Measuring public sector productivity 4

John O'Connell Better Government

An ONS report published on Tuesday revealed that productivity in the public sector has declined by 3.2% since 1997. This is the first such report carried out using the recommendations of the 2005 Atkinson Review, which rightly highlighted the need to change the way productivity in the public sector was measured.

Sir Tony Atkinson’s review was crucial. The ONS report points out that previous measurements of public sector productivity followed the old convention of ‘outputs=inputs’. With public funding there is no price mechanism by which to calculate the value of productivity, so assume that ‘more output=more money invested’. Of course, this crude assumption fails to acknowledge that as well as yielding a higher output, increasing the level of investment in a service should also aim for a higher quality output.

The ONS therefore applies ‘quality adjustments’ to properly determine how effective public expenditure actually is. As opposed to simply quoting output figures this takes in to account ‘the improvement in the outcome for the service user that could reliably be attributed to the relevant activity’. This level of analysis delves deeper than mere output figures, which are endlessly recounted by ministers as marks of achievement.

And in using these measures, the ONS’ findings are unflattering. While raw outputs have increased with extra investment over the last ten years, the quality in public services should have seen a significant increase. Instead a steady decline between 1997 and 2007 saw productivity drop by an average of 0.3% annually.

The report says that inputs have risen by 38% in the same period. With outputs increasing by 33.6%, traditional measures of productivity have not been met either, compounding negative ‘quality adjusted’ figures.

Encouragement from the report is that the last two years have seen a slight improvement using quality adjusted figures. This in no way should assuage criticism for the overall drop in the ten year period, particularly given the vast increase in investment. We were promised quality improvement, but instead we have got more at a worse quality.

Both major parties plan to make spending cuts after the next election, if in power. Even Labour’s 2009 budget has planned cuts of 7% over 3 years. It is important then that whoever takes office after the next election ensures that improvements in public sector productivity are accelerated. Adhering to old measures and increasing output simply by investing more will not suffice; action needs to be taken to ensure that value for money is achieved. Concentrating on the quality of outputs is always essential, not just when you have less money to throw at a problem, as is the case now.

Whilst the methodologies used are still in their experimental stage, it is encouraging to see the ONS adopt a more sophisticated approach to measuring productivity – especially important when it is measuring the value of Government spending. What is clear is that taxpayers deserve to see a better return in the future.

John O'Connell

John is the Research Director of the TaxPayers’ Alliance, and the author of major reports on a wide range of issues such as healthcare, public sector pensions and regional business policy

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http://profile.typepad.com/6p011169014b45970c Horse

I agree that it is important to monitor productivity within the public sector. However, when we are talking about the core responsibilities of a government to it’s people ie the police, prisons, hospitals, armed forces and schools I think we should tread carefully. Attempting to monitor the productivity or otherwise of these institutions inevitably leads to useless government targets and a dreaded box ticking culture. I would like to see the productivity of the whole equality and diversity industry monitored rigorously. However, I suspect these will remain exempt.
Hardeep Singh

Whole heartedly agree with you Horse, the public sector is there to serve the people of the country. However the true level of productivity is whether or not people are getting what they need. Far too often it’s the people having to conform to the public sector’s needs, desires and whims. Stats are for politicians and serve little benefit to an upset ‘end user’. For example if you had a bad experience whilst at the airport you’d find it cold comfort to given stats on other people’s experiences, you just want to know what they’re going to do about your problem. The same applies to the public sector especially policing. it’s socity’s perception that tells them whether or not things are safe not stats and most certainly not a far removed politician.
Steve Robson

but perception is not reality Hardeep, however much it seems like it is. Flying IS safer than driving, despite many people’s fears. Evolution and the world being round ARE facts irrespective of people believing otherwise. Crime IS factually falling whether people believe it to be or not.
public policy needs to take account of perception, but if perception is wrong, the wrong policy responses will result if we don’t look at the facts.
Sad Sid

I work in a school and the Headteacher on £60K never puts in a full week.
Taking a group of teachers on an international Trip to South Africa for 10 days plannings meeting, the trip, the feedback lectures- how does this impact on our children? Then there is consultancy work for the NCSL £400 per day, then their own CPD £150 per night in the Lakeland Hotel with Champagne Buffet? But you promote two staff to assistant headteachers , run a deficet budget and make redundant a teaching assistant!
Standards go down but who really cares?