Productivity crisis deepens as public sector continues to stutter
Public sector productivity has dropped at its fastest rate in nearly three years, according to fresh official figures that lay bare the government’s multi-year struggle to revive the efficiency of the country’s creaking public services.
Data from the Office for National Statistics (ONS) showed total productivity at state-owned bodies fell by 0.7 per cent year on year in the three months to June, marking the sharpest decline since the final quarter of 2022 when the country was in the grips of a slew of industrial action and pandemic-related backlogs.
Healthcare productivity fell by some 1.5 per cent over the same period, dragging down the overall figure, despite the Chancellor announcing the largest settlement for the beleaguered health service in over a decade at the last Budget.
The healthcare figures bring into sharp relief the scale of the efficiency challenge confronting health secretary Wes Streeting, who has previously vowed to improve efficiency at hospitals and GPs with the multi-billion-pound cash bung from Rachel Reeves.
In the immediate wake of last year’s Budget, the Essex MP said ministers “owed it to patients” and taxpayers to deliver value for money. And last week he claimed that a bonfire of middle management roles was helping improve NHS performance.
Productivity languishing post-pandemic
The plummeting efficiency at public services will also stoke fears over the size of the productivity downgrade the Office for Budget Responsibility will hand the Treasury in the run-up to next month’s Budget. The fiscal watchdog is expected to reassess its historically optimistic productivity forecasts, in a move that could add as much as £20bn to the Treasury’s fiscal shortfall going into the Chancellor’s eagerly awaited speech.
But the Chancellor was also handed a minor reprieve from upward revisions made by the ONS to previous figures. The official stats body said that public sector productivity rose by 0.9 per cent in 2023 and 0.3 per cent last year.
The UK has been an international outlier in the extent to which its public services have struggled to return to the productivity levels enjoyed before the pandemic. Despite the revisions, efficiency among taxpayer-funded bodies remains three per cent lower than in 2019. The problems are especially grave in the NHS, which is producing 7.8 per cent less per pound spent than before the nationwide lockdowns.
Responding to the figures, shadow Treasury minister Gareth Davies said: “Public sector productivity has fallen quarterly-on-previous-year compared to under the Conservatives.
“Even after Wes Streeting paid the ransom to his trade union paymasters, healthcare productivity fell 1.5 per cent.
“Under Labour mismanagement, the state gets bigger and does less.”