Exactly!

It would be interesting to know what area of local council you work in, and what part of the private sector you worked in before.

I say this because there have been good studies showing (and it is common sense) that working with the public pushes up sick days off. (Nurses are the classic example, as they are numerous and deal with sick people all day long)

I work in the private sector – but I work in an office with 20 other healthy adults. I thus wouldn’t claim and like for like comparison with my sister who teaches 20 six and seven year olds in a primary school with over 150 pupils.

Ah – so they have discounted transfer payments but then failed to not (as in my article) that we could perhaps judge MoD spending against the number of brown skinned foreigners we kill each year. But we don’t. Meanwhile we can’t quantify an increase in not being invaded every year. So Defence output is not qualitative or quantitative. That means the total value of Defence is only really measurable by the price we pay for it. And as such productivity can’t verifiably rise or fall in any meaningful way.

Interesting.

It is all hugely cumbersome and pathetically inefficient and almost enough to make you vote conservative.
I can’t see it changing though; all the top managers have come up through the ranks so they think it is perfectly normal.
I can’t stand it any longer – I’m off back to the private sector where things get done otherwise you get your backside kicked, where people do come in if they’ve got a cold and where there isn’t an archaic union lurking in the background cracking its knuckles.

“So the report ignores transfer payments – acknolwedging that the productivity for these can’t be monitored in a useful way – but then includes them again for the final calculation?”

No.

The report ignores transfer payments, but includes the third of GGFCE (defence, public administration etc) where outputs cannot be directly measured and are defined as equal to inputs i.e. productivity growth is defined as zero as we cannot measure it, even in the flawed way in which productivity is measured by ONS.

It seems a bit unfair to criticise the public sector for achieving low productivity growth in these sectors when we start by defining this as zero.

The argument is something like:

1. We cannot directly measure output in some public sector areas like defence or public administration, so we have to assume outputs are equal to inputs

2. As a result, productivity growth in these sectors is definitionally zero

3. Private productivity growth was ~3%/annum. This is far better than the zero productivity growth in e.g. defence and public administration. This proves that the government has been inefficient – and could have saved £20 billion in these areas if it matched private productivity performance

It’s the argument of an idiot.

So the report ignores transfer payments – acknolwedging that the productivity for these can’t be monitored in a useful way – but then includes them again for the final calculation?

In that case have they just assumed that although it can’t be calculated, productivity in those areas matched exactly productivity in the rest of the public sector? Becuase that’s a very silly assumption on which to base policy.

As I say, I’d like to see a study of private sector health productivity – and it turns out (Today) that the Australians have one.

http://www.pc.gov.au/projects/study/hospitals/report

The Commission’s experimental cost estimates suggest that, at a national level in
2007-08, public and private hospitals had broadly similar costs per
casemix-adjusted separation.

Interestingly though, staff costs and capital spend seem to make up bigger parts of the cost mix in public hospitals – while equipment makes up a larger part of costs in private hospitals.

Actually if we look carefully Spain spends more than the UK – and Luxemburg is a slightly pointless comparison, what with it being a tiny country with one city and no widely dispersed rural population or poverty.

Finland spends about the same % of GDP as the UK – (0.2% less) but is not playing catch up – ie it has been spending that reasonable level for a long time rather than having only just raised itself to western levels in the last decade. And of course health indicators lag, so ours should by rights be catching up. (the OECD report hints at that but gives few figures to compare from previous years).

Indeed just ten years ago spending in the UK was less than 7% of GDP – Down at the level of Korea and the Czech Republic.

Believe me, that has often been said to me. It merits three comments:

- For the last 50 years (I joke not), a standard argument made in favour of the NHS, even in heavyweight academic papers, is to contrast the NHS with the (truly awful) American healthcare system where current outcomes are an average life expectancy at birth that is marginally lower than in Britain and an infant mortality rate which is so high that it is in a similar league to that of Mexico and Turkey. What makes all that so terrible is that America spends c. 16% of its national GDP on healthcare, far more than any other OECD country. Demonstrably, high spending on healthcare is not a sufficient condition for good healthcare outcomes.

- If we check carefully, I think that we’ll find some EU countries with better healthcare outcomes than Britain but where healthcare spending is a lower percentage of national GDP. Finland, Luxembourg, Ireland and Spain in western Europe do well in terms of healthcare outcomes while spending a smaller proportion of their national GDP on healthcare.

- The distinctive feature of the NHS is that it combines a social insurance scheme to cover (approved) personal healthcare costs, with what comes close to a state monopoly on the provision of healthcare services – hence the relatively small percentage of Britain’s GDP spent on private healthcare. Other west European healthcare systems have not followed this NHS model in state managed provision of healthcare services.

What is usually claimed on behalf of the distinctive NHS model is that central management and purchasing are more cost-efficient. The rather miserable comparative healthcare outcomes of the NHS reported in the OECD survey suggest that far too much is claimed for the cost-efficiency of the NHS model. Central control of purchasing could be making the NHS less cost-efficient – perhaps because too little account is taken of local labour market conditions.

