Keynote points of the discussion and abridged expositions of speaker reports are published below.
Keynote Points:
The number of civil servants in Ukraine has remained unchanged for many years. They were at their most – 335,000 – in 2013; the National Agency currently clocks their number at 237,000.
A new Law of Ukraine on Civil Service contains and exhaustive list of civil servant categories that does not include local self-government officials, police, employees of the Security Service of Ukraine, State Border Service personnel, prosecution and court staff.
The official civil service statistics has been artificially trimmed to not include those employed for activities paid from the central budget and tax payers’ money.
New public services (NABU, NAPC, SIB) have been set up and staff numbers at law enforcement have increased.
Attempts to downsize the state machinery started back in 2004 yet yielded no tangible results. David Arakhamiya announced a plan to cut the funding of government bodies, which might lead to a reduction in the numbers of officials.
State machinery reduction is handicapped because of impediments mounted by officials themselves. In order to correctly reduce their numbers, it is necessary to measure performance in a specific given central body of the Executive.
The state machinery costs about UAH100 billion a year to maintain; this is 2% GDP, or about 5% all budget expenditures. By halving the government costs it would be possible to save UAH50 billion, or 1% GDP.
An efficient downsizing of the state machinery should go parallel to a reduction of government function and imposition of limits on areas known to spend lots of resources.
It would be challenging for the state to downsize itself, but it can be done during the change of political cycles, government reboot, in wartime conditions with assistance of international targeted initiatives in the scope of European integration. It will be a chance to rebuild processes involving political will and leaders who will assume responsibility.
The key objective of state machinery reduction should concern not budget savings but rather the development of an efficient civil service.
Transcript of discussion (for the full video of discussion please follow the link)
– What is the statistics of civil servants in Ukraine? What is the situation now?
Andriy Savarets
Well, the Civil Servant Day is exactly today so let us get it right with the statistics and who can be generally called a civil servant. In every political cycle a political leader declares the need of 20%-30% state machinery reduction but the number of civil servants remains unchanged. We had the most of them – 335,000 – in 2013; the National Agency now states there are 237,000 of them.
No drastic change in the number but there is some reduction indeed. First of all, because of the nation getting smaller due to the russian aggression; secondly, with the adoption of a new version of the Law of Ukraine on Civil Service a whole range of civil servant categories have been taken out of its scope. That prompted some rather interesting phenomena: e.g., the staff of prosecution bodies are civil servants but prosecutors are, well, the prosecutors to whom a separate Law of Prosecution Bodies applies. That is, we have 237,000 civil servants not counting local self-government officials, 134,000 police force, 30,000 Security Service of Ukraine officers, 60,000 State Border Service staff (their number was increased for understandable reasons), 15,000 staff in the prosecution bodies and also judges who are out of reach of the Law on Civil Service. Meanwhile, all these categories fill out their e-declarations and are subject to the Law on Prevention of Corruption.
– How many categories of those not called civil servants while still actually being them are there?
Andriy Savarets
There are exactly such bodies where a person is sort of in civil service and is subject to all limitations, also the anti-corruption ones, but he/she still is not called a civil servant. Besides, there are ‘men in uniform’, bodies with special status – for example, the National Police – that have their own legal regulations governing their operations.
A number of bodies, like the employment service and such, have been taken out of the law’s scope. I cannot understand the logic myself as these de facto perform governmental functions and even deem themselves civil servants. This has affected the total number of civil servants. The government may report a downsizing but if we collect everyone paid from the budget like public enterprise employees, teachers, doctors, the resulting number will be of more than 5.5 million. These are the people paid from the national budget, with tax payers’ money.
– While the civil servants were stripped of their status and a divestiture happened, the moves failed to lead to state machinery downsizing.
