GDP figures reveal big decline in public service output and rise in public sector inflation

Two of the biggest sector falls in the economy in the sharp recession last quarter were health and education, owing to the impact of the virus on their ability to work. The ONS decided they delivered 34.4% less education and 27.2% less healthcare. These are bigger falls than the economy as a whole. Because public spending rose sharply the ONS also decided there was a very fast inflation in the public sector. They calculated public sector inflation or the rising cost of government at 32.7% “because the volume of government activity fell whilst at the same time government expenditure increased in nominal terms”. The overall deflator “the broadest measure of inflation in the domestic economy” as a  result shot upwards.

Restoring health and education output is a very important part of the recovery policies the government is now following. Of course the government needs to ensure safe working for all employees as the schools and surgeries get back to full working and the non Covid work of the hospitals builds up again.

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60 Comments

  1. bill brown
    Posted August 12, 2020 at 12:19 pm | Permalink

    Sir JR

    The fact we ahve the biggest decline in GDP of any major economy, shold give time for reflection and plans for long term solutions, due to a growing unemployment among young and older in the work-force

    • APL
      Posted August 12, 2020 at 9:43 pm | Permalink

      bill brown: “The fact we ahve the biggest decline in GDP of any major economy, ”

      For the last thirty years we’ve been told that the service economy was our strength, but the policy of this government over the last three months, has been to completely decimate that sector.

      Don’t expect any useful measures from the government, this is the Tory parties mess.

      Given that we are practically governed by the SAGE committee, after all it was Neil Ferguson’s advise that led to the massive overreaction – Nationalisation of all economic activity in the British economy – leading to a 20% destruction of GDP.

      We’d do well to know who is on the SAGE group of government advisers.

      https://www.gov.uk/government/publications/scientific-advisory-group-for-emergencies-sage-coronavirus-covid-19-response-membership/list-of-participants-of-sage-and-related-sub-groups

      Apart from Ferguson who still seems to be a government adviser, there is one Susan Michie. Whom according to WIKI is a paid up member of the British Communist party.

      https://en.wikipedia.org/wiki/Susan_Michie

    • a-tracy
      Posted August 12, 2020 at 10:00 pm | Permalink

      Do we get a reduction in the payment to the EU as GDP fell so far?
      We should they gave us extra bills every year when it increased more than expected.
      Especially with Germany doing so well and having such better testing capability close to their privatised hospital service.

  2. agricola
    Posted August 12, 2020 at 12:27 pm | Permalink

    You did what you felt was necessary in the face of armagedon. With hindsight mistakes were made, understand them and prepare for the next disaster. Don’t take any crap from the opposition, they were up the creek without a paddle when it broke. Listen to the professionals who had to work through it warts and all.

  3. Narrow Shoulders
    Posted August 12, 2020 at 12:28 pm | Permalink

    I was expecting an increase in public sector activity seeing as remote working is so productive.

    Maybe it isn’t

    • Philip Haynes
      Posted August 12, 2020 at 6:19 pm | Permalink

      “big decline in public service output” – great fewer people issuing parking tickets, taxing you and harrasing you in other ways.

      Most in the public sector do not have much real output. Many have a net negative output.

  4. Narrow Shoulders
    Posted August 12, 2020 at 12:30 pm | Permalink

    On the subject of public sector, isn’t Network Rail a public body?

    Someone should tell Labour that accidents and bypassed health and safety are not the preserve of the private sector

  5. Mike Wilson
    Posted August 12, 2020 at 1:11 pm | Permalink

    Restoring health and education output is a very important part of the recovery

    Health and education output? Surely, in the round, these sectors are a drain (a necessary drain) on the economy.

    I would say getting people back to work, earning money and spending it is the thing we need. Teachers, doctors and nurses are earning money and spending it – although some of them have taken the opportunity of an extended holiday. Why is their output important for the recovery?

