NHS must stop prioritising staff convenience over public health
Falling productivity, striking doctors and a refusal to embrace new technology: the NHS is not run for ‘us’, but the convenience of its staff, writes Paul Ormerod
The Office for National Statistics (ONS) released yet another gloomy estimate of economic data last week. It is one which has profound implications for the Starmer government.
In the three months from April to June, productivity in the public sector fell by 0.7 per cent compared to the same period in 2024. In other words, the public sector has become less efficient than it was in the run up to the general election.
We can never read too much into a single number relating to a single quarter. But the general trend is clear. According to the ONS, in 2024 public sector productivity was three per cent lower than it was immediately before the pandemic in 2019.
Over a much longer period, the productivity of the sector is estimated to be similar to what it was in 1997. Over a period of almost 30 years, there have been no overall gains in efficiency in the public sector.
NHS productivity has plummeted since 2019
The latest release from the ONS is particularly depressing regarding the health service.
In the April-June period, public healthcare productivity was 1.7 per cent lower than a year ago and a massive 7.8 per cent below its level in 2019.
It has been widely trailed that Rachel Reeves will seek to deflect criticism from the forthcoming tax rises by saying the money is needed for “our” NHS. But it seems more and more that the NHS is not being run for “us” but for the convenience of its staff.
A vignette illustrating this exact issue appeared in a story in The Telegraph over the weekend. The British Medical Association (BMA) – essentially the trade union for GPs – passed a resolution rejecting the government’s plans for patients to use an online booking tool for appointments from 8am to 6.30pm Monday to Friday.
We can only hope that these Luddites keep more up to date with their medical knowledge than they do with technology.
There are genuine reasons why productivity growth in the public sector will usually be lower than in the private.
Most public sector activity, for example, consists of the delivery of services. It is harder for services in both private and public sectors to increase efficiency than it is in, say, manufacturing.
And the further away from the market an activity is, the harder it is to measure its productivity. We know the cost of the armed forces, for example, but any estimate of the value of their output will of necessity be rather arbitrary.
The American economist William Baumol laid the foundations for these arguments in a famous paper 50 years ago. Indeed, the phrase “Baumol’s cost disease” has entered the jargon of economics.
Even so, a major sector of the economy has registered no overall gains in efficiency over the course of three decades.
Labour’s only resolution is to tax, tax, tax
Health secretary Wes Streeting appears to understand the opportunity this presents. Public services can be improved without having to spend more money. But so far, his efforts have yielded few positive results.
But most of the rest of the Cabinet appear like blind kittens. The only way they appear to be able to think about maintaining public services is to tax the nation more and more.
To be fair, Rachel Reeves did set up the Office for Value for Money (OVM) to “root out waste and inefficiency”. But it was the subject of scathing criticism by the Treasury Select Committee of the House of Commons earlier this year, describing it as an “under-staffed poorly defined organisation”. The OVM has now been closed down.
Improving the productivity of the public sector is low hanging fruit for any government with both the imagination and political will to bring it about.
Paul Ormerod is an honorary professor at the Alliance Business School at the University of Manchester and author of Against the Grain: Insights of an Economic Contrarian