{"id":2260,"date":"2024-03-15T14:08:41","date_gmt":"2024-03-15T14:08:41","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/iprblog\/?p=2260"},"modified":"2025-04-04T10:36:32","modified_gmt":"2025-04-04T09:36:32","slug":"from-plans-to-action-addressing-the-uks-productivity-challenge","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/iprblog\/2024\/03\/15\/from-plans-to-action-addressing-the-uks-productivity-challenge\/","title":{"rendered":"From Plans to Action: Addressing the UK\u2019s Productivity Challenge"},"content":{"rendered":"

Prof Michael Lewis<\/a> is a Professor of Operations & Supply at University of Bath School of Management.\u00a0His work explored a broad wide range of operations and supply management challenges, ranging from fast fashion retail and senior care to the initiation of mega-projects and the retrofitting of buildings. His latest work, \"A Better Way to Pilot Emerging Technologies<\/a>\" (with Netland and Maghazei) has just been published in MIT Sloan Management Review. Michael's long-standing engagement with public policy includes helping to evaluate Best Value legislation, support for 'failing' local government services, PFI contracting and, most recently, the regulation of emerging technologies.<\/em><\/p>\n

Last week\u2019s <\/span>Budget<\/span> provoked<\/span> a range of reactions<\/span><\/a>. <\/span>C<\/span>o<\/span>nservative MPs felt it wasn\u2019t political enough and <\/span>commentators either declared it \u201cunderwhelming\u201d or bemoaned \u201cmissed opportunities\u201d.<\/span><\/a> Above all there was a sense that it <\/span>hadn\u2019t<\/span> acknowledge<\/span>d<\/span> the scale of the challenge<\/span>.<\/span>S<\/span>tagnant <\/span>per capita<\/span> income <\/span>and weakening<\/span> infrastructure<\/span>;<\/span> not just roads and <\/span>railways<\/span><\/a> and rivers <\/span>but the social infrastructure<\/span>s<\/span>that make life worth living. <\/span>N<\/span>o<\/span> real <\/span>mention <\/span>of<\/span> the financial crisis in <\/span>local government, <\/span>the<\/span> transformed context<\/span> for defence <\/span>and the existential challenges of climate change<\/span>.<\/span> F<\/span>or all the talk of fiscal rules<\/span>,<\/span> th<\/span>e<\/span> budget <\/span>seemed<\/span> profoundly <\/span>Micawber<\/span>ish<\/span>.<\/span> Conservative <\/span>party <\/span>happiness or misery<\/span>reduced to <\/span>the <\/span>unreliable <\/span>fiction<\/span> of <\/span>\u2018<\/span>headroom<\/span>\u2019<\/span>, a<\/span> forecast <\/span>of the gap<\/span> between two vast numbers, spending, and revenue<\/span>, over a multi-year timeframe.<\/span> Reinforcing<\/span> that<\/span> feel<\/span>ing of unreality <\/span>was<\/span> the<\/span> silence around <\/span>future<\/span> spending<\/span>, the<\/span> 1% above inflation uplift mean<\/span>s<\/span> \u00a320B in cuts <\/span>outside protected areas<\/span>. <\/span>Instead, the <\/span>Chancellor <\/span>emphasis<\/span>ed <\/span>the <\/span>Office for Budget Responsibility <\/span>(<\/span>OBR<\/span>)<\/span> claim<\/span><\/a> that<\/span> a <\/span>5% increase in public sector productivity <\/span>could equal<\/span> around \u00a320 billion in extra funding<\/span>. <\/span>It is t<\/span>his <\/span>\u2018productivity will save us\u2019 part of the budget is<\/span> what I want <\/span>to reflect on<\/span> in this <\/span>blog<\/span> post<\/span>.<\/span><\/p>\n

In recent years<\/span>,<\/span> the only<\/span> \"productivity puzzle\"<\/span> the UK seems to have solved is in the production of plans for productivity.<\/span>We have had Osborne\u2019s <\/span>Productivity plan<\/span><\/a> (2015)<\/span>, May\u2019s <\/span>Industrial Strategy<\/span><\/a> (201<\/span>7)<\/span> and then Johnson\u2019s<\/span> Building back better<\/span><\/a> (2021) <\/span>with its diagnosis of <\/span>historic low levels of investment in physical capital and lower levels of basic and technical skills.<\/span> We even had <\/span>Hunt\u2019s <\/span>\u2018<\/span>Autumn Statement for Growth<\/span><\/a>\u2019, <\/span>only<\/span> 105 days <\/span>before this budget<\/span>,<\/span> with its 110 measures including <\/span>many <\/span>things to, you guessed it, boost productivity. <\/span><\/p>\n

Productivity<\/span><\/a> can<\/span> seem<\/span> simple<\/span>. <\/span>If outputs go up more than associated inputs, then the system is getting more productive. Simple? Well not really<\/span>. <\/span>Even <\/span>mea<\/span>s<\/span>uring<\/span><\/a> it is difficult<\/span>, think of the vast array of inputs and outputs in a setting <\/span>like healthcare <\/span>or<\/span> education<\/span>. <\/span>How do you measure<\/span> productivity in <\/span>an<\/span> area like <\/span>po<\/span>l<\/span>icing<\/span><\/a>?<\/span> The Chancellor <\/span>highlighted<\/span> the<\/span>complexity <\/span>of its outputs <\/span>when <\/span>he <\/span>talk<\/span>ed <\/span>about how <\/span>preventing knife crimes help<\/span>ed<\/span> avoid hospital admissions<\/span>.<\/span><\/a><\/p>\n

