Vive la révolution

Rebuilding the global economy
Looking beyond crisis management
Reshaping
government
for the future
Life at the center
Sir Gus O’Donnell on leading
the British civil service
Home pages
Taking stock of housing
December 2009

December 2009
A warm welcome back to Citizen today, Ernst & Young’s magazine for our government
and public sector clients around the world.
The state of the economy continues to dominate debate. While some countries have
pulled out of recession, job losses abound. And although governments had little option
but to spend heavily, the resulting debt levels mean that policy-makers still face a
difficult task.
The fiscal challenge, matched with continued structural pressures such as rising citizen
expectations and aging populations, demands systemic changes. Much depends on
our political leaders to drive efficiencies and reduce spending while protecting core
public services.
In this, our third issue, we look at many of these themes. With more citizens turning
to the state for social security support, we examine how different countries are
responding. We have an exclusive interview with the UK’s most-senior civil servant, Sir
Gus O’Donnell, about the British government’s response to the economic crisis and his
attempts to shape public services that respond to citizens’ needs. And we analyze how
countries are dealing with the challenge of rising unemployment.
We talk to housing leaders in Canada and New Zealand about housing provision and
what can be done to improve the lives of badly housed people. We consider how the
French government is implementing sustainable reforms to the way it delivers public
services, including the view of the Director-General for State Mordernization. We look
at how government and business in the US are working in partnership to address social
and economic challenges. And in our regular “government and enterprise” feature, we
look at the fast-changing postal sector, with the help of Bruno Chaintron from La Poste.
Please continue to send us feedback about the magazine. We are eager to hear your
suggestions and offers to contribute your own experiences and insights. Please contact
us at citizentoday@ey.com.
03
ContentsWelcome
About Ernst & Young
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Ernst & Young
© 2009 EYGM Limited. All Rights Reserved.
EYG no. FK0005
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This publication contains information in summary form and is
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www.ey.com
Craig Baker
Managing Editor of
Citizen today and leader
of Government and Public
Sector Advisory Services
Philippe
Peuch-Lestrade
Global Government and
Public Sector Leader
04
Getting labor working
How different countries are responding
to rising unemployment
23
Guiding the global recovery
Delivering a new approach to
governance
26
Rebuilding for the future
Moving from crisis management
to strategic planning
29
Vive la Révolution
Modernizing the state in France to
deliver lasting change
32
Delivering a better way
of life
Government and business working
together to address social and
economic challenges in the US
36
Signed, sealed, delivered?
Postal markets respond to EU reform
and new competition
38
Spotlight on China
Introducing Ernst & Young’s
government practice in China
16
Building New Zealand’s
communities
Housing leader Lesley McTurk tells
Citizen today about affordability and the
future of social housing in New Zealand
19
Creating strong foundations
Citizen today talks to housing chief Karen
Kinsley about affordability, increased
demand and the environmental impact
06
Worldwide unemployment trends
Mapping the wide variation in rates
and developments
08
Delivering 21st-century
government
Sir Gus O’Donnell talks to Citizen today
about leading the British civil service
through change and global recession
Preparing for the worst
How resilience planners
should prepare for future
Olympics and World Cups
13

December 2009 05
Almost all European countries have sought to
support key industries and have set out plans to
invest in infrastructure programs to safeguard
jobs. Germany, Holland, France and Italy all
have schemes in place where government
subsidizes the wages of temporary workers. And
the German federal government has expanded
programs for older and skilled workers, as well
as created jobs by increasing the numbers of job
placement officers in employment agencies.
In the Far East and Australia, there is a mixed
picture. China expects its unemployment rate
to hit 4.6% this year, which would be the worst
since 1980. In response, its Ministry of Human
Resources and Social Security aims to create
jobs for nine million new urban labourers, five
million workers who have lost their jobs, and one
million people who are facing difficulties finding
work. “Improving the employment situation is
our top priority and everything we do is aimed at
achieving the goal,” Yin Chengji, the ministry’s
spokesperson, said in a media briefing in October.
And although Japan’s jobless rate in September
was 5.3% — down from July’s record high of
5.7% — according to official figures from its labor
ministry, the number of people unemployed was
still far higher than in last year.
The Australian job market appears to have
bounced back. Although Australian policy-makers
have sought to play down the significance,
Bureau of Statistics figures show that 40,000
jobs were created in September, mostly full time,
and the unemployment rate fell to 5.7%. This
was the biggest monthly rise in nearly two years,
with an overwhelming switch from part-time to
full-time work.
The Australian economy has been stimulated
by A$20b in government cash handouts to
consumers and the central bank’s decision to
slash borrowing costs between September
2008 and April 2009 to the lowest level in half
a century.
Its central bank is now predicting that economic
growth will be driven further by increased
government infrastructure spending and demand
for minerals from China, the nation’s second-
largest export market. In addition, Australia’s
single biggest investment project, the Gorgon
natural-gas venture in western Australia, is
expected to create up to 10,000 jobs when
construction starts in early 2010.
Based on their attempts to fight unemployment
and facilitate the transition to the economic
recovery, governments need to be able to
react swiftly to market developments. And yet
policy-makers cannot act alone; good policies
and strategies need to be supported by excellent
implementation. Whether the goal is occupational
retraining of citizens, creating new jobs or
sustaining private consumption, opening up new
resources through partnerships is vital.
For example, in April 2000, the UK’s Department
for Work and Pensions began to test a program
aimed at getting long-term unemployed
individuals back to work. The department
commissioned independent providers to deliver
employment counselling services in 15 areas
with high unemployment. “Employment Zones”
represented a step change by offering providers
financial incentives to get participants back to
work quickly — and into sustainable employment.
The program was successful, significantly raising
the rate at which jobseekers returned to work.
Efficient processes for policy and strategy
formulation that involve key stakeholders are also
important. One way to achieve this is through the
use of financial incentives. For example, Holland’s
central government announced earlier this year
that €153m would be made available for the
Dutch regions to invest in youth employment.
There was only one catch: the regions had to
publish their proposals before 1 September
2009. This deadline forced the regions to
cooperate intensively with their stakeholders to
deliver in time and secure the investment funds.
What’s also clear is that while governments can
select measures from a vast array of options, it
is important to use a combination of measures in
any stimulus package. By doing so, governments
give themselves the ability to adjust measures
to what are constantly changing circumstances.
Central and local governments also should
optimize their limited resources by identifying
necessary organizational changes, defining
new workflows, developing human capital and
implementing IT systems.
We continue to live in challenging times. The
global economic crisis has left governments and
citizens very much on the defensive. But through
the provision of vital social security support,
governments can provide very practical support
to citizens and the economy at large.
The spectre of increased unemployment has
cast its shadow over a great many of the
world’s economies in the wake of the global
financial crisis.
From continent to continent, labor markets have
felt the full force of the worst economic slowdown
since the Great Depression, and more pain is
likely to come. An Organisation for Economic
Cooperation and Development (OECD) study
released in September reported that by the end
of 2010, 10 million more jobs are expected to
have been lost among its member states. This
would bring to 25 million the number of job
losses in the 30-member group of industrialized
nations since the economic crisis began at the
end of 2007.
At a time of severe fiscal constraint, governments
are thus faced with increasing demands for
social security support from their citizens, as
well as confronted by the logistical challenge of
ensuring that its existing business systems are
capable of dealing with this spike in demand.
The map on pages 6 and 7 demonstrates that
while different countries have adopted different
measures, interventions from the state have
been widespread.
Take the US for example. It may be out of
recession, but October was the 22nd successive
month that unemployment rose, and its economy
lost jobs at an average monthly rate of 256,000
in the third quarter of this year, according to
official figures from the US Treasury. The trend,
however, was nearly a third of the pace of job
losses of two quarters ago.
Although his opponents disagree, supporters
of President Barack Obama contend that the
actions taken by his administration have helped
mitigate the severity of the US jobs crisis. The
federal government’s US$787b recovery plan has
deployed federal tax cuts and incentives to try to
create and save jobs, expanded unemployment
benefits, and directed spending to social
entitlement programs. In addition, federal
agencies are using recovery funds to award
contracts, grants and loans around the country.
In Europe, meanwhile, unemployment has been
rising throughout the euro zone, as well as
in those countries that still use their national
currency, such as the UK. The Baltic countries
have been particularly badly affected, as have
Ireland and Spain, both of which have suffered
from the collapse of their construction industries.
“Policy-makers cannot
act alone; good policies
and strategies need to be
supported by excellent
implementation”
“At a time of severe fiscal
constraint, governments
are faced with increasing
demands for social security
support from their citizens”
About the author
Cornelia Gottbehüt is a senior manager in
Advisory Services with Ernst Young GmbH
Wirtschaftsprüfungsgesellschaft.
Getting
labor
working
Rising unemployment has
been one of the primary
consequences of the global
financial crisis. With many
more citizens turning to the
state for support, Cornelia
Gottbehüt examines how
different countries around
the world are responding to
the challenge
Assessing four key service delivery drivers will help to identify areas of focus
Increase value for money and do
more for less
Improve reputation and trust
Improve resource allocation and focus on
your top priorities
Improve capital and asset management
Source: Ernst Young, “Rebuilding for the future”, August 2009.
How efficient are you?
Consider outsourcing with payment linked to►►
creating sustainable jobs
Switch to low cost channels►►
Streamline business operations►►
Introduce shared services►►
Do all your stakeholders view
you positively?
Strengthen governance, transparency,►►
accountability
Demonstrate assessment processes are fair►►
and rigorous
How effective are you?
Focus on returning people to work — and keeping►►
them there
►►
Support unemployed and recently►►
employed
►►
How well are these managed?
►►
Reuse technology assets►►
►►
Ernst Young
service delivery
drivers
Dispose of surplus property
Review all capital programs
Engage with employers
Build partnerships with third parties
As we have seen, the downturn poses
a significant challenge to existing
employment and social security
organizations across the world.
Adopting a “business-as-usual”
approach will not drive the greater
sense of urgency that governments
should adopt. What capabilities
do these organizations need, and
where must they focus their efforts?
Ernst Young believes that there
should be four primary areas of focus.