Andriy Savarets
Yes; also, a number of new government authorities was established at that time, not really many of them, but one might include the NABU, the NAPC, the SIB. There are several thousand officials employed at these bodies who are also paid from the national budget to perform their functions and they still affect the total number. In addition to that, personnel strength of the law enforcement bodies – I mean the staff numbers here – is on the rise. The Security Service of Ukraine is currently lobbying an increase; the law currently provides a cap of 30,000 for them, and 60,000 for the Border Service. That is, the numbers dwindle here or get higher there and the total strength has remained almost unchanged despite Ukraine’s decreased demographics (some say about 42 million while others mention 37 million).
– How many state machinery downsizing attempts have been there?
Andriy Savarets
There was a rather powerful message back in 2005, President Viktor Yushchenko never declared it but Prime Minister spoke about state machinery reduction. If we take the Presidential Administration, a secretariat or office we will see them regularly upsizing and downsizing. Viktor Yushchenko talked about a reduction of 400 but then it was increased to 610; at the time of Viktor Yanukovych, it stood at nearly 700, then was downsized again. Starting in 2014, at Arseniy Yatseniuk’s time at Prime Minister office, the announced state machinery downsizing started at 20% to later increase to 50%.
MP faction chief whip David Arakhamiya has recently declared a cut in the funding of government authorities. He would not give numbers and obviously, to him, a financial cut might lead to smaller salaries prompting government officials to leave by themselves.
– Numerous attempts to reduce the state machinery have brought no results. Why so and how mistakes should be analysed?
Andriy Savarets
First of all, state machinery reduction is a popular election pledge, plus the civil servants are voters themselves. So, if we assume there are 237 thousand civil servants, it is about, at least, half a million families. When a politician declares some of the staff are going to lose their jobs because of redundancy, I think, he/she will be lost to this category of voters. Still, the matter is popular with people and is well received.
The civil service has become somewhat detached from reality. Too many bylaw regulations, not all the bodies are switching to a more service-oriented operation; therefore, in voters’ imagination the state machinery is still the evil, if a small one.
Nevertheless, before going to downsizing one first needs to understand the harm the officials cause. I would split it into three: first, the barriers to administrative services and markets that officials create; second, the corruption schemes in which civil servants are involved and, willingly or not, guard them; third is inefficiency, when the question of performance arises.
To downsize – say, a certain individual central body of the Executive – correctly, one will have to identify what efficient performance is. A manager has to: bring professionals into the team to sort out the functionality and the processes – how they should be and how they actually are – and then make managerial decisions (personnel shuffling may be required or some functionality should forego due to the lack of resources for it). Or business processes should be simply rebuilt. Project teams could be also established inside government bodies to go away from the established departmental principle in favour of some cross-sectoral teams that will work for specific result.
The current set-up of government bodies is tied to a process, that is, aims at managing or combating a process. But when it is about a result, probably, another set-up principle should be used from the outset. Cross-sectoral teams may be possibly established with focus on a specific success indicator that will be monitored by a minister of body’s top manager.
There may be another, axe-cut approach when 30% state machinery staff is axed and it does not matter whether it is about vacancies or positions that are currently occupied. Still then the managers will come to an understanding that real-time axing is about sacking: of a non-performer, or a disloyal but professional employee, or someone randomly selected. Then someone will have to bear political responsibility for this.
– Have you ever worked in civil service?
Andriy Savarets
Yes, I worked in civil service for 11.5 year in total, so I do understand what I am talking about. Civil service experience is priceless regardless of all negatives; it is also important to have an outsider’s view to understand what went wrong and how things could be done in a right way.
– What might help with civil service optimisation? How much can be saved in the sense of budget?
Volodymyr Dubrovskiy
There exists a rather widespread illusion: when people see our state machinery with its buildings, number of officials, they are easily tempted to say, ‘Let us downsize the state machinery and live like in Singapore with world’s lowest tax rates.’
If we look at national budget expenditure distribution – one can check it at our Cost of State web site – the upkeep of the state machinery costs around UAH100 billion a year (2021) – quite a lot for an ordinary citizen though it generally makes for just 2% GDP, or about 5% all budget expenditures. If the team of reformers halves the cost of the state now, this will only mean a reduction by UAH50 billion, or 1% GDP.
