The public sector is facing unprecedented change. Productivity challenges remain, debt is high, and we're only halfway through the implementation of the cuts to be made to UK public services. Those are the main findings of the third edition of our State of the State report, an annual piece of research we have published with the think tank Reform.
Through analysis of our public sector's financial position and a series of interviews with public service executives, we found that the public sector will change profoundly over the next few years. Already-difficult decisions will become even harder - yet there are many reasons to be positive. When it comes to modernisation, for example, our public sector is leading many of its international counterparts.
Industry executives expressed to us their pride at how many of their organisations have adapted to tighter financial conditions. Many interviewees told us they have managed to maintain service delivery standards, or even make improvements, despite budget cuts. Nevertheless, the challenges are formidable.
We are only halfway through the UK Government's deficit reduction programme. The UK finds itself in £1.4 trillion worth of debt – equivalent to 77% of GDP – which exposes us to an unstable financial risk and interest payments of £1 billion a week. That equates to the amount that is currently spent on education. If debt levels increase further, by 2023 the UK Government could be spending three times as much on debt interest as it does on defence.
Against this fiscal backdrop, many executives spoke of their genuine concerns about the ability of their organisations to withstand further austerity. Most acknowledged that the "low-hanging fruit" had already been plucked and further cuts would be more challenging to implement. Some went as far as to say future crises were inevitable for their services.
This is one of the reasons behind State of the State's recommendation that governments across the UK need to provide leadership and focussed support to help organisations improve productivity. Our analysis found that overall, the UK could save £1.64 billion for every one per cent of public sector staff time saved through productivity measures. Our public sector has the potential to deliver on this, but it needs to be a priority objective. Digitising public services is the key to improving performance and creating services that are more engaging for the public.
Much of this can be achieved by making sure the right people with the right skills are in the right jobs with the right incentives. Yet, this in itself is another hurdle for the public sector to overcome. The executives we interviewed told us that staffing issues are occupying more of their time as they struggle to attract, recruit, and retain people for crucial positions. Stress and weak career progression, combined with comparatively poor pay and conditions were the most commonly-cited factors for not wanting to join public bodies.
Those are some of the underlying reasons behind the popularity of our public sector as a career destination falling in recent years. To remedy this issue, governments across the UK need to consider distinctive talent management approaches to make the most of their people, exploiting the sector's unique qualities. This could include developing more flexible working models or matrix patterns of working – where individuals are given flexible, multiple roles that fit their skills and expertise.
Underpinning all of this will be politics. It is omnipresent in the public sector. Those running public services said they want to see a more constructive and collegiate political narrative – aimed at managing what citizens can expect from our public sector. Many felt that politicians often criticise services but do little to help the people using them understand the impact of spending cuts.
All of this points to a public sector that is approaching an inflection point. In reflection, its leaders are rightly proud of what they have achieved to date, but now it's time to look to the next chapter. The next stage of austerity will involve some tough discussion about the future of the public sector. Tackling the challenges of debt, productivity, and talent are three positive places to start.
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