The Government Productivity Crisis

Britain today is faced with a multitude of economic problems widely acknowledged to originate from government;

1) The Pensions Crisis

2) The Black Hole in Government Finances

3) The Relentless Growth in European and UK Red Tape

4) The growth in state transfers to welfare dependents

5) Increased disincentives to growth in the private sector

The Paradox is that expectations of what government can achieve have consistently grown faster than the resources available to pay for them. Yet the available resources to government from private sector taxation for the next 20 years are now on a trajectory of accelerating decline for the following reasons;

1) A prospective decline in the size of the working population which has just peaked

2) A decline in the trend economic growth rate

3) A decline in revenue from North Sea Oil and Gas

4) A decline in the profit margins in some of Britain's leading industries

5) A decline in competitive advantages in tax and regulation in the global marketplace and regulation due to pressures for harmonisation and standardisation throughout Europe

6) A decline in stockmarket performance since 1997

7) The rising costs of energy prices

8) Globalisation providing many alternative choices for higher margin and faster returns on capital, much of which will no longer be domiciled in the UK

9) A decline in Foreign Direct Investment

10) A decline in the negotiating power in trade issues of the UK Government through a weakening European Union

The consequence is a continued decline in tax revenues yielding fewer resources for the UK's government's commitments. The pot of income is destined to shrink. But critically, for all of the above reasons, the pot is diminishing for the private sector as well, but at a faster rate. There just will not be enough capital for the private sector to invest and achieve the leap in productivity growth that is required to overcome the competitive challenges of the next 20 years.

The solution
To concentrate on making government achieve more with less, to subject the public sector to greater competitive pressures and to achieve productivity growth per government employee far ahead of the decline in government revenue. At the time of writing, because of the lower productivity of the public sector, for every 1% increase in government expenditure, the economy's annual growth rate declines by 0.14%. Only by increasing the efficiency of Government, by raising the productivity of government, can more capital be released to the private sector to invest and make their own investments to yield higher productivity that will allow for increased competitiveness in the Global Economy.

The Efficiency in Government Unit is committed to taking a long-term, mature view of the UK Economy and its present and future challenges. Achieving greater Efficiency in Government is a goal that can be shared by Left and Right.