The redistribution via state public funds reached 46% GDP in 2020. The downsizing in 2021 was meant to be around 41%, that is, by 5%; the downsizing suggested today is only by 1%, which is not much.
Talking about impact on economic growth: it might give us additional 0.1% economic growth a year: not much but still nice. On the other hand, e.g., the corporation tax reform that replaced the income tax with the distributed profit tax provide a possibility of substantial improvement of the fiscal environment relieving businesses from a great deal of proportional pressure and lots of inspections. It is all about the cut of receipts within the mentioned UAH50 billion.
E.g., in order to downsize the state machinery according to the government’s programme, a reform could be easily carried out, still more than the receipts will bounce back later. It might be possible to increase the funding of the Armed Forces by a third; the one that existed before the war when 3% was spent on that could be increased to 4% – almost to the level our enemy has. However, this is not relevant today as the proportions are different now.
I would say if there is a chance of halving the state machinery’s expenditures without detriment to its performance – probably, even making it higher – then it is a rather noble task that surely must be implemented.
– The state machinery cannot downsize itself; who has to do it then?
Andriy Savarets
This is a super-task, a paradox when the state has to downsize itself by itself. Still, this can be achieved right at the time of political cycle changes as the next presidential and Verkhovna Rada elections will take place almost simultaneously. The reboot of the government, even during the war, is a chance to rebuild certain processes. The economy is sagging but there are things to push away from – a ‘shock’ is needed. There is no other way around – without political will, political leaders and, actually, someone to assume responsibility, the civil service will not self-reform.
Surely, the involvement of the civic society and experts, the great impetus of the European integration make for a background to trampoline from. The Council of the EU adopted a decision today to grant Ukraine the status of candidate to the EU so there is nowhere to go, the reform is necessary and I think political leaders need to assume the responsibility for it.
– There have been multiple attempts of state machinery reduction. What needs to be taken into account to avoid past experience repetition?
Volodymyr Dubrovskiy
All downsizing efforts so far have happened without an actual reduction of the government function. There is a Parkinson principle according to which the bureaucracy is ever-growing and has a tendency to bloat. Where there is a function there must also be performers who need office space, payroll, equipment. Whenever a head of a service is unable to cope with a task, he/she generally takes excuse in the lack of resources. It was always like this in the Soviet Union. This is the simplest explanation that is always accepted – and then the state machinery begins to bloat.
It will be a real challenge to downsize it without cutting functions, even whole branches that have become rotten or disfigured. For this, one needs an external force of sorts capable of doing it without self-interest; then the situation is possible when quality downsizing will happen at the cost of performance. In order for it to be at the cost of performance, one has to understand that an efficient, a strong and a great nation are actually different things.
The EU has examples of nations with large and rather powerful state machinery; France is one of them. However, such a state machinery has been built for not dozens but hundreds of years. It is rather difficult to make it large and, at the same time, efficient. If we want it to perform better, it would be much easier to make it more compact – but this would mean the state needs to narrow its function by, e.g., stopping interventions in pricing, labour relations. That is, it needs to limit many areas it used to interfere and spend lots of resources on.
On the biggest issues in the EU today is the state interference in many aspects, which has become a tradition. The national state machinery and the supra-national, Brussels, one, are another yet problem as it interferes and tries finding niches for that even where it is not necessary for the market. Besides, this is not free from various influences, specifically, from businesses.
Therefore, we need to be very careful: if we are to harmonise, it should be carried out, first of all, to the minimum extent where an expansion of the state function is needed, and secondly, in line with best, not worst practices.
– Has the experience with state machinery reform/optimisation been successful? Has something been done the way it should be?
Andriy Savarets
In 2010 the administrative reform was launched during which a theoretical background was prepared to sort all government authorities and subordinate central bodies of the Executive to ministries. This resulted in the National Police, the National Emergency Service, the National Border Guard Services being included as separate bodies into the structure of the Ministry of Internal Affairs. Same happened to other ministries. It was also envisioned to downsize administrative offices at ministries and central bodies of the Executive and to reduce the number of deputy officers there.
