How far will the Chancellor’s productivity programme go towards unlocking a more effective public sector?

The details of the latest government productivity programme have just been revealed – but now comes the hard work of implementation for departments and agencies. To succeed, lessons must be learnt from previous efficiency drives. 

The UK government faces being trapped in a vicious cycle. Demand for services is growing, but economic growth – and as a result, government revenue – is not keeping pace. This means all government departments face having to deliver more with less in the years ahead.  

In a bid to break out of this doom loop, the Treasury has undertaken a public sector productivity review. The aim of the review, according to Chancellor Jeremy Hunt, is to create “a more productive state”, with a target of increasing public sector productivity growth by 0.5%. This would, by Hunt’s calculation, match the projected increase in demand for public services (measured by public spending as a proportion of gross domestic product), breaking the link between growing demand and higher tax take.  

The Chancellor himself admits that meeting this aim will be a “challenge”, and indeed it is not the first time that the government has tried to address it. Since 2010, there have been at least six productivity reviews across central government – but none of them have been able to sustainably shift the dial to a more productive state. 

So what is needed to make this review work? 

The positive case for the review 

The announcement of the review by the Chancellor in June kicked off a process in which Whitehall departments submitted their ideas to the Treasury on how they could deliver more efficient services. 

At the Autumn Statement, the Chancellor announced the latest central push for savings through the Public Sector Productivity Programme, aiming to modernise and streamline the UK's public sector workforce, reduce administrative burdens on frontline workers, and embrace cutting-edge technologies like AI and quantum computing. The programme also focuses on strengthening preventative measures to reduce demand on public services and improving the ONS’ productivity measurement techniques. 

Such centrally led processes can be beneficial. They can uncover ways – both small changes and bigger investments – that could improve how departments work despite the skeptical way they can sometimes be viewed in departments as another central commission without a clear purpose.  

High-level backing from the Chancellor and other senior ministers can also give extra impetus to efficiency programmes within departments, as this focus will flow down into the thinking of the senior civil service leaders as they seek to improve operational performance and push against the range of other priorities pilled upon often stretched leadership.  

Running the review through the centre in the Treasury also means that good ideas highlighted in one department or agency can be shared with others, or can be taken forward by civil service professions, like digital, data and technology, commercial or finance, that cut across departmental boundaries. 

In addition to the funding the Chancellor announced at the Autumn Statement, the Treasury now has ideas and insight from departments, which creates the potential for future Spending Review decisions to be based on these plans. Departments may not accept a settlement of nature, with most believing that more investment is needed to deliver the scale of change or standards of services the public demands.

However, this review shows that another wave of the productivity wand alone cannot resolve the pressures on public sector finances. Many of the most dramatic productivity improvements such as using quatumn or AI suggested through the review will require additional investment, and Hunt himself has indicated that the Treasury needs to “change its focus from short-term cost control to long-term cost reduction” – even if this means upfront investment is needed. Ultimately, this government or the next faces a series of tough spending decisions that will require difficult prioritisation, and some will lose out.  

Departments must own action on efficiency 

But centrally mandated commissions and reviews are only going to solve part of the problem: departments need to be able – and empowered – to improve their own efficiency.  

This means that operational leaders need to be given freedom – and where needed, additional funding – to implement plans to deliver long-term productivity improvements.  

Short-term solutions, often dictated by the centre, that divert effort and resources away from this, must be avoided. And to do this means learning the lessons from  previous productivity reviews.  

Such reports and initiatives have been littered across Whitehall in the last decade, ranging from the Public Sector Efficiency Group that in 2014 focused on building an understanding of the drivers of productivity growth in government, to the Efficiency and Savings Review, announced by Hunt a year ago. The latter identified savings announced at the 2023 Budget – building on the 5% efficiency challenge set in the 2021 Spending Review. 

There are a number of lessons from this plethora of reviews as departments move towards implementing the findings of this latest review. 

First is that the ultimate focus must be on how effective public services are, not just hitting output numbers on a spreadsheet. Sustainable transformation of public services will be unlocked through clearer focus on outcomes that services are trying to deliver and can organise resources around, rather than being focused on meeting a crude savings target. 

Departments should work to establish clear metrics for public service delivery, based on outcomes. This will ensure the actions on productivity have the desired effect, rather than having unintended consequences. Defining these objectives should be done in collaboration with those delivering the services rather than being set in the abstract by policy teams – and should form the basis of a better understanding of what productivity means. And there should be clear accountability for who is responsible for delivering the key elements of the plan, with Permanent Secretaries made directly responsible for delivering outcome delivery plans. 

Focusing on setting realistic targets and being data-driven in achieving them 

Linked to this is the need for departments to be data-driven in both setting targets and sticking to them.  

Setting efficiency or savings targets is often done as part of spending settlements between departments and the Treasury – and many of these government efficiency reviews have also set their own targets. 

However, these can prove difficult – or counterproductive – to deliver. Government would be better served by focusing on delivering one agreed set of commitments, rather than trying to frequently rerun exercises to identify savings. A longer term approach will also allow data to be more effectively used to drive change – both within departments and across the system.  

This also links to the third priority – the imperative of sharing what does and doesn’t work across government so departments have useful intelligence that can inform their own work. To do this, the Treasury and the Cabinet Office need to act strategically as the centre of government to connect the different areas of government that have innovated and increased productivity. They can help departments understand what drove the productivity improvements, and what the common learnings or approaches could be in other contexts.  

Similarly, the centre should collect lessons on where and why major productivity drives have failed and share these lessons – both to set all projects up for success, and avoid duplicating failures. Not every productivity improvement will work for every public service – what works for a police force might be different to what works for an NHS trust, for example, but understanding and sharing best practice saves those on the ground time and effort, and empowers them to drive forward their own productivity gains.  

Making this productivity review the last government needs 

These elements are the key building blocks for successfully implementing the recommendations of the review. 

Given the pressures on government, it has never been more vital to extract maximum value from every pound of government spending, and this efficiency review therefore has the potential to make a sustained impact.  

Central reviews like this one can drive momentum but they are not enough to deliver transformation in isolation. 

The Treasury must stand ready to invest in implementation and share best practice, but leaders in government departments need to use the momentum from the review to engage staff in the development and implementation of more efficient ways of working. This demands clarity of purpose across the organisation and a shared understanding of monitoring progress against these aims. 

Follow this advice and both the centre of government and individual departments will be able to better understand what leads to efficiency – and how to generate better public service outcomes for many years ahead. 

We’d love to talk to you about how you think how departments can maximise value from the productivity review. Get in touch with our expert Matt Jones, a Partner in Baringa’s government team, focused on productivity and efficiency improvements.

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