Public sector productivity numbers are so bad they’re difficult to believe
Facts4EU.Org reveals the enormity of the problem with our public services
Montage © Facts4EU.Org 2025
Part II of our Productivity Report will shock many readers and prompt some difficult questions for the Government
In Part I yesterday we looked at the UK’s overall productivity problem, showing that the country’s productivity as a whole is falling after a period of very poor growth. Previously the UK had experienced growth averaging around 2% per year.
In this final part today, we zoom in on one area of our economy – that of what many would now call our burgeoning and bloated public sector. The Facts4EU team knew there were problems here, but we had no idea just how bad they were (and are) until we delved into the detail.
A Brexit Facts4EU.Org Series
The problem of UK productivity
Part II : Productivity – How big is the problem and how does it affect us all financially?
Part II (This report) - Public sector productivity – The problem here is far, far, worse – what is this costing us
Below we present the facts. We then asked a respected and knowledgeable man in these things, Sir John Redwood, to explain the significance to our readers. Finally we present our own views in the ‘Observations’ Section.
Brexit Facts4EU.Org Summary
Public service productivity UK: to Q2 (Apr – Jun) 2024
© Brexit Facts4EU.Org 2025 - click to enlarge
[Sources: ONS | HoCL. ]
These numbers are truly bad
Public service productivity was estimated to be 2.6% lower in Quarter 2 (Apr to June) 2024 compared with the same quarter in 2023.
It gets worse: the falls are accelerating. Public service productivity fell by an estimated 1.2% in Q2 2024 compared with the preceding quarter, which in turn had fallen from a period of zero growth in the quarter before that (Q1 2024).
Comparing to the pre-Covid years
Looking back a little further to pre-Covid times, public service productivity in Q2 is estimated to be an astonishing 8.5% below its number in Q4 (Oct to Dec) 2019. This contrasts with the overall figure for the UK, which includes the public services, of a 2.8% increase.
Brexit Facts4EU.Org Summary
Public services productivity from 2019 (pre-Covid) to Jun 2024
© Brexit Facts4EU.Org 2025 - click to enlarge
[Sources: ONS | HoCL. ]
Without the profoundly negative effect of the public sector, the UK overall would have looked more positive.
The problem in public services is not lack of investment – far from it
Delving down into the components of productivity, an alarming trend can be seen. At its root, productivity is the difference between inputs and outputs. In other words, how much goes in to produce what comes out the other end.
Our analysis shows that the amounts going into public services have increased dramatically. In the last 12 months for which we have data, the quarterly amounts going into public services have increased by the following :
- Q3 2023 : 2.3%
- Q4 2023 : 5.1%
- Q1 2024 : 3.2%
- Q2 2024 : 5.2%
Despite this, productivity has decreased significantly. And this is long after the government’s Covid measures necessitated special responses.
So what’s going on in the public sector? We asked Sir John Redwood to explain
Sir John Redwood is the former MP for Wokingham, having decided not to stand in the 2024 general election. He held many roles in government, including that of Chief Policy Adviser to Margaret Thatcher. He has led industrial businesses where being more productive was crucial to selling competitively priced products to safeguard the jobs of the workforce.
He has been in the vanguard of the raising of the issue of productivity – specifically in relation to the public sector. Here is Sir John, with his exclusive explanation for Facts4EU readers of what has been going on.
The Rt Hon Sir John Redwood
"The collapse of public sector productivity has caused a large black hole in the public accounts. According to the Treasury it costs £20 bn a year more this year than in 2019 to deliver our public services, a number similar to Chancellor Rachel Reeves' alleged missing money. This figure is before taxpayers need to find much more extra cash to take care of the inflation of wages and bought-in goods. The £20 bn is the cost of all the extra staff hired to produce the same output. It is likely the Treasury estimate of £20 bn understates, as there has been a further loss of productivity since it was made."
- The Rt Hon Sir John Redwood, 08 Jan 2025, writing exclusively for Facts4EU
"The large scale recruitment of extra civil servants and public sector Administrators in recent years has also facilitated many more promotions, producing more managers relative to other staff, all on higher salaries. There has been a further expansion of regulatory activities, audit and supervision, as opposed to delivering more service. More regulation requires more compliance staff. None of this helps to increase useful output at a lower cost to taxpayers."
"How can this be tackled?"
The Coalition Government did reduce the civil service substantially up to 2016, boosting productivity a bit, only for numbers to expand by around a third since. The easiest way to progress, without need for compulsory redundancies, is to use natural wastage. As people retire or move on, so posts should be amalgamated and good internal candidates be promoted. There can be the abolition of some public bodies and functions, and amalgamation of others.
"Longer term productivity trends since 1997 have been poor in the public sector before the post 2019 collapse. This is surprising as there are many clerical tasks, from paying benefits to issuing licences, where computers can do - and often are doing - much more of the work, yet staff numbers remained high after the installation of big computing projects.
