A recent downtick in UK’s productivity forecasts highlights long-standing structural issues in the public sector, prompting calls for transformative reforms to bolster growth and fiscal stability ahead of the upcoming Budget.
It is a challenging moment for the UK economy as the government prepares for its upcoming Budget amid renewed concerns about public sector productivity and its far-reaching implications. The Office for Budget Responsibility (OBR) is expected to have downgraded the UK’s productivity growth forecast by 0.3 per cent annually, a seemingly modest adjustment with outsized consequences. According to Andy Haldane, former chief economist of the Bank of England and President-elect of the British Chambers of Commerce, this downgrade translates into an additional £20 billion hole in the public finances, exacerbating the fiscal deficit and increasing pressure for tax rises that could dampen economic confidence and household spending.
Productivity, fundamentally a measure of how efficiently the economy uses its resources, is crucial because it directly influences pay rises, living standards, and overall economic prosperity. The UK experienced steady productivity growth of around two per cent annually throughout the 20th century, which drove a sevenfold increase in living standards. However, since the global financial crisis of 2008, productivity growth has stalled dramatically, averaging just 0.5 per cent annually. This stagnation has left the average British worker no better off in real terms than they were 15 years ago.
Haldane attributes the problem less to transient factors like Brexit or austerity and more to longer-term structural issues, including the increasing fiscal deficit and the growing public sector share of the economy. Public debt has tripled this century and now approaches the size of the UK’s annual national income, with borrowing costs around £100 billion per year. As the government runs persistent deficits, it transfers resources away from the high-productivity private sector to the comparatively low-productivity public sector. This “doom-loop” effect risks crowding out private investment, which could otherwise drive innovation and economic growth.
Despite recent government rhetoric and initiatives aimed at boosting public sector efficiency, evidence suggests that improvements have been limited. The public sector’s efficiency levels today are not significantly higher than they were at the turn of the century, with all real productivity growth in recent decades occurring within the private sector. Reports from the Office for National Statistics (ONS), however, indicate some positive signs: public service productivity rose by 4.0% in 2022 following a 7.3% increase in 2021, largely driven by sectors such as healthcare and education. Further, the first quarter of 2025 saw a 1.0% rise in public service productivity compared to the previous year, with healthcare output notably increasing by 2.7%. These figures suggest that there have been some efficiencies gained post-pandemic but against a backdrop of long-standing structural challenges.
The government has committed to ambitious plans to enhance public sector productivity, with a recent initiative aiming to generate benefits worth up to £1.8 billion by 2029 through measures such as freeing police officers for frontline duties and expanding violence prevention programmes. The OBR estimates that returning to pre-pandemic productivity levels in the public sector could save around £20 billion annually, underscoring the high stakes of these efforts.
Yet, according to assessments by The Productivity Institute, sustainable productivity gains in the public sector without increased funding remain complex. While cost-cutting measures helped in the short term, further efficiency improvements are constrained by rising demand for services and inflationary pressures. Experts argue the government’s focus on cost-efficiency, as exemplified by Chancellor Jeremy Hunt’s recent ‘productivity drive,’ risks overlooking broader innovation opportunities that could transform public service delivery.
Haldane urges a “radically different approach” where public sector reform goes beyond incremental efficiency improvements to include fundamental restructuring of the state. He proposes a “one-in, one-out” fiscal rule where any tax increase is matched by an equivalent cut in public spending, thereby preventing the crowding-out of productive private sector investment. With the UK’s state size now exceeding 40% of the national economy and rising pressures from an ageing population and defense commitments potentially pushing it beyond 50%, such reforms are becoming increasingly urgent.
The challenges extend beyond fiscal balancing to deeper socio-economic questions. Nearly a third of the UK workforce is neither in education nor employment, including about one million young people aged 16-24, highlighting inefficiencies in skills development and labour market activation. Compounded by a notoriously complex tax code, restrictive planning laws, and intrusive regulations, these factors collectively stifle productivity growth and innovation.
