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Jump in cost of public sector

COSTS in the public sector have soared at a much faster rate than those in the private sector since 1997, according to official statistics released yesterday. The report confirms fears that much of the sharp rise in public spending over the past decade has been gobbled up by higher wages and other costs, rather than being translated into commensurate increases in the actual output of education and healthcare.<br /><br />The Office for National Statistics found that between 1997 and 2007 the unit cost of public service output grew by 13.7 per cent more than unit costs for the whole economy. On average, costs in the public sector grew&nbsp; by 1.3 per cent more every year than in the rest of the economy. The gulf with the private sector alone &ndash; included in the figures for the overall economy &ndash; would have been even larger.<br /><br />The costs of public service healthcare output grew by 13.6 per cent more than unit costs in the whole economy. And the unit cost of public service education provision jumped 24.4 per cent faster than unit costs in the overall economy. The figures confirm that public sector inflation remains much higher than private sector inflation.<br /><br />Mike Phelps, author of the report, said: &ldquo;Between 1997 and 2007, public service productivity fell by 3.4 per cent, meaning that the volume of input needed to produce a unit of output rose by an annual average of 0.3 per cent.&rdquo; During the same time, productivity in the private sector soared, as firms were forced to compete and increased the efficiency of the resources they used. <br /><br />This latest research will intensify the pressure on the government to freeze public spending and to look for efficiency savings.