"There is talk of spending more on better computers and software and relying on more AI to replace people. The immediate task is to restore 2019 levels of productivity, when there was no AI. First recover the £20 bn, then consider some 'spend-to-save' ideas. It will require government to get better at investing in technology and adjusting manpower down as it comes in.
"Doing more with the same number of people or doing the same with fewer is essential to reduce the burden on taxpayers and to create growth and prosperity. The public sector has let taxpayers and the economy down badly in recent years. The £20 bn black hole created by the productivity loss is unaffordable and unacceptable. It is a genuine black hole that required damaging tax rises in the latest budget."
What is being done to improve public services productivity?
Our research has shown that every government since time immemorial appears to have launched an initiative to eliminate waste, increase efficiency, and improve productivity in the public sector. These initiatives have of course required partnering between statisticians, government departments, public service ‘experts’ and ‘academia’. (Scarcely an experienced business brain in sight.) These reviews, we have been told each time, would result in large savings running into billions of pounds and would of course help to pay for that government’s additional spending plans. The predicted – and notional - freeing up of expenditure enables governments to claim that their manifesto plans have been “fully costed”.
The reality, naturally, is that reviews have been undertaken at significant cost (thereby reducing productivity) without seeming to have had any effect. A recent case in point is Jeremy Hunt’s ‘Public Services Productivity Review’ launched in June 2023, when he commissioned the National Statistician to review how productivity measures of public services could be improved.
This in turn was part of the ‘Public Sector Productivity Programme’ and was deemed necessary as the whole area of public services inputs and outputs is mired in mist. Indeed in the case of some major areas of expenditure, the departments concerned simply report that outputs equal inputs, and that no calculations can be made. Very handy…
Who is spending the most taxpayers’ money on public services?
Firstly, public services are not the same as public spending. Two-thirds of the UK government's spending is on public services, as opposed to benefits and transfers, and this equates to around one-fifth of the output of the UK economy. Below we show where all the hundreds of billions of pounds are spent.
Brexit Facts4EU.Org Summary
Proportion of public services spending by service area
© Brexit Facts4EU.Org 2025 - click to enlarge
[Source : ONS Progress Report, 20 February 2024.]
Nearly 60% (57.7%) of public services spending goes on just two areas: Healthcare and Education. Unsurprisingly these are the areas that are always singled out by governments, because the potential gains to be achieved through productivity improvements are so much greater. So far, the results show that none of these gains have materialised.
This brings us nicely - and finally - to Rachel Reeves
It must surely go without saying that Jeremy Hunt’s successor as Chancellor, Rachel Reeves, dived straight into the whole area of public spending, as part of a concerted attack on the previous government. On 29 July 2024 she addressed Parliament, when she made her now-infamous remarks about an alleged “£22bn black hole” in the country’s accounts.
The Rt Hon Rachel Reeves MP
“On my first day as Chancellor of the Exchequer, I asked Treasury officials to assess the state of public spending.... There were things that the Conservative party covered up from the Opposition, from this House and from the country....
“We have inherited a projected overspend of £22 billion.... It is £22 billion of spending this year that was covered up by the Conservative party. If left unaddressed, it would mean a 25% increase in the budget deficit this year.”
- The Rt Hon Rachel Reeves MP, 29 Jul 2024
In the course of her speech she made much of her new approach aimed at increasing productivity in the public sector, including using AI to increase the effectiveness and efficiency of the delivery of prescriptions. In September Feryal Clark, Under Secretary of State in the Department for Science, Innovation and Technology, followed up:
“We want to seize every opportunity that technology offers to improve lives for our people, whether that means life-saving healthcare in our hospitals or a world-class education in our classrooms. If used rightly, technologies such as AI can transform the productivity of Britain’s broken services.”
Observations
It should go without saying that none of the implied criticisms in this report are directed at those in the front-line, providing public services. Our issue is with the apparent inability of the management of the public sector to run its very expensive services in anything resembling an efficient manner.
It is perhaps instructive that all the reviews we have seen have been written by those who are part of the problem. Our solution would be to bring in highly experienced business people on contract, with a brief to introduce constructive reforms to deliver value for money to the public as soon as possible.
A classic example of this was the decision by Boris Johnson to employ Dame Kate Bingham to manage the vaccine rollout. This became the shining example in the West of how this should be done. While the EU floundered in numerous bureaucratic delays, Brexit Britain outshone them completely. Whatever readers' views of vaccines, it was an impressive performance. The one area which was far less than optimal was the inability of the public sector subsequently to manage the purchase contracts for protective equipment and ensure there was no fraud.
Our second action would be to return to the normal, pre-Covid practice of public sector employees working at the place of work defined in their contracts. This means five-days-a-week - and these should be full days.
Thirdly we would end the practice of public sector managers telling their staff to take their full annual entitlement to sick leave - whether they are sick nor not.
These measures would be a good start.
To end on a less than positive note, we have no confidence that if we follow up this report in two years' time, we will be able to report on any improvement. We sincerely hope we will be proved wrong.
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[ Sources: ONS ] Politicians and journalists can contact us for details, as ever.
Brexit Facts4EU.Org, Thurs 09 Jan 2025
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