- Britain has a productivity crisis. But a new CPS paper by John Redwood argues that it is at its worst in the public sector, and is costing Britain billions as a result
- Spending plans in the recent Budget are predicated on productivity growth three times what we are currently seeing. Failure to reach these levels will lead to enormous black holes in the public finances
- Healthcare plans for 2028/29 will leave the Treasury with a £20 billion black hole if NHS productivity does not return to pre-pandemic levels
- Despite this, swathes of the public sector remain well below their pre-pandemic levels, with the NHS in 2024 8% below 2019 levels and 12.8% below where it would have been had pre-pandemic trends continued
- The private sector is also struggling on productivity, as government policy hampers or effectively drives out of business some of our most productive sectors
- Redwood sets out the alarming scale of the productivity challenge, as well as a toolkit for improving the performance of the public sector
A sluggish public sector and the closure of productive private sector industries are hampering growth and risking significant future tax hikes, according to a new report published by the Centre for Policy Studies.
‘A Productivity Toolkit for Britain’ by former Conservative Cabinet minister and now peer John Redwood draws on his experience of public and private sector management to highlight the need to boost productivity in public services.
As a former Executive County Councillor and Minister, John found ways within the public sector to cut costs and raise productivity without sackings and without damaging services. As a leader of two international industrial businesses John worked with teams in each to raise quality, get more right first time, link bonuses to better performance, save energy and recycle waste.
The Government’s failures in embracing the digital revolution and using computers to deliver more for less include the Post Office Horizon project, which sent honest managers to prison and cost taxpayers a fortune. There are too many other less extreme examples of poor use of computer investment.
The report highlights not just the problem of long-term failure to boost economy-wide productivity — it has averaged 0.4% per annum since the financial crisis, compared to 2.1% prior to 2008 — but the impact that failing to boost productivity will have on the economy going forward.
Healthcare spending plans announced at the recent Budget are predicated on NHS productivity returning to levels last seen in 2019, before the pandemic. If NHS productivity has not improved from current levels by 2028/29, the Chancellor will need to find another £20 billion for the NHS to achieve currently anticipated health outcomes. According to HMRC calculations, £20 billion is roughly equivalent to a 5p increase in corporation tax, or a 2p increase to each of the basic and higher rates of income tax.
While most of this damagingly low, or indeed non-existent productivity growth exists in the public sector, Redwood also highlights how Britain has steadily hamstrung or indeed totally closed down highly-productive elements of the private sector.
Physical production — mining, manufacturing, energy and water utilities — has declined from 21% of GDP in 1997 to just 13.1% of GDP in 2022 and is likely lower today. Government policy is to accelerate the closure of the North Sea oil and gas industry — one of the most productive sectors, with relatively few, well-paid workers producing a big stream of revenue.
The report recommends a comprehensive list of measures which could improve public sector productivity grouped between staffing reforms, maximising the use of the public sector estate and improvements to procurement procedures.
Commenting on why we need a productivity drive and how we can manage one, report author John Redwood said:
‘This century there has been no growth in government productivity despite big spending on computers and automation. The Chancellor’s black hole in the finances is all created by the failure to even deliver 1% a year improvement in productivity.
‘Quality and efficiency are two sides of the same coin. Get things right first time and you can shrink the complaints department. Use technology well and you can proof your work against mistakes and accidents. Hire the right number of staff, train them well and align their interests with your aims and things will work better. Use bonuses to reward good performance. Do not keep changing people around but value them in jobs they are good at.
‘There are billions of pounds of savings to be made in the public sector without need for compulsory redundancies and unfair demands on staff.’
CPS Director Robert Colvile said:
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ENDS
NOTES TO EDITORS
- ‘A Productivity Toolkit for Britain’ is available under embargo here
- For more information, please contact Melisa Tourt on 07399 251110 or [email protected]
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, housing, immigration, and energy abundance, its goal is to develop policies that widen enterprise, ownership and opportunity
Date Added: Wednesday 11th February 2026
