Many claim that the state is inefficient, but is that because they're simply using the wrong criterion for appraising it?
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This is the transcript:
Lots of people tell me that the government wastes money. They also demand that the government improve the productivity of the state sector, and they say they should look to the private sector for inspiration. And I say that a great deal of what those people are saying is complete and utter codswallop. Let me explain.
Let me use a simple example. One of the big complaints that we have at present is that the productivity of staff in the NHS is falling. At the same time, there are massive concerns about the fact that there are long queues in the NHS. And let me just play a little mind game with you.
Suppose we want to reduce the length of the queues in the NHS. What is the easiest way to do that? Imagine you're sitting in the GP surgery. There's one GP and the queue's pretty long because somebody's gone in to see them with a mighty complicated complaint which is going to require a referral into hospital and forty minutes later, the entire appointment system of the GP surgery is in mayhem and there are people almost queuing out of the door by now.
If there were two GPs, that wouldn't be a problem. The second GP, who would not have been booked to capacity, because there aren't enough appointments required for two GPs to have to work to capacity, could pick up the slack. Everybody would be happy. Despite the fact that there had been a crisis for one person that had delayed the first GP considerably, those people who needed to see a GP urgently, and weren't too worried about who it was, could go and see the other GP and take up the slack.
Now the point is, the queue is only necessary because the GP is trying to make their productivity as high as possible by not taking on a second GP who will have some slack in their schedule. Slack means in this sense, low productivity, because sometimes they will not be seeing a patient. And that is how productivity is going to be measured in this case.
They might be doing other really useful things, by the way, in that slack time. They may be doing things like drug reviews, which apparently take vast amounts of time, I am told, by GPs, and are absolutely critical to make sure that if a person is on 10 or 15 drugs, that those don't conflict with each other and cause admission to hospital. And if you think that isn't an issue, 1 in 8 hospital admissions arise for that reason alone.
Or, they could be doing admin and writing better referral letters, or doing follow ups, or phoning patients who need to be checked. All of those other things that don't really get done as well as people would like right now. But that's not defined as being productive. And yet everybody would be happier.
So, we have a direct conflict just shown by this one example within the public sector. If the public sector is to be productive as possible and employ as few people as possible whilst basically externalizing the waiting process so that we suffer because the NHS employees are always sitting with somebody in front of them under maximum stress situations, then we can have highly productive public services. But we can all sit around and suffer.
Alternatively, we can have less productive public services, but enjoy the level of service that we want.
And there is very little alternative to one of those two choices.
Successive governments, since 2010 at least in the UK, have gone for reducing the number of GPs and forcing us to wait.
We have to wait at the GPs.
We have to wait to see somebody in hospital.
We have to hang on the phone for hours, it seems, if we phone HM Revenue and Customs or any other agency. I had to phone the DWP a while ago and it was a mighty long time before I got an answer.
All of those things are the price of government efficiency.
So, is the government inefficient, or is it just not providing the service we want? We have to decide about that.
I would go for service.
At present, those people who think that the government is a poor alternative to the private sector, go for productivity, because they claim the private sector is much more productive than the government.
That's not necessarily true. The difference between the government and the private sector is that many of the things that the government does are not inherently capable of being changed greatly in the time that they take. Two examples help here.
One is that you want to play the minute waltz. I think it was written by Chopin. And guess how long it takes to play? Precisely one minute was the target time. Apparently, it's quite hard to do it in a minute. If you do it in 50 seconds, it sounds absolutely, truly appalling. The same would be true if you tried to play something like a Mozart sonata in three quarters of the time that was designated for it.
You would have increased productivity according to the theory of economists, but you would have an absolutely rubbish experience. And that would also be true, by the way, of almost any piece of music, it doesn't have to be classical. So, my point is, there are some things that have to take a certain set period of time.
Going back to the GP surgery, a perfect example of this is the older person - and lots of older people go to surgeries - who comes in and is wearing three cardigans. I am told by my wife that this is not an uncommon experience, and she was a GP for a long time before she retired. The GP who wants to examine that older person has to wait while the patient takes their cardigans off.
It does take time, and at the end of the appointment, the patient has to be allowed to put their cardigans back on again. There is nothing that can be done to speed that process up. Old people take time to dress and undress. That's a function of age. But the people who claim that they want increased productivity don't know that. But they're using a false criterion of productivity in any case.
