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Hunt set to unveil investment to boost public sector productivity

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Chancellor Jeremy Hunt is set to announce new investment to boost public sector productivity as he seeks to curb the growth in government spending and focus on tax cuts in next week’s Spring Budget.

A portion of the pot will go towards driving up productivity in the NHS, with a capital injection aimed at enhancing automation and increasing the use of data, according to people briefed on the plans.

Hunt said last year that he was initiating “the most ambitious public sector productivity review ever undertaken by a government”, to find ways to increase output growth across public services by at least 0.5 percentage points a year.

“We need a more productive state, not a bigger one,” he said at the time, highlighting in particular glaring discrepancies between productivity growth in the private and public sectors.

Hunt, who is expected to announce cuts to personal taxes in the Budget, will probably use his productivity spending announcement to defend against claims the government is offering tax giveaways at the expense of investment in public services.

Fixing the productivity conundrum is seen as particularly crucial in the NHS, which is treating fewer patients than it was pre-pandemic, despite having much higher funding and staffing levels, according to the Institute for Fiscal Studies.

NHS England’s Long Term Workforce Plan for the NHS — which outlined a pathway for hiring about 60 per cent more staff by 2036 — estimated that it would only be able to meet increased demand if productivity increased by between 1.5 and 2 per cent.

One person familiar with the discussions suggested that unless the funding went beyond the low hundreds of millions, it was likely to be in “helpful-but-not-game-changing territory”.

NHS capital budgets have already been raided by almost £1bn this year to cover the cost of industrial action and other spending pressures, according to documents published by the Treasury on Tuesday.

Max Warner, a health economist at the Institute for Fiscal Studies think-tank, was sceptical that a small capital boost would make a material impact on the NHS’s “productivity problem” ahead of the election expected later this year.

“In our view there aren’t easy things you can do in the short term,” he said, adding that resolving ongoing and costly industrial disputes with doctors “could be the single biggest contributor to improving performance in the short term”.

The government said it “would not comment on Budget speculation, but the Chancellor has made it clear that productivity growth in the public sector needs to improve so public servants can get back to what they do best; teaching our children, keeping us safe, and treating us when we’re sick”.

Meanwhile an analysis published by the IFS on Thursday warned that it was “unlikely that waiting lists will reach pre-pandemic levels” over the next four years, despite the numbers falling for the last three months in a row.

Separately, Oliver Dowden, the deputy prime minister, will announce a new AI collaboration charter with the NHS. 

It will outline a framework for co-operation between NHS England and the AI cell that sits within the Cabinet Office and pave the way for greater use of machine learning to support the health service and the potential rollout of a chatbot to help people access information and services in the NHS.

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