The justification was good but the implementation became a perversion of the idea. Essentially, they simply started personnel reduction cutting down vacancies. The number of deputy officers was reduced, then increased again – then the idea was abandoned for good.
Before central bodies of the Executive were authorised to unilaterally adopt regulations; afterwards, only ministries have retained this power. This reduced the number of bylaws sacrificing the timeliness of response to situations. A ministry is not able to adopt that many regulations as subordinate central bodies of the Executive have been. This started ‘law-making jams.’ Quite a controversial experience, though the idea was not bad. There was a clear distinction between a service and an agency with a normal theoretical background in the core. The message was clear: the machinery and the total staff strength has to be reduced with a national-level service to emerge. However, it brought nothing in practical terms.
There currently is a trend for setting up reform offices; a positive development indeed. These offices are dealing solely with projects and regulation design and are not involved in any operational activity that the ministries and central bodies of the Executive are in charge of. This allows focusing only on project-level tasks but, on the other hands, begs a question of what then the ministries are busy with and why such operational activity consumes all of their working hours.
There even appeared an idea of state secretaries as institutional memory keepers. Ministers come and go – but there is a state secretary in the know what is in that file, what kind of reform we are going through no and what decision must be made. A nice idea – in disregard of national mentality though. Every minister is averse to having another minister on top of him, and this is what the idea was about. The state secretary who is irremovable would have more power than a minister – quite an important matter in our reality where each minister wants to have a state secretary of his/her own, a go-to, loyal, trustworthy person. Then they began to sack state secretaries in droves and employ new ones – this is already about the institute of competitive selection for civil service. Therefore, the practice is more about accumulating experience rather than an efficient tool.
– Which functions can be sacrificed to downsize the state machinery without detriment to performance?
Volodymyr Dubrovskiy
These would be, first of all, the functions that the state has not had at all. That is, the areas it should not regulate. There is a beautiful criterion formulated in due time by Milton Friedman, an outstanding economist but also reform practitioner. He wrote several titles based on which Margaret Thatcher and Ronald Reagan carried out their neoliberal revolution in early 80ies, which was very successful and ensured West’s quick break away from the Soviet Union. Milton Friedman formulated that the state needs to intervene wherever market faults exist, where the market is unable to ensure an optimal resource distribution. As a practitioner, he also added the second component: it is necessary to first ascertain it a market fault exists and, if yes, verify if the state is able to settle the matter better than it might be otherwise regulated by itself without any state intervention.
We have lots of examples here: the tell-tale pricing – we have recently witnessed the case of fuel prices regulation; minimum wages are another example of price regulation. There is a whole governmental service for labour tasked with inspecting employers’ compliance with the labour legislation that limits their rights. This is what could be downsized.
The state simply harms in many state policy areas. For example, the Ministry of Economy, having recalled its past as state planning department, now tries to establish which goods can be bought for currency, which can be included in the list of critical imports and which – not. There are guys sitting there who assess domestic market needs and establish whether the demand can be met by national producers. These types of activity are simply redundant, they are harmful and the economy will only benefit with them scrapped.
Also, there are areas in which subsidies are earmarked for enterprises – e.g., the restored Ministry for Strategic Sectors and Industry that, luckily, has been suggested for redundance cut.
In my view, this all is what could be downsized from the state machinery to make it perform better.
Andriy Savarets
Indeed, it is necessary to dig deeper into the functionality; for this, whole teams will need to be set up to monitor, analyse and use results to suggest decisions.
We have quite a long experience of some positions established and a dozen of vice prime ministers created simply to prevent a nice chap from losing his job.
The workload of the Security Service has been crazy during the wartime; however, we have always said it there are functions that are improper and can be trimmed. This concerns the economy and the combating of corruption: we have enough of anti-corruption bodies, and the Security Service still has a service department to fight corruption and organised crime. This SSU’s function could be scrapped in the future and the manning schedule could be reduced.
