It’s been a grim week.
On Monday, the House of Lords Economic Affairs Select Committee published a paper on our national debt, now standing at almost 100% of GDP. It made the striking comparison with how, in the post-war years, successive governments had managed to reduce the national debt because of the baby boom, a reduction in defence spending, and growth in world trade – trends which are all now in reverse. It concluded: ‘If we wish to maintain the level and quality of public services and benefits that we have come to expect, we face a choice: taxes will need to rise or the state will need to do less’.
On Thursday. Lord Darzi published his report on the NHS and rightly identified the many systemic failures of British healthcare – and how an ageing population would gravely exacerbate today’s problems. And then the Office for Budget Responsibility published its ‘fiscal risks and sustainability report‘, forecasting that, on current trends, debt would rise to 275% of GDP within 40 years.
All this gloom perhaps explains, in part, why we have record numbers of young people who have simply dropped out of the labour market.
But one feature is common to all these reports: they all accept, quite rightly, that public sector productivity is the only way to get out of the mess that we are in. The numbers from the ONS are stark: productivity in the private sector has increased by 27% between 1997, compared to an 8% fall in the public sector. Closing that gap would release £100 billion a year for tax cuts, additional spending on the NHS or paying down the national debt.
But they do not explain how public sector productivity can be transformed. It seems that ‘productivity improvement’ is used as a buzzword, without any understanding of what implementing it would entail. But just think how extraordinary it is that public sector productivity growth has been stagnant this century, despite the extraordinary technological advances which have transformed working practices in the private sector. And if you want a simple practical example of this, consider the NHS and fax machines. You probably haven’t used a fax machine for decades. You almost certainly won’t have bought one this millennium. But in 2018, it was revealed that the NHS was then the world’s largest purchaser of new fax machines, leading the Secretary of State to ban any further purchases from 2020. Yet last year, it turned out that the NHS was still using 600 fax machines – to the grotesque inconvenience of surgeons and nurses.
In the private sector, there are natural incentives for improving productivity: every day, the pressures to keep costs down, or to improve your offer to customers, mean that everyone is aware of the need to do better. But no such external pressures exist in the public sector. Which is why it is so important that the basic principles of good management must be applied in the NHS – and every other spending department.
No, no, no, say the supporters of the status quo. You can’t just transfer practices in the private sector over to the public sector! The two are completely different beasts, they claim. But listen to Gerry Robinson, a very successful Labour-supporting entrepreneur, who in 2007 made a series of television programmes about management in the NHS. He concluded that:
Any business, no matter how large, can be made to work well. I knew nothing about the medical profession but good management is good management – whether you’re running a corner shop or a large hospital. I was working in a hospital in Rotherham but the ideas we were trying could be applied across the NHS to any hospital, anywhere in the country.
And compare Gerry Robinson’s attitude with that of Lord Darzi who said in his report that:
Some have suggested that this is primarily a failure of NHS management. They are wrong. The NHS is the essential public service and so managers have focused on ‘keeping the show on the road’. Some fantasise about an imaginary alternative world where heroic NHS managers were able to defy the odds and deliver great performance in a system that had been broken. Better management decisions might have been taken along the way, but I am convinced that they would have only made a marginal difference to the state that the NHS is in today.
Lord Darzi is clearly a brilliant surgeon. But he has never run a successful, large business. Even so, he is putting forward his ideas on how to reform an organisation with an annual turnover of over £180bn. That is twice as much as, say, Tesco. Isn’t it reasonable to expect the same quality of management in the NHS as in a supermarket chain?
And it is not only Lord Darzi who lacks management experience and expertise. So does every single member of Keir Starmer’s cabinet – with the possible exception of the Prime Minister himself, who did run the Crown Prosecution Service for five years.
There have been 24 attempts to reform the NHS since 1990. During that time, NHS spending has increased from 4% of GDP to over 10%. Have things improved with all this extra money and all these attempts to reform? Lord Darzi’s report suggests not.
None of these reforms have recognised that good management is crucial. So to finish off a grim week with more bad news, we have to recognise that the NHS will continue to decline until this basic fact is recognised and acted upon.
But, seeking to end on an optimistic note, just think of the fabulous rewards that lie ahead for whoever recognises that good management can transform our broken hospitals, prisons, schools! Is it too much to hope that one day, perhaps, someone will give it a try?
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