Public service productivity?

Some of you may have noticed there’s a general election ongoing in the UK

Politicians of all colours and persuasions have produced their goody-bag manifestos to entice us, the public at large, to vote them into power and so be able to shower us with their gifts and skills

But those rafts of goodies need money to fund them – money which must come not only from taxes and borrowings but also from public sector productivity improvements

The problem with the latter, however, starts at first base – there are few good measures of productivity in the public sector so where best to act, when, with how much effort:

  • At unit level, most have little on the availability, utilisation and efficiency of use of the costly resources they employ, especially their mix of labour and facilities
  • At the macro level, where measurement is admitted to be ‘difficult’, those measures that do exist often involve dubious assumptions about input costs equalling output value so the more money spent, the more value obtained – and/ or dubious estimates relating volumes of output activity to quality of outcomes – yet, despite this uncertainty, decimal point changes per period in productivity of the health service, say, are claimed based on these same statistics


And this productivity improvement problem is then compounded by ‘experts’ concluding from such data plus their personal experiences that:

  • Billions more needs to be spent on boosting staff inputs i.e. thousands more doctors and nurses, and training unemployed UK residents rather than recruiting from abroad
  • Billions more also needs to be spent on more capital inputs – more new expensive equipment, IT and buildings


Yet those same ‘experts’ make little mention of the possibility that current use of existing resources and processes that have to be followed involve enormous waste of time and money – and the result of that can be enormous cost and possible pain or worse for end-customers, the general public whom they exist to serve

Why so?

Because nobody has much idea how much waste is involved – those in charge seem to assume that current ways of working are ‘about right’ and so the obvious need to meet an ever-increasing demand (for an ever-increasing range of services) is simply more expensive inputs

Just imagine if this were not the case – but nobody knows!


With this in mind, it’s well worth reading the following extracts from an article by Thomas Popecassia Rowland and the IFG – the well-respected Institute For Government whose mantra is’Working to make government more effective’ – in particular, Thomas seeks to answer: “What is public service productivity and how is it measured?”

Public service productivity
  • There are two broad reasons why improving public sector productivity is important in the current context:
    • First, the UK has experienced a productivity slowdown since the 2008 financial crisis. The public sector accounts for around 25% of GDP,  so a more productive public sector can help to contribute to stronger economy-wide productivity growth.
    • Second, performance across most public services is poor, and demand is continuing to grow. But spending plans going forwards are ungenerous. Improving public service productivity is one way to improve or maintain performance without spending more.
  • Productivity is a measure of how efficiently the economy uses the inputs available (like workers, buildings and machinery) to create output.
  • For public services, conceptually this means how well public services use resources to achieve relevant outputs and outcomes – for example, how effectively the health service translates its resources into improvements in the nation’s health.
  • In practice, measures of public service productivity focus on how public spending translates into outputs (like the amount of activity done), rather than outcomes (like healthy life expectancy).

How does the Office for National Statistics (ONS) measure public services productivity?

  • Measuring productivity in the public sector is difficult.
  • In most of the private sector, the value of output is measured by the market price.
  • But there is no equivalent price for the output of most public services because most are provided free at the point of use, or at the very least are highly regulated.
  • For this reason, the output of public services has historically been simply calculated by its input: £100bn spent on health care was deemed to be worth £100bn of health care output.
  • When measured this way, greater efficiency in the service does not lead to higher measured productivity as the assumed input/output calculation remains the same.
  • However, the ONS, which is highly regarded internationally, has made advances in measuring productivity in public services.  
  • For services where relevant data and metrics are available, it now measures output based on the quantity of activity performed, with an adjustment made for the quality of outcomes associated with that activity.
  • For example, productivity in the NHS is measured based on how inputs are converted into a range of different activities (for example, elective surgeries), with a quality adjustment made (for example, the survival rate after surgery).
  • In practice, the ONS method uses outputs across hospitals, GPs, dentistry and other areas for its healthcare estimate and employs a similar broad approach in other services.
  • But suitable metrics to measure the relevant outputs of public services do not exist in all cases.
  • For example, the output of defence spending is difficult to define conceptually.
  • In these cases, the ONS retains the inputs equals output approach.
  • In some other areas, the ONS does not have ways to adjust the quality of output and so uses unadjusted quantities.
  • Overall, the ONS uses outputs or quality-adjusted outputs for 60% of public services spending.

What happened to measured public services productivity between 1997 and 2019?

  • Between 1997 and 2019, measured public service productivity increased on average by 0.2% per year.
  • In contrast, economy-wide productivity increased by 1.1% per year on average over that period.
  • Among all the public services the ONS measures, only healthcare saw increases in productivity (of 0.9% per year on average), while all other services declined in productivity.
  • Public order and safety (which includes prisons and courts) declined most rapidly, by 1.5% per year on average.
  • This period can broadly be split into two: the period between 1997 and 2009, where productivity fell by 0.2% per year on average, and the period 2009 to 2019 where productivity increased by 0.7% per year on average. However, this should be interpreted cautiously. The way productivity is measured is not perfect, and there may be other aspects of service quality not captured in these numbers.

What has happened to public service productivity since the onset of the pandemic?

  • How public service productivity has recovered since 2020 is still uncertain, in part because the ONS’s official statistics, incorporating a full quality adjustment, are only published with a three-year lag.


How can governments improve public service productivity?

  • Institute for Government research has shown that there are no silver bullets to immediately increase public service productivity, but that there are several barriers to productive working that, if addressed, could lead to improved productivity in the longer-term.
  • Well-targeted capital investment in buildings and equipment can help staff operate more effectively. For example, in the NHS a shortage of scanners and outdated IT equipment has been found to prevent staff working as productively as they can.
  • Good management, and good management practices, are important to help large organisations like public service providers operate effectively. In the NHS, managerial roles have not kept pace with growing clinical staff numbers.
  • Retention of experienced staff and clear workforce planning.
  • While there was initially no fresh funding attached to the government’s target of 0.5% annual growth in public sector productivity, announced in the 2023 autumn statement, the spring budget saw the chancellor commit £3.4 billion in additional capital funding to deliver the NHS productivity plan, spread over three years from 2025/26.
  • He also pledged a further £0.8bn over the same period to improve productivity in other public services. This includes £230 million for the police, including establishing a Centre for Police Productivity, and £170m for the justice system.



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