NHS productivity fell in the three months to September and was almost 20 per cent below its pre-pandemic level, raising concerns about mounting pressure on UK public services spending.
Healthcare productivity, a measure of the efficiency with which labour and capital are used to deliver NHS services, fell by an annual rate of 2.4 per cent in the third quarter of 2024, according to data “in development” published by the Office for National Statistics on Monday.
It was estimated to be 18.5 per cent below its pre-pandemic peak in the final quarter of 2019, the agency said.
The figures mark the first time the ONS has reported quarterly data on healthcare productivity, and highlight the challenges facing the government as it pushes to cut NHS waiting times and improve the service’s performance amid stretched public finances.
In the autumn Budget, chancellor Rachel Reeves announced a £22.6bn rise in the day-to-day budget of the NHS over two years and a £3.1bn increase in its capital budget.
She also set the health service and Whitehall departments a 2 per cent productivity target in 2025 “by using technology more effectively and joining up services across government”.
While greater efficiency in public services could ease financial pressures, the data on Monday suggests productivity is moving in the opposite direction.
Bart van Ark, managing director at the UK-based Productivity Institute, said “despite increased spending on public sector inputs, the response in output growth has been weak over the past two years” and called on the government to “figure out how to use these resources better”.
Overall public service productivity dropped by an annual rate of 1.4 per cent in the third quarter of 2024 and was estimated to be 8.4 per cent below its level in Q4 2019, before the pandemic, the ONS said.
However, the agency’s productivity data is riddled with issues and is now labelled “official statistics in development” because of the low response rate for the labour market survey, on which the figures are partially based.
The ONS said Monday’s data did not take into account changes in the relative quality of these services because many of these quality factors require data that is not yet available.
Andrew Bailey, Bank of England governor, said on Thursday he could not tell to what extent the fall in measured public sector productivity was a “real phenomenon”.
In a press conference he cautioned about drawing any “strong conclusions” about the state of productivity in the public sector “because there are a lot of conventions about how these things are measured”.
Nevertheless, the UK’s weak productivity performance has raised concerns among policymakers, since it lowers the capacity of the economy to produce goods and services and could keep inflation high.
In terms of the future path of interest rates, productivity growth “matters because it’s the speed limit for the economy in terms of supply”, said Clare Lombardelli, BoE deputy governor, at the press conference on Thursday.
Productivity growth mattered for everyone because it “is the only way to get rising real incomes in the long term”, she added.