  6. Caterpillar
    Posted August 12, 2020 at 1:11 pm | Permalink

    Hopefullynthis will.be the worst quarter and the year as a whole.will not be so bad. Nonetheless this is broight on by Mr Hancock’s and Mr Sunak’s perfrormance, and the PM’s unwillingness to find better replacements.

    As I have said before, I am concerned about both the ethics and effectiveness of Mr Sunak’s policies –

    (1) Did he properly warn of the consequences of the shutdown (in terms of potential life expectancy increases that were guaranteed to be lost, in terms of statistical value of life years etc)?
    (2) Why did he choose to.continue with furlough which arbitrarily values individual loves differently, whilst encouraging resource immobility? UBI would not have done this.
    (3) Why did he introduce a stamp duty holiday when there was delayed demand and supply due to the lockdown? Rather than create house price inflation now, the ethical choice could be to have waited until unemployment was high and people forced into sales – i.e. aid and smooth the corrective adjustment.
    (4) When obesity increases many health risks why did he fund people to eat out – it even covers sit down doughnuts, a health step worse than walking along with a doughnut?

    The lack of ethics of (presumably) his policies astonishes me.

    • anon
      Posted August 12, 2020 at 10:38 pm | Permalink

      From a standing start bold action was taken.
      It should have been simpler.

      1) UBI – great opportunity missed, still recommend as furlough ends.
      2) VAT – reductions to zero in those badly hit sectors, less gimmicks and vouchers.
      3) A simple % sales tax for small business based on agreed SIC sale categories.
      4) Abolition of NI, replaced with a higher basic tax rate, & pension relief limited to basic rate of tax and a maximum tax relief cap.
      5) A national pension fund defined benefits or contribution, all public services schemes combined, all private sector employees eligible to join on same terms. No other government schemes allowed. Privately funded schemes allowed as now, but no state employer payments.
      6) LVT

      • Caterpillar
        Posted August 13, 2020 at 8:15 am | Permalink

        I agree with 6, there are good arguments for a (well-designed, simple) LVT.

        I agree with the essence of 5, I have mentioned before the New Zealand Kiwisaver example.

        I do find NI a little bit of smoke and mirrors, but I am not sure how the transition would be managed

        3 and 2, I tend to prefer VAT as it is collected along the supply chain. I don’t like differential VAT rates as the system should be as simple as possible. (I have particular views on increasing VAT but returning this to citizens within UBI as a progressive consumption tax).

        1. Agreed, as long as it is a genuine UBI.

  7. Nigl
    Posted August 12, 2020 at 1:14 pm | Permalink

    Yes. I am sure we would all like to know. Could they have done better? ‘Owing to the impact of the virus on their ability to work’ Mmm. What about attitude. I wonder what they would have done if they were running their own business? As ever the private sector showed an urgency and innovation sadly lacking in the public one.

    Back in the day we had the ‘snowfall’ measurement of commitment. Some would get to work, walking if necessary in any weather. Others would phone in at the first sign of a snowflake.

    How prescient seeing how people are allowed to be today. Will a scintilla of criticism be offered. Ha!

  8. Jess
    Posted August 12, 2020 at 1:45 pm | Permalink

    The ONS are idiots then. Almost all schools have been closed for months so their “output” must be down more than 90%- thereby leaving tens of thousands of children less brainwashed.
    Considering that millions of people have been denied any treatment causing tens of thousands of people to die whilst hospital staff make dance videos the NHS “output” must be down by the same 90%+.
    The rising cost of government or more accurately “paying for the scamdemic with money we don’t have and never will” is again grossly under reported.
    The government can no more ensure safe working than Boris can keep a promise. Sir Humphrey is alive and well and publishing reports just as absurd as he ever did.

    • a-tracy
      Posted August 12, 2020 at 10:04 pm | Permalink

      Yes I’d also query the ONS figures here, how did they calculate those percentages?