07December 2009
Canada: 1.5m/8.4%
Although unemployment fell 0.3%
in September 2009, this number
is still 35% higher than in October
2008. Many economists predict that
layoffs in the manufacturing, forestry,
construction and auto sectors could
push the number of Canadian jobless
to more than 9% by the end of 2009.
Mexico: 2.9m/6.4%
Mexico’s unemployment
rate jumped more than
expected in September
as a crippling recession
ravaged the country’s
key exports. While
Mexico’s unemployment
rate increased, it is still
lower than in many other
industrialized countries.
Some analysts say that
Mexico’s absence of
unemployment insurance
causes workers to take
any available job if they
are laid off.
Germany: 3.4m/8.0%
German unemployment fell to 8.0%
in September 2009, confounding
forecasts of a slight increase.
Government subsidies that allow
firms to cut working hours have
so far prevented a flood of jobless
claims, but experts warn that
claims could rise significantly in
Q4 2009 and Q1 2010.
Netherlands: 0.4m/5.0%
The Dutch government has
started a program of part-time
unemployment benefit payments.
Employers can let their skilled
workers work up to 50% fewer
hours rather than being laid off,
with the time they are not working
made up with a benefit payment.
Spain: 4.1m/17.9%
The OECD predicts the number
of Spanish jobless will reach
20% of the workforce during
2010. The social consequences
are already being felt. Protests
have erupted across Spain as
citizens struggle to deal with
the economic crisis. For some
commentators, the downturn
has been aggravated by Spain’s
labor regulations.
France: 2.6m/10.3%
Analysts have warned that
even though the economy
seems to be on the mend, rising
unemployment is a serious
threat to any recovery as it
could sap consumer demand,
the key driver of growth.
Australia: 0.7m/5.7%
Australia’s unemployment rate
fell to 5.7% with 40,000 jobs
created in September 2009,
defying international trends and
stunning financial markets.
South Africa: 4.1m/23.6%
South Africa’s unemployment
problem is rooted in its apartheid
history. Although President
Jacob Zuma has pledged to
create 500,000 jobs in 2009 and
4m by 2014, with South Africa
now in recession after years of
steady growth, economists say
the government will have a hard
enough time saving jobs, never
mind creating them.
United States: 15.1m/9.8%
September 2009 was the 21st consecutive
month of shrinkage for the US workforce.
The official figures were far worse than
economists had forecast, and together with
a drop in factory orders, sent stock markets
lower and sparked renewed talk of the
possibility of a “double dip” recession.
Brazil: 1.8m/7.7%
At the start of the crisis,
President Luiz Inácio Lula da
Silva increased and expanded
access to social protection,
implementing a series of anti-
cyclical measures designed
to safeguard employment,
assist the unemployed and
protect internal consumption.
The Brazilian economy added
252,617 jobs in September,
on top of 242,126 in August.
Japan: 3.6m/5.3%
Many Japanese economists
believe it is just a matter of time
before the unemployment rate
tops the current postwar record
high of 5.5%. In June, the Cabinet
Office annual report put the
number of excess workers at
Japanese companies during the
first three months of 2009 at
6.07m, adding that the capability
of these workers to remain
employed under severe business
conditions is reaching its limits.
China: 35.0m/4.2%
Unemployment in China is
hard to accurately measure as
the number of jobless migrant
workers is not recorded. The
Ministry of Human Resources
and Social Security aims to
create jobs for 9m new urban
laborers, 5m laid-off workers
and 1m people who are facing
difficulties finding work.
India: 40.0m/9.1%
In India unemployment
is estimated at 9.1%, but
this number is thought
to largely reflect the
“organized” (official) sector
of the economy, which
makes up just 10% of the
country’s workforce.
United Kingdom: 2.5m/7.8%
The UK’s Office for National Statistics
reported that in September UK
unemployment had risen to its highest
level in 14 years. Alarmingly, youth
unemployment rose to a record high
of 19.8%, adding to fears of a new
“lost generation” of young people.
Italy: 1.8m/7.4%
While the Italian unemployment rate is
less than some expected, the number
of people giving up the search for
work has increased. Hours worked in
Italy have fallen 3.8% since Q2 2008,
compared with a fall of just 1.7% in
France, and the number of workers
temporarily sent home on reduced pay
under the “cassa integrazione” scheme
has gone up around six-fold since June
2008. Experts expect this scheme will
be used less in coming months and the
unemployment rate will rise accordingly.
Worldwide
unemployment
trends
Source: Data and intelligence has been drawn from national statistics on employment,
OECD, IMF, and the World Bank, and economic media.
This map records Q3 2009
unemployment levels in certain
countries around the world. It is clear
that rates and trends vary dramatically,
with comparisons complicated by
different recording methods. At
one extreme, South Africa (23.6%
unemployment) and Spain (17.9%) are
fighting hard to control the problem.
At the other end of the spectrum,
Australia has 5.7% unemployment
and falling rolls, and the Netherlands
has just 5.0% unemployed. Globally,
the International Monetary Fund
and the World Bank forecast that
unemployment will not peak until
Q3 or Q4 2010.

Delivering
21st-century
government
As head of the British civil service, Sir Gus O’Donnell works in
partnership with the Prime Minister and leads an organization of
500,000 people working across the UK. Here, he talks to Matt Mercer
about his role, what he has learned from around the world and his
attempt to shape a civil service that is responsive to citizens’ needs
December 2009 09

