Tuesday 30 June 2015 8:08 pm

Why it’s public sector productivity George Osborne should worry about

Improving the UK’s lagging productivity record is a hot topic among economists and politicians at the moment. Next week, the chancellor is likely to produce a productivity plan alongside his Summer Budget, which is set to find additional savings and enshrine budget surpluses into law, all without raising the rates of income tax, national insurance and VAT. To do this, he will need to look at how improving productivity within the public sector can help the public finances. While some have speculated about the potential boost to the tax take from improved productivity in the wider economy, boosting efficiency within public services has barely featured in the debate thus far. That is the missing piece of the jigsaw. Last year, Deloitte calculated that each 1 per cent of the public sector workforce’s time saved through productivity improvements would save the public purse £1.64bn each year. That could make a substantial difference to putting the UK’s public finances and public services on the path to long-term sustainability. While it’s a relatively recent concern in the wider economy, productivity is an historic problem in the public sector. Between 1997 and 2010, public sector productivity remained flat, meaning we only ever got more out of public services – lower crime rates, lower waiting times, better exam results – by putting more – cash, teachers, doctors, police officers – in. In the last Parliament, with public sector organisations maintaining services with fewer people, some argued that productivity must have been getting better. But there needs to be a far greater underlying improvement in the way things are done. Finances are tightening and demand for public services is rising, so adding more to existing ways of doing things can no longer be an option. It’s time to look at how services are delivered and how public servants work. Remote and flexible working and workplaces are increasingly commonplace in private sector businesses, helping to keep staff motivated, focused on their goals, and improving job satisfaction. We are seeing similar approaches starting to emerge in Whitehall, but many local public sector organisations have much to gain from this kind of thinking. A recent report by Lord Carter on efficiency in the NHS, for example, discovered that one hospital found it could save £750,000 by improving how it managed staff rotas, flexible working and annual leave. Technology has a big role to play and the public sector has more to gain from embracing digital than any other sector. In a survey we conducted last year, 88 per cent of UK citizens say they want to do more of their interactions with the public sector online. But services have always been built around analogue processes in the form of phone calls, letters and forms. Technology can also help public servants do their jobs quicker and spend more time doing the things that matter. In the United States, Deloitte calculated that equipping 74,000 social workers with mobile devices could raise their productivity by 45 per cent, enabling them to provide an extra 57m hours per year in frontline care. Improving productivity also requires looking at, and removing, overlaps and repetition of services across the public sector. Consider a sick elderly person. They could be seen by: their GP; nurses and doctors in hospital; care home staff; and home visitors. Are all these different providers working together in the most efficient way without doing the same things many times over? None of this is to say that those in the public sector do not work hard. They of course do. It’s about enabling them to work smarter and deliver more. The social worker working off a mobile device will be happier in their job when less paperwork and time spent in meetings allows them to focus more on the people they care about. Finally, we need strong and honest political leadership. For too long, political debates have been focused on inputs rather than outputs. In the election campaign, parties clambered to explain how they would find the £8bn the NHS needs, with hardly anything said about the £22bn in efficiency savings it also requires. Politicians should focus on what we get out of public services, not what we put in, and how services could be delivered, not how things have always been done in the past. The private sector constantly seeks to boost productivity as a means of keeping prices low, increasing effectiveness, and improving profitability. It’s time the public sector followed suit.

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