Official figures released by the Office for National Statistics (ONS) have raised concerns about the public sector’s impact on the UK’s economic recovery from the recession. The data showed a decline in productivity in the public sector, which is mainly made up of education and healthcare, between the third and fourth quarters of 2023. This decline of 1.0% over the period brings the figure 2.3% lower than it was a year ago, and even further from pre-pandemic levels.
The gap between the volume of services delivered and the volume of inputs, such as salaries and government funding, needed to maintain those services, was measured at 6.8%. This measure of public sector productivity is crucial in determining the efficiency of the sector.
While the public sector has faced challenges due to strikes since the end of the COVID crisis, the National Health Service (NHS) has also struggled to deal with a growing backlog in key waiting lists. Disputes over funding have been worsened by record levels of long-term sickness. The current jobless rate stands at just over 4%, equating to approximately 1.4 million people. However, the number of individuals economically inactive due to poor health is close to double that figure.
According to the Office for Budget Responsibility, this issue has added approximately £16 billion to the government’s annual borrowing bills. These pressures have been reflected in the ONS data, with output in both the health and education sectors declining during the fourth quarter of the year, contributing to the country’s recession. This decline occurred despite an increase in inputs during the same period.
Back in March, Chancellor of the Exchequer Jeremy Hunt announced a Public Sector Productivity Plan in his budget, with a focus on improving technology in the NHS. Next week, figures are expected to confirm the end of the recession, with overall output returning to growth during the first quarter of the year. Recent private sector surveys have also painted a positive picture for the dominant services sector, which accounts for almost 80% of overall output. However, there are ongoing concerns about budget pressures due to higher inflation and interest rates, which are being tackled to address the issue of rising prices.