11December 2009
As the global downturn took hold, Sir Gus was able to draw on his
background in economics. Having studied the subject at the University of
Warwick and Nuffield College, Oxford, he spent four years as an economics
lecturer at the University of Glasgow before he finally joined the UK’s
Treasury ministry as an economist.
“In some ways you think you spend your whole life preparing for something
like this because I have a very Keynesian economics background,” he says.
“For us in the UK, we had a big role to play by hosting the G20 Summit in
London in April. I remembered my economic history of the response to the
Great Depression and all the things that went wrong there — the conflicts
and the fact there was a G66 meeting which went on for a month and it
accomplished little. The G20 for a day and a half was tough enough!”
What was it like? “It was fascinating. Getting the G20 leaders together with
the heads of international organizations was crucial, as they all realized
that they had a common purpose. We have, I think partly as a result of the
summit, had various regions of the world starting to turn around already,
particularly in Asia. Personally, for me, it was tremendous because I was
able to meet people like President Obama and talk to him. He was incredibly
impressive and very, very good at helping to solve problems and moving
things on.”
With the London 2012 Olympics on the horizon, hosting such a big event
was a particularly useful experience for the UK. “As a logistical exercise it
was something else,” Sir Gus says. “I think people didn’t realize how big
an event G20 is because there are rather more than 20 representatives
there! But in terms of outcomes it was a great success and it has led on
to Pittsburgh, and now we will have G20 meetings in Canada, Korea and
then France. So I think what it has done is cement the G20 process as the
key international economic forum, and this is a big achievement and a
big change.”
The UK civil service is structured into three organizations. There is the home
civil service, which Sir Gus heads, and two other administratively separate
civil services. One is for Northern Ireland, the Northern Ireland Civil Service,
and the other is the Foreign Service, Her Majesty’s Diplomatic Service.
The heads of these services are members of the Permanent Secretaries
Management Group, reporting to Sir Gus, who says the system works well.
“It’s quite permeable. In the old days you would have seen an embassy
or high commission as fundamentally being there to promote our foreign
policy, but this has now changed. When I went to India recently, I saw
how our high commission operates as a platform for British government.
There were people there working on things like commercial issues, inward
investment, science, and economics — people from a whole range of
departments. So the idea of embassies just focused on foreign policy is
outdated — it’s still essential but it’s very much just one element. And in
many countries, the Department for International Development — known
as DFID — is also working in new and innovative ways to reduce poverty and
playing a more and more important role in how the UK operates overseas.”
Earlier in his career Sir Gus had two stints working in Washington, DC. In
1985 he joined the British Embassy to serve in the economics division for
four years. In 1989 he became press secretary to Nigel Lawson, the British
chancellor of the exchequer in London, before transferring to fulfil the same
role for Prime Minister John Major for another four years. Between 1997
and 1998 he returned to Washington to serve as the UK’s executive director
to both the International Monetary Fund and the World Bank.
“Having had two spells in Washington I learned a lot,” he says. “It was
incredibly personally enriching and is one of the reasons I always say to
people here. “If you want to get on, get out.” I was there in the mid-1980s,
the Reagan years, and it was fascinating to see the growth in popularity
of supply-side economics, but also to see the center of gravity moving
somewhat to the west, going to places like San Francisco and San Diego.
Seeing the focus westwards, rather than eastwards, was really interesting as
it was the early days of the growth of China and India.”
Now, as cabinet secretary, he still seeks to pick up as much as he can from
regular trips abroad. “It’s very important to learn about best practice from
public services around the world. America’s ideas on opening up data were
really interesting, for example.
“We are doing something similar on www.data.gov.uk which is where we are
opening up non-personal data for other citizens to reuse. This is to increase
transparency, empower people to help improve public services and stimulate
economic growth. In one case, we released data on where cycling accidents
occur. Within 48 hours of it going online, cycling user groups had planned
alternative routes. So this generated real value to the user — cyclists in
this case. The state didn’t have to pay any money — all we did was put the
raw data out there and people used it to their best advantage. The idea of
finding ways for other people to use the material we can publish, in a world
where we may be stretched in terms of resources, is a really good one.”
And what about other countries picking up lessons from the UK’s civil
service? One key area of interest has been in the UK’s capability reviews,
Sir Gus’ flagship reform, which systematically assess the organizational
capabilities of individual departments and publish results that can be
compared across departments. The five-member review teams for each
department typically include two senior civil servants from outside that
department, two members from the private sector and one from local
government. In response to weaknesses identified in its review, each
department must draw up and follow an action plan to ensure that it can
meet the challenges to its current and future delivery.
“Getting the G20 leaders together with the
heads of international organizations was
crucial as they all realized that they had a
common purpose”
“It’s very important to learn about best
practice from public services around
the world”
Every Tuesday morning British Prime
Minister Gordon Brown and his secretaries of
state meet in Number 10 Downing Street for
their weekly cabinet meeting.
Always sitting to Brown’s immediate right is
not a senior minister but Sir Gus O’Donnell,
the cabinet secretary and head of the UK home
civil service. His placement at these meetings
underlines the importance of his role. He and his
civil service colleagues support the government
of the day in developing and implementing
its policies, as well as in delivering the UK’s
public services.
And yet Sir Gus insists that participating in cabinet
is not the best part of his job. “What I like best is
seeing the great things that civil servants do in
various contexts, helping the most disadvantaged
groups and working to improve public services,” he
says. “One day it could be seeing people working on
one of our best services, such as the car tax system,
which is an incredibly efficient online and telephone
service. And then another example is when I visited
Kabul, in Afghanistan, seeing our civil servants there
operating in incredibly difficult circumstances to try to
improve lives.”
Sir Gus’ large wood-panelled office, deep within the Cabinet
Office building in Whitehall and overlooking Horse Guards
Parade, is exactly what you’d expect it to be — imposing and
humming with the activity that comes with life at the very
center of government. But, since taking on the role in August
2005, Sir Gus prefers a down-to-earth approach — no old-
fashioned mandarin is he.
It was from this base in the Cabinet Office — a short walk down
a rabbit warren of corridors from Number 10 — that he has
spent much of his time working on the British government’s
response to the global economic crisis.
“Trying to sort out our economic policies on what continues to be
a really, really unusual global downturn has been challenging,” he
admits. “But, again, you see great rewards when organizations like
our JobCentre Plus agency are putting more people into jobs than
you would ever have expected, given the scale of the fall in GDP.”
He is also keen to stress that it’s at times of crisis that the civil
service’s values of honesty, impartiality, integrity and objectivity
really come to the fore. These values were first put forward by the
Northcote-Trevelyan report of 1854, which was the foundation of
a modern civil service that aimed to be efficient and non-partisan,
recruiting on merit through open and fair competition.
“I have made a big push on values,” he says. “And one of the highlights
for me is that the House of Commons is shortly going to be voting on
legislation that will enshrine these values into law — 150 years on from
Northcote-Trevelyan. These things are the bedrock of our civil service.”
Delivering 21st-century government

Preparing
for the worst
Resilience planners for Olympics and World Cups must not merely
hope for the best, says Jay Rebbeck. Prioritizing resources, rigorous
training and planned coordinated responses are all crucial elements
that help reduce the risk from emergencies
13December 2009
At 4:30 a.m. on 5 September 1972, five terrorists from the Black September faction of the Palestinian
Liberation Organization climbed over a two-meter fence into Munich’s Olympic Games village. After
meeting with two insiders with security access, they used stolen keys to enter the Israeli team’s
apartments. Two Israelis were killed in the initial struggle and nine were taken hostage. After relocating
to a nearby airfield, the crisis ended disastrously later that day when a failed rescue attempt left all the
hostages, one German police officer and five terrorists dead.
This was without doubt the worst terrorist incident any modern Olympic Games has had to face. It
continues to act as a reminder to the host organizers of major international sporting events for the
need to contingency plan against terrorist attacks, as well as other potential ‘nightmare’ scenarios that
could happen.
Forthcoming international sports events include the Vancouver Winter Olympics in February, next
summer’s World Cup in South Africa, and the London 2012 Olympics. In 2014 Brazil will stage the
World Cup and Russia will host the Winter Olympics, and the Olympics are headed to Rio in 2016. The
organizers of all of these events face the same challenge — what resilience preparations should they
have in place, and how can they maintain business continuity if a significant emergency or incident
threatens the event?
“We’ve had an enormous number of delegations come
and talk to me — all wanting to see if we could find ways of
benchmarking their performance against other countries,”
says Sir Gus. “I’m very pleased that I started the reviews
straight away because I think it takes a while to come
through, but we’re really seeing the benefits of constantly
looking at trying to improve. To me, it underlined the
importance of the need to professionalize the civil service
and to open it up. The weaknesses we found were in areas
like finance, HR, commercial procurement and IT, but
we’ve improved dramatically. This has been pushed by the
capability reviews, but departments have also responded
by bringing in external experts, which has worked really
well. In the long term, we want to grow more of our own
talent, but right now I don’t think people realize how
open we are — about 30% of our senior staff we bring in
from outside.”
Looking to the future, Sir Gus predicts that the civil service
in the UK will look very different. Already very diverse
when compared to the private sector — the proportion
of women in the senior civil service has almost doubled
over the last decade — this trend is going to accelerate
even further. “We are already majority female and we’re
on track to be majority female in the whole of the senior
civil service by 2020,” he points out. “In the FTSE 100 the
number of women directors is 11% but we’re at just over
33% — three times as good.”
The civil service will also continue to professionalize, he
predicts. “A lot of our big processes will be about putting
more services online and making them more accessible.
This will inevitably mean we will be somewhat smaller.
We will be much more focused on outcomes, much more
focused on making sure that we can measure how the
public feel about the services we are providing.
“So I think 10 years from now there will be a lot that is
different in terms of pace and professionalism. There will
be a lot more pride and passion in what we do. But what
won’t change will be that we will continue to operate on a
bedrock of traditional values. So we have to keep the very
best of our traditions, but at the same time move towards
more pace and more professionalism.”
“I think 10 years from now there
will be a lot that is different in
terms of pace and professionalism”
Delivering 21st-century government

