This presentation was made by Julian Kelly, United-kingdom, at the 37th Annual Meeting of OECD Senior Budget Officials held in Stockholm on 9-10 June 2016

1. What are the challenges in measuring
public sector efficiency?
1
While all efficiency data available are imperfect and subject to caveats, none of the
problems around defining and measuring efficiency are insurmountable.
Analysing public sector efficiency poses a number of measurement challenges…
Public
Money
Inputs Outputs Desired
Outcomes
The ONS has produced guidance on what data
is needed to construct a cost weighted index
of inputs and outputs that can be used to
construct an efficiency index.
How can we attribute
changes in outcomes to
changes in outputs?
How do we define and
measure the quality of our
outputs?
How do we turn cost and
price data into volumes of
inputs and outputs?
Problems
Potential
Solutions
How do we ensure
consistency in
measuring costs?
When outcomes are affected by many factors (e.g. health), quality adjustment
can be used to account for the effectiveness of the outputs produced. A range
of methods exist to measure quality, e.g. QALYs, or client satisfaction.
Where the outcome is a public good (e.g. defence) assessing the impact of
outputs on outcomes is more difficult, and may require an interdisciplinary
approach – for example, using an independent risk based assessment.
Consistency Costs into volumes
ONS Guidance
Quality Attribution
Quality adjustment & public goods

2. What do the data show
for frontline services?
2
Schools
80
90
100
110
120
130
140
150
160
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Index,1996=100
Revised Outputs
Revised Inputs
Revised Productivity
Original Outputs
Original Inputs
Original Productivity
The wider evidence base suggests changes in performance are heavily influenced by factors outside the education
system, such as parental engagement and the home learning environment.
Source: ONS

3. 90
140
190
240
290
340
1974/75
1975/76
1976/77
1977/78
1978/79
1979/80
1980/81
1981/82
1982/83
1983/84
1984/85
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Index1975/76=100
NHS productivity in England 1974/75 – 2012/13
Source:DH
Since 1975 NHS productivity hasrisen by
an averageof 0.8 per cent per annum
Between 2010/11 and 2013/14 it
averaged 1.4 per cent per annum.
Outputs
Inputs
Productivity
2009/10
2013/14
5.8%
increase
What do the data show
for frontline services?
3
Outputs: a variety of measures, including in-
and out-patients treated, GP consultations and
prescriptions issued. These are quality adjusted
using survival rates, patient surveys and waiting
times.
Inputs: an aggregate of labour input, purchased
goods and services, and capital consumption
(real terms).
Much of the historic
productivity increase has been
driven by reduced average
length of hospital stay and
shifting activity to day cases.
This allows fewer beds and
nurses per episode, though the
average acuity of patients in
hospital increases.
A combination of pay restraint,
improved labour productivity,
cuts in central budgets, and
the abolition of some tiers of
management have delivered
unprecedented savings over the
past four years. This has allowed
the NHS to maintain the offer
with funding growth around a
quarter of long run trend.
Health Services
Geometric Averages
per annum
Change in
input prices
(real)
Change in
unit costs
(real)
Increase
in Inputs
Increase
In
Output
1975/76 to 2010/11 +1.4% +0.6% 2.5% 3.3%
2010/11 to 2013/14 -0.4% -1.8% 1.7% 3.1%
The NHS has recently performed strongly on productivity – costs have fallen,
and the input to output ratio has outperformed the long run trend. This is
broadly consistent with the efficiency measure produced by the ONS.

4. What do the data show
for transactional services?
4
40
60
80
100
120
140
160
2001/02=100
Outputs: volume of tax returns.
Inputs: full time equivalent employees.
Outputs
Inputs
Productivity
It is impossible to produce a single headline measure of efficiency in tax
collection, as the work of HMRC covers several areas and has changed
radically in the past decade.
One measure is the processing of physical tax returns, which shows that
administrative productivity increased over the period 2004-2008, following
the merger of Inland Revenue with HM Customs Excise.
However, since 2008, tax inputs have become almost 90 per cent digital.
This vastly reduces the amount of labour needed to process returns.
HMRC created
Tax Collection
UK tax administration productivity, 1997-2008
Source: Dunleavy and Carrera, 2008
This study is based on publicly available data
and the results are not necessarily endorsed by
HMRC.
By 2015, approximately half of HMRC’s budget will be
allocated to compliance, tackling fraud and reducing
error.
Future efficiency gains will focus on data-led
compliance: using data to predict where non-
compliance might occur and more effectively target
resources, as well as deploying a greater range of
personalised digital services with a ‘once & done’
approach, reducing the need for customer contact.
Source: HMRC

5. What next: Value Maps
5
What does the end product look like?
An illustration of the end product is what DCLG has produced for its housing programmes. All Whitehall departments will
have completed such value maps by the summer.
The end product and the process of producing
value maps is intended to:
• Encourage departments to gather or
make better use data on inputs, outputs
and outcomes to assess efficiency.
• Encourage departments to consider how
efficiency might be improved, drawing
on the drivers of efficiency developed by
the Public Sector Efficiency Group.
• Provide a method for reviewing efficiency
consistently, transparently, regularly
and simply helping Executive Teams to
decide where to focus analytical efforts and
drive improvement, backed up by peer
review from other departments.
Large scope for efficiency improvements
Moderate scope for efficiency improvements
Low scope for efficiency improvements
Key: Scope for efficiency improvementsKey: Understanding of efficiency
Unable to assess
Help to Buy
New Homes Bonus
Affordable
Housing
Partial or no data and limited
understanding of efficiency
Some or good data but limited or no
understanding of efficiency
Good data and comprehensive
understanding of current efficiency