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investment. By setting targets the public are given a clear statement of what the Government is trying to
achieve so improving the accountability of the Government. PSA’s give the Government a means of
monitoring what is, and what is not working, so providing a clearer sense of direction, and enabling the
Government to focus on delivering results. PSA’s are now an integral part of spending plans, focusing
public spending on the outcomes the Government seeks to achieve, rather than crude inputs or processes.

Decisions about PSA’s are made alongside department’s budgets during the Spending Review. The
Ministerial Committee on Public Services and Public Expenditure (PSX) considers PSA’s so the
outcomes that departments are aiming to deliver are linked to the money they are allocated.

Each large department has a PSA that sets out its aim, a number of objectives, and performance targets
usually linked to the objectives. Departments should aim to have no more than ten targets, the average
per department in Spending Review 2004 was less than six.

In many cases, the delivery of PSA’s will depend on the actions of those outside central government,
such as local authorities or agencies. As far as possible, delivery staff should be consulted and involved
in the preparation of PSA’s. This should help to ensure the relevance and quality of PSA’s, and give
those responsible for delivery a sense of ownership

A good PSA target should be:

• Outcome-focused – focused on the ultimate result the Government seeks to achieve from its
  activities;


• SMART – Specific, Measurable, Achievable, Relevant, Timed;


• Understandable by the public;


• Deliverable;


• Not open to distortion – PSA’s should not create perverse incentives or encourage staff to massage
  or misrepresent performance data; encourage staff to focus on easy-win cases above more
  problematic and important cases; or lead people to compromise quality in order to achieve a
  measured target.

As an example the Department for Education and Skills has the following PSA objective and targets.

Objective I: sustain improvements in primary education.

Targets:

1. Raise standards in English and maths so that:
   
   
   • by 2004 85% of 11 year olds achieve level 4 or above and 35% achieve level 5 or above with this
     level of performance sustained to 2006; and
   
   
   • by 2006, the number of schools in which fewer than 65% of pupils achieve level 4 or above is
     significantly reduced.
   
   
   
   

3. Results

The next section gives a broad overview of the recent trends in UK spending, and then looks in more
detail at spending on the Governments key areas of education, health and transport.

3.1. Overall spending

Spending on Government priorities needs to be seen within a general increase in expenditure. Between
1997-98 and 2004-05 Total Managed Expenditure (TME) increased from £372.6bn to £474.7bn (real
2003-04 prices), a total real increase of over 25 per cent or an annual average increase of 3.1 per cent.