Payment by results

I came across this paper the other day, where three partners in KPMG are calling for the vast majority of public services to be be financed on the basis of results. They say that this will ease the problems of inefficiency in the UK's public services. Perhaps it would...but I'm sceptical about that.

I can see two immediate problems. The first is knowing what results to pay for. It sounds easy, doesn't it but if payments are to be attached to achieving results it is critical that the correct results are used. in business generating sales leads to profits so it makes sense to incentivize managers to hit sales targets. Except sometimes it all goes horribly wrong such as when the banks created a global recession. The existing systems of performance indicators in the public sector don't have payments attached to them (in general) and yet things still go wrong such as this story about people losing their sight because of the Bristol Eye Hospital chasing performance targets. The adage hitting the target and missing the point never seemed more apt.

Second, let us say that the right results are identified for a specific public service. How is the cost going to be capped? Payment by results gives an incentive to achieve more results but the country's situation requires lower spending, which probably means less results.

I appreciate that the authors want to stimulate debate but the cynic in me wonders how the government would set up the monitoring and financial systems to implement a payment by results regime. Would they turn to management consultants?