15December 2009
Putting plans into practice
In preparing for an event, it’s critical to train and test
resilience plans is critical. Typically, the highest-priority
scenarios are tested through full-scale training events and
lower-priority scenarios are tested through “tabletop”
simulations. The Athens Olympic Games Security Division
held seven major drills before the 2004 Games, including
simulations of a chemical attack, a plane hijacking and
an epidemic outbreak. South Africa’s training regime
has included testing of air and maritime defenses and
chemical, biological, radioactive and nuclear simulations in
Cape Town, Pretoria, Port Elizabeth and Bloemfontein.
The importance of training and testing was highlighted by
the Atlanta 1996 Olympic bombing in Centennial Park that
killed two and injured 111. The FBI was critical of Atlanta’s
resilience response. Systemic failures in the process
delayed police responding to a warning call, and they
could not clear the park before the bomb exploded. More
comprehensive training and testing would have arguably
highlighted these system issues.
Reliable intelligence sharing and response coordination
Reliable security intelligence needs to be gathered and
shared among key departments and agencies before
and during the event. The German security operation for
the 2006 World Cup was a prime example of effective
security intelligence gathering and sharing. The National
Information and Cooperation Center in Berlin tracked
6,000 unruly trouble-makers and received thousands of
tip-offs by coordinating closely with police, Interpol and
the Central Sports Intelligence Unit.
Robust health-intelligence gathering is critical to monitor
and contain communicable disease outbreaks caused
by food poisoning, bioterrorism or emerging epidemics.
Sydney’s Olympics organizers spent three years
developing an extensive infectious disease surveillance
system for the games. Fortunately, there was no outbreak
in communicable diseases during the games. However,
the comprehensive surveillance system was a success
that also created an excellent health legacy. This is a great
example of a resilience investment delivering benefits
long after the event, which is a useful lesson for other
organizers to learn.
When resilience scenarios strike, command and control
structures need to be in place to act as the surveillance
and decision-making hub that coordinates the response.
These are typically secure rooms deep inside government,
with pre-determined protocols for which department
or agency will take the lead in any given scenario. The
importance of locating these command hubs in discrete,
resilient locations was highlighted during New York’s
emergency response to 9/11. The Emergency Control
Center that was meant to be the city’s main command and
control headquarters in the event of a terrorist strike was
located on the 23rd floor of the World Trade Center.
Facing the future
Today’s resilience landscape is complex. Every event is
unique, and risks have to be assessed locally. A second
wave of pandemic flu in the northern hemisphere would
give the Vancouver Winter Games a major problem. With a
UK general election looming, London’s resilience planners
will find short shrift if they start pushing the GB£600m
resilience envelope. Sochi’s planners in Russia already
know they need to massively increase their energy supply
for the Winter Games in 2014 — at current levels the event
would drain 80% of their total available energy.
Spectators want to feel completely safe when they attend
an Olympics or World Cup, but citizens don’t want to see
spiraling resilience costs that they know they ultimately
will pay for. Given limited resources, organizers have to be
ruthless in how they choose to mitigate risks. This means
prioritizing how resources are focused, putting rigorous
training and testing regimes in place and delivering
coordinated resilience responses. But even with all this,
ultimately sporting organizers never want their resilience
plans to see the light of day. They would swap the best
plans in the world for one ingredient — good fortune.
However, luck has a peculiar habit of favoring those who
don’t depend on it.
Assessing the strategic context and risk factors
The environment in which today’s resilience planners
work is more complex than in the 1970s. Every sporting
event is unique. The first step in resilience preparation is
to comprehensively understand and assess the local risks
that could threaten the event.
For example, the attacks on the Sri Lankan cricket team
in Pakistan in March this year highlighted the increased
likelihood of terrorist attacks on sporting targets. Massive
sporting events such as World Cups and the Olympics also
bring with them the focus of the world’s media spotlight;
4.3 billion viewers tuned into the Beijing Games. High
modern attendances also put greater strain on host city
infrastructures, stretching utility services, transport
systems and emergency services alike. And resilience
plans for all these scenarios need to be financed during
the worst economic downturn in living memory.
Prioritizing risks
Assessing the local risks affecting a sporting event will
generate a very long list of potential risk scenarios.
However, with limited resources to respond to these
scenarios, the risks need to be carefully prioritized. This
is typically done on the basis of their relative likelihood
versus their relative impact. The UK government uses this
approach to prioritize the risks posed to the whole country
by accidents, natural events and malicious attacks.
It is important that resilience planners of major sporting
events use this rational prioritization of risks for two
reasons. First, the trade-off between likelihood and impact
throws up results that are not always intuitive. Although
a nuclear attack would cause far more devastation than a
gun attack on a crowded iconic venue, the latter scenario
is far more likely. It is therefore a higher priority in terms
of resource allocation. Second, this approach forces us
to assess likelihood rationally — something that humans
are not very good at. This is because the “recency effect”
often gets the better of us. We tend to assess scenarios as
more likely if they have happened recently and less likely
when they haven’t happened for a while. For example,
in the year after 9/11, there was a marked decrease
in the numbers of Americans traveling by plane and a
corresponding increase in road travel.
Resilience planning
Once high-consequence risk scenarios have been
identified, they must be translated into effective plans.
This begins with the design of the events themselves. A
key security lesson of the 1972 Munich hostage crisis
was the need to physically separate athletes from the
public. This was taken on board in Sydney 2000 and by
London’s 2012 organizers, both of which favor a layered
security policy that sees athletes housed in an Olympic
village within the Olympic park. Successively more-
stringent checkpoints need to be accessed to enter the
Olympic village.
Crowd safety also needs to be built into the physical design
of the venues. The importance of building structurally
sound venues was highlighted by the Heysel disaster in
1985, where 39 people died as a result of a collapsed
stadium wall. Numerous other football disasters (including
Peru in 1964, Hillsborough in Sheffield in the UK in 1989,
Ghana in 2001 and Johannesburg in 2001) point to
the need to allow fans overspill space (onto the pitch if
necessary) to avoid crushing and for stadia to have rapid
evacuation protocols in the event of an emergency. This
includes having all-seated stadia, wide exits, and gentle
slopes running away from the stadium.
Resilience plans need to cater for the additional staff,
equipment and vehicles needed in and around the venues.
This includes extra security staff and police officers, more
firefighters, more medics, and increased numbers of police
cars, fire engines and ambulances. To pay for all this,
resilience budgets have surged. For example, the Athens
2004 Olympics spent just over €1b for their security
campaign. A major lesson has been the need to ring-fence
an appropriate resilience budget. While London 2012’s
planners have so far stuck to their GB£600m budget,
Vancouver’s organizers have spent more than five times
their initial budget of US$175m, and are now on course to
spend US$900m.
About the author
Jay Rebbeck is a senior
manager with Ernst Young
LLP. He has nine years of
experience, the last five as a
strategy advisor to the UK’s
national and local government.
Preparing for the worst

Surprisingly, for a nation of such vast open
spaces and comparatively small population, New
Zealand still suffers from housing challenges
familiar to those living in larger, more densely
populated countries.
From constructing sufficient numbers of
affordable homes to tackling rent disparities and
the rising unemployment borne out of the global
financial crisis, there’s no doubt there is a lot in
Lesley McTurk’s in-box to keep her busy in the
office. But as the chief executive of Housing New
Zealand Corporation (HNZC), McTurk makes it a
priority to get out and about, engaging with an
eclectic array of partners and customers.
“In the broadest sense our stakeholders are
very generic,” she says. “They include the New
Zealand public, because they pay for the services
we provide through their taxes, and because of
the work we do right across the country, we have
a lot of interest groups that are impacted. We are
not just talking about social housing providers;
we are also talking about people who provide
social services. And they include a lot of the not-
for-profit groups who have an involvement with
our tenants. So we touch pretty much everyone.”
HNZC is the government’s agency for providing
housing services to people in need, as well as
its principal advisor on housing. It currently
manages a portfolio of around 69,000 houses,
currently valued at NZ$14.7b (US$10.7b),
including about 1,500 homes for community
groups providing residential services. HNZC’s
traditional role has been to provide good-
quality, affordable rental homes for people on
low incomes or with housing needs. But it also
works to improve access to affordable homes
through programs such as home ownership
loans and education for people on low to modest
incomes, as well as locally based programs to
strengthen communities.
“We are not a social welfare agency, we are a
housing provider,” McTurk points out. “Within
that role, however, the way in which we discharge
our obligations as a housing provider involves
referring to and touching many other agencies
who we believe might be required to provide
the necessary wraparound services when there
are challenging situations, or difficult and
vulnerable tenants.”
Increasingly, McTurk and her colleagues are
seeking to involve New Zealanders in the
delivery of their services. “This is the basis of
the approach we are taking in Tamaki, a suburb
of Auckland,” she says. “We are involved there
in a very high level of engagement with the
community in co-design. They are very much
a driver in that development, and not just our
own tenants either — the broader community are
involved, too.”
In New Zealand, it’s not just central and local
government that are involved in the provision of
social housing, McTurk says. “Local authorities
are one player in the market, but there are also
others like not-for-profit organizations who
are involved as well,” she points out. “We are a
provider, but the reason for wanting to have local
provision in part is that you end up with far more
responsive provision of housing to the local need,
a greater understanding of what that local need
is, niche providers who might provide for the
disability sector and so on. And you end up with a
better and more responsive sector.”
Prior to taking up her role with HNZC, McTurk
was chief executive of Christchurch City Council.
Asked for her views on the major changes in
New Zealand’s social housing sector over the
past decade, she pinpoints affordability, and
the resulting increase in those people unable to
afford to buy their own home.
“We were involved in a significant piece of
cross-government research in the last couple
of years,” she says. “This demonstrated very
clearly that in about 2003 there was a significant
and irreversible shift in housing affordability. A
variety of factors came together, such as interest
rates, immigration trends, and the introduction
of new compliance costs. When combined with
an increase in land prices, it effectively froze
first-home buyers out of the market — a group of
people who previously would have expected to
be able to own a house, but subsequent to that
change in trend, will not be able to.”
With fewer people buying their own homes,
the number of homeowners in New Zealand is
expected to fall to 62% in future years. “There
is nothing necessarily wrong with that in itself,
because you can compare countries in Europe
which have far lower home ownership rates,”
she adds.
“As an alternative to home ownership, there
needs to be more institutionalized arrangements
to give security of tenure for people. I think
in New Zealand, home ownership has been
a substitute for wealth generation and
intergenerational wealth transfer. In lieu of a
good savings record, people save in their home —
it’s where they put their equity. So it’s important
for those people who aren’t homeowners
anymore to find other investments that are going
to generate wealth for them in their older age.
We also need to, and we are looking at, designing
different products, if you like, for lease/rental that
will meet people’s needs and are more secure
than the current private rental market.”
And what about the effect of the economic
crisis on New Zealand’s housing sector? The
country as a whole has not been immune to the
global downturn. Even though the country’s
banks are sound, global interdependencies and
accumulated domestic imbalances mean that
the economy has inevitably been affected by the
worldwide financial and economic crisis.
McTurk, though, says that the effect on housing
has been far from immediate. “It’s interesting
how the impact of the recession has taken
longer to flow through than might have been
anticipated,” she says. “But there is also the
fact that it is flowing through in a patchy way.
For example, our overall waiting list for houses
hasn’t changed across New Zealand, but it has
grown in certain areas and obviously declined
in others. Once unemployment peaks, then the
impact of that takes still longer to flow through
the housing market.”
Turning to what lies ahead over the next 10
years, McTurk suggests that how the sector
evolves depends very much on the decisions
taken today. “Housing affordability is a challenge
that we’ve got to think about quite robustly in
New Zealand,” she says.
December 2009 17
Home pages:
analyzing housing
“Housing affordability is a
challenge that we’ve got to
think about quite robustly in
New Zealand”
“It’s interesting how the impact
of the recession has taken
longer to flow through than
might have been anticipated”
Building
New Zealand’s
communities
Providing people with access to good-quality, affordable homes is
what drives Lesley McTurk, chief executive of New Zealand’s principal
housing agency. Here, she tells Stuart Mutch and Alan Judge about
her role, tackling affordability and the future of social housing

