Public services like health, education, defence or general administration make up a significant share of the UK economy. So, accurate measurement of their value is vital to understanding the economy and providing a true reflection of productivity levels. However, measurement can be more of a challenge than in the private sector. This is because outputs are harder to define, and harder to measure, especially when they do not have a price. As a result, the value of public services is frequently determined by the sum of their costs, which may not align with the value that citizens place on them. Additionally, the volume of services delivered is measured by the volume of inputs, making it impossible to measure changes in productivity.
In June 2023, the former Chancellor commissioned the National Statistician to review how to improve the measurement of public services productivity – the Public Services Productivity Review (PSPR). The Office for National Statistics (ONS) has now published this review to provide a timely and granular understanding of Public Services Productivity. ESCoE researchers have contributed to this review through work on measuring defence output, measuring public health measures in the National Accounts and reviewing measurement approaches.
The Atkinson Review
The 2005 Atkinson Review established nine principles for measuring public sector output that have stood the test of time. This review shifted the measurement of public sector output and productivity away from the simple formula of output equalling input. Instead, it moved towards measures that reflect the actual services delivered. The review included sound measurement principles, such as adjusting for quality change in outputs and carefully defining and measuring inputs prices and volumes of inputs.
Since the Atkinson Review’s publication, the ONS has applied these methods in its measures of public service productivity. However, there is more work to be done, and the landscape has changed in the last 18 years, especially due to the impact of the COVID-19 pandemic.
The PSPR has provided an opportunity to update the Atkinson Principles. It sets the agenda for ONS to improve quality and coverage and historic time series, and to incorporate public sector productivity into UK National Accounts.
New methods and data sources
Through working collaboratively with government departments, the devolved governments, academics and expert users, the review has identified and developed new data sources and methods. The improvements to published ONS data will be made available from late March when the next annual Total Public Services Productivity (PSP) statistical bulletin is published.
As part of the review, ONS also conducted two new pilot surveys, looking at how public sector workers spend their time, and public sector management practices. Both provided the first ever insight on public sector workers’ and managers’ views on how productivity could be improved through using automation and Artificial Intelligence.
The report tackles conceptual challenges in defining and measuring the productivity of various public services like taxation and social security administration and how to define the output of the defence sector. It develops new measures and extensively explores new data sources. The report also covers new experimental improvements to PSP estimates that the ONS has introduced. This includes using “nowcasting”, a technique that allows production of estimates when there is a time lag for receiving data (this is the case for the annual data) and to publish service sector statistics on a quarterly basis, starting with healthcare.
ESCoE’s contribution
ESCoE work has fed into the PSPR, providing detailed proposals and research into the headline questions:
- An ESCoE discussion paper published in 2023 by George Kapetanios and Fotis Papailias provides a generic methodological framework for a dynamic nowcasting of variables and assists economists and statisticians in tracking of these low frequency qualitative variables.
- An ESCoE technical report published last week by Mechelle Viernes, Martin Weale and Mary O’Mahony explores how public sector productivity is measured. The report highlights key areas for improvement and emphasises the importance of incorporating quality-adjusted measures. The report also emphasises the need to have a clear mapping of service delivery chains to better understand institutional structures, budgets, inputs, outputs, and outcomes, helping to identify the key drivers of productivity.
- Recent ESCoE work by Martin Weale discusses how public health measures might be shown in the National Accounts. The study first develops a methodology and then illustrates this using the Diabetes Prevention Programme, introduced in England in 2017.
- An ESCoE discussion paper by Ron Smith explores the challenges of measuring defence output, inputs and productivity within the UK National Accounts. This is an area that had not been examined in detail since 2008.
- The ONS Public Sector Management Practices Survey pilot carried out as part of the PSPR builds on the Management and Expectations Survey, developed by ESCoE in collaboration with ONS.
What’s next?
The PSPR will result in a more timely and granular understanding of PSP, impacting on overall total PSP for the first time when published in late March.
An analysis of the impact and revisions caused by the Review is planned for publication on 27 March. Following stakeholder feedback, ONS have also developed a plan to improve the coherence between quarterly and annual PSP published statistics. There will be a launch event for the report on 2 April 2025 in central London, which you can sign up to here.
Ultimately, better measurement of public service productivity ensures that policymakers, analysts and stakeholders have access to the most up-to-date and detailed insights available. This can guide policymaking and spending to improve public services, in turn bringing benefits for the health, education and security of the nation and helping to tackle the global productivity slowdown.
Find out more
- ESCoE Conference 2024 Special Session D: Public sector productivity
- Measurement in the modern economy event, April 2024
- ESCoE work on public sector productivity
- Challenges in productivity measurement
ESCoE blogs are published to further debate. Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the ESCoE, its partner institutions or the Office for National Statistics.