Oliver Letwin is a very clever man who sometimes says daft things. He had public sector employees around the country spitting feathers over the weekend when he suggested that “some real discipline and some fear” were needed to make them improve their performance.
As often with Mr Letwin’s outbursts, there is enough of a grain of truth in them to make them sound credible. The public sector certainly needs to improve the way it manages performance. As the CIPD noted last year, public sector managers are more reluctant to discipline poor performers than their private sector counterparts and they take a lot longer about it when they do. In many organisations, unacceptable performance and behaviour is tolerated for far too long. Managers need to get better at giving more people a good slap a lot sooner.
It is also true that public sector productivity has declined since 1997, by an average of 0.3 percent per year, according to the ONS. To an extent, though, this is inevitable when staffing levels are increased rapidly. A service can become more effective without becoming more efficient. If outputs don’t keep pace with inputs then productivity will fall, as this handy post from the LSE explains.
This graph, created by LSE’s Politics and Policy blog from the ONS data, shows that public sector delivery improved but not at the same rate as the increase in resources.
Let’s take a simple example. Suppose a school has 120 pupils in a year, split between 4 classes of 30. Its SATS results show that, at age 11, only 60 children, 50 percent of the year, reached the standard expected for their age. The governors decide this is not good enough so they recruit two extra teachers and reduce the class sizes to 20.
The following year, 84 pupils achieve the desired standard. The rate has shot up to 70 percent and everyone congratulates themselves on a job well done. However, while the overall performance of the school has improved, the productivity hasn’t. When the school had a 50 percent pass rate, it had 15 passes per teacher. Now, it only has 14 passes per teacher. It could, of course, improve its productivity by sacking the two new teachers but that would not go down well with the parents.
OK, it’s a crude example but it illustrates the public sector’s dilemma. In the criticism of Gordon Brown’s spending spree, it is often forgotten that he was delivering things that people said they wanted. Smaller class sizes, more police, cleaner streets, more nurses and doctors. As often happens when you throw money at something, in most public services delivery improved but it improved at a slower rate than the increase in staff and other resources.
How easy will it be to improve this productivity? Not very. It is interesting that Mr Letwin made his comments at the offices of KPMG. Last year, their report concluded that, if the public sector improved its productivity at the same rate as the private sector, it could save £60bn in 10 years. The problem is, the government has committed to cutting costs by £52bn in half that time, so unless the public sector manages to improve productivity at rates rarely seen elsewhere, it is almost inevitable that the overall output of public services will fall.
Will more discipline and fear help? Probably not. A bit more discipline wouldn’t go amiss in some areas but it’s not going to save £52bn. If anything, language like this will just further piss off the already pissed off public sector managers, the very people on whom the government is relying to make the changes work.
Rather like my hypothetical school, the savings will be achieved by reducing the number of staff and, in so doing, reducing the standards of the service. The services might become more efficient but, even if they do, they will be delivering less. Given the scale of the savings needed, more fear and discipline won’t make a hell of a lot of difference.