[A-List] UK corporate state: more "reform"

["Michael Keaney" <michael.keaney@xxxxxx>]

Fall in public sector productivity makes the case for reform
By Philip Thornton, Economics Correspondent
The Independent
05 June 2003

Productivity in the public sector has fallen sharply over the first years of
Labour rule, according to the first official attempt to measure government
efficiency.

The growth in the amount of money pumped into the public services
outstripped the resulting increase in performance between 1995 and 2001,
according to experimental work by the Office for National Statistics. "Over
this period output growth has fallen behind the increase in inputs implying,
on the new experimental measure, a fall in productivity," the report said.

At face value the research confirms the need for public services reform that
the Government insists must accompany its massive planned spending
increases. The Treasury has already imposed targets on Whitehall departments
via Public Services Agreements that committed civil servants to hitting
specific targets.

However, the figures will also stoke concerns that extra cash aimed at
improving hospitals and schools will be absorbed by higher pay rises and
managerial inefficiencies. The Tories seized on the figures. Michael Howard,
the shadow Chancellor, said: "This raises questions about the value people
are getting for higher taxes and higher spending and they will expect
answers from the Government."

The UK already lags its main economic rivals such as France, Germany and the
US in private sector productivity, measuring output achieved per hour worked
by employees.

The ONS warned that the fall in productivity could be explained by a delay
between when the money was spent and when the output could be measured. In
addition, spending might have been on items that improved outcomes, such as
staff training, that did not result in an output that could be measured.

Academics believe it is almost impossible to measure productivity and
attempts can produce strange results. One well-known piece of research, by
Professor Simon Burgess of Bristol University, found that the introduction
of competition in hospitals to improve productivity was followed by higher
death rates. Another oddity is that moves to cut class sizes in schools
would worsen productivity, as more teachers were needed to teach the same
number of pupils.

Louise Horner, a researcher at the Work Foundation in London, said: "You are
ultimately looking at social outcomes when there may be many factors
affecting them. What you choose to measure is a political decision."

The ONS research was based on spending on labour, goods and services and
capital consumption for health, education, social security, social services,
and the police, justice and fire services - which together make up 70 per
cent of public spending.