Let's just look at the private sector. It may, in some instances, manage to apparently produce more economic output per labour input than does the NHS, for example. But in the NHS, almost the whole of the input is people. And those people are time constrained by those people they are seeing.
But the private sector is not that efficient. Because, let's be clear. Most small businesses last less than two years. The failure rate is absolutely staggering. That is absolutely diabolical in terms of a rate of efficiency. The vast majority of UK start-ups don't work. Simple, straightforward fact. The companies created ceased to trade within two years of starting.
A few survive for a long time. I've run businesses that have lasted for well over 20 years. They are exceptional. And that is a point about efficiency. Short term efficiency, which is what the productivity specialists look at, is one thing. Long term efficiency is totally different.
We cannot afford governments that fail in this country. They must succeed. There's no point starting somebody in education at the age of 3 or 4 without having any idea whether there will be an education system for them when they reach the age of 18. The commitment is that it will be there. It cannot fail. That requires a degree of robustness that simply is not required in the private sector, where failure can be tolerated. You can't compare these two together.
I'll use another example. This one came from my father. He joined the electricity industry on just about the day that it was nationalised in the 1940s. He retired in the late 1980s. He saw the nationalised era right through.
He always, as a senior planning engineer, which is what he was, had enough staff to deal with any emergency that he thought might arise in the area for which he was responsible, which was, broadly speaking, the East of England.
If there was going to be a snowstorm, he had the people to get out there.
If there was going to be a massive power cut as a result of bad weather, or whatever it might be, he had the people who could get out there. They could deal with any emergency, because they had enough staff at all times.
I put it to him once, isn't that hopelessly inefficient? What do these people do the rest of the time? He said, “It's not inefficient at all. They keep the system running, they repair and maintain it. We make sure that the risk of failure is as low as possible by maintaining the equipment to the highest possible standard. That's our job”, he said. “We don't allow for failure. When it happens, we can cover it. But our job is not to even get to that point in the first place.”
This is totally different. from the logic of the person who's obsessed with productivity. They think failure, inconvenience to you, is acceptable, and that the price you pay for that is one that they don't have to suffer. It's externalised, as far as they're concerned, and that's what they think is an acceptable price to pay for failure.
When my father worked for a nationalised electricity service, he didn't tolerate failure. They had the people to cover for it. And they maintained their systems in a way which would now, frankly, be probably unimaginable.
So, we have choices about productivity. To pretend that it's actually that important, when the drive for productivity simply transfers costs out of the public sector, into the private sector, most obviously seen in that queue at the GPs, or the queue for HM Revenue and Customs, or wherever else, is mad because of the inefficiencies that are imposed upon us by a supposedly efficient state sector.
We have to ask the question, have we got the measure right? And my belief is that overall, and I'm not saying perfectly, because every system is run by human beings, and every system run by human beings has the capacity to fail in some way, but overall, the state sector is pretty efficient, given that it has one overarching objective, which is it must not fail.
And that's what we demand of it. And whilst we demand that the state sector must not fail, we shouldn't be using productivity as a criterion for success. We should be using the fact that it doesn't fail as our criteria for success. We can, therefore, rightly complain about failure for that reason, many of which arise because of understaffing, because of the drive for productivity, by the way. That's the cause of most of the crises in the NHS.
But when it comes down to it, let's use the right criteria for different types of service. And at present, most of those people who are claiming the private sector is more efficient than the state sector are using the wrong criteria for comparison, because they ignore the simple fact that the private sector fails spectacularly almost all the time because failure is built into it and it isn't built into the state sector.
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People have been brainwashed into thinking that productivity is better then quality, in ALL cases. In fact, in reality, people value quality over productivity.
To use your analogy, Imagine the visit time for a GP is set at 5mins, to hit productivity targets. Lets put a timer in the surgery. Imagine then, the outcome when in the middle of your complicated diagnosis, the timer goes off, and the GP says ” times up, next please”. If that happens to you, I am absolutely sure you will not be bothered about “productivity”.
Agreed
Spot on. Most folk will often say they want the NHS to be more “efficient” but in reality they just mean “better”. As you say, increased waiting times actually improves “efficiency” but makes it “worse”.
