A further decline in public sector productivity worries the economy Business news

Official figures have raised fears of a deeper public sector drag on the UK’s economic recovery from recession.

Data from the Office for National Statistics (ONS) shows that between the third and fourth quarters of 2023, productivity in the public sector, dominated by education and health, deteriorated.

It calculated a 1.0% decline over time, down from 2.3% a year earlier, and still far from recovering pre-pandemic levels.

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The gap was 6.8%.

Public sector productivity measures the amount of services provided against the amount of inputs such as salaries and government funding required to maintain those services.

While the sector has seen gains from the effects of strikes since the end of the Covid crisis, the NHS has struggled to cope with a worsening backlog on many key waiting lists.

Queues over funding have been exacerbated by record levels of chronic illness.

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The official unemployment rate is just 4% – about 1.4 million people.

However, the number estimated to be economically inactive due to poor health is more than twice that amount.

The Office for Budget Responsibility estimates the problem has added around £16bn to government borrowing bills a year.

The pressures were reflected in ONS data, which showed output in the health and education sectors fell in the fourth quarter of the year – contributing to the country’s recession.

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Despite increasing entries during that period.

In March, Chancellor Jeremy Hunt used his Budget to announce the Public Sector Productivity Plan, with an emphasis on improving technology in the National Health Service (NHS).

Figures next week are widely expected to confirm the end of the recession, with overall manufacturing returning to growth in the first quarter of the year.

Recent private sector surveys paint a rosy picture for the dominant services sector, which accounts for nearly 80% of overall output, to help cure the price problem despite continued pressure on budgets from the impact of high inflation and interest rates.

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