19December 2009
For the last 60 years, the Canada Mortgage and Housing
Corporation (CMHC) has been working to help Canadians access
a wide choice of safe, quality, affordable homes. Established as
a government-owned corporation in 1946 to address Canada’s
post-war housing shortage, the agency is now a major national
institution providing mortgage loan insurance, mortgage-backed
securities, housing policy and programs, and housing research.
Karen Kinsley, its president and chief executive since 2003, explains that CMHC operates in
conjunction with Canada’s different levels of government. “We actually have a shared role, certainly
in the provision of affordable housing, or what we call ‘social housing’,” she says. “Here, the federal
government provides funding and this is generally shared equally with our 10 provinces and three
territories. The federal government sets principles and priorities for the funding, and then the
provinces and territories have the responsibility to design the specific initiatives to meet the needs of
their citizens.”
Canada is the world’s second largest country. From east to west, it encompasses six time zones and
with territory facing the Atlantic, Pacific and Arctic Oceans, it has the longest coastline of any country.
Kinsley, however, is keen to stress that its geography does not hinder the delivery of CMHC’s services.
“Internally, we are a big user of technology and we use video conferencing for those of us who are
in our regional operations,” she says. “We also use web forums to keep in touch with staff across the
Corporation. And I make a point to personally visit all of our regional centers annually to ensure that
everyone is clear about our priorities and to thank our staff for their work.”
Housing in New Zealand
In 2006, 67% of homes in New Zealand were owner-occupied, down►►
from 71% in 1996. Projections suggest that owner-occupied housing
will decline to 62% by 2016.
New Zealand’s biggest city, Auckland, has lower home ownership,►►
projected to drop to 58% by 2016. Home ownership is lower for Maori
(43%) and Pacific peoples (34%).
House prices increased through November 2007. More recently, house►►
prices and interest rates have declined, and houses have become more
affordable. The New Zealand Treasury predicts house prices will fall
further in 2010, reflecting lower demand as a result of tighter lending
criteria, investor uncertainty, low net migration and a weakening
labor market.
In February 2009, Housing New Zealand received NZ$124.5m of►►
additional funding from the government’s fiscal stimulus package to
spend on state housing over an 18-month period to July 2010. The
money is being used to build new state homes and improve existing
ones across the country by making them warmer, drier and healthier.
Source: Housing New Zealand, Statement of Intent 2009–10
“I think a lot of it is also about how we face up to
the lessons of the recession — are we still going
to be subject to the borrow and hope mentality?
Or are we going to learn some lessons from this
recession and change the way we structure our
financial affairs as individuals? It’s about whether
or not New Zealanders can actually afford the
level of amenity in housing that they have been
used to. Can we afford it as a country?”
McTurk believes that there needs to be a scaling
back of aspiration levels. “What social housing
looks like in New Zealand is relative to what the
expectations are of the average New Zealander,”
she says. “For example, we might have someone
who can afford a certain two-bedroom flat in
the private sector but they find that that’s not
suitable for their circumstances, or they decide
they want to apply for a state house because it’s
going to be better. But the reality is that’s all they
can afford with their income. That means state
houses are available for the most vulnerable in
our communities.”
McTurk believes that social housing trends in the
next decade will be driven by the health of the
labor market, as well as by demographic changes
such as immigration and refugee and migrant
intakes. “The thing that we need to do in New
Zealand — and this comes back to that housing
affordability issue — is that anything that will
stimulate housing supply is a good thing.
“At the moment we need about 20,000 houses
a year to be built to maintain supply at the right
level, and depending on immigration it could be
more or less. We know that it’s going to push
rents up, and that pushes people into the social
housing sector so supply is key. We need to keep
supply levels healthy and balanced and not hit
by wild fluctuations. It went down to 12,000 as a
result of the recession. Building consents are up
23% so that’s a good sign, but that’s up from a
low base so it’s still going to take a while.”
Innovation, too, will be crucial. “We need to
see the development of other products and
services to create more choice for tenure, with
institutional investors coming into the long-term
rental market. We really need to start thinking
about building complexes and density. There is
a huge opportunity there for those institutional
investors, superannuation funds and so on.
There is a whole lot of interest in this, and that’s
really exciting.”
About the authors
Stuart Mutch is an Assurance partner and
Alan Judge is Head of Government Services at
Ernst Young New Zealand.
“At the moment we need
about 20,000 houses a
year to be built to maintain
supply at the right level”
“The private sector could possibly
do more to help with addressing
the need for affordable housing in
our country”
Building New Zealand’s communities
Creating strong
foundations
Delivering quality and affordable housing in a country as large
and varied as Canada is no easy feat. Here, Karen Kinsley,
chief executive of Canada’s national housing agency, tells
Julie Mills about addressing the needs of 33 million people
spread across 10 million square kilometers

Looking at the housing market across Canada as a whole, issues and
challenges vary from region to region — one size does certainly not fit all.
“Clearly, different parts of the country will have different approaches,”
Kinsley says. “Some of the strategic issues, however, such as the
affordability of housing are common challenges. But how one deals with
affordability issues is very much driven by local circumstances.”
Kinsley, who joined the organization in 1987 and was previously vice-
president and treasurer of two real estate development companies, cites the
level and pace of innovation in Canada’s housing system as a major area of
change over the last 10 years. “The pace of innovation is now much quicker
than it would have been a decade previously,” she says. “I think there is
now a much more competitive marketplace. Consumers are benefiting from
more choice and a high-quality product.” She also points to the increased
amount of information about how housing markets are functioning.
“Analysis about prices, affordability, demographics and demand is becoming
much deeper and much more widely used.”
She goes on to say that housing as a sector is now increasingly recognized
as an important generator of economic activity. “The impact of housing
on the wellbeing of society more generally has also come to the fore. The
benefits of good housing — and obviously the consequences of not having
a strong housing system — are becoming better understood, not just by
policy-makers in government, but citizens more generally. Certainly in the
last economic downturn, the impact of not getting it right had become
regrettably well known to many.”
However, Canada appears to have coped far better with this downturn than
many other countries. For example, unlike their US neighbors, Canadians
have not been as exposed to the problems associated with sub-prime
mortgage lending — where loans are made to borrowers who did not qualify
for loans from mainstream lenders.
“We never insured sub-prime loans,” explains Kinsley. “So the amount of
sub-prime mortgage in this country is very, small — probably less than 5%.
So this speaks to the strength of our institutional framework combined with
our prudent attitude. While this global downturn affects us all, in Canada’s
case, in both the overall economy and the housing market in particular, we
went into this downturn in very good shape. While it has had some impact,
clearly it has been nothing on the scale that other countries have seen.”
Kinsley goes on to pinpoint three factors underpinning Canada’s strong
performance. “First, the strong economic fundamentals of the country
going in to the downturn. Second, the very strong banking system in this
country, and third we have a very prudent housing market. You combine
Creating strong foundations
Home pages:
analyzing housing
21December 2009
Housing in Canada
According to the 2006 Census, an average of 240,000 newcomers►►
arrive in Canada each year. As a result, roughly two-thirds of Canada’s
annual population growth now comes from net international migration.
In 2008, new home construction in Canada was above the 200,000►►
unit level for the seventh consecutive year and housing-related
spending contributed just over C$300b to the Canadian economy.
Gains in new construction were recorded in Newfoundland and►►
Labrador (23.1%), Saskatchewan (13.7%), Ontario (10.2%) and New
Brunswick (0.8%). Decreases were recorded in Alberta (-39.7%), Nova
Scotia (-16.2%), British Columbia (-12.4%), Prince Edward Island
(-5.1%), Manitoba (-3.5%), and Quebec (-1.3%).
Under the Affordable Housing Initiative, the federal government,►►
through Canada Mortgage and Housing Corporation, provides
contributions to increase the supply of affordable housing. As of
31 December 2008, more than 41,000 units had been completed
under this initiative.
Home builders are increasingly taking a water-sensitive approach to►►
urban design, viewing it as an important part of efforts to encourage
the development of healthy, energy-efficient sustainable homes and
communities. Provinces such as British Columbia, Nova Scotia, Ontario
and Saskatchewan have already included, or are in the process of
including water efficiency in both their provincial water strategies and
building code regulations.
Source: 2009 Canadian Housing Observer, Canada Mortgage and Housing Corporation.
those three things and the result is that we have not seen the types of
problems that have been experienced elsewhere.”
From a housing perspective, the biggest impact of the downturn has been
the overall lack of capital or liquidity. “But again, we had tools here in
Canada that allowed us to act quickly,” Kinsley points out. “The government
of Canada, through CMHC, purchased insured residential mortgage pools
from Canadian financial institutions enabling them to access stable long-
term financing, which in turn helped them continue lending to Canadian
consumers and businesses. As these loans are already mortgage-insured
by CMHC — that’s part of our legislative regime — this provided a level of
liquidity with no additional risk to the taxpayer.”
Looking ahead, Kinsley would like to attract more private sector interest
and participation in the area of affordable housing. “The private sector
could offer some creative ideas and possibly do more to help with some
costs associated with addressing that need in our country,” she says. “In
addition, I think that ensuring that we are always looking for opportunities
to diversify mortgage funding sources is important. It’s the old adage that
‘“you shouldn’t put all your eggs in one basket.”’
Increasing the energy efficiency of housing is also a priority. “Here in most
parts of Canada, we have a very cold climate for a long part of the year,
so this is a very practical issue for us. There are tremendous opportunities
to really push forward on that frontier. Not only would this make homes
more comfortable for occupants but also, at a broader level, could result in
significant reductions in energy consumption.”
In 10 years’ time, while Kinsley expects to see homes which are more
energy efficient, she is less sure about how communities will be dispersed
across the country. “While land availability in many cases may not be
the constraint, I think there are other factors to consider,” she says. “We
really have to be efficient when planning future housing needs. Many
municipalities are very engaged with, respect to on the one hand protecting
green space, and on the other hand planning for rapid expansion.
“How to balance increased demand for housing with the impact on the
environment is creating some very healthy debates amongst policy makers
across the country. I expect the approach will vary from region to region,
but there’s no doubt that it is a very interesting time for all of us. Only time
will tell what the future holds.”
About the author
Julie Mills is a senior manager with Ernst Young LLP in Canada.
“There are tremendous opportunities to
really push forward on increasing the
energy efficiency of housing”