The £60 billion estimates has a number of serious flaws aside from the caveats about the validity and comparability of public sector productivity stats.

What follows assumes that these caveats do not apply – so I’m being an economics simpleton in this sense (assuming that productivity measures of public sector output are high quality where the ONS makes an attempt to directly measure it) in the rest of the post to take on the TPA argument on its own terms.

The report Matt Sinclair linked to from the CEBR is interesting (link didn’t work – http://www.cebr.com/Resources/CEBR/Public%20sector%20costs.pdf does).

A bit off-topic, but interesting none the less, is the bit where is says “On the other hand, although pay in the public sector has recently risen much faster than in the private sector over the whole period from 1997 to 2007 pay in the public sector rose by slightly less”. Certainly don’t hear that coming from Matt Sinclair and the TPA!

The article claims that “lost productivity gains” should apply to the whole of General Government Final Consumption expenditure (which I was surprised at – they are actually excluding transfer payments and making at least some attempt to prevent the calculation being skewed).

This is false. Paragraph 1.2.6. of the ONS release http://www.statistics.gov.uk/articles/nojournal/TotalPublicServiceFinalv5.pdf (worth a read for all those who take the headline “productivity has declined” story as the gospel truth) states that “the majority (representing around two thirds of total expenditure) have their output measured by direct indicators. The remaining services are currently measured using the ‘output=inputs’ convention. That is, the output is deemed to be equal to the volume of the inputs used in generating the output (my notes – i.e. productivity growth is definitionally equal to zero).

So even on the terms of ignoring the caveats that the ONS apply to areas where they can directly measure statistics and pretending that the “lost productivity gain” is given by the gap between measured public sector productivity growth and that seen in the private sector, the £60 billion is an over-estimate.

The “productivity gap” should only be applied to 2/3 of General Government Final Consumption expenditure (as this is what it refers to), which is £167 billion (2/3 * the £250 billion CEBR use for GGFCE). Applying the 30.5% productivity gap used by CEBR would give an estimate of less than £40 billion savings from achieving the same productivity gains of the entire public sector.

Of course, the caveats I mentioned in previous posts make this a ridiculous economically incompetent estimate. But the estimate Matt S (and Hammond) quotes is not even right when taking it on its own terms.

You are absolutely right, and I do need to cast off my rather jaded private sector blinkers.

However, the input cost of outputs has changed somewhat over that period – in part because of the decision to boost staff numbers so rapidly. As such moneterising the lack of productivity growth as being worth £60billion is both symplistic and dangerous.

After all, it offers no assessment of whether that £60billion could thus have been saved by doing everything the same as was done, except hiring new staff – or the same as was done without buying new equipment. And so on.

Without that assessment – which would be aided by comparison to the private health sector – we are left with nothing but a rather useless big number.

And that doesn’t serve much of a purpose in debate about reform.

To be fair – we spend less on healthcare than the OECD average – so should probably expect worse than average healthcare (all else being equal).

Indeed the biggest influence beyond that is probably that until the middle of this decade we spent a lot lot less than the OECD average, and had far far worse outcomes than the OECD average.

As such our outputs are still playing catch up. Indeed that seems to be backed by the OECD’s assesment that out survival rates are improving.

“Although survival rates for different types of cancer are improving in the UK, most other OECD countries achieve higher rates. The UK does well in avoiding hospital admissions for people with high blood pressure and certain heart problems, but could improve the treatment of people with asthma and diabetes.”
http://www.oecd.org/document/38/0,3343,en_2649_33929_44220582_1_1_1_1,00.html

“but the divergence is in fact the result of a different employment culture”

I would disagree to a degree pagar. The “different employment culture” seems to be a large/small organisation issue. Studies have put the difference in sick leave down to large organisation/small organisation issues. Large private sector employers have similar rates of sick leave to the (large) public sector employers.

For instance, an HSE study based on the Survey of Workplace Sickness and Absence in 2005 concluded that “The popular view that public sector workers take more sick leave than their private sector counterparts is misleading” and revealed that “differences in public and private sector sickness absence rates are small, an average of approximately 0.3 days per employee, when account is taken of the size of an organisation; and differences in the age and gender profiles” http://www.hse.gov.uk/PRESS/2006/e06073.htm. This is backed by other studies.

It is also due to (I suspect) better measurement of sick leave in the public sector, due to the statutory duty to record and report this information that the public sector has. The HSE report provides some evidence of this, concluding that “For single-day absences public sector respondents considered the maintenance of a formal records more likely than their private sector counterparts; 87% and 77% respectively”

A third important reason is I guess cultural – private sector employers will try and cut corners, avoid their responsibilities and scare their employees into turning up for work when they are sick and should not really be there (e.g. if they have flu). The public sector, rightly or wrongly, strives to comply with employment law and demonstrate best practice. Maybe it would be better if the public sector ignored employment law too and forced ill workers to come into work when unproductive and to encourage illness to spread.

http://www.guardian.co.uk/society/2009/aug/19/nhs-sick-leave

I suspect it comes from a combination of stress…..