Your example of your father does throw up one area where NHS efficiency could be improved. Surgery is a complex thing requiring surgeons, anaesthetists, nurses, tools, drugs, blood, premises etc.. If any one element fails the whole thing grinds quickly to a halt. A large, team sits idle because of a small failure in one part of the system.
So, initially as you streamline and pare back things you get improved efficiencies but eventually you start to destroy resilience and at that point “efficiency” goes down… however you want to define it. Failure to maintain the estate (for example) is damaging efficiency in Health and Education.
We are in agreement
Of course a lot of the things the public sector does doesnt respond to measurements of output.
As an obvious example PC on the Ball arrests virtually nobody on his beat? Why? Well he’s one step ahead of the game making it hard for offenders to operate in his area. By comparison PC Robocop whose beat is next door nicks a lot of offenders but thats because he’s not stopped them coming onto his patch.
Discuss who’s doing a better job
Excellent example
Neoliberalism regularly claims that the public sector wastes money. This is a deliberately ploy to reduce public spending with the aim of breaking public services, and privatising them. We have seen this in the UK with energy and water companies, and the rail companies.
Are the private companies that run these businesses more efficient? If you own shares then you will be delighted with the regular dividends. If you are a consumer, then you are paying some of the highest prices in Europe (if not the world). These businesses are not investing in the future (raw sewage in our waters, an electrical grid that can’t handle electric charging points and renewable energy).
This is all by design for those with wealth. Read Matt Kennard’s book “The Racket” (2nd Ed). https://www.bloomsbury.com/uk/racket-9781350422711/
Thanks
Liked the power example. MANWEB 1950 – the decision was made to build a fully meshed network using standard components. This cost a bit more than open ring networks (so not as economic) as other DNOs e.g. NORWEBs network . But.
Nobody lost supply becuase faults were automatically islolated. Not so on other networks. Come privatisation, MANWEB has a network with the lowest number of minutes lost due to a fault… on the planet, the other DNOs by the 1970s had started to invest heavily in network automation & ended up spending far far more than MANWEB. As a MANWEB engineer remarked to me: evetually we were forced to buy a network management system – never needed one – but Ofgem/Offer kept asking why we didn’t have one & it was embarrasing for the other DNOs.
I’d suggest this is an example of effectiveness vs efficiency – it is quite possible to efficienctly do the wrong thing. Sometimes common sense deployment prevents this – other times standing back and asking “what do we want to achieve here” delivers the answer – as per the blog. Obvs economists have a role, but putting them in the driving seat (as per the UK) just leads to disaster after disaster (Thames Water anybody?)
Thanks
Agree with all!
It’s wasn’t this way in the past, and that’s not just rose tinted spectacles.
Over the past 25 years, and maybe longer, the government has been cutting away at public services. I just heard the same tale about the justice system which has been suffering death by a thousand cuts resulting in long backlogs. The technical term is enshittification (check it out on Wikipedia).
In the past our public services worked better. They had plenty of faults but they were not chronically under resourced, at least not to the same extent. They have been systematically starved of resources year on year for decades.
Do our politicians never wonder how we could afford public services in the past, but not now? Do they not think that despite the country being much richer overall we no longer have the money to spend on public services? Do they not wonder why one of the richest countries in the world cannot afford decent public services? Have they no ability to think this through?
Of course we could have decent public services. We have had much better in the past. We don’t have them now because of an all pervasive misunderstanding of macro economics: the fallacy that the government doesn’t have it’s own money, that it’s all “tax payers money”. Until politicians are able to think critically and realise that they have to spend money to invest in public services, and they are not limited to the money (they themselves created) that they collect in taxes, the situation won’t improve.
Poor public services are not a law of nature, they are a political choice.
