1. Main points

  • These estimates are experimental, using a degree of estimation to deliver timelier estimates compared with our national public service productivity figures, which are published with a two-year lag; the methodology used in these estimates is explained in New nowcasting methods for more timely quarterly estimates of UK total public service productivity.

  • In Quarter 3 (July to Sept) 2017, productivity for total public services increased by 0.7% relative to the previous quarter; this followed on from a 0.5% decrease in Quarter 2 (Apr to June) 2017.

  • Comparing with the same quarter in the previous year, Quarter 3 2017 productivity fell by 0.1%.

  • In 2016, revised up from previous estimates, year-on-year productivity growth for total public services has increased by 1.6%, as year-on-year output grew by 0.8% while inputs fell by 0.7%, leading to an increase in the ratio of output to inputs.

  • In 2015, year-on-year productivity was revised up, with official estimates showing growth of 0.2%.

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2. Things you need to know about this release

Productivity of public services is estimated by comparing growth in total output with growth in the total inputs used. Productivity will increase when more output is being produced for each unit of input. Estimates of output, inputs and productivity are given both as growth rates between consecutive periods and as indices that show the cumulative trend over time.

Estimated growth rates of output and inputs for individual public services are aggregated by their relative share of total expenditure on public services (expenditure weight) to produce estimates of total public service output, inputs and productivity.

Inputs are composed of expenditure on labour, goods and services, and of consumption of fixed capital. For some labour inputs, direct quantity measures can be observed and used, such as full-time equivalent. For other areas of labour and all areas of goods and services, and consumption of fixed capital, the quantity of inputs is not directly available. In these cases, the quantity of inputs is estimated by taking associated expenditure data and adjusting for inflation using a suitable price index (deflator). Expenditure data, used to estimate most inputs growth, are taken from the quarterly national accounts (QNA).

The QNA also provides estimates of government output, based on direct measures where they are available and indirect measures where they are not. Direct measures of output use the number of activities performed and services delivered, which are weighted together using their relative cost of delivery. Indirect measures of service output assume that the volume of output is equal to the volume of inputs used to create them. This is referred to as the “output-equals-inputs” convention and means productivity growth will always be zero where indirect measures are used.

This release presents experimental estimates for total public service productivity, inputs and output, providing a short-term timely indicator of the future path for the national estimates of total public service productivity, which are produced with a two-year lag.

Estimates of output, inputs and productivity up to 2015 are reported on an annual basis and use data from Public service productivity estimates: total public service, UK: 2015. This allows the entire time series to reflect the most comprehensive data and understanding of UK public service – chief amongst these being measures of output that reflect quality changes. After 2015, estimates in this article are presented on both a quarterly and annual basis1, however, the quality of services provided is assumed not to have changed and remains constant throughout the period.

Trends in quarterly total public service output, inputs and productivity estimates are mostly determined by those service areas where quarterly data are readily available, for example, healthcare. A large proportion of activity data used to estimate the volume of output are annual data. This has subsequently been converted to a quarterly series – split among the four quarters – reducing the impact these components have on volatility.

Differences between the official and experimental public service productivity estimates are a result of differences in the estimates of output and inputs. Further information on these differences can be found in New nowcasting methods for more timely quarterly estimates of UK total public service productivity.

Notes for: Things you need to know about this release

  1. Using annualised quarterly data.
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3. Quarterly public service productivity rises as inputs fall and output grows

In Quarter 3 (July to Sept) 2017, total public service productivity increased by 0.7% relative to the previous quarter, following a decrease of 0.5% in Quarter 2 (Apr to June) 2017. This was a change in the recent trend of quarterly productivity, where quarterly productivity was relatively flat in 2016 and declining in the earlier quarters of 2017. As a result of the latest quarterly growth, productivity is now slightly below that of Quarter 3 2016, by 0.1%.

Placing this in the context of a longer time series, Figure 1 combines the latest experimental quarterly estimates – covering Quarter 1 (Jan to Mar) 2016 to Quarter 3 2017 – with estimates for between 1997 and 2015, taken from our Public service productivity estimates: total public service, UK: 2015 release. Figure 1 shows that, while maintaining an upwards trend, growth in public service productivity has experienced some volatility.

Between 2010 and 2016, total public service productivity is estimated to have increased by 3.6% – an average growth of 0.6% per year. This represents the longest sustained period of growth in public service productivity since the start of the series in 1997.

Figure 2 breaks down the productivity estimate into the underlying changes in inputs and output of total public services.

It shows that the latest increase in quarterly productivity of 0.7% was mainly driven by inputs decreasing by 0.5% with output rising by 0.2%. This meant that there was an increase in the ratio of output to inputs, leading to an increase in productivity.

