multiannual Financial Framework (MFF) in 2014, there will also be significant reforms to the EU staff regulations. The Commission is of course conscious of the pressure that the financial crisis has put on national public administrations, and it is only right that the EU civil service should share some of that pain in difficult times.

That's why we have proposed a number of reforms, including a 5% cut in staff levels and redeployment of a further 5%, an increase in the working week to 40 hours, and a pay-and-pension freeze for two years. We've lowered entry and end of career salaries between 18% and 45% for a large number of staff, and increased the retirement age to 66 with a possibility to work until 70. We have also created a new category of post for secretarial staff and amended the career advancement process to better reflect the needs of the institution and ensure that the right staff are recruited to the right posts.

These changes, in addition to the reforms already carried out in 2004, will certainly bring significant cost savings – but this is not all about the money.

It's also about the Commission practising what it preaches, about doing more and better with less, about being smart and innovative. The Commission – indeed the entire EU civil service – has a chance to lead by example, and we must make sure we grasp it!

Ladies and Gentlemen

I've talked at length at the end of a long and busy day for us all, but I hope I've managed to add a little something to the discussions you've had about how public administrations can and indeed must respond to times of economic crisis.

I started with a pertinent quotation, and if you'll excuse me, I'd like to end with one as well.

That great European statesman Winston Churchill once said: "To improve is to change; to be perfect is to change often."

Europe is far from perfect – but it is, I believe, open to change. The important thing is to make sure that change is for the better – and that, I firmly believe, is what we all hope to achieve.

Thank you for your attention.


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