Government and the Global CEO: A new contract between business and the state

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Across the world, governments are grappling with the twin challenges of global uncertainty and austerity. And at the same time, government and public sector leaders are facing the challenge of balancing between an internal focus on efficiency and effectiveness and an external focus on helping businesses to create the wealth and jobs that societies need to prosper.

We believe key themes in PwC Global's report Government and the Global CEO: A new contract between business and the state resonate with many of the issues, challenges and opportunities facing Canada’s public sector and have outlined some thoughts below from our team behind this perspective.

Perspectives from PwC’s Canadian Public Sector and Government Practice

Brian McLean, Partner, National Public Sector Lead

Brian McLeanFiscal deficit has private sector CEOs worried and in the Canadian context there’s a lot of pressure in most provinces to deal with this.

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Brian McLeanFiscal deficit has private sector CEOs worried and in the Canadian context there’s a lot of pressure in most provinces to deal with this. For example, the province of Alberta recently announced that from what they thought was a balanced budget, they now have a CA$4 billion deficit for the financial year ending March 2013. In a private sector organization, a large difference and deficit like this would be tackled in a very outcome driven manner. This is something governments at all levels in Canada realize, and we’re seeing a focus on results based budgeting and performance based budgeting, especially at the provincial level.

Governments are now stepping back to see contribution to their strategic plans before allocating funds–very much a private sector concept. This is a step in the right direction. Our public sector organizations need to get to a level where they can track that programs are delivering results through established metrics. They need to get frameworks and methodologies in place at the onset with external help, but with an eye to becoming self reliant in the long run.

Often, some of the work that the government does, such as managing and building infrastructure, may not be their core strength. Greater efficiency and better management of funds can be achieved through public-private partnerships (PPPs) in these cases.

CEOs are also concerned about talent crunch, which will likely become more acute due to Canada’s aging population. Our governments need to work even more closely with educational institutions to attract foreign students. We need to focus on programs to have these foreign students contribute to the economy rather than return to their home countries.
 



John Moore, Federal Public Sector Lead

John MooreOur government and regulators in Canada have done better than many of their counterparts globally during the economic downturn.

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John MooreOur government and regulators in Canada have done better than many of their counterparts globally during the economic downturn. An important reason we didn’t get into a deep recession like some other countries is because Canada did some basic things right with our banking systems and policy frameworks. But fiscal deficits and economic volatility remain amongst the biggest concerns for CEOs.

To build a more resilient economy, we need to continue focusing on the basic things. We need to get our education system to produce more highly qualified graduates. We also need to have a ruthless focus on lowering tax rates and reducing our deficits. This will make us more fiscally attractive for investments in an intensely competitive global economy and will enable businesses to reinvest for growth.

Lowering tax rates and reducing deficits must involve transforming government, not just cutting costs. Citizens have high expectations of service, including their ability to interface with governments electronically. These expectations are shaped by citizens’ experiences with governments of various levels private companies and their personal use of the internet. The upshot is governments have to simultaneously tackle reducing costs while improving service levels. This can only be achieved through major changes to internal governance models, business processes and technology, the way public sector employees are deployed, how they conduct their work and how governments engages the private sector in delivering programs.

To transform the public sector, governments need to invest in designing and implementing complex changes. At the same time, they need to build confidence with politicians and taxpayers that they have the capability to change and deliver the benefits expected from major investments – an especially important aspect in the transformation journey. While there are excellent examples in government of successful transformation, there are many lessons to be learned from failures. And governments simply don’t have the leeway to fail.
 

 

Geneviève Bonin, Partner, Consulting and Deals

Geneviève BoninFiscal deficit, debt and talent crunch are some of the things that have both CEOs and our governments worried.

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Geneviève BoninFiscal deficit, debt and talent crunch are some of the things that have both CEOs and our governments worried.

With regards to deficit, the questions before the government is, how can we afford to provide services that we spend on today and how do we reduce costs? The answer lies in finding the balance between efficiency, innovation and modernization. There could be better collaboration between the public and private sectors to get a balanced budget and work towards long-term economic stability. To become more efficient, the government needs to make better use of technology to provide consolidated digital service delivery. Then they may not need as much retail access as they have currently and can provide convenience to citizens. There’s a huge cost to government due to replication of systems and effort, and consolidation of infrastructure can really help curtail costs.

Debt in Canada is another looming concern, with household debt levels peaking. Interest rates are fairly reasonable today but they’re expected to continue to rise. We’re not in a problematic situation today, but if we can’t afford our debt at some point, the problem will escalate exponentially, and the government has to work towards controlling this.

Talent crunch is not only a private sector issue, but also a public sector one with the government’s aging workforce. The government needs to invest in creating its leaders of tomorrow. An underutilized talent pool is our veterans. We need more robust programs to transition them into the workforce after they retire from service, as many other countries such as US and UK have done. Another opportunity is collaborating closely with the private sector and educational institutions to provide the talent for the next few years.
 

 
Feel free to contact a member of our Public Sector and Government practice to discuss the issues presented in this report. To download the report, click here.