    • Lifelogic
      Posted August 13, 2020 at 4:43 am | Permalink

      +1

  9. Everhopeful
    Posted August 12, 2020 at 1:46 pm | Permalink

    Worst recession of the G7 I think they are saying.
    Huge number of “Detention Deaths”.
    Another fine mess…..

  10. miami.mode
    Posted August 12, 2020 at 2:11 pm | Permalink

    All power to your elbow for highlighting areas where government departments underperform. The guaranteed wages of staff, howsoever their competence, and the fact that government can increase taxes at will, breed complacency.

  11. Ian Wragg
    Posted August 12, 2020 at 2:12 pm | Permalink

    But the wage and pension bill rumbles on.
    How many public sector are going to be made redundant due to the so called new normal were we can outsource their non productive jobs offshore at a fraction of the cost.
    Just like the Fleet Support Ships, Put our dockyards out of business to demonstrate your internationalism.
    Shame on you.

  12. Andy
    Posted August 12, 2020 at 2:17 pm | Permalink

    The UK slump is the worst in the G7. GDP has dropped by almost double the EU average. Worse than Germany, Italy, France and Spain,

    How do you reckon Brexit is going? Asking for a friend.

    Reply Not so. Ist half 2020 Spain fell more and France fell a similar amount to U.K. Only Germany did quite a bit better

    • Nigl
      Posted August 12, 2020 at 4:34 pm | Permalink

      Indeed and OECD figures indicate we are coming out of it quickly. We need you to help open up travel. Ok if Spain for instance is a danger area but you are doing zero for the airline industry. I/we need a safety valve. You are not even thinking about that let alone a solution.

    • Martin in Cardiff
      Posted August 12, 2020 at 4:52 pm | Permalink

      Yes, I seem to remember that Luton did quite well against Liverpool, in the first half of an FA cup tie once.

    • APL
      Posted August 12, 2020 at 9:51 pm | Permalink

      Andy: “Not so. Ist half 2020 Spain fell more and France fell a similar amount to U.K. Only Germany did quite a bit better”

      I’ve no truck with your correspondent Andy,

      But John Redwood, compare our economic performance with Sweden. According to COVID mortality statistics, they are approximately 100 per million population, lower mortality than the UK and the Swedish economy worked right the way through the first and second quarter.

      No economic shutdown, and better mortality plus no ballooning debt.

      • Fred H
        Posted August 13, 2020 at 5:12 pm | Permalink

        Sweden 10m population spread over thousands of coastal islands and inland lakes, along with vast forests and glaciated mountains.
        Biggest city Stockholm less than 1m.
        Perhaps rather less social contact ?

        • APL
          Posted August 14, 2020 at 6:37 am | Permalink

          Fred H: “Perhaps rather less social contact ?”

          Perhaps.

          But if you look at the figures for mortality ( drop those who dies with Covid – after being hit by a train ) then you’ll find that death rate from COVID-19 in England and Wales, is THE EIGHTH HIGHEST SINCE 1993.

          That is, in the last 27 years, there were seven years when more people died of seasonal flu than COVID-19 this last 2019 – 2020 winter/spring.

          On none of those eight occasions was it necessary to shut down the economy, and cause the loss of tens of thousands of jobs, or loose 20% of economic activity nor explode the government debt.

          Nor so far as I can tell were our government being advised by communists infiltrators.

    • Lynn Atkinson
      Posted August 12, 2020 at 9:53 pm | Permalink

      The U.K. has experienced the strongest recovery, in spite, I have to say, of Ferguson and Boris. What would be have done without them – miracles I think. Let’s try it!

    • a-tracy
      Posted August 12, 2020 at 10:06 pm | Permalink

      Don’t we all get charged by the EU according to GDP so that means the others have to step up and pay the extra charges and poor old UK gets a reduced bill.

    • Richard1
      Posted August 12, 2020 at 10:41 pm | Permalink

      But wasn’t the Wuhan Plague which has led to the global downturn caused by Brexit?

