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Why digitized back-office operations will be key to solving the public sector’s ‘productivity problem’ – NAO reports

from  April 11, 2024 | 4 min read

The head of the National Audit Office (NAO), Gareth Davies, in his annual speech to the UK Parliament, reports that improved productivity is a top priority for public sector organizations looking to optimize costs and navigate the effects of recent disruptions to government.

In his speech, Davies focuses on “the need for a stronger focus on value for money and ensuring people receive high quality public services." 

He highlights the issues the public sector faces, its ‘productivity problem’, and areas where refocus and investment could deliver the improved operational efficiency the public sector needs.

Keep reading to get the highlights from Gareth Davies’ speech to parliament and learn more about the problems and potential solutions for public sector organizations.

The current issues facing the Public Sector

Gareth Davies paints a clear picture of the challenges facing the public sector that can broadly be split into two categories: general economic and social issues that must be navigated, and the consequences of historic operational inefficiencies in the public sector that require intervention.

In the first case - “spending and borrowing forecasts supporting November’s Autumn Statement show that government of whatever complexion faces a tough challenge in the years ahead” – the issues include:

  • Increased demand for public services as the number of older people increases.
  • Higher inflation has led to increased costs “particularly for large infrastructure projects” and naturally led to reduced budgets across the public sector.
  • Unavoidable backlogs across the public sector are “impeding service delivery and costing more to put right in the long run.’
  • The cost of “servicing government debt” has meant tighter budgets and spending across the public sector.

In the second case, Davies points to poor investment in operational efficiency in past years that has caused its own problems:

  • Out-of-date IT systems slow the modernization of many public services” and lack of investment in operations have led to poor efficiency and productivity.
  • Reliance on legacy systems have led to an increased risk of cyberattacks as well as “maladministration”.
  • Employee retention is particularly low in the public sector, evident in that “turnover in social care roles reached 37% in some area in 2022” as well as “thousands of digital vacancies across government”.

Davies recognizes that it is unrealistic for public sector leaders to focus on “potential policy measures on tax and spending” but argues that “there is good evidence from the NAO’s work to believe that government can achieve more with what it already spends.”

Click to read Enhancing public sector citizen outcomes with ERP (Gated)

The productivity problem 

It’s clear that recent disruptions have led to a particularly poor economic outlook for the public sector and a lack of investment in operations and modern systems have, as Davies points out, “combined to leave public services with a productivity problem” and highlights “the false economy of allowing maintenance backlogs to build up.”

Yet, Davies believes “there is good evidence from the NAO’s work to believe that government can achieve more with what it already spends” and points out some areas of opportunity for the public sector where “potential financial benefit is far from being realized.”

  • Major Infrastructure Projects – Davies suggests that there is an unrealistic focus on “mega projects which are arguably too large for the risks to be manageable” and that “better governance of our largest projects offers significant financial benefits”.
  • Asset Management – Investment in operations and systems that enable productivity for “the efficient maintenance and improvement of existing assets” is entirely necessary before the procurement of new assets, as “new assets will only deliver promised benefits if they are properly maintained.”
  • Procurement – Davies argues that “Government still spends more than it should in certain areas [of procurement]” and that more strategic and data-led analysis is required to ensure that procurement processes are optimal.
  • Security – “The losses to the public finances from fraud, error and tax evasion run to billions of pounds a year.” Davis suggests that the public sector must explore new technology that provides better security to find cost savings in the long term. 



Why is digital transformation stalling in the Public Sector?

Here lies the issue of digital transformation in the Public Sector: technology adoption remains strong, however, changing priorities, resistance to change, and inflexible back-office systems are hindering their progress. 

Unit4’s recent survey ‘State of the Digital Nation’ makes clear that while 52% of public sector organizations surveyed are adopting specific digital solutions to manage data only 46% of organizations are considering replacing legacy siloed systems to simplify wholescale operational data. 

Yet, Davies presents a compelling case to Parliament that investment in digital systems will likely outweigh its initial costs in the long run, by ensuring higher quality public services are delivered as a result.

Final Thoughts

Productivity is an issue for public sector organizations, many of whom are entrenched in legacy IT systems that can’t provide the productivity and user experience necessary to overcome the backlog affecting service delivery.

You can hear, or read, Gareth Davies’ full speech in parliament to get more detail on productivity issues in the public sector. 

Alternatively, read Unit4’s recent research State of the Digital Nation into the trends that provide further insight into the roadmap for digital transformation in the public sector, or visit our website to hear how Unit4 helps public sector organizations digitally transform.

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