Some of the issues discussed in this chapter may appear to be technical and of little consequence in the overall development of management capacity. To my mind, however, getting the price and other incentives right is essential to effective public management.

Why has New Zealand, which has been bolder than any other country in liberating managers, been more restrictive in some financial management practices? The somewhat unsettling answer is that New Zealand reform has been driven by a separation of the Crown from departments and of purchase from ownership. The premise is that the Government should stand in relation to its departments as a buyer would to a seller in a market exchange. This separation leads to the logical conclusion that the government should get what it bargained for, that operating surpluses belong to it, that funds should not be transferred between financial years or between output classes.

I am troubled by the concept of a split-personality government that has influenced financial management and other reform practices. It is likely, however, that as the New Zealand model progresses from innovation to standard operating procedure, it will increasingly be shaped by the exigencies of practice rather than by the dictates of theory.

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