Page last updated at 13:15 GMT, Tuesday, 9 June 2009 14:15 UK

Public sector productivity falls

By Nils Blythe
Business correspondent, BBC News

GP treating a girl
It is not easy working out how productive the health service is

Value for money from public services fell by 3.2% between 1997 and 2007, an annual average fall of 0.3%, according to the Office for National Statistics.

However, there were signs at the end of the period that public services productivity was improving.

The ONS calculates the productivity of public services as a way of measuring what taxpayers get for their money.

The efficiency of public services will be an important battleground in the run-up to the next general election.

Over the decade between 1997 and 2007 public spending was increasing.

'Experimental'

Research by the ONS has been attempting to measure the "ouputs" of all the public services.

The ONS admits that is a very complex task. Senior statistician Aileen Simpkins describes the figures as "experimental".

In the private sector, most outputs are measurable in money terms, but in the public sector most outputs are difficult to capture in that way.

What value do you put on improvements in the education or health of the population?

The simplest measures of output in public services look at things like how many pupils are being taught at school and for how long.

In recent years, the ONS has been developing more complex measures of output to assess quality, particularly for healthcare and education, which account for about half of all public service activity.

For education, the measure of output now includes GCSE average points scores.

For health the measures include clinical outcomes, waiting times and what they call "patient experience".

Calculation problems

Even so, these figures cannot measure everything.

For example, an anti-bullying initiative might be a key factor in determining what children and parents think about a school, but unless it is actually producing better exam results, the school's output is not increased as far as the statisticians are concerned.

So it can look as if an organisation has become less efficient if it is devoting resources to things that are not being measured.

Another problem with the figures is that only health and education outputs are adjusted for quality.

In other areas, such as policing and defence, the outputs are assumed to rise in line with the inputs.

In other words, more spending on police is assumed to produce an increase in the measured output of the police.

Key patterns

For all their limitations, these are important figures.

They cover about one fifth of all the activity in the economy and, as the methodology used by the statisticians is the same for each year covered, the pattern they reveal is important.

According to the ONS figures, productivity in public service fell in most of the years after Labour came to power in 1997.

The falls were at their worst in 2002 and 2003, but the last two years of the survey - 2006 and 2007 - show improvements in productivity.

This suggests that big spending increases take time to bed down and produce results.

The largest increases in public spending have been in healthcare and it is in healthcare that the ONS research finds the biggest falls in productivity, although the decline slowed in 2007.



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