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President Vladimir Putin: Alexander Dmitryevich [Zhukov], tomorrow, as far as I know, you are to examine questions regarding the conclusion of the final stage of government reform. This reform is not an end into itself, however, and the government has set itself specific aims. How is the work proceeding from this point of view?

Alexander Zhukov: Tomorrow we will examine the main directions for budget reform. The government has several important objectives in this area. Of course, these objectives are many, but there are four principal aims.

The first aim is to raise living standards in the country. Also on the list are, of course, putting in place the conditions for accelerated economic growth, creating the conditions for future generations’ development and ensuring our country’s security. These are our four main, overall aims. Each of the ministries should have its part to play in fulfilling these objectives.

Tomorrow we will also examine reports from the ministries on their work towards achieving these four main aims set by the government.

Vladimir Putin: For ordinary people, for taxpayers, it is very important to know how the state’s money is being spent. We had many previous discussions on the need to cut back the administrative apparatus. But ordinary people find it hard to understand why it is so important to cut numbers back by 20 civil servants in one place, 30 in another, and then boost them by, say, 100 civil servants in a third place. What are the criteria being used and how can the new administrative system help improve management of public finances?

Alexander Zhukov: Yes, this really is the whole point of budget reform – not to simply reduce the number of civil servants or say how much money the state has spent. We need ways of defining results that the public can see and measuring the government’s performance, the work of federal targeted programmes, the budget programmes, that the government is responsible for carrying out. This needs to be done in such a way that any person here will be able to see exactly what state money is being spent on and how he stands to benefit. Results should not be measured by the number of documents signed by civil servants or by the amount of money the Health Ministry, say, has spent on health care. Rather, performance should be measured by indicators such as how life expectancy in this country has changed, whether infant mortality has declined and what increase there has been to the average wage.

A performance indicator for the Industry Ministry, for example, would be the extent to which the population’s housing needs are taken care of.

For the Telecommunications Ministry, performance would be measured by the number of telephones per person. This is a change from the old days when output of galoshes or some other item that no one even ultimately needed was all planned in advance.

The indicators being set for the ministries today reflect the country’s level of development. They are based on international practice and enable us to compare living standards in our country with those in other countries. These indicators enable us to measure how effectively budget funds are being spent. Many countries have taken this road and this has been a process requiring many years, but in Britain and Finland, for example, budget reform based on end results has not only halved the number of civil servants but has also considerably increased the effectiveness of their work.

Vladimir Putin: Alexander Dmitryevich, the government will have to show the country, the public, where we stand today. If we take the figures and results for the last few years, the last four or five years, and provide objective figures for the main indicators, this would make it possible to get an objective evaluation of this or that ministry’s performance over this period. I think this could be quite a revelation for the public, this chance to see objective figures on the state’s work up until now.

Alexander Zhukov: Yes, this is something we have not done before and it could indeed be a revelation for many people to see this change in indicators over time in a way that everyone can understand. We think this is definitely something we should do because everyone should know how their lives have been changing over the last few years. We have already formulated the objective indicators we will need for this and we will present them. In the future we can use them to evaluate the government’s performance overall and the work of each individual ministry, which is also a very important part of administrative reform. This is because, in the future, each ministry will receive greater independence in spending budget funds and in carrying out the budget programmes they propose, and at the same time, they will also be given far greater responsibility. So it is important then that these objective indicators will give us a means of evaluating in what way and how effectively budget funds are being spent.