Tim Knox: Conservatives must find an answer to stagnant public sector productivity | Conservative Home

Tim Knox is editor of the Effective Governance Forum and former Director of the Centre for Policy Studies www.egforum.org.uk.

Nothing is more dangerous for a political idea than for it to be adopted by all the main political parties. For when that happens, everyone can pay lip service to the idea. But no one ever feels the pressure to undertake the difficult steps of actually delivering it.

Improving public sector productivity is now in exactly that position. After all, if this or any future government is to deliver better public services without spending more at a time when Britain’s deficit and debt are so high, this is the only possible way forward.

But for the Conservatives, making the case for improving public sector productivity is essential. For remember the simple equation that ‘GDP growth = size of the labour force x productivity growth’.

So if the Conservative leadership is serious about reducing net immigration at a time of radically falling birth rates, then improving productivity in the public sector should no longer be a mere buzz words. It can only resonate if it becomes the fundamental principle on which they set out an alternative to a high spending, high tax Labour government.

The problem is that the Conservatives have tried to tackle this dilemma. Just one year ago, Jeremy Hunt announced the “most ambitious public sector productivity review ever”. But nothing happened.

The manifestos of all the major parties recognised the problem – and apart from setting various targets to improve productivity, no one actually detailed the practical steps which need to be taken. So in the Budget this week, Rachel Reeves simply announced that:

“Today we are setting a two per cent productivity, efficiency and savings target for all departments to meet next year, without specifying how such a target would actually be met beyond the usual platitudes of “using technology more effectively and joining up services across government.”

For the scale of the problem is staggering: ONS data show that between 1997 and 2022 economy labour productivity increased by 27 per cent. However, public sector labour productivity declined by per cent over the same period. This at a time when so many technological advances have taken place which should have made public sector productivity grow, not shrink.

To state the obvious: widespread computerisation surely means that office workers – the majority of the public sector workforce – should be more efficient. The internet gives us all free access to the knowledge of the whole world throughout history. Mobile data creates opportunities for flexible working in a way that would be unthinkable a few decades ago.

The ever-growing efficiency and higher value of everyday office and household items should also mean that we get more for less. We get more for less. But not in the public sector.

The cost of failure is massive: the ONS shows that between 2019-2020 and 2023-4 government spending in real terms increased by £152bn, or 17 per cent of total government spending. But there was no sign of any equivalent productivity increase. In other words, we got nothing from a vast increase in spending.

So Kemi Badenoch must quickly start to set out their explanation of why things have gone so badly wrong in the public sector for so long, along with a compelling vision of what needs to be done to fix it.

Fortunately, this can also be an explanation for the many failures of the last 14 years, an explanation which could also provide a powerful narrative for what they must do in the future: namely that the problems in the public sector are in areas where good management is a rare exception.

In the private sector, a company or an organisation will go bust if the principles of good management are not applied consistently. But no such external pressures operate in the public sector. Indeed, the incentive often lies in the opposite direction, for success and promotion in Whitehall often depends on increasing a departmental budget or headcount with no commensurate improvement in measurable outputs.

The principles of good management apply to a good school, a good prison, or a good hospital just as much as they do to a good business, charity or sports club. Consider how the Michaela Community School in Wembley gets 82 per cent of its sixth-form pupils into Russell Group universities.

Or how HMP Oakwood, described by HM Inspector of Prisons Charlie Taylor as the “best prison I have seen in my time as chief inspector”, achieves extraordinary results while costing only £17,000 per prisoner per year, compared with an average of £28,500 for a comparable category C prisoner elsewhere.

Or how Gerry Robinson, the Labour-supporting entrepreneur, said back in 2007, when he was making programmes about the failure of NHS hospitals to adopt standard management practices, that:

“Any business, no matter how large, can be made to work well. I knew nothing about the medical profession but good management is good management – whether you’re running a corner shop or a large hospital. I was working in a hospital in Rotherham but the ideas we were trying could be applied across the NHS to any hospital, anywhere in the country.”

The secret they all have in common? High expectations, experienced leadership, a clear sense of direction, knowing what you must achieve, incentives for good behaviour, risk-taking mixed with robust action when things go wrong, stability, and hard work – for everyone, be they staff, pupils, or prisoners.

The question of how to improve the management of public services and major infrastructure projects is one which all parties need to answer. For this is a key problem of modern politics, and the first party to get it right will reap great financial and electoral rewards.

Some things which the current Government are doing should be commended: James Timpson, the new Prisons Minister, has the necessary personal experience of the importance of good management along with deep knowledge of the sector. Wes Streeting, when he says that the NHS must “reform or die”, is presenting an intelligent analysis of the problem of the health service.

Meanwhile the Reform Party at the last election sensibly recommended bringing in successful professionals to replace Civil Service leaders.

We all now know the system is broken. The challenge – or even the opportunity – for the Conservative Opposition is that, if they can own this agenda, they will be able to present a fresh narrative to the public.

So the Party should be positive about the need for change. It can praise any successful reform achieved by Labour, safe in the knowledge that these will be rare.

And more importantly, Badenoch can from day one stress that she and she alone will introduce professional management to the public services to secure public sector productivity improvements to the benefit of everyone: the public, those working in public sector and politicians themselves.