Progress in measurement of productivity
Following the introduction of direct output measures in the national accounts, the ONS set about measuring public service productivity (Pritchard 2001, 2002, 2003). The productivity measure they used compared growth in gross output (not value added) with growth in all inputs – labour, capital, and intermediate goods and services. Gross output was chosen, as public and political interest is usually in the total output of each government service rather than the output net of intermediate goods and services. This becomes a particularly important distinction when government contracts out a large proportion of a particular service.
The output measurement used by the ONS in the productivity calculations was the constant price output measure for each service from the national accounts. The input measures were based on staff numbers or pay, the procurement of goods and services required for production, and the depreciation of plant and equipment used in production (capital consumption). The amount spent on each input was deflated by an appropriate price index to get a real volume measure.
In 2003, using its output measures, the ONS found government productivity had decreased.
In the 2003 paper, Pritchard found that the volume of government inputs went up by 14% between 1995 and 2001, while outputs grew by only 11%, implying a reduction in productivity (see Figure 2). Pritchard acknowledged that this negative productivity growth could have been due to increased spending on things that would enhance future capacity, incomplete coverage of output measures, or spending on increases in quality or equality.
The measured productivity of the National Health Service was also found to be decreasing.
Following from this investigation into general government productivity, the ONS focused on a significant area of government spending – health. The ONS investigated productivity in the health service using improved output series from the national accounts and experimental input series (Lee 2004). Between 1995 and 2003, outputs were found to have grown by 28% while inputs had grown by between 32% and 39%, depending on the measure used, implying a productivity decrease of 3% to 8% over the nine years. Hemingway (2004) provides more detailed information on the sources and methods used in Lee’s study.
