Many analysts puzzle over why UK productivity has failed to grow in recent years. Part of the answer is the sharp fall in North Sea oil output, from 4.5 million barrels a day in 1999 to 1.5 million and falling. Producing oil yields very high incomes and profits which scores as high productivity. Part of the answer is the transfer of some of the highest paying financial activities out of London to the Far East and elsewhere, as tax, regulation and the crash take their toll on this activity which also scores as highly productive in the official figures.
Today I want to look at another part of the explanation. Around 30% of the UK’s output is now public sector activity. Total public spending is considerably higher, as it includes taking money from people who earn their own living to give it to people who are unable to and need help through tax and welfare payments. We exclude welfare or transfer payments from public sector output, as these become money for private spending and decision. The largest parts of the public sector output are health and education services.
The main aim of these sectors is to provide better quality services. Many people think the way to do this is to make them more labour intensive. Governments want each teacher to teach fewer pupils – smaller class sizes. They want each Doctor or nurse to handle fewer patients – no waiting lists and manageable workloads. As a politician I agree with them. These are popular ideas.
However, there is a danger that the understandable view that I want my child to be taught in a smaller class becomes transmuted into a general view that all public services can only get better if their productivity falls. There are cases where productivity of the public sector can rise just as it does in manufacturing or private services, by getting smarter at how we do things and using more technology. Generally we can only pay ourselves as a nation more if we do work smarter with more machine power at our elbow.
Take the case of MP services. My productivity was slashed by almost a quarter at the last boundary review, when my constituency was cut in size from over 86,000 electors to 66,000 electors. I was quite capable of handling the cases and opinions of the larger constituency. I never had any complaints that I had failed to answer in a timely way or failed to pursue a case owing to overwork. It is dangerous to assume you can only have high quality MP services if we represent fewer and fewer people.
Labour and Lib Dems of course wish to prevent MP productivity rising again, by blocking reforms which would reduce the number of MPs by 10%. It is also probably the case that MP productivity has fallen over the last couple of decades through the recruitment of more staff to MP offices to help them with their workloads. I say probably, because you would also need to research workload as well. Whilst the workload of an MP has clearly reduced through the reduction in Parliament’s hours, in other ways it has gone up, especially with the arrival of email. There are many more organised lobby group email campaigns than there were letter campaigns, as they are easier and cheaper to do.
If we look at the delivery of other public services, there are many ways in which productivity can be boosted with no diminution in quality, or with an increase in quality at the same time. Adopting new digital ways of keeping patient and pupil records, using computer and phone systems for appointments, taking advantage of internet based recruiting, using smart technology in the classroom or surgery can all lower costs and improve performance. We need to make sure that our love of more teachers and doctors for the right reasons does not become an obstacle to raising productivity elsewhere in these services.
As I have written here before in more detail, I see the obvious scope for improving productivity and performance in a public owned service like Network Rail. Part of the answer to our productivity problem lies with politicians and senior officials in public services developing a healthier interest in doing more, doing it better and doing it at lower cost. Given the wonders of modern technology, all this is possible. It also means a better trained and better paid workforce to do it. Starting from the current base, achieving steady improvements of a few per cent each year in many parts of the public service is possible and would help to correct the poor performance of overall productivity in our economy.