Public Sector Productivity

Baroness Noakes Excerpts

Wednesday 9th October 2024 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I join other noble Lords in congratulating my noble friend Lady Neville-Rolfe on securing this debate and for her masterly introduction. Public sector productivity, or the lack of it, is holding back the UK’s overall productivity growth and thereby putting a damper on our economic growth. In the time available, I will not concentrate on the soaring numbers of civil servants, the clear issues with working from home—which was addressed by my noble friend Lord Patten—or the inflationary public sector pay deals which have shockingly been awarded in return for zero productivity. Instead, I want to focus on two areas: state-owned economic activity and the NHS.

We are only a hundred days into this new Government, but there is one clear direction of travel—we can expect more state-controlled economic activity. The Government are already laying the foundations for renationalising the railways, the energy system operator has just been brought into the public sector and GB Energy is being set up with £8 billion in order to take an active role in energy generation. I doubt that the Government’s ambitions will stop there, but they need to learn the lessons from history.

Before 1979, we had a lot of nationalised industries and, the record shows, third-rate productivity at best; they were a real drag on the UK economy. There were several attempts to impose economic and financial frameworks to solve this problem, but they failed. The one thing that did eventually work was privatisation, which unlocked considerable efficiency gains, and I am especially proud of what we achieved in the 1980s and 1990s. Now, the Government are heading in the other direction with little apparent regard for efficiency. I was struck when the noble Baroness, Lady Blake of Leeds, who is the Minister here today, introduced the Second Reading of the Passenger Railway Services (Public Ownership) Bill two days ago and, in her opening speech, did not even mention productivity or efficiency. As the activities of the state increase, the greater will be the impact of low or negative efficiency on the whole economy, and the Government cannot afford to rest on hopes that it will all be different this time.

My other topic is the NHS. Because the NHS gobbles up about 40% of public expenditure, overall public sector productivity will be a problem if the NHS is not fixed. Measuring productivity in the NHS is very difficult, as the noble Baroness, Lady Wheatcroft, has already said, but it seems generally agreed that the NHS has not even returned to pre-pandemic levels of productivity; it is treating fewer patients but has far higher staff numbers. Before the pandemic, the ONS measure, which includes a flattering quality adjustment, had the NHS as the best performing bit of the public sector, but not anymore. It is vital that the Government grasp this issue.

The last Government’s productivity plan for the NHS involved £4 billion being spent on technology transformation. The current Secretary of State has talked about creating a digital NHS. Another lesson from history is that all previous attempts at large scale technology-led transformation in the NHS have failed. There are lots of reasons for this, including the complexity of the NHS and insufficient management skills and capabilities.

More importantly, transformation will not happen unless the whole of the NHS buys in; it cannot be optional. The NHS has to want to change, not just in the upper echelons of NHS England, but in every GP surgery, every ward and every support service. If that does not happen, it is not worth investing a single pound in a grandiose transformation plan.

In my view, the NHS has to stop finding excuses for low productivity—lack of investment, burnout in the workforce, strikes and so on—and turn its attention to the basics of delivering world-class efficiency. I wish that I had confidence that this will happen.