The Bank of England Governor, Andrew Bailey, recently warned that low productivity in the public sector is having an adverse impact upon the economy.
Low Productivity
Andrew Bailey's concerns stem from the addition of 500,000 public sector workers since lockdown without a corresponding increase in productivity. Public sector productivity remains 8.5% below pre-pandemic levels, raising serious questions about value for taxpayer money.
Bailey stated: "It is fair to say we have seen an increase in public sector employment. We haven’t seen a commensurate increase in measured public sector output".
The concerns raised by Bailey echo broader worries about persistent low productivity and very high sickness absence rates within the public sector compared to the private sector.
Whereas productivity within the public sector fell by an average of 0.1% per annum between 1995 and 2008, since 2008 the level of decline has increased to an average of 0.9% per annum. The net result of this is that whereas productivity has increased by 50% in the private sector since 1995, it has fallen in the public sector by 20%. Indeed, it is 8.5% below the level it was at pre-pandemic.
The level of the decline in public sector productivity is put further into context by the fact that had public sector productivity remained at the same level it was pre-pandemic, then Government spending would now be £74 billion lower per annum than it is now.
High Sickness Absence
ONS Findings
The productivity crisis is further complicated by concerns about persistently high sickness absence rates amongst public sector workers, compared to the private sector. In 2022, for instance, the Office for National Statistics (ONS) found that the public sector sickness absence rate of 3.6%, significantly exceeded the private sector level of 2.3%. That represents a gap of 1.3%, up 0.2% compared to 2021. Accordingly, the problem is getting worse.
Other Findings
Moreover, a recent report found that sickness absence in relation to civil servants increased from 7.9 average working days lost in the year to the 31st March 2022, to 8.1 days in the year to the 31st March 2023 (10.6 days across the public sector as a whole). The report found that this rate is considerable higher than the private sector (5.8 days). In terms of the 8.1 days, 4.4 days related to long term sickness absence (up from 4.3 days the previous year) and 3.7 days to short-term sick leave (up from 3.6 days the previous year).
The report also found that mental health issues represented the main cause of long term sickness absence within the civil service (45%). Morerover, analysis of the aforementioned ONS report found that "public sector workers are three times more likely to take mental health sick days than those in the private sector".
Reasons
Reasons cited by the ONS for the difference in sickness absence rates include: “workers in the private sector are less likely to be paid for sickness absence than those in the public sector” and “the analysis only counts people as sick if they work fewer hours than they are contracted for and would exclude those who make up lost hours at a later point in the week; individuals in smaller workforces, which are more prominent in the private sector, may be under more pressure to make up any lost hours.”
Potential Measures
Potential measures for addressing these issues, include:
- Enhanced productivity monitoring: The implementation of sophisticated performance measurement systems across all departments. This could include clear, quantifiable metrics tailored to each department's specific functions and objectives. Regular performance reviews could be conducted using standardised frameworks that assess both individual and team contributions to organisational goals. Digital tools and analytics could be deployed to track work patterns, project completion rates, and service delivery effectiveness. This data-driven approach would enable managers to identify bottlenecks, optimise resource allocation, and make informed decisions about workforce planning. Additionally, departments could benchmark their productivity against comparable private sector operations where possible.
- Reforming sickness absence policies: This requires a balanced approach that addresses both prevention and management. Organisations could implement early intervention programs to identify and address potential health issues before they lead to extended absences. The current sick pay system could also be reviewed. Clearer return-to-work protocols could be established. Specialised training could be provided to managers in relation to absence management, including how to conduct effective return-to-work interviews and identify patterns of absence that may indicate underlying issues.
Looking Ahead
The stark contrast between public and private sector performance metrics, particularly in productivity and sickness absence rates, suggests fundamental structural issues that require immediate attention. To navigate these challenges effectively, a multi-faceted approach is essential. This should include implementing robust productivity monitoring systems and reforming absence management policies. The goal should be to create a more efficient, resilient, and productive public sector that delivers value for taxpayers while maintaining essential services.
