Public sector productivity and procurement performance

I am a bit of a statistics anorak; it was only stats and probability got me through my two years of Maths at university, where I discovered I was good with numbers, not good at Maths.

Anyway, and I know this sounds tautologous, there was  a very interesting report published by the Office of National Statistics earlier this month. They stress that these are 'experimental statistics' and that more work is needed, but they are already fascinating and relevant to public procurement.

It looks at inflation and productivity in the public sector, with a more detailed look at the Health and Education sectors.  In summary, it suggests that input prices for the public sector have risen by 9.8 % more than prices in general over the 1997 -2007 period; so what we might call 'public sector inflation' has run ahead of the general economy.  Meanwhile, there has been no increase in productivity to offset that increase; public sector productivity actually fell by 3.4% over the same period.

In Health and Education, the analysis has gone one stage further, which is where it gets interesting for procurement.   Input costs for the Health sector rose 8.8% above general inflation , while productivity fell around 5% over the period.  But this is all accounted for (in fact, more than accounted for) by increases in labour costs.  Inflation for goods and services in health (procurement spend in other words) has been lower than general inflation (more than 1% per year lower); or, as the report puts it,  "restrained growth in the price of goods and service inputs in health-care has to some extent offset the relatively high recent growth in labour costs".

In Education, there is a similar but not quite as procurement-favourable picture. Labour inflation has run well above general rates; and no gain in productivity; but costs of other goods and services shows inflation very similar to general inflation.

So well done to everyone involved in Health procurement, reasonably well done to Education procurement, and not so well done to anyone involved in maximising productivity of the employed workforce.....

Public sector performance is only going to get more important as money gets tighter, so understanding what has happened and how we might address these issue in the future seems pretty important.  All this strikes me as much more important to the future success of the UK than the PM's spelling or whether we can all eat another doughnut a day; things that get orders of magnitude more coverage on the BBC and in the press than this report did.   Sad, isn't it?

Peter Smith

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