Guiding the
global recovery
Policy-makers need to keep public
deficits and debt under control so that
the private sector will once again become
self sustaining. This will require not just
expertise in financial management, but
a new approach to governance, says
Philippe Peuch-Lestrade
23December 2009
How to best respond to the economic downturn has been
a challenge for governments the world over.
What interventions are necessary? How will the markets
react? What measures can we afford? While these are
just some of the questions that have tested policy-makers
and administrators over the last two years, governments
of nearly all countries with developed economic assets
have responded to the crisis proactively.
Most took enormous fiscal measures, and while it is too
early to draw lessons about the effectiveness of many of
these stimulus programs beyond their role in calming the
markets, it is clear that the debt incurred has increased
the pressure on governments to become more efficient.
New Zealand and Canada may be separated
geographically by thousands of miles but their
respective housing needs are uncannily similar.
Delivering quality, affordable housing is the
overriding aim; a target made more complicated
by the impact of the global financial crisis and the
fluctuating levels of supply and demand.
Lesley McTurk and Karen Kinsley are both
housing specialists, leading their respective
organizations after accumulating many years’
experience of this sector. They are therefore well
placed to judge the evolving housing needs of
their respective countries. Affordable housing
looms large and, quite rightly, both agree there
is no catch-all solution to the problem — this
goal can only be tackled through a variety of
measures and programs.
In New Zealand, McTurk’s organization juggles
home ownership loans with, amongst other
things, education for people on low to medium
incomes and partnerships with support for
councils and community groups wanting to
increase their involvement in providing social
housing. In Canada, meanwhile, the focus
ranges from improving building standards to
publishing what aims to be objective and reliable
housing information.
Affordable housing needs to cater for the
requirements of a wide spectrum of people.
While those in long-term need generally receive
priority, there is an increasing number of people
who cannot access housing through the open
market. This is because both open-market rent
and purchase prices are unaffordable in relation
to their incomes. This has led to more innovative
thinking around methods of ownership and
occupation, such as shared equity products.
On the impact of the financial crisis, New
Zealand’s housing market has, so far at least,
escaped relatively unscathed. Not that the
sector is out of the woods, however. With
unemployment yet to peak, the recession is
likely to place more pressure on the country’s
affordable housing stock as citizens struggle to
make rent and pay their bills. Canada, thanks to
its strong economic fundamentals, is in a better
position it would seem.
Not all countries have been so fortunate. As the
recent events in Dubai demonstrate, property can
be all too vulnerable to market instability. And in
the UK, for example, the housing sector has been
badly affected by the recession with new housing
starts falling to levels last seen in the 1930s.
Despite the injection of significant government
subsidy in various forms in order to support the
house-building industry and preserve capacity
in the sector, the economic downturn has
exacerbated the mismatch of supply and demand
across the whole housing market, with affordable
housing supply being severely affected.
In the future, governments and housing agencies
around the world will seek to involve communities
in the delivery of housing services. Not only does
increasing citizen involvement help ensure that
national priorities are in tune with local needs,
there are also cost and quality advantages
which will be especially relevant in this new age
of austerity.
Housing remains at the heart of robust and
sustainable communities. Ensuring people have
access to appropriately priced, high quality
housing in areas in which they want to live
remains a shared vision, but important choices
need to be made as to how this can best be
achieved. A range of delivery models which can
be flexed to fit local circumstances, the public
and private sectors working together and the
involvement of local communities are the key
elements to enabling the affordable housing
sector to continue to grow.
Taking stock:
examining the latest
housing developments
Ensuring people can live
in high-quality, sustainable
places is the priority of
housing leaders in both
New Zealand and Canada.
How best to go about
this, says Ernst Young’s
Elizabeth Austerberry, is
the key question
About the author
Elizabeth Austerberry is a director with
Ernst Young LLP. She has over 25 years
experience of the residential sector, and is currently
advising both the public and private sectors on
affordable housing delivery.
“In the future, governments
and housing agencies
around the world will seek
to involve communities
in the delivery of
housing services”
Home pages:
analyzing housing

25December 2009
The stimulus has come at a high price. To fund their programs, many
national governments and public entities were forced to tap into public
funds and resources that, in some cases, were already in dire straits. While
these measures were effective in preventing even greater deterioration in
the global economy, they resulted in a huge increase in government debt
levels. As of 2009, the ratios of government gross debt to GDP were at
historic highs in several developed countries, according to the IMF. These
included Canada, 75%; France, 74%; Germany, 79%; Italy, 115%, Japan,
217%; the UK 63%; and the US, 87%, up from 63% just two years ago.
Most leaders recognize that these levels of public debt are unsustainable,
and most intend to make corrections. Indeed, even before the crisis began,
France had elected Nicolas Sarkozy on a reform platform that promised
sweeping changes to the French state, as well as the revitalization of
its economy through business liberalization. Prudence is not always
popular, however.
While hard choices will still have to be made, efficiency gains could make a
huge difference in reducing the severity of the financial squeeze. The smart
application of new technologies and modes of communication, combined
with the use of some of the same management techniques that have cut
costs and improved outcomes everywhere — from the assembly line to the
operating room — may offer a way to reduce the scale of the dilemma and
provide new tools for future challenges.
We believe there are three important lessons that can be drawn from
recent events:
1. Stimulus programs need to be administered carefully and transparently
to help rebuild public trust and confidence.
2. High debt levels mean governments cannot easily return to business
as usual.
3. A bold reform agenda is required to turn the crisis into an advantage.
Governments have responded to the global recession with complex,
multifaceted plans. Many included regulatory changes, seizures of
companies and macroeconomic actions to control certain economic
indicators such as the unemployment rate.
It seems to have worked. Most economies have stabilized, and equity and
trade indices have bounced back. But recent experience suggests that
stimulus programs carry two basic risks.
First, there may be unintended consequences. For example, almost
two-thirds of the responses were geared towards boosting short-term
demand. Consequently, many were entered into without taking time for
the rigorous cost-benefit assessments that would have been undertaken in
normal circumstances.
Second, the execution of a program may be faulty. It is important for
governments to effectively manage their own costs, verify that proper
controls are in place, and maintain high standards of governance and
transparency. If they are to lead their constituents through these difficult
times, leaders must first put their own houses in order.
“If governments are to lead their
constituents through these difficult
times, leaders must first put their own
houses in order”
“While hard choices will still have to be
made, efficiency gains could make a huge
difference in reducing the severity of the
financial squeeze”
Guiding the global recovery
In our view, while it is difficult to treat a recession as an opportunity,
governments now are left with no other choice but to deliver a lasting
cultural shift. The growing budget deficits and continued structural
pressures, such as rising citizen expectations, aging populations and
climate change, demand more systemic changes. The question is how
to do it.
Taxes often can’t be raised without damaging the economy, and
programs can’t be cut without affecting citizens or harming a part
of the economy that depends on the public sector.
What is needed is sound leadership to drive through reforms. The
most successful change programs have been delivered when
political leaders made reform a top priority and worked with
public servants to make this ambition a reality.
The good news is that from financial regulations to better
auditing processes, from project-management software to
sophisticated accounting standards, the tools that will enable
governments to be more transparent and accountable are
ready to be implemented. New delivery mechanisms and
greater customer choice will help to do more with less, while
improving resource allocation will encourage organizations
to focus on their top priorities.
In the end, the financial crisis may prove to be the catalyst
that accelerates public service reform and delivers lasting
benefits for citizens around the world.
For further reading please visit: www.ey.com/gps
About the author
Philippe Peuch-Lestrade is the Global Government and Public
Sector Center Leader for Ernst Young. He has been closely
involved in the government sector in France for the past 18 years.

