SLIDE 1
Changing costs of public services
- Public sector output and measures
- Relative costs of public services
- How costs are related to productivity and
input prices
- Relative costs of healthcare
- Relative costs of education
Changing Costs of Public Services Mike G Phelps UKCeMGA ONS - - PowerPoint PPT Presentation
Changing Costs of Public Services Mike G Phelps UKCeMGA ONS - - PowerPoint PPT Presentation
Changing Costs of Public Services Mike G Phelps UKCeMGA ONS November 2009 Changing costs of public services Public sector output and measures Relative costs of public services How costs are related to productivity and input
SLIDE 2
SLIDE 3
Output measures ONS measure approximately 65 per cent of government output directly As a result we can measure:
- Productivity: output divided by input
- The change in the cost of a unit of output: a
measure of inflation for public service output
SLIDE 4
Cost of unit of public service output Changes in the unit cost of public service output give a measure of public service cost inflation However, most interest lies in how public service cost inflation compares with some
- verall measure of cost inflation
This is the relative cost of a unit of public service output
SLIDE 5
The cumulative change in relative cost of public services, 1997-2007
United Kingdom Percentage change from 1997
- 2
2 4 6 8 10 12 14 16 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: ONS
SLIDE 6
Relationship between relative cost and productivity Productivity and Relative Cost are related measures
ty Productivi inputs
- f
price Relative
- utput
- f
cost Relative =
SLIDE 7
Cumulative change in relative price per unit
- f input and input per unit of output, 1997-
2007
United Kingdom Percentage change from 1997
- 2
2 4 6 8 10 12 14 16 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit output Relative price per unit of input
Source: ONS
SLIDE 8
What are the drivers of rising relative unit costs?
- The rise in input requirements has driven up
relative unit costs of public service output
- But the fact that aggregate public service
input prices rose faster than whole economy costs made a bigger contribution
SLIDE 9
Cumulative change in input per unit of output, relative price of input and relative cost of output in healthcare, 1997-2007
United Kingdom Per-cent
- 2
2 4 6 8 10 12 14 16 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 10
Cumulative change in labour prices in healthcare and whole economy, 1997-2007
United Kingdom Per-cent
- 20.0
- 10.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Healthcare W hole Economy
Source: ONS
SLIDE 11
Cumulative change in goods and service prices in healthcare and whole economy, 1997-2007
United Kingdom Per-cent
- 20.0
- 10.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Healthcare W hole Economy
Source: ONS
SLIDE 12
Cumulative change in input per unit of output, relative price of input and relative cost of output in education, 1997-2007
United Kingdom Per-cent
- 10
10 20 30 40 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 13
Cumulative change in labour prices in education and whole economy, 1997-2007
United Kingdom Per-cent
- 20.0
- 10.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Education W hole Econom y
Source: ONS
SLIDE 14
Cumulative change in goods and services prices in education and whole economy, 1997-2007
United Kingdom Per-cent
- 20.0
- 10.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Education W hole Economy
Source: ONS
SLIDE 15
Cumulative change in input per unit of output, relative price of input and relative cost of output in adult social care, 1997-2007
United Kingdom Per-cent
- 10
10 20 30 40 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 16
Cumulative change in input per unit of output, relative price of input and relative cost of output in children’s social care, 1997-2007
United Kingdom Per-cent
- 10
10 20 30 40 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 17
Cumulative change in input per unit of output, relative price of input and relative cost of output in social security administration, 1997-2007
United Kingdom Per-cent
- 10
10 20 30 40 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 18
Cumulative change in input per unit of output, relative price of input and relative cost of output in public order and safety, 1997-2007
United Kingdom Per-cent
- 10
10 20 30 40 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Input per unit of output Relative price per unit of input Relative cost per unit of output
Source: ONS
SLIDE 19
Conclusions
Between 1997 and 2007:
- cost of a unit of public service output grew by 13.7
more than cost inflation across the whole economy (annual average relative rise of 1.3 per cent)
- the aggregate price of inputs grew by 9.8 per cent
more than cost inflation across the whole economy
- public service productivity fell 3.4 per cent
However, in 2007, the relative cost of public service
- utput fell for the first time since 1997 as productivity