I have worked in both sectors and can assure you that the average public sector job is not more stressful and that you cannot, therefore, use that as a factor in explaining the disparity.

Clearly some public sector jobs are highly stressful but the divergence is in fact the result of a different employment culture which is rooted in the

fear in the private sector that if you take legitimate sick leave you’ll lose your jobs.

You sound as if you don’t approve of fear as a motivational driver but, when they develop a minor illness (a cold, for example), private sector staff tend to be more motivated to go to work because they are aware that. ultimately, they form part of an enterprise that has to make money to survive. They know that their absence would be costly to the business and would therefore threaten their security of employment.

The figures are also affected by the fact that in many small businesses staff are not paid any company sick pay if they are ill, only SSP which is paid at a lower rate and kicks in after a period of absence.

if you take legitimate sick leave you’ll lose your jobs.

Can I take it from your wording, Tim, that you are paid in full if you are off sick and don’t share this fear?

Small point – may give Matt S et al’s more ammunition for the argument that the public sector are inefficient, but if we are having a serious debate we need to be clear on the facts.

” since the NHS has expanded a lot, in part by pushing up wages to attract enough staff”

The productivity stats are unaffected by wages or prices of other inputs – they look at the quantity of inputs rather than how much they cost. So the fact that workers in the healthcare sector (note – and only the healthcare sector) have seen large pay rises compared to the private sector average (the rest of the public sector pay has kept pace/been slightly lower than private sector wage growth) is unimportant to the data on productivity.

Your fourth suggestion sounds very intriguing. Comparing productivity like for like within sectors would be very very useful.

Comparing productivity in the NHS to productivity in car manufacturing (which the figures in the article effectively do) is worthless. But a more focused approach would be really useful.

I imagine it would still show a productivity leg, since the NHS has expanded a lot, in part by pushing up wages to attract enough staff – but the gap would be far more useful since it might suggest real ways of improving NHS practice – rather than setting an agenda for cuts with no plan reform.

Sometimes it is just good fun being aggressive.

Though actually this isn’t really an agressive article when it comes to that headline figure. That was never my focus. Indeed it would have been even less so had the Tories not rounded up a figure that they didn’t reference, fail to send me a details off when I asked them, and which was not put somewhere relevant on their website.

The article is focused on the fact that lower productivity (which I don’t question is a fact) was a choice we as a nation made – deliberately – and knowingly.

“Don’t just go on an ill-informed rant”

Ha. The “Taxpayer’s” Alliance would never go off on ill-informed rants.

1. These statistics you present as the gospel truth that prove your ideological beliefs that the public sector is a waste of space are presented as “experimental statistics” by the ONS and their publications give a number of caveats for why a comparison of this with private sector productivity data is spurious.

2. You and your ilk often pen articles that say that the drop in productivity proves that “additional money has been wasted” – which must be a deliberate lie (surely you undetstand what productivity means?). Look at the statistics on output – it has increased massively.

3. It is very difficult to measure quality. It is clear people wanted capital investment in schools and hospitals, smaller class sizes, shorter waiting lists, more police and more personalised services. But productivity stats would define each of these as a pure waste of money. For example, productivity of schools could be doubled overnight if we sacked half of teachers and doubled class numbers.

4. Where are your like-for-like comparisons – why not try and compare productivity in private schools and private hospitals with productivity in the NHS and state schools? Surely more constructive than comparing labour-intensive industries with less scope for productivity gains. For example, the private sector construction industry has seen productivity decrease over time – you don’t shout about this do you?

5. The big trend in public service provision has been contracting out of services to the private sector. Are you suggesting this approach is not working after all?

6. Output in the public sector is difficult to measure as you know. As a result, output is definitionally equal to inputs and productivity increases defined as zero. Arguing the public sector is inefficient and wasteful purely because we are unable to measure output in an intelligent way

7. The private sector efficiency gains have been largely due to off-shoring. The big gains for the public sector will be in following suit – and replacing civil servants with cheaper Indian/Chinese labour inputs produced privately. This might be a good thing, but I’m not sure this is politically palatable.

But no, far easier to deliberately misinterpret the stats to ensure they are consistent with your agenda.

I hope that the Conservatives are only making the rhetorical “let’s kick the public sector” point rather than actually believing any of the crap you talk about with the “£60 billion”

I suspect it comes from a combination of stress, (higher sick leave is particularly common in departments with massive staff shortages) and fear in the private sector that if you take legitimate sick leave you’ll lose your jobs.

Are they more stressed or less well motivated?

I know the answer.

I think we all do if we’re honest………