Report reveals how governments can do more with less

By on 23/04/2017 | Updated on 24/09/2020
Governments across the world could be saving £2.7 trillion according to a McKinsey report (Image courtesy Flickr/401(K) 2012)

Improved productivity could save governments around the world up to US$3.5 trillion (UK£2.7tn or €3.3tn) a year and help them deliver better public services, a new assessment by the McKinsey Center for Government (MCG) suggests.

The report reveals how a number of countries have in recent years managed to improve services while maintaining or even reducing spending levels, thanks to efforts to boost productivity.

The paper, ‘Government productivity: Unlocking the $3.5 trillion opportunity’, highlights the extent to which an increasingly complex range of challenges is putting pressure on governments to be more productive with their increasingly stretched resources. But MCG says that the lack of a universal measure of government productivity has made it difficult for governments to gauge the returns on their spending and thus to identify inefficiencies.

Its report seeks to address this by benchmarking the efficiency and effectiveness of government expenditure. Its analysis is based on reviews of 200 government productivity improvement efforts in 42 countries, together accounting for 80% of global GDP, as well as interviews with political and public sector leaders.

MCG applied its benchmark methodology to seven key sectors: healthcare; primary, secondary and tertiary education; public safety; road transport; and tax collection.

Its findings suggest significant differences in countries’ relative productivity. Even among comparable countries with similar outcomes, MCG found that the least efficient government currently spends more than twice as much per unit of output as its most efficient peer.

Nevertheless, MCG found examples in every sector of governments managing to deliver “dramatic” improvements in outcomes while either maintaining or even reducing expenditure per unit.

It says that if the world’s governments were to match the efforts of their most productive peers, they could save up to $3.5 trillion a year by 2021 – almost the equivalent of the world’s collective annual public sector deficit.

Alternatively, governments could channel their improved productivity levels into achieving better outcomes for citizens. For example, MCG says that if all 42 countries in its sample had improved the productivity of their healthcare systems at the rate of the best performers, they would have added 1.4 years to the healthy life expectancy of their populations in the past five years, with no increase in spending per capita.

To achieve better productivity, MCG identifies four key areas where governments need to rethink and reshape their capabilities: finance; commercial competencies; digital technology and data management; and talent management.

“Pioneering countries have reimagined and strengthened these functions so they play a more strategic leadership role in pursuing efficiency and improving outcomes. Across these areas, those governments have adopted an ambitious, structured approach to transform the effectiveness of the state,” MCG concludes.

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See also:

UN leaders look to private sector for sustainable development goals cash

Indian demonetisation may clear the way for radical tax reforms

Government departments in Mexico to face significant cuts, as 2017 budget sets out fresh austerity plans

About Ben Willis

Ben Willis is a journalist and editor with a varied background reporting on topics including public policy, the environment, renewable energy and international development. His work has appeared in a variety of national newspapers including the Guardian, Daily Telegraph and Times, as well as numerous specialist business, policy and consumer publications.

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