Agreed
It seems it’s often the case that “efficiency” is synonymous with creating an externality, as in your example, everyone else waits apart from the NHS worker. Your example of the GP is echoed in infant ICUs where the ratio of staff to babies has increased (fewer staff, more babies). This is more “efficient”, the downside being more dead babies (an uncounted “externality”). How do we factor these in, along with things like stress, and the emotional and physical health consequences for those charged with being “efficient”? In the private sector, “efficiency” seems to be a euphemism for worker exploitation, and for externalising time (your call is important to us) and costs of all kinds (extraction, exploitation, waste dumping). To me, “efficiency” seems largely a political, rhetorical device, a lever, deployed to shift cost, effort and consequences. I volunteer for Samaritans and often calls relate in some way to “efficiency”, though callers themselves call it being overworked or made redundant, or physically/emotionally harmed by work, or exhaustion. When I worked as a counsellor, my caseload often included teachers, who, perhaps because of the workplace culture, rarely saw that working 50 or more thankless hours each week was a primary factor in their distress. In such conditions, no one is well-served. I wonder what sort of world we’d create if, instead of a tiny ruling number focusing on maximising their returns regardless of what that does to everyone else and the world around us, we collectively asked, first, is this necessary? And if it is, secondly, how can we do this in a way that takes care of everyone and the world?
Thanks
I volunteered for Samaritans for years while working as a teacher.
After retiring a year early in 2005- looking back I was burnt out -I became a counsellor until 2019. I saw all what you say. It was made worse by the BS which is spouted by management teams. It distances people from the reality. Few really believe it but don’t feel free to comment. It reminds me of the Soviet Union,
I once had a client from local govt who described some changes. I remarked it sounded like style over substance. ‘Oh,’ she said, ‘my manager is quite open about it. He would go for that any day.’
I asked why? Naive I suppose.
‘If he wants to go for promotion, for example, what is on the website counts.’
I wondered if that was just her resentment. But having seem more people since, I don’t discount it.
A few years later I saw a weekend course ‘Neo- liberalism and the cult of managerialism’. Great title. I found 140 of us including some from Europe all with similar experiences.
One take away was by Dr. Paul Hoggett formally of UWE. When he said he was seeing people for which his training and experience had not prepared him. After reflection he came to the conclusion that modern management used shame as a way of discipling an educated workforce. ( You’ve failed your targets )
https://www.youtube.com/watch?v=K6tuPUPHZ6I&t=439s Introduction
and Paul Hoggett
https://www.youtube.com/watch?v=q82Og7kT7t8&t=47s
I think that entirely plausible
But then, then I hate everything about appraisals
As is so often the case, who gains and who loses from the current emphasis on “efficiency”?
Might the current foregrounding of (alleged) efficiency rather than its essential twin effectiveness be a consequence of:
1) Ignorance of these two contrasting concepts?
2) A desire to reduce (democratic) government?
3) A desire to promote commercial wealth and power?
4) A desire to follow current alleged thinking?
5) A desire to ingratiate themselves with current dominant groups?
7) ?
Might this definition using contrast help?
Efficiency is the ability/intention to produce an intended result in the least waste of time, effort, resources and emotions in sub-functions.
Effectiveness is the ability to produce a better, more realistically beneficial outcome for all concerned, not least the “recipients”. It majors on final outcomes more than internal processes. (From BetterUp)
A huge difference between the private and public sectors is that the state is essentially a closed system, encompassing not just the state’s direct activities, but everyone else in the country too. When the private sector sheds employees, they become someone else’s problem, so the private companies appear to have improved efficiency. Likewise, the thousands of hours people spend on hold to support lines do not affect the ‘efficiency’ of that enterprise.
Contrast that with the state, which ought to consider the ‘efficiency’ of the whole country (although it seems unfashionable for Governments to do that). To use Richard’s example, which is more efficient, to employ two GPs, or to employ one GP and support the other one on benefits? Is it more efficient to mend potholes in a timely manner, or to have thousands of people taking time off to drive to a garage to get their cars repaired? Why is it considered better for services like HMRC or DWP to have tens of thousands of people wasting an hour or more of their time on hold, instead of doing something productive with that time?
It is time Governments looked not just at the ‘performance’ of state institutions, but at the net effect on the country as a whole.
Agreed
When I worked for British Rail in the 1980s, there was a spare train kept ready in the sidings near King’s Cross in case the 10.00 Flying Scotsman was full, so they could run a relief train behind it.
That train was fully staffed and ready to run. It was used quite a lot in the summer.
They stopped it as privatisation loomed.
Relief trains were commonplace on BR until privatisation
The customer mattered
Hull Trains run a very efficient service from Hull to London, with most trains heavily booked and at prices down as far as half what other providers charge.
The downside is that they have no resilience, no spare trains.
If there is a problem you can quite easily find yourself on a bus from Doncaster to Hull late at night. Or sent on a local train into to the other North South services.
