Can we afford public sector failure!

In Public sector, UK productivity on September 20, 2010 by Tim Aikens

I often hear the phrase ‘we need to do right things and do things right’.  The first is about effectiveness and the second about efficiency (or productivity) .  The public sector has been in the press recently for seemingly failing on both counts!  The head of HMRC has been taken to task for failing to apologise over  the (6) millions of miscoded tax numbers issued to people and the head of Mersey fire service is in the news for suggesting that there are some ‘bone idle’ public sector workers! The first is about doing right things, in other words making sure what you do is what is needed to be done and done correctly. The second is about doing things right – being efficient in the work place.

They are both vital to a productive organisation and apply no less to the private sector as to the public sector.  Let’s take HMRC first.  The cost of making the mistakes and then correcting them will not be trivial. Six million letters, each needing 32p for second class mail. Including paper and processing, assume £1 per letter. Then there is the loss of not claiming all those with a bill of less than £300. Let’s say 250,000 at £150. Finally interest on the outstanding amounts. Assume an average amount of £400 for 250,000 at 4% for six months (by the time most people have paid)

That all adds up to £1m in processing, £37.5m in lost income and £2m in interest.  The ‘mistake’ in simple terms and very conservatively will cost the UK tax payer almost £40million!!!  That is probably the tip of the iceberg. Multiply that by a number of similar issues across a range of public sector organisations and the UK is squandering money at an eye-watering rate!

Now let’s look at the issue of efficiency.  The UK public sector employs some six million people. By the time you allow for part timers, let’s say four million full-time equivalents. The average salary is around £22,500.  Add 15% for pension and another 25% (conservatively) for other on-costs and the average public sector employee costs the tax payer around £32,500 p.a.  So let us make a conservative assumption that there are some (not many) idle folk in the public sector – but more likely that they are less productive because of how they are expected to work!  Take half of the work force as being 90% productive (unlikely but conservative!). Of the rest assume that another 25% are 80% productive, 15% are 40% productive and the remaining 10% are 25% productive.  All that adds up to losing about 1 million equivalent workers, costing £32,500 each or a total of £32.5 billion A YEAR. Now let’s assume I have got this totally wrong and the reality is three times better than my numbers.  That still means there is a loss of over £10 billion a year! I would love to hear of different numbers (higher or lower)

The UK as a whole needs to accept that we need to do a lot better!  Only by being more productive across the board – private and public sectors will we be able to afford to pay off our debts and earn a higher standard of living!  Is your organisation doing it’s part?


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