Figure 2 also shows the longer-term trend, including the change in both components since 1997, with growth up to 2015 taken from the Public service productivity estimates: total public service, UK: 2015  article and growth rates after this taken from the quarterly experimental series. Output has grown steadily over this series while inputs have been weaker and volatile in recent periods, leading to productivity growth in the series. Taking each series from 2010 to 2016, inputs have grown by 1.3% (an average of 0.2% per year) while output has risen by 4.9% (an average of 0.8% per year).

In the experimental period, the general trend in the underlying components is similar; with inputs acting as the main driver behind changes in productivity. In recent quarters, this has largely been due to falls in inputs of healthcare services, reflecting both contractions in healthcare’s inputs and its large expenditure weight, relative to total public services. This means that increases or reductions in spending are reflected strongly in total inputs.

The fact that productivity rose after four consecutive quarters of flat or negative growth represents a change in the trend. However, Quarter 3 2017 has seen a similar fall in inputs to that of Quarter 2 2016 while maintaining modest output growth, resulting in productivity growing 0.7% in the most recent Quarter. The quarters between saw inputs rising again, primarily driven by increased expenditure on goods and services.

Further information on data sources for quarterly total public service productivity can be found in the Quality and Methodology Information report and in New nowcasting methods for more timely quarterly estimates of UK total public service productivity. These articles highlight methods and caveats for producing the quarterly growth estimates and they should be referenced when reporting on specific quarterly movements. This is especially the case for the latest quarters, which are more liable to be subject to revisions.

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4. What’s changed in this release?

All estimates, by definition, are subject to statistical “error”, but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information, which allows the statistical error of previous estimates to be reduced. Public service productivity estimates operate an open revisions policy. This means that new data or methods can be incorporated at any time and will be implemented for the entire time series.

Compared with the latest release, published on 6 October 2017, a number of revisions have been incorporated to the quarterly experimental series, including:

  • updated measures of output, inputs and productivity for public services in the UK between 1997 and 2014, in addition to new (non-experimental) estimates for 2015

  • minor revisions within the quarterly national accounts back to Quarter 1 (Jan to Mar) 2016

  • minor revisions in direct measures of labour input

  • minor revisions in some price deflators

  • improvements to price deflators resulting in minor revisions to specific service areas

These changes mean that productivity and its subsequent components – inputs and output – have experienced revisions from previous estimates over the experimental period.

The largest of revisions to productivity occurred for Quarter 1 (Jan to Mar) 2016, growth being revised up from 0.4% to 1.0%. This revision however, as well as illustrating the impact of revisions to data, reflects the impact of growth now being between the annualised quarterly data for 2015 (from the experimental estimates) and Quarter 1 (Jan to Mar) 2016, rather than Quarter 4 (Oct to Dec) 2015. Beyond this, further revisions made to the growth rates of other quarters are a result of minor revisions in the data.

Figure 3 summarises these revisions, presenting previous and current estimates of the period-on-period productivity growth between Quarter 1 (Jan to Mar) 2016 and Quarter 2 (Apr to June) 2017.

In addition to revisions in the experimental data, productivity estimates between 1997 and 2015 have been revised since the previous publication due to changes in the official public services productivity series. As well as updated measures of output, inputs and productivity for public services in the UK between 1997 and 2014, this release includes new estimates for 2015.

Compared with previous estimates, growth for public service productivity in 2015 was revised up from 0.0% to 0.2%. This was as a result of growth in both inputs and output being revised up – inputs from 0.6% to 1.2% and output from 0.6% to 1.5%. In 2015, the overall quality of public services is estimated to have remained unchanged and to have had zero contribution to growth in quality adjusted total public service output. Further information on the impact and causes of revisions, as well as the impact of quality adjustment, can be found in Public service productivity estimates: total public service, UK, 2015.

The estimate for annual productivity growth for 2016 has also experienced revision from previous estimates, revised up from 0.9% to 1.6%. This was driven by a combination of a large downward revision in inputs growth (from 0.2% growth to a decrease of 0.7%), while output growth fell to 0.8% from 1.1%.

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5. Future developments

This article presents updated experimental quarterly total public service productivity, inputs and output series, aiming to provide a timelier indicator of the likely trend in the existing annual series. These estimates are based on different sources from those used to estimate annual total public service productivity.

The sources used here contain less detail and necessarily involve a greater degree of estimation than annual estimates produced later. As a result, they are not replacements for the annual estimates and are merely intended to provide a timelier estimate for the more recent period. We aim to assess the impact of these differences and to address issues such as quality adjustment, direct measures, the treatment of annual data and service level breakdown in future work.

Feedback on the use of these estimates and suggestions for improvements will be essential for the future development of timely estimates for public service productivity. All feedback is welcome and can be sent to productivity@ons.gsi.gov.uk.

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6. Authors

Mark Grundy and Piotr Pawelek, Office for National Statistics.

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7. Quality and methodology

The Quarterly public service productivity estimates: Total public services Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • users and uses of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

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Contact details for this Article

Fred Foxton
productivity@ons.gov.uk
Telephone: +44 (0)1633 455750