      • Fred H
        Posted August 13, 2020 at 5:09 pm | Permalink

        🤣

    • bill brown
      Posted August 13, 2020 at 3:04 am | Permalink

      Sir JR,

      I am afraid your reply to Andy is not totally correct the Spanish GDP fell 18,5% from April to June. (UK 20,4%)The French fell 19% for the first half of the year.

      Read my comment. My figure is half year

  13. Martin in Cardiff
    Posted August 12, 2020 at 2:53 pm | Permalink

    “Of course the government needs to ensure safe working for all employees as the schools and surgeries get back to full working”

    But it is the complete opposite of a simple “matter of course”. It requires careful analysis of the lessons learned from the countries which have done best at this. And even they have not managed to make working as safe as it was before covid19 appeared.

    This government have at best been playing catch-up, and only then after matters have become far worse than in comparable countries ever did. They have so much to do that it seems like their main concern is covering up the fact that they really don’t know where to begin.

    • Edward2
      Posted August 12, 2020 at 4:16 pm | Permalink

      If we had locked down werks earlier and blocked ports and airports as you and Andy wanted, the GDP figures would have been worse.
      Yet with some nerve you are both now attacking the government for the figures that have been released.

      • bill brown
        Posted August 13, 2020 at 5:56 am | Permalink

        Edward 2

        Read what we have writtne not what you think we have written. Nobody is attacking the government, even if they are totally incompetent

        • Edward2
          Posted August 13, 2020 at 8:58 am | Permalink

          “Nobody is attacking the government….even if they are incompetent.”
          One of your best funny comments.

          PS who is we?

          • bill brown
            Posted August 13, 2020 at 2:36 pm | Permalink

            Edward 2

            there was no attack in my first blog so stick to the facts.
            Just facts , please

          • Edward2
            Posted August 13, 2020 at 4:33 pm | Permalink

            I quoted what you actually said.
            That is therefore a fact.

            PS
            Who is we?
            Still not answered.

        • dixie
          Posted August 14, 2020 at 6:26 am | Permalink

          Bill – “we”?

          are you the sock or the puppeteer?

      • Martin in Cardiff
        Posted August 13, 2020 at 6:50 am | Permalink

        What a load of feeble, counsel-of-despair nonsense.

        Look at the far better outcomes in Germany, Norway, etc.

        • Edward2
          Posted August 13, 2020 at 9:02 am | Permalink

          Martin.
          You’ve spent months on here complaining we should have locked down earlier.
          Now you are complaining about the GDP figures.

          • bill brown
            Posted August 13, 2020 at 2:38 pm | Permalink

            Edward 2

            lots of countries locked down earlier and are stilll performing better, so one does not always exclude the other. SO please stick to the facts again.
            Example Denmark, Norway, Poland and Finland

          • Edward2
            Posted August 13, 2020 at 4:41 pm | Permalink

            If you have 160 nations arranged in a hierarchy you will get some at the top and some at the bottom.
            But there are huge differences and numerous elements for example:-
            demographics, health profiles, population densities, povertity, numbers of homes of multiple occupancy, quality of health provision, willingness of the population to behave carefully as advised and average age of the population all of which affect the results.
            Some locked down earlier, some locked down a bit later and some didn’t lockdown very much at all.
            I realise you are desperately trying to blame our government but it really is bit more complex than you think.

          • bill brown
            Posted August 14, 2020 at 6:32 am | Permalink

            Edward 2

            I think Hefner has answered the questions

            thank you

          • Edward2
            Posted August 14, 2020 at 12:33 pm | Permalink

            Not really bill, he just had a moan that GDP Q2 is worse than other G7 nations.
            He misses the predictions by the Bank of England for the overall results for the whole of 2020 and the predictions for 2021 as a year of growth.
            But I realise both of you are keen to criticise the Conservatives at every opportunity.

