Low-productivity public services need ‘revolution’ to avoid cuts, Hunt says

Chancellor Jeremy Hunt said public services needed to undergo a “productivity revolution” to ensure that the quality of public services did not suffer from a shortage of funding.

In a session of the House of Lords’ Economic Affairs Committee, Hunt was questioned about how realistic the government’s spending plans are for after the election.

The government intends to increase day-to-day spending after the election by around one per cent in real terms. Taking into account pre-existing commitments in areas like health and defence, the Institute for Fiscal Studies estimates that spending on unprotected departments will fall by around £20bn.

Hunt said the “only” way this could be delivered without cuts to public services was if there was a “productivity revolution”.

Growth in public sector productivity has been painfully slow since the turn of the millenium, and has deteriorated sharply since the pandemic.

“Productivity in the public services is 5.9 per cent lower than before the pandemic at the moment,” Hunt said. “What we’re asking for is public services to increases their productivity by about two per cent in the next Parliament”.

Raising public sector productivity to pre-pandemic levels would be the equivalent of around £20bn extra in funding, the Office for Budget Responsibility has estimated.

When challenged how realistic the plans were, Hunt said: “I think that is completely doable. I think most people with any kind of private sector background think that is much lower than they are aiming for”.

He admitted that it was “more challenging” to raise productivity in the public sector, but pointed to how new technologies could transform the delivery of services.

Thanks to new technologies, it now takes just three weeks to get a new passport – down from ten weeks a year ago.

Hunt argued the lessons could be applied to other services too. “They’ve done it by simply applying the things that happen in every other realm of our lives in the online world to the process of buying a passport,” he said.

Similarly, Hunt said doctors could spend less time at the end of the day filling out medical notes if voice recordings could be translated into medical notes.

“These things have real potential and we should be going for them full tilt,” he said.

In the Spring Budget, the Chancellor announced plans to invest £800m in public services – funds that are specifically earmarked for new technologies, including artificial intelligence. This came alongside a £3.4bn investment package for the NHS, of which £1bn will go towards data and AI.

“I fully accept it will be challenging. But I don’t think its by any means impossible,” he said.