– Making 100 thousand employees redundant with no chance of employment will mean a burden on the budget via the social protection system. What mechanisms could be applied today to prevent a simple increase in the number of unemployed?
Volodymyr Dubrovskiy
For firsts, it is not about 100 thousand officials; it is about 100 thousand vacancies, both filled and not. Secondly, there is a big personnel turnover in the private sector where they downsize and create job openings many more than 100 thousand positions. The officials are in the same position as redundant regular blue collars.
Because of the war, many have relocated, lots of businesses had to close so, on the backdrop of million-strong moves, the state machinery downsizing will not be perceived. Surely these individuals will get their proper unemployment benefits but it will not make an additional burden for the budget. There will be six months of payments for which period they will find other jobs and will not be a burden for the budget. Here a possible cut in expenditures will not happen in a snap.
– Are there any international organisations able to assist with review of the state machinery and governance in general?
Andriy Savarets
There surely are individual initiatives, and there will be more of them in the scope of further European integration. I would repeat it here that European integration is going to give us an impetus we are currently lacking. It seems to me no one is going to launch a revolution in the civil service. They would act cautiously, surgically, making some cosmetic changes; it is the European integration that is able to give a sensible impetus to ensure some really to-the-core changes rather than yet another reform imitation.
– Those HR management practices used by private businesses, like KPIs, grading system, bonus system etc., how appropriate and efficient they might be if applied in the civil service?
Andriy Savarets
They can be quite efficient. There have already been attempts of introducing KPIs for body managers, midlevel managers. I cannot tell you if the implementation of the system was a success, but the approach was there.
Such practices can be really borrowed from the private sector, e.g., in respect of bonus payments at civil service. As of today, it is either everyone receives bonuses or the top manager unilaterally decides on percentages, which may result in bias. There should be some indicators for an employee to know and be able to tell the amount him/herself – this is how pecuniary incentive works.
– Will state machinery downsizing provide budget savings?
Volodymyr Dubrovskiy
The key objective of state machinery downsizing should be not a budget saving but the development of an efficient civil service. However, there is faulty way of thinking: on the one hand, it is about downsizing the state machinery and state function reduction; on the other, talks about proactive role of the state, industrial policy and things that will really require increasing the role of the state and the size of the state machinery and related expenditures. Top government managers have no clear reform ideology, they stand for everything good against everything evil, but everything good the way they see it contradicts itself.
– Which approach is the most viable one: to wind up/re-establish a body or to improve performance of the existing one?
Andriy Savarets
I am in favour of improving performance of the existing bodies and pinpoint elimination of strange ones, like the Ministry of Strategic Sectors. It may be I do not understand something about them, them performing some rather important functions; maybe, we are simply not in the know. It appears such ministries, particularly when they have no subordinate institutions or sector to themselves, should be downsized to the level of an office or advisor to Prime Minister.
The attempt to pile several central bodies of the Executive under a vice Prime Minister or a minister is artificial. We do understand all the top managers can talk directly to the Prime Minister without any need for a generaliser or intermediate agent.
I am still not convinced in viability of State Bureau of Investigations, which fully duplicates other bodies. They have quite a lot of professional investigators and operatives there but I am still to comprehend why a separate body and what makes it so unique.
Volodymyr Dubrovskiy
A reboot or a reform? It all depends on the extent of damage dealt to a given government body by bad institutional culture. If it has been bad from the outset, like with fiscal bodies, or whenever a body is completely corrupt – as it was with the State Vehicle Inspection – then, unfortunately, there is no other way than a reboot. This will be a more complex exercise than having to make something from scratch and, whatever reforms, it will remain corrupt because of the same people who will recreate same corrupt practices. That is, such a damaging institutional culture must be erased from the memory and replaced with something else. The example with patrol police instead of the SVI was borrowed from Georgia where they had done the same with their tax, customs services and many other completely rotten bodies.