I’ve just emerged from a stuffy Westminster room where Philip Hammond gave another of his “Doing More With Less”-type speeches.
His key point – apart from a new centralised property agency to rent out Whitehall back to the civil servants – was the claim that £60bn could be saved through greater productivity performance.
“Over the first decade of Labour’s rule from 1997 to 2007, according to the ONS, quality adjusted public sector productivity shrank by 3.4 per cent. Over the same period, productivity in the private sector of the economy grew by over 30 per cent.”
The shadow secretary to the Treasury said his team had modelled the savings if the public sector had enjoyed the same productivity savings as the private sector: a “startling” £60bn saving.
It was a journalist from Bloomsberg, Rob Hutton, who made two points which I’m not sure that Mr Hammond properly answered:
1] Productivity improvements in the private sector are misleading because failed companies drop out of the statistics as they go under. As a result, there is “survivor bias” which flatters the overall result.
2] Companies can choose to change what they do if society/markets/tastes change. If old people stop eating Werther’s Originals, for example, the manufacturer can start making a different type of sweet. Providers of prisons or schools don’t have quite the same latitude.
Meanwhile I asked how much of the £60bn would have to come from using fewer civil servants; the answer was as vague as they come.
Jim Pickard
Kiran Stacey