Efficiency, productivity, and public sector technology

The UK has a productivity problem. In fact, labor productivity has been close to flat (0.4%) since the financial crisis of 2008.

One of the first things the current government committed to, when it came into office, was to grow the UK’s economy, and that means tackling productivity.

Ministers have also committed to addressing the productivity gap in the public sector. If productivity is a problem for the economy as a whole, the situation is even worse in the public sector.

The most topical example of this is in the NHS. Health and Social Care Secretary Wes Streeting ordered an independent investigation into the health of the NHS. The health services has struggled to increase its outputs — such as the number of surgical operations — despite more money, and more staff.

Lord Darzi’s report was published on 12 September, identifying both growing demand for healthcare and as expected, low productivity.

But productivity remains a challenge across the public sector. And one reason is the public sector does not always make the best use of technology.

According to the Office of National Statistics (ONS), public sector productivity grew by a mere 0.2%, on average, each year since 1979. The agency also estimates that productivity was actually 0.3% lower in 2022, than it was before the Covid-19 pandemic.

The ONS stresses that these are “experimental statistics”, and are subject to revision. But the public sector clearly lags behind the private sector, even though private enterprise isn’t exactly enjoying a productivity boom itself.

Over time, this creates a number of problems. We are putting more demand on public services, in the NHS, social care, education, defence, the justice system… the list goes on. And, unless productivity improves, it will be hard to keep up, let alone improve services.

Then there is the prospect of higher wage bills, and pension bills in future, if more people need to be employed to deliver those services. As the previous Chancellor, Jeremy Hunt, stated early this year, “the way to improve public services is not always more money, or more people – we also need to run them more efficiently.” And the current government believes much the same.

How, though, can the government achieve this? Earlier this month, TechUK held its tenth “Building the Smarter State” conference in London. At this event, technology companies mingle with civil servants, agencies, and local government staff — both technologists and leaders — with a view to building relationships between the two groups.

Building bridges

“We try to get good engagement between those government departments, the buyers of technology, and our members, the suppliers,” says Heather Cover-Kus, head of the public sector program at TechUK. “It’s around procurement opportunities, but also around the challenges those departments might be having, and how tech can address some of them.”

Part of this is to showcase innovation in the private sector. But Cover-Kus readily acknowledges that the technology industry has to understand the requirements, and challenges, of the public sector and “how to be a better partner”. The government, for its part, needs exposure to innovation in the industry.

Cover-Kus, though, is seeing plenty of enthusiasm from those working in digital government. A new administration will bring its own ideas, and a new approach. But there are other trends, such as the sector’s interest in AI, that has carried over from the last Parliament.

“It’s hard to have these discussions without talking about AI,” she admits. “It has made such a big, big change in the way people operate, and it has the potential to do some really interesting things. That will be an important technology, going forward.” The larger departments, such as the Department of Work and Pensions, and HMRC, are looking at AI to improve how they deliver services.

But there are challenges too. Legacy systems remain a problem across all levels of government. And the cost of maintaining, or upgrading, legacy systems is closely tied to the issue of skills. Skills is an industry-wide challenge. “Government wants those technical people, but so does the private sector,” says Cover-Kus. TechUK is looking at ideas around talent sharing and secondments, to bridge the gap.

Money, too, will always be a consideration. Public sector funding for IT will always have limits. And the connection between IT spending — or investment— and better services or lower costs can be harder to establish than in the private sector. And this links directly to the question of productivity.

“I don’t know if this is something that the IT industry can help with, but it’s not necessarily even the money. It is also how the money is allocated, capital expense versus operating expense,” explains Cover-Kus. “We’ve been speaking to the Treasury about what a different system might look like… we are really trying to tell the story around the role of technology and improving productivity.”

Transformation

This could mean cheaper public services, or it could equally be about delivering more within the same budgets. However, there is more at play than deploying technology and digitalization. There needs to be transformation too.

Otherwise, there is a risk that all that the public sector will achieve is marginal improvements to existing business processes, and no real gains in efficiency, productivity, or vitally, from the citizen’s point of view, quality.

At TechUK, there is enthusiasm for projects, such as the Scottish government’s CivTech program, which each year allows public sector bodies to invite industry to help solve a specific problem. There is interest in improving data sharing, especially between departments, and different tiers of government. And there have been achievements, such as the NHS app, and automation at the Passport Office.

“The digital part is somewhat easy; the technology part is easy. But you’re not going to move the needle without transformation,” says Cover-Kus. “It’s not always just changing the technology. Instead, it’s changing the way you operate, and the way you think about a particular challenge.

“It is part of a wider business change, a wider public sector change. It’s not just about making a form a PDF. It is about rethinking the whole way things are done.”