At <\/span>a national level <\/span>productivity <\/span>is fundamental because higher productivity means more goods and services produced with the same amount of labo<\/span>u<\/span>r and capital<\/span> and this <\/span>enables higher wages, lower prices, and <\/span>funding for<\/span> public services. Essentially, boosting national productivity is crucial for enhancing quality of life, reducing poverty, and ensuring sustainable economic development. <\/span>With this as a backdrop, understanding why we have<\/span>, for example,<\/span> lower <\/span>financial services <\/span>productivity<\/span>, really<\/span> matters. In this case it is largely a question of <\/span>reduced <\/span>demand. For example, <\/span>between 2018<\/span>-<\/span>21, the value of financial service<\/span> exports<\/span> to the EU fell by 19<\/span>%<\/span><\/a>and s<\/span>maller output <\/span>from this critical sector <\/span>contributed to lower <\/span>national <\/span>productivity<\/span>.<\/span> But th<\/span>e<\/span> Chancellor<\/span> also spent a lot of time addressing the related but distinct notion of system<\/span>-level<\/span> productivity<\/span>,<\/span> especially <\/span>in <\/span>his<\/span> emphasis on <\/span>\u00a33.4 billion for the NHS productivity plan<\/span><\/a>. <\/span>This kind of productivity<\/span> needs to be understood in <\/span>a <\/span>different <\/span>way. <\/span>For <\/span>example,<\/span> given <\/span>how important<\/span> wait<\/span>ing<\/span> times <\/span>and responsiveness are in the NHS, l<\/span>et\u2019s use<\/span> a bit of<\/span> queueing <\/span>theory<\/span><\/a> to<\/span> explore <\/span>budget proposals to improve <\/span>NHS productivity.<\/span><\/p>\n

W<\/span>aiting time in a queue <\/span>can be approximated as<\/span> the product of<\/span> three<\/span> factors: <\/span>variability, <\/span>utilization<\/span>, <\/span>and service time<\/span>.<\/span>Variability i<\/span>s <\/span>unpredictability in demand <\/span>for, and provision of, <\/span>services. <\/span>It<\/span> complicates planning, as the system must accommodate a wide range of patient needs and treatment times.<\/span> Influencing productivity by r<\/span>educing variability <\/span>was<\/span>implied in talk of new<\/span> appointment systems<\/span>,<\/span> via an enhanced NHS app<\/span>,<\/span> that<\/span> minimise missed appointments<\/span><\/a>.<\/span> Utilization<\/span> is <\/span>a measure of both how much resource <\/span>you have <\/span>and <\/span>how<\/span> these<\/span>resources are being used<\/span>. <\/span>The NHS has <\/span>h<\/span>igh utilization<\/span> for example, and this is a balance between too few <\/span>resources<\/span><\/a> and potentially wasted efforts on non \u2018value adding\u2019 work. <\/span>The <\/span>chancellor was referring to the latter <\/span>in talk of 13 million hours lost annually to paperwork and antiquated IT <\/span>systems. <\/span>Service time is about the <\/span>absolute <\/span>duration <\/span>of<\/span> each <\/span>consultation or <\/span>treatment<\/span> pathway <\/span>and was<\/span> implied in talk of investments to streamline MRI and CT scanning processes and <\/span>digitising operating theatre workflows to facilitate an additional 200,000 operations per year<\/span><\/a>.<\/span> These variables interact of course<\/span>, although there was no real sense of this. <\/span>I<\/span>ncreasing capacity at one point in <\/span>a<\/span> system doesn\u2019t help if you have a constraint elsewhere <\/span>\u2013<\/span> for the NHS <\/span>some of the <\/span>key<\/span> capacity <\/span>limitations<\/span> lie <\/span>beyond the hospital and here<\/span> the <\/span>missing <\/span>national care strategy<\/span> is a <\/span>significant<\/span> brake<\/span> on overall <\/span>performance<\/span>.<\/span> Moreover, t<\/span>reating more patients <\/span>doesn\u2019t<\/span> help <\/span>overall <\/span>if you have <\/span>even greater <\/span>increase<\/span> on<\/span> demand <\/span>because<\/span>of <\/span>long-term health system problems<\/span>.<\/span><\/p>\n

Th<\/span>e focus of the NHS plan <\/span>also raises <\/span>the role of <\/span>technology. <\/span>I<\/span>n a manufacturing business<\/span>, <\/span>it\u2019s quite easy to see how i<\/span>nvestment in machinery<\/span> increas<\/span>e<\/span>s<\/span> output per unit of input. <\/span>Determining <\/span>its<\/span> impact in <\/span>a public service like <\/span>polic<\/span>ing <\/span>is <\/span>more difficult<\/span>. <\/span>It<\/span> might<\/span> reduce utilization<\/span> (\u201c<\/span>Police officers waste around 8 hours a week on unnecessary adm<\/span>in<\/span><\/a>\u201d<\/span>) <\/span>but <\/span>the nature of policing <\/span>outputs means that the impact of this \u2018free time\u2019 is determined by numerous other fa<\/span>ctors such as training, community engagement, and effective <\/span>policy.<\/span> The same logic applies to the <\/span>rather more <\/span>eye-catching intent to make <\/span>\u201cappropriate use drones as first responders<\/span><\/a>.<\/span>\u201d<\/span> So, <\/span>while <\/span>it is <\/span>likely <\/span>true<\/span>,<\/span> as suggested<\/span>,<\/span> that <\/span>Large Language Models have<\/span>\u00a0the potential <\/span>to improve public sector productivity,<\/span> the purpose <\/span>of their use <\/span>needs to be <\/span>much <\/span>clear<\/span>er<\/span>. <\/span>In general, ever more grandiose <\/span>promises <\/span>to transform<\/span> things<\/span> with <\/span>ever more sophisticated <\/span>technology <\/span>should be tempered by three <\/span>basic <\/span>questions<\/span>:<\/span><\/p>\n

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