Investing, not cutting, is the key to boosting public sector productivity. Underfunded public services and their exhausted workforce cannot be expected to do more with less.

After fourteen years of failed productivity drives, the chancellor today announced another one. The bulk of the funding for which will be spent on implementing an NHS productivity plan, with a further £800m to various initiatives in other public services. Government claims it will deliver £1.8 billion worth of productivity benefits by 2029 based on increasing public sector productivity by 5 per cent. Between 1997 and 2019, productivity in the public sector grew by 0.2% on average.1  Given the current strain on public services, a 25-fold increase in productivity seems highly improbable.

The chancellor is using technology to justify budget cuts. Technology can be a valuable tool, but it's no substitute for skilled and experienced workers. With record vacancies in education, health and social care, crumbling school buildings and unusable hospital spaces, services desperately needed a significant boost in capital and day-to-day spending.

Increasing numbers of economists are finally coming forwards and recognising the government’s approach as self-defeating. For example the Cambridge economist Diane Coyle wrote yesterday: “The short-term perspective ignores the basic dynamics of growth, and therefore of fiscal arithmetic”. We made the same point in our submission to the Treasury ahead of today’s Budget:

The government is now in danger of repeating the mistakes of 2010, when huge public spending cuts decimated services and undermined economic growth. The result was the worst economic recovery for more than a century. Such poor economic outcomes also mean the debt ratio has barely stopped rising, a disastrous outcome and unprecedented for at least a century.

It is not possible to repair the growth failure with the same policies that caused the growth failure.

It remains unclear whether full expensing of business investment, made permanent in the Autumn Statement in November 2023, is a cost-effective way of boosting business investment. Today’s budget documents say this measure ‘represents a tax cut for companies of over £10 billion a year and is forecast to generate £3 billion of additional investment each year’. Nonetheless, the Chancellor has announced that this will be extended to leased assets ‘when fiscal conditions allow’.

In reality, business investment will only get properly off the ground when there are grounds for optimism, when good salaries permit a serious and sustained expansion in spending.

Another recurring theme here is aiming people’s retirement savings at boosting investment. While reasonable, the proposals are confused and potentially conflicting. The threat of heavy-handed action against pension schemes that don’t get the best long-term returns and increase holdings of UK equities is a potential concern, particularly as the flight from UK equities was driven by earlier regulation focused on de-risking and diversifying. And on pensions more generally it was also disappointing that the Chancellor committed to further explore the lifetime provider model of pensions. The idea was roundly rejected after the last Autumn statement – including by the TUC. There is little chance the government will get far with this, but it will eat up resources that would be better spent improving the pension system we have – starting with implementing 2017 proposals to extend auto-enrolment.

As always blame for Tory economic failures is placed elsewhere. And his claimed plan for long-term growth also points the finger at workers. Fundamentally workers are victims of a lack of growth not the cause of the lack of growth.

Paul Nowak slammed “a deeply cynical budget” with “wishful thinking on productivity and pre- election gimmicks”.  Tax reductions are a “political con trick” - “no one wants tax cuts at the expense of their local services”.  “Action on non-doms is too little too late” -  and unsurprising from a government that has always “put the very wealthiest first”.

We need a government that will take responsibility for growth, with stronger public services and strengthened public infrastructure not least to meet the climate crisis. For working people up and down the country a change of government cannot come to soon.