          • hefner
            Posted August 15, 2020 at 8:52 am | Permalink

            Edward2, another of your rather ridiculous statements. -20.4% is a measure of the past behaviour of the economy, you’re quoting BoE’s predictions. Not exactly the same things, aren’t they? Then if I remember well, aren’t you one of those who in the past have critically commented predictions of the BoE?

            So either you are a very clever ‘devil’s advocate’ or a person unable to keep steady their train of thoughts for more than half an hour. Please tell me what you are.

            And I certainly criticise your type of Conservatives: I am so convinced that ‘the other Conservative candidate’ (at the time of the internal CP choice) (I cannot give his name, Sir John has already censored me on this) would have done so much better in matters health-related.
            But obviously, Esward2, you are not an eagle able to perceive this type of things.
            Pub bore, as I had already the opportunity to call you.

        • JimW
          Posted August 13, 2020 at 11:49 am | Permalink

          Sweden.

  14. Ian @Barkham
    Posted August 12, 2020 at 3:01 pm | Permalink

    The cynical view would be that those with the protected income and jobs could be the least bothered to offer the same effort as others.

    Even more cynical these are the same people that paraded through London recently demanding the same pay increase as those that risked their lives and work on to keep us safe.

    When you read ONS figures you also need to take on board they clearly state in their T&C they there figures and conclusion are not to be relied upon to be real facts.

  15. hefner
    Posted August 12, 2020 at 4:03 pm | Permalink

    ‘Big decline in public service output and rise in public sector inflation’: no sh*t Sherlock, isn’t it rather obvious, it is the job of the ONS to collate these figures. So tell me, what are/will be the equivalent (AMJ) figures for private companies’ output and likely inflation in prices of services from private sector companies as soon as the Covid-19 constraints are released, when private companies will have to fight to reestablish some kind of viability.
    I would bet we will not get a similar vacuous comment from Sir John.

    If there is any surprise in these numbers it is that the UK is the worst of the G7 countries (-20.4%) with EZ at -12.1% and EU27 at -11.9%, and the EU biggies at -18.5 Spain, -13.8 France, -12.4 Italy, -10.1 Germany, -8.6 Sweden, …

    From all the ‘world-beating’ this, that and the other one could have expected those at the UK helm to provide results a bit less awful, but no, and it is now the job of CP sycophants to feed the populace the usual BS.

  16. acorn
    Posted August 12, 2020 at 4:35 pm | Permalink

    What actually happened was that, “… very fast inflation in the public sector.” means the government paid rip-off prices, for stuff it bought from the private sector, for use in the public sector. The free marketeers screwing a desperate and uninformed government customer.

    Health and Education are non-market services. Individuals reduced their consumption of these public sector services, for the same reasons they reduced their consumption of private sector services, distorted by government redirecting or mostly halting the formers normal operations.

    If education activity was judged to have only dropped by a third, ONS has assumed that two thirds of the teaching machine was still operating via any channel that still worked.

  17. Anonymous
    Posted August 12, 2020 at 5:00 pm | Permalink

    The country is in chaos.

    Utter chaos.

    • Fred H
      Posted August 13, 2020 at 5:07 pm | Permalink

      I can’t agree, chaos should imply disorganised activity with little discernable aim.
      What we have is little activity with a rather suspicious aim.

  18. ChrisS
    Posted August 12, 2020 at 6:00 pm | Permalink

    The unprecedented fall in Public Sector activity and productivity is truly shocking.
    It just shows the lack of resilience in the public sector, particularly healthcare.

    While private industry has made every effort to maintain activity – because its very existence is at stake – many in the public sector have simply cut back too far and too fast or stopped working altogether because they have no concept of customer service. Nobody has been furloughed, many have simply been receiving full pay for sitting at home.

    We have discussed the low level of activity in the NHS in the last six months for which there is no excuse. Thousands of people will have their lives shortened because they have had essential treatment delayed and others have rightly been too concerned about catching the virus in hospital that they have refused to attend. NHS Management have spectacularly failed to ensure the continuation of service.