I usually take the chance…… the cost benefit is worth it.
Agree with the main post and other contributions but here are some of my observations.
The public sector I work in used to be a ‘public corporation’ that used provide a lot of means to do the job itself, these were very powerful bodies.
These days we spend a lot of time contracting out, ‘commissioning’ services from the private sector who have increasingly got their foot in the door and the public sector has shrunk. It is the private sector that has grown into corporations now.
We all know the big names involved in this. What is hard to justify is that the public sector alone is at fault. It’s not. The external private sector contractors who are responsible too.
The private sector claims domain knowledge to get the contracts and then charge extras for what the contract has not covered. They lay in wait for mistakes and make money out of exorbitant claims about performance and delivery.
For me, it all needs to be brought back in house again, especially given that some sectors – like house building
– have certification processes guarding standards that don’t mean anything even before we have yet another bonfire of the regulations under Stymied and Rachel from Accounts.
It seems that the public service is no longer subject to a proper cost benefit analysis, because the costs and benefits are tightly ring fenced.
Take the decision to do away with the Winter Fuel Allowance. It was claimed that the decsion had been fully costed, by which it seems they meant the benefit was the saving in money paid out to all pensioners while the cost was seen as the additional people claiming pension credit.** see below.
Proper costing should have taken into account the increased morbidity and mortality among those who could no longer afford to properly heat their homes, and the resultant costs to the NHS and society, and the loss of the universality of that benefit.
**As an aside, the number of those eligible for pension credit falls each year because it only brings state pension income up to the level of the New State pension. Everyone who retires now will be on the new state pension,mostly at the full rate, so ineligible for pension credit, while there is a reduction every year in the number of state pensioners on the old pension, due to ‘natural causes’.
Thanks
I’m retired now, but from 20+ years providing, managing and purchasing varied local govt service provision of maintenance and construction services, people ALWAYS get a better less expensive accountable service all round utilising a mix of predominately in house provision of planning, design, specification, managing and actual delivery of services. A mix of smaller portions of contract or casual provision keeps the balance of costs and quality of services innovative and competitive. Where it goes wrong is employing managers who just contract out everything due to either ideological dogmas, inability to scope the full spectrum of service or plain actual or coerced corruption. A good mantra on it all is the poorer the service delivery the greater the actual coerced or corruption in the govt service, usually more up the food chain than less. Large scale medium to high end corruption rather than incompetence is the biggest issue depriving public of good quality cost effective public services from my experience.
Thanks
Should also point out that private companies want profitability over efficiency, and will sacrifice that latter for the extra money earned.
It is far more efficient for the bank to send you an email rather than a letter, but the latter incurs greater cost and hence the customer can be charged more.
It is more efficient for the energy companies to automatically transfer you to the cheapest tariff. Do they heck.
It is more efficient for companies to provide cancellation options on their web site, rather than having to phone in an talk to a customer services representative (i.e. sales rep).
Agreed
According to the Crowe, Peters & Peters and the University of Portsmouth, Annual Fraud Indicator 2023 (latest available – https://www.crowe.com/uk/insights/annual-fraud-indicator), it would appear the private sector is more efficient than those in the state sector regarding fraud. The private sector estimated fraud levels are more than 3 times of the public sector. The report estimate frauds as follows:
Private sector fraud losses estimated to be £157.8 billion
Public Sector fraud losses estimated to be £50.2 billion
People who are claiming the private sector is more efficient than the state sector, well it’s true, especially if one uses the metric of fraud.
Those public sector losses are seriously understated: private sector operators defraud it of much more than that in tax.
Might you provide evidence that “private sector operators defraud it of much more than that in tax,” please.
Who else do you think does tax fraud?
And search my work on the tax gap.
On private vs public you dont have to look further than the USA and The NHS when it comes to heakthcare.
One is hugely expensive and omits to provide care to those that are uninsured and cannot afford healthcare. It results in both overtreatment of those who are insured and without bottomless pockets and social dumping of the poor and underinsured.
US hospitals are small,overequipped and run at very low levels of technical efficiency.
UK hospitals are large, underequipped,and are over occupied. Largely because the UK doesn’t indulge in social dumping of people with no suitable homes to be discharged to.
Both systems could be improved but productivity is not the heart of the problem.