December 2009 27
Rebuilding
for the future
With the global economy showing signs of stabilizing, the
emphasis now needs to shift from crisis management to
strategic planning, says Craig Baker
When the credit markets first started to contract in 2007, few
would have predicted the extraordinary period that followed.
In response, most governments in the developed world have so
far focused on short-term measures including bank rescues,
programs to prop up ailing industries such as automotive and
construction, and increased spending on infrastructure.
Many countries have adopted plans to protect vulnerable
groups by strengthening unemployment benefits or by
providing cash transfers to the poor, the elderly or children.
These payments will protect the most vulnerable, and the
they are likely to prompt increased citizen spending that
will stimulate ailing economies.
Although the early signs are that these measures appear
to be working, the task facing our political leaders
remains daunting. Governments today face ever-growing
demands for services. As demographic compositions
change, the capacities of welfare, healthcare and
infrastructure must grow and change to cope with the
public’s evolving — and increasing — needs.
Climate change is creating another huge and
unprecedented challenge. With global warming
accelerating, the Copenhagen Climate Conference
taking place between 7–18 December is the last
opportunity for governments around the world to
design a workable successor to the Kyoto Protocol.

Balancing so many high priorities grows ever more difficult. Even the
governments of the richest countries in the world are struggling to provide
adequate financial and human resources without damaging the economy.
Structural issues are another challenging factor. The distance between
centralized strategies and systems and frontline decision-making is often
vast. Some of this is a function of politics, but some of it is simply because
the 20th-century models of government administration still followed by
many of the world’s governments are unequal to the complex challenges
we face.
Policy-makers increasingly agree that what is needed to cope with these
challenges is nothing less than a new model for the financing and delivery
of public services, based on a combination of collaboration and competition
between public, private and not-for-profit organizations. In addition, the
need to harness new technologies to run government efficiently will create
an ongoing set of operational challenges. The focus needs to return to
structural reform — this time with renewed urgency and energy.
We have identified four key challenges that will help government and public
sector organizations identify their most pressing priorities: How effective
are you? How efficient are you? How well do you manage your assets? And
finally, do your stakeholders view you positively?
In order to address these challenges and to take this agenda of public
service reform forward, our experience shows that nine core competencies,
required. (See sidebar below.)
The most effective and successful public sector organizations are already
looking to the future. In our next two articles, Arnauld Bertrand explains
how policy-makers in France are in the process of delivering lasting,
systemic reforms, and Deborah Holmes then argues that government and
business in the US are increasingly working in partnership to address social
and economic challenges.
This is a challenging and fast-moving policy environment, but the clock is
ticking. Let’s seize this opportunity to reshape government for the better
and make it fit for the long term.
For further reading please visit: www.ey.com/gps
About the author
Craig Baker is a partner in the UK firm, Ernst Young LLP and Global Advisory
Leader for the Government and Public Sector.
29December 2009
Vive la
Révolution
Arnauld Bertrand
examines how French
policy-makers are driving
forward plans for a
sweeping modernization
of the state
Ernst Young’s nine core components
for successful public service reform
1. Citizen focus: customer relationship management puts citizens at the
heart of service design, helping to ensure that government priorities
better reflect local needs. It also increases the quality and control people
have over public services and helps to reduce costs. Greater transparency
in reporting performance and value for money offers an opportunity
to re-engage directly with citizens and encourage a new relationship
between citizens and the state.
2. Strategic performance: the right strategic direction should drive the
delivery of ambitious policy goals. Service delivery requires working
closely across departmental boundaries, collaborating strategy
development and performance management to deliver value.
3. People and organizational change: effective change helps maximize that
the power and value of the team so it can reap the benefit of investments
from conception through detailed organization design, stakeholder
engagement and implementation.
4. IT advisory: better use of technology supports frontline and back office
services. This drives consistency in the delivery of information and
communication technology (ICT) projects to time and budget, thereby
allowing for improved value on ICT spending.
5. Finance: finance professionals should be in the frontline of government
management. The application of clear and consistent policies, controls
and procedures will help to make better spending decisions and ensure
that resources are deployed efficiently.
6. Supply chain and operations: supply chain management helps to ensure
value from external resources. Value driven from business process
outsourcing as well as traditional goods and services helps create new
service delivery models. It brings the best of the private sector to bear on
public service delivery.
7. Program advisory services: against a background of changing priorities,
governments need to be confident they are effectively running programs
that are aligned to their strategic objectives.
8. IT risk and assurance: key to being in accordance with security and
compliance requirements, this involves identifying and managing IT
risks, improving risk controls and processes, and ultimately reducing
business risk.
9. Risk: risk management helps mitigate both financial and reputational
issues through effective governance, compliance and control. It pulls
together all of the elements into a well-managed whole.
Source: Ernst Young, “Rebuilding for the future”, August 2009.
Rebuilding for the future

