Solving the public sector productivity puzzle

The UK public sector is in a productivity crisis. As Chancellor Jeremy Hunt has set out, the private sector has seen a 1.3% uplift in productivity, but public services are still 5.7% less productive than before the pandemic.

A recent Institute for Government report published that 8 out of 9 public services are performing worse now than they were in 2019/20, including across prisons, hospitals and courts. The NHS in 2022-23 is offering 400,000 fewer outpatient appointments than before the pandemic in 2019-20 and recent analysis by the Health Foundation think-tank found that – on current productivity trends – the waiting list for NHS services will peak at just under 8 million in August 2024. 

Such statistics illustrate the importance of addressing the productivity challenge. Productivity improvements are vital, particularly as slow economic growth means that funding for public services is likely to remain tight for much of the remaining decade, even as service demand is increasing. Government departments therefore need to ensure that they are getting maximum value from every pound of public money.

Poor productivity measures make progress difficult

Whilst the scale of the challenge is becoming clear, shortfalls in productivity measures mean that it is currently impossible to accurately measure the productivity of Whitehall. 

ONS statistics on public sector productivity struggle to tell the real story. In areas such as healthcare and education, there can be as much as a two-year time lag in the production of sector-specific productivity figures, which means they are impossible to use as a way to measure performance or direct resources. Similarly, the Cabinet Office is only two years into publishing efficiency savings and has further to go to effectively quantify these.

And in many areas of the public sector, including in central government, the problem goes deeper. In these areas, there is no measure of outputs at all, so it is assumed that the volume of output equals the volume of inputs used to create them.  This approach means that in key areas of Government investment, such as recruiting 20,000 new police officers, there is no insight into whether the investment is driving the desired outputs, so can there be confidence that this investment is reducing crime?

This is a situation that the Chancellor Jeremy Hunt is keen to change. He has asked the ONS to review how the government measures public sector productivity. This review is expected to run for two years, with the aim of developing updated measures of public service productivity “to ensure consistent and accurate reporting across the public sector”, according to the ONS. Initial findings will be announced in the Chancellor’s upcoming Autumn Statement on 22 November. In the meantime, departments need to rapidly demonstrate progress on their efficiency plans. It is unclear how these new productivity measures will be used in the longer term to change how departments think about their opportunities for savings. 

In addition to the overall efforts by the ONS to measure productivity in the aggregate, individual departments have their own measures of productivity. However, these often face similar problems making it difficult to build a true picture of productivity, meaning that departments are in the dark on where their efforts can make the greatest difference. And departmental productivity measures rarely map back to outcomes, which hampers efforts to try and transform.  

Improving how we understand and measure productivity 

There needs to be a way to effectively measure public sector productivity.

Some improvements have already been made in recent decades. The UK is one of the few countries to include public sector output measures as well as input data in its productivity statistics, and, following a review in 2005 by eminent economist Tony Atkinson, the ONS developed a methodology to include the quality of services, particularly around healthcare and education, in its efficiency measurement. This is intended to make it easier to measure outcomes from public service being provided, rather than the output alone.

However, the Chancellor’s request illustrates that modern government needs even better productivity data.

Good information on how efficient government is at turning public money into public value would allow the Treasury to know where it is best to invest scarce public resources to have the most transformative impacts on society, enable public sector operational leaders to know where to target their efforts to improve public services, and convince the public that their taxes are being spent well.

Productivity improvements alone will not be enough to transform public sector services

Better productivity information will take time to generate and is just one step that needs to be taken towards more effective government.

Transforming public services to meet modern demands will require more than just producing more – it will need a much clearer focus on the outcomes that government wants to deliver – and effective ways to track them to understand the overall impact on society. This means recognising that productivity statistics are just one part of a bigger picture.

One way to achieve this is in the form cross-government missions, which articulate the long-term objectives in a small number of policy areas, and set out what is required from government to meet them. This approach has been used, for example, in the government’s Levelling Up White Paper and the Labour party’s development of five key aims if it was to form the next government. 

We believe there are 3 things departments must get right: 

• Clearly articulate the outcomes the department wants to deliver for citizens and society, fitting within the government’s overall objectives. This should be the basis of renewed and refreshed outcome delivery plans (ODPs). ODPs were introduced in 2021 to better monitor priority outcomes set for departments at each Spending Review, but their impact in government so far has been limited – and the publication of the plans for 2022-23 was cancelled by ministers. But the founding aim of the plans – to support the delivery of outcomes in the long-term and more effectively track delivery – remains vital, and this pause offers an opportunity to refresh the development and deployment of ODPs. We have experience working with departments to become more outcomes focused, aligning teams around new and improved performance measures, generating meaningful insights through interactive dashboards, and setting up the frameworks to hold leaders accountable.
  
  
• Map projects to show how they will deliver progress against departmental outcomes – coupled with more detailed productivity information so departments have improved information on what works, and what doesn’t. Make ODPs the golden threads that run through the work of the department, providing the basis of linking outcomes to the outputs that departments will need to produce to reach them.
  
  
• Embed an outcomes focussed approach through all layers of the organisation. This requires changes to how civil servants across departments understand and monitor performance. Tracking how well the department is doing against agreed outcomes is not just a job for team leaders, but is for officials at every level. Outcomes should be integrated into the day-to-day work of civil servants. In a recent example of this, we worked with a central government agency in the UK to review and rethink how the agency measures and communicates performance across all areas of accountability to provide a data-driven evidence base that supports decision-making and builds an understanding of how they manage demand and competing operational pressures to deliver policy outcomes for government, industry, and the public.

We are experts in helping government departments implement these changes in a way that leads to more engaged and productive organisations. 

Get in touch

To find out how Baringa could help your organisation unlock productivity improvements through a more outcome-focused approach, please contact our experts Matt Jones, Rhiannon Evans, or Robyn Turl.

This article can also be found on Civil Service World. 

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