Some esteemed economists argue that a “step change” increase in public investment is necessary to increase Britain’s economic growth (Letters, September 16).
This macro analysis rests on the implicit assumption that higher investment spending will result in higher productivity which, in turn, will generate higher growth. However, at the micro level, that assumption is questionable unless vested interests and outdated practices can be overcome, especially in the public sector.
Healthcare is a prime example. It accounts for around 40 per cent of total public service expenditure and employs over 2mn people. According to Lord Ara Darzi’s Review of the NHS, published last week, “despite the massive gap in capital investment, the NHS has more resources than ever before, even if there is an urgent need to boost productivity”. Whether additional spending is for investment or on the salaries of doctors and nurses, it will not generate higher economic growth — or even better outcomes for patients — unless it is accompanied by structural reform and the use of technology to simplify processes and replace expensive labour. The same issue faces public transport investment, unless it overcomes train unions’ resistance to modernising practices.
The question is not whether the chancellor should provide more investment spending, but whether the new government will grasp the nettle of public sector productivity reform.
Dame DeAnne Julius
London KT22, UK
