Public sector productivity fell again last year, according to figures that dealt a blow to ministers’ hopes of a more efficient state.
Rising numbers of staff are not being matched by results and the state remains 8.4 per cent below its pre-pandemic levels of productivity, according to the Office for National Statistics.
The NHS has driven declining efficiency and remains 18.5 per cent less productive than before the Covid lockdown, the figures suggest.
However, NHS England said that figures it had calculated showed that the service had improved, leaving ministers unclear whether the most expensive and politically significant public service will actually make best use of a £22 billion budget boost.
Sir Keir Starmer has promised a “ruthless” focus on cost-cutting as part of a spending review due in June which is demanding departments improve results while imposing 5 per cent savings.
Rachel Reeves, the chancellor, said the review was “really going to be driving productivity and efficiency and cracking down on wasteful spending in public services to make sure that every pound of taxpayers money is spent well”.
However, the ONS concluded that productivity across the public sector fell by 1.4 per cent in July to September last year, compared with the same period in 2023. After a bounce back from the pandemic, increases in resources for the public sector have consistently outstripped improvements in results since 2023, the agency said.
While the ONS said the fall had been driven by the health sector, NHS England last week insisted that its productivity has grown by 2.4 per cent in the current financial year, saying its output had grown significantly faster than rises in resources. It conceded, however, that productivity remained 8 per cent below pre-pandemic levels.
Max Warner of the Institute for Fiscal Studies said it was not clear why the ONS and the NHS had produced such different results. “They lead to such different conclusions — NHS England’s is, ‘We’re doing pretty well and we need to keep pushing’, but the ONS’s is, ‘We’re getting worse so what needs to change?’,” he said.
“There’s a tension here because NHS England are best placed to measure things, but also the ones being held accountable for improvement and you don’t want people marking their own homework.”
After senior MPs accused the NHS leadership of being complacent about the problems they faced, Warner said the ONS suggested that “maybe things aren’t going quite as well as this one measure from NHS England suggests”. He added: “The big picture is that there is this productivity problem so you are probably right to focus on it as a government.”
Starmer’s spokesman said the figures “underline the challenge that we face, which is why we’re determined to rebuild our NHS and rebuild our public service”. But he acknowledged that “change will take time”, promising “systematic reform” of the NHS which would “drive the change that we need to drive up productivity”.
The Bank of England last week blamed an NHS hiring spree and a growing public sector for dragging down Britain’s “tepid” productivity as the economy continued to stagnate. “It is fair to say we have seen an increase in public sector employment. We haven’t seen a commensurate increase in measured public sector output,” Andrew Bailey, the Bank’s governor, said.
Helen Morgan, the Liberal Democrat health spokeswoman, accused ministers of “dither and delay on major reforms”, saying: “the Labour government’s failure to grasp the urgency of this disastrous situation has been shocking.”
An NHS spokeswoman acknowledged there was “a lot more work to do” on productivity and said that the health service would be “ruthlessly focused on this over the next year”. She added: “There are different methods for working out public sector productivity and we will continue to work with the ONS to ensure all figures used are as accurate as possible.”