    Another classic example is the DVLA. I sold a Motorcycle in April and am still paying the road tax on it, via my bank, despite the new owner having received the V5 !
    But I will have to send a letter because, currently, you cannot phone or email the DVLA about anything, unless you are a “key worker.” I suspect my letter will sit in a mailbag for a few weeks before anyone gets around to opening the post.

    Other organisations have arranged for workers to deal with enquiries by telephone from home but not the DVLA, it’s the DVLA’s customer that suffers the poor service. Has anyone been furloughed at the DVLA ? I doubt it.

  19. Philip Haynes
    Posted August 12, 2020 at 6:20 pm | Permalink

    “big decline in public service output” – great fewer people issuing parking tickets, taxing you and harrasing you in other ways.

    Most in the public sector do not have much real output. Many have a net negative output doing far more harm than good. Landlord licencing is a very good example of this.

  20. David Brown
    Posted August 12, 2020 at 7:58 pm | Permalink

    Health and Education is important to the economy.
    However I feel so is a different set of economic priorities
    GOV needs to urgently enter into talks with CBI and set out a strategy for recovery, please don’t fudge this its too important. People can forgive the Covid errors eg Care Homes and Track and Trace etc due to a big learning curve, but the economy should be some thing a Conservative majority should be able to quickly resolve. Otherwise people will not forgive you.
    World Trade needs to change exporting and importing from long distances needs to end
    More focus on regional trade deals a priority should be EU as a key trading partner ( not USA its too far away and insular in its trade approach)
    More focus on environmentally friendly fuels and move away from carbon fuels in line with industry.
    Greater research into Hydrogen fuels
    Move way from excessive long haul flights inc USA focus more on short haul.

    • dixie
      Posted August 13, 2020 at 7:39 am | Permalink

      But the EU is not interested in fair trade. The EU does not want to buy our goods and services so we should focus on markets that do.

    • Fred H
      Posted August 13, 2020 at 5:05 pm | Permalink

      A lot of words to say continue at any cost with the EU!

  21. APL
    Posted August 12, 2020 at 9:31 pm | Permalink

    Given that the mortality rate ’19-’20 is only the eighth highest since the winter of 1993. Do you think destroying 20% of the economy and effectively taking into Public ownership the whole of the economy, was worth it?

    Should a Labour government that performed this badly be reelected?

  22. Lynn Atkinson
    Posted August 12, 2020 at 9:55 pm | Permalink

    Incredible really that the two sectors to suffer the greatest fall in productivity get the biggest pay increases. The private sector, derided at every turn takes all the punishment and produces all the goods.
    Where is the ‘social justice’?

  23. Lindsay McDougall
    Posted August 13, 2020 at 12:53 am | Permalink

    You can make non COVID work in hospitals safer by transferring all COVID 19 patients to the Nightingale hospitals. There is fear of COVID among non COVID patients and we need to dispel it.

  24. Mark B
    Posted August 13, 2020 at 5:11 am | Permalink

    Good morning

    So the two largest State bodies that have just received a pay rise worked less than the rest of us. Not a good start to my working day! And on top of it, and following in from yesterday’s post, I may be required to pay out more for them.

    And I never needed a State funded QUANGO to tell me the bloody obvious either.

  25. Posted August 13, 2020 at 7:22 am | Permalink

    …rising cost of government at 32.7%….”

    Amazing — that’s what must have helped to give the private sector a kick start.

    To make the UK more efficient this would appear to be the figure – the waste figure – that can be extracted from government’s public sector to make it smaller, cheaper, less intrusive and a damned sight more effective

  26. A.Sedgwick
    Posted August 13, 2020 at 8:24 am | Permalink

    My wife wanted her blood pressure tested, pre Covid a machine was available in the GP surgery, which is now locked to casual callers. The pharmacy is not interested. She went on line to the surgery to ask for guidance – response: buy your own kit. No doubt made in China – say no more.

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