Although France’s economy, the fifth largest in the world, has
not proved immune to the global recession, it appears to be
weathering the storm better than many.
Its small level of growth — 0.3% — in the second and third
quarters of this year will doubtless have pleased President
Nicolas Sarkozy, who had made France’s economic
performance the principal focus of his administration even
before the collapse of Lehman Brothers proved the catalyst for
the worst global downturn since the Great Depression.
Sarkozy’s bid to deliver lasting, systemic change has been
based on his General Review of Public Policies (Révision
Générale des Politiques Publiques, RGPP), a set of proposals
launched just after his election. The plans have committed
the French government to a course of unprecedented
modernization that affects all of France’s ministries. The
results have been striking: 374 ideas are expected to generate
nearly €7.7b of savings by 2011.
The drive for reform has been made possible by a combination
of five key factors:
Strong, personal commitment and leadership from the►►
French president
Support from a broad consensus of elected officials,►►
citizens and public servants
A constrained budgetary environment►►
Lessons learned from similar experiments abroad, such as►►
program reviews in Canada and spending reviews in the
United Kingdom
The knowledge acquired from transformation projects►►
under way within the administration, such as the reform
of the state’s accounting and financial processes and
modernization of its financial information systems.
The RGPP differs from previous reform attempts in France.
This time, joint teams of government auditors and private
sector advisors conducted a systematic review of how the
French government is organized, as well as a detailed analysis
of its policy and program management.
The success and longevity of the planned reforms, however,
depend on a new system for implementation and monitoring:
Steering and monitoring committees►► at the highest
levels of government: a steering committee chaired by
the French president, and a monitoring committee run
jointly by the secretary general of the presidency and the
director of the office of the prime minister
Operational management►► provided by a dedicated
team of senior public servants, the Directorate General
for Modernization of the State (Direction générale
de la modernisation de l’Etat, DGME) in association
with the State Budget Directorate and the Human
Resources Directorate
A transformation steered within each ministry►► by its
secretary general, with a dedicated support team and
assistance as needed from the DGME and advisors
A structured►► transformation methodology, with
project managers for each proposal, an implementation
calendar, monitoring indicators and published
inter-ministerial scorecards.
The RGPP is already breaking new ground. For example,
the reform of France’s local government, long sidelined as a
difficult and complex subject, is now well under way. About
300,000 civil servants have been affected by the creation of
local inter-ministerial directorates or the merger of regional
bureaus. These moves have reduced the number of regional
organizations from 20 to eight and consolidated various
regional support functions.
Another area of focus is the strengthening of procurement
systems. The recent creation of a central purchasing authority
aims to improve and professionalize the diverse practices
currently in place within government. This alone is expected to
generate €1.3b in savings.
Both citizens and the private sector stand to benefit from
the reform program. The merger of tax assessment and
collection departments will result in one-stop tax collection
points. Entrepreneurs will benefit from steps to make it easier
to set up a business, tax filing will be streamlined and more
administrative requirements will be made available online.
But while the RGPP is expected to result in public services
that are more efficient and offer an improved service quality,
it is probably just a first step. Although €7.7b in savings by
2011 is a substantial figure, it’s not enough to overcome a
projected budget deficit of €116b in 2010. With the financial
crisis accentuating constraints on public finances, there is an
urgent need to go further while ensuring the implementation
of projects already in progress.
Now is a good time to question the capacity of government
intervention itself. We must look at improving the effectiveness
of policy through evaluation; consider outsourcing certain
policies or functions whenever relevant; and perhaps
extend the scope of the RGPP to public bodies such as local
authorities, hospitals and welfare agencies.
The transformation of the state will be realized, however,
by the rising demands of its citizens and by the hard work
of its public servants. Delivering increased worker skills,
strengthening and rewarding initiative and accountability,
promoting the emergence of project managers, ensuring an
attractive career path for the best talent, and questioning the
role of ministerial cabinets all merit further analysis within the
modernization agenda.
The RGPP is revolutionizing the state by putting the user, the
tax-payer and citizen at the heart of the system and shifting
from a means-based management philosophy to one based on
results. But it’s early days. The scope still remains to do more.
31December 2009
The Directorate General for Modernization of the State (Direction générale
de la modernisation de l’Etat, DGME) provides support and assistance to
ministries in implementing their modernization projects. More than 50
projects were completed within the last year, involving virtually every
ministry. The overarching principle of our work is always the same: develop
clear targets based on a diagnostic analysis, identify solutions to be
implemented in relation to these targets and ensure total follow-through
until the desired end result is achieved.
Among other things, the DGME has defined the methodology for
monitoring the program’s implementation. This takes the form of a
semi-annual progress report submitted to the president’s cabinet. Each
of these reports (available at www.rgpp.modernisation.gouv.fr) offers
a chance to highlight the progress achieved and make the decisions
needed to anticipate challenges and secure the expected impact.
Much like a large company, the state needs to have an overview
of its activities with tools to effectively monitor them. The private
sector can offer government new skills such as experience in
change management and project management, or contributions in
more-specific areas such as the overhaul of information systems,
construction of indicators, or tools for monitoring and analysis.
Drawing from methods that have already proved themselves in
the private sector such as “lean management” — based on the
critical analysis of internal procedures and a strong emphasis
on employee experience — reorganization solutions that
generate savings can be identified quickly. Modernizing public
management and giving supervisory personnel the opportunity
to be actively involved in the transformation process are
also key.
The initial results mark a profound change in the delivery
and efficiency of public services. This can be seen in the
reorganization and pooling of defense base support
functions in the armed forces, as well as in the merger of
the agricultural bureaus, which ended the proliferation of
government contacts required for farmers, manufacturer,
and consumers.
We are continuing to pursue our objectives and are
determined to respond even better to the demand for
savings and service quality. With citizens’ expectations
rising, we are now identifying new areas for reform,
such as operational and support functions and
operating expenses. The acceleration of these
projects will simplify procedures and continue to
improve services to users.
François-Daniel Migeon is Leader of France’s
Directorate General for State Modernization.About the author
Arnauld Bertrand is a partner with Ernst Young and Associés and
leads the Government and Public Sector Advisory practice in France.
He advises the French government and international organizations
on major performance improvement programs.
The view from
inside government
“The initial results mark a profound
change in the delivery and
efficiency of public services”
Vive la Révolution

Delivering
a better
wayof life
The financial crisis has encouraged government and business
to work in partnership to address systemic social and economic
problems. Deborah K. Holmes analyzes US social investments
during the downturn
December 2009 33

35December 2009
an astonishing US$18t in assets. And the number
of signatories has risen rapidly in the last two
years despite the financial crisis.
Finally, corporate responsibility can help a
business prosper in the long term by creating
a better business climate overall. We see our
relationship with Kiva.org, the world’s first
person-to-person micro-lending website, as
more important than ever. Kiva connects micro-
entrepreneurs with people willing to lend them
small sums. Ernst Young donates substantial
professional services to Kiva to ensure the
transparency of this process, and we are
delighted that Kiva is now assisting entrepreneurs
in the US, as well as in developing countries.
Whether they are minimizing their carbon
footprint or increasing access to education,
American corporations are focusing on
sustainability. It’s impossible to sustain a
healthy society, and therefore healthy markets
and healthy businesses, without educated
young people, a marketplace that encourages
entrepreneurship and a stable climate.
Ultimately, downturns offer opportunities. They
demand innovation, so entrepreneurs often
flourish in them. People with new ideas for
solving social problems also tend to flourish in
downturns, whether they work in government or
in private industry.
With unemployment and underemployment
currently at their highest levels in the US since
the Great Depression, it will be a long time before
the pain of the current downturn is fully behind
us. However, given the efforts that both business
and government are expending on education, a
sustainable environment and new technologies
for a better way of life, there may well be an
element of renaissance in any coming recovery.
First, they gain the goodwill of their own
increasingly civic-minded employees. Social
investments can keep people motivated when a
difficult economy makes raises and promotions
scare. At Ernst Young, we’ve found that
volunteering is most meaningful when our
people are using their professional skills to solve
problems in their communities. As a result, we
focus on issues — the environment, education,
and entrepreneurship — where our training as
business advisors is particularly useful.
Corporate responsibility efforts can be
especially valuable in a downturn — not only
for their influence on employees, but also for
their influence on costs. Concentrating on
environmental sustainability means spending less
money on electricity, fuel and waste of all kinds.
The smartest organizations also understand
that corporate responsibility can spur innovation
and open up new markets in powerful ways. One
of the most interesting examples belongs to
UK-based mobile telecommunications company
Vodafone. Vodafone and its local partner
Safaricom initially began offering mobile phone
money transfers to people without bank accounts
in Kenya as a way to help the United Nations
meet its Millennium Development Goals. Today,
this is a thriving business, with 6.5 million
customers in Kenya alone.
Investors, too, increasingly fall into the category
of socially responsible purchasers. The United
Nations-backed Principles of Responsible
Investment now has 560 signatories: asset
owners and investment managers who have
pledged to incorporate environmental, social and
corporate governance considerations into their
investment decisions. Together, they represent
About the author
Deborah K. Holmes established and leads the
Corporate Responsibility function at Ernst Young
LLP, where she focuses on skill-based volunteerism
in education, entrepreneurship and environmental
sustainability.
“Corporate responsibility
can help a business
prosper in the long term by
creating a better business
climate overall”
Businesses, on the other hand, have to manage
their cash very carefully in a recession. But
they are still able to react to the needs of the
communities around them very quickly. For
example, in response to the suddenly plummeting
economy, the GE Foundation directed US$20m
in funding to food and shelter organizations in
December 2008.
Clearly, some businesses are too cash-strapped
to maintain their previous levels of spending
on good causes. And given the suddenness
and severity of this recession, it would not be
unreasonable to expect a mass withdrawal
from the civic sphere on the part of American
businesses. But this has not occurred. On the
contrary, many businesses have responded to
the crisis by doing more. The Foundation Center,
an online directory of private, philanthropic
and grant-making foundations, forecasted that
although 51% of corporate foundations expected
to decrease their total giving this year, 49%
expected it to remain unchanged or to increase.
In addition, corporate giving now represents
just a small part of businesses’ engagement
in their communities, and it sits under a
much larger umbrella that is often called
“corporate responsibility” or “corporate social
responsibility.” Businesses no longer contribute
passively to important causes. In the US, they
are often leading the charge on issues such
as environmental sustainability, whereas
government action has been slow. Corporate
responsibility is now a key part of business
strategy, identity and even survival.
Many companies are staying committed because
there is such a strong business rationale for their
social and environmental investments. A recent
Boston College Center for Corporate Citizenship
report suggests that the best corporate
responsibility programs can yield direct financial
returns of three to one. It is also an important
means of improving the battered reputation
of corporate America after the many business
scandals of the last 10 years.
Of course, corporations engage on the social and
environmental front.
No one would claim that the severe global
economic downturn of the last year was a
desired event. However, it has offered countries
around the world an opportunity to address
both challenging social issues and their physical
infrastructure as they seek to rebuild confidence
in their markets.
In the US, these issues include the country’s
excessive carbon consumption and the
obstacles faced by entrepreneurs hoping
to remake its energy landscape, as well as
an uneven educational system that is not
doing enough to prepare young people for a
technology-driven future.
Businesses and government are now working
together to make substantial investments aimed
at solving some of these problems.
Unlike most businesses, government agencies
now have large amounts of cash to spend on
important social goals, thanks to the massive
US$787b economic recovery package that the
US adopted in February 2009. The challenge for
American government agencies is spending these
sums wisely, while at the same time spending
them quickly enough to help alleviate the worst
of this recession.
The consensus is that while the spending is on
track, it is slow to feed through given the political
risks of acting precipitously and the simple
fact that much of the money will be distributed
through state governments, adding another
layer of bureaucracy. Of US$499b to be spent
on various projects, just US$158b had been
distributed by the end of October.
“Corporate responsibility is
now a key part of business
strategy, identity and
even survival”
Delivering a better way of life

Vive la révolution

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