Haldane also calls for greater honesty from government and political leaders about the limits of state provision. Despite promises made by Prime Minister Keir Starmer upon taking office to tread lightly on citizens’ lives, government spending continues to expand, with little evidence of a strategic shift towards empowering businesses and households. The forthcoming Budget represents a pivotal opportunity to alter this trajectory by lightening the fiscal burden on the engine of productivity, the private sector, while driving genuine, structural public sector reform.
In summary, the UK’s productivity woes are not simply a result of external shocks or temporary fiscal policies but a reflection of deeper systemic issues related to the balance and role of the public and private sectors. Addressing these concerns will require both political will and innovative leadership from government and business to restore economic dynamism and improve living standards for the future.
📌 Reference Map:
- [1] (Daily Mail) – Paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14
- [2] (UK Government) – Paragraph 6, 7
- [3] (ONS) – Paragraph 6
- [4] (ONS) – Paragraph 6
- [5] (ONS Public Service Productivity Review) – Paragraph 6
- [6] (The Productivity Institute) – Paragraph 7
- [7] (The Productivity Institute) – Paragraph 7
Source: Noah Wire Services
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative presents recent developments regarding the UK’s public sector productivity and its implications for the upcoming Budget. The earliest known publication date of similar content is from September 16, 2025, when Reuters reported on the Office for Budget Responsibility (OBR) downgrading its productivity forecasts, potentially adding fiscal pressure on Finance Minister Rachel Reeves ahead of the annual budget on November 26. ([reuters.com](https://www.reuters.com/world/uk/uk-budget-watchdog-expects-downgrade-productivity-outlook-ft-reports-2025-09-16/?utm_source=openai)) The report also mentions that a 0.1 to 0.2 percentage point downgrade could cost the public finances between £9 billion to £18 billion annually. This indicates that the narrative is based on recent developments and is not recycled content. The inclusion of updated data, such as the OBR’s anticipated downgrade and its potential fiscal impact, justifies a higher freshness score.
Quotes check
Score:
9
Notes:
The narrative includes direct quotes from Andy Haldane, former chief economist of the Bank of England and President-elect of the British Chambers of Commerce. A search for these quotes reveals no earlier usage, suggesting they are original or exclusive to this report. This originality enhances the credibility of the content.
Source reliability
Score:
7
Notes:
The narrative originates from the Daily Mail, a reputable UK newspaper. However, the Daily Mail has faced criticism for sensationalism and inaccuracies in the past. Given the current context, the source’s reliability is moderate.
Plausability check
Score:
8
Notes:
The claims regarding the OBR’s anticipated downgrade of productivity forecasts and its potential fiscal impact are plausible and align with recent reports from reputable sources. For instance, Reuters reported on September 16, 2025, that the OBR was expected to downgrade its productivity forecasts, potentially adding fiscal pressure on Finance Minister Rachel Reeves ahead of the annual budget on November 26. ([reuters.com](https://www.reuters.com/world/uk/uk-budget-watchdog-expects-downgrade-productivity-outlook-ft-reports-2025-09-16/?utm_source=openai)) Additionally, the Financial Times reported on October 27, 2025, that the OBR was expected to cut its productivity growth forecast by 0.3 percentage points, potentially leading to a £20 billion hit to the public finances. ([m.investing.com](https://m.investing.com/news/economic-indicators/uk-faces-268-billion-public-finances-gap-from-productivity-cut-ft-reports-4311704?ampMode=1&utm_source=openai)) These reports support the plausibility of the narrative’s claims.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative presents recent and original content regarding the UK’s public sector productivity and its implications for the upcoming Budget. The inclusion of direct quotes from Andy Haldane, which appear to be original, and the alignment with recent reports from reputable sources, support the credibility of the content. While the source has a moderate reliability score due to past criticisms, the current content appears to be accurate and timely.
