Introduction

In the light of seemingly inexorable pressures to increase NHS expenditure year on year, it is not surprising that the productivity of the health system looms large in political debate. It has long been argued that the impacts of an aging population and the development of new technologies place ever greater demands on the health system. The question is whether these demands should translate directly into greater allocation of resources, or whether better use can be made of the resources already devoted to the NHS though improved productivity. Unsurprisingly, politicians presume that there is scope for the latter, and in the first section of this chapter we summarise some of the key political measures claimed to promote NHS productivity improvements over the past ten years.

Productivity is a conceptually simple construct, relating the amount of output produced to the amount of inputs used in the production process. NHS outputs include the amount and quality of care provided to patients. Inputs include the number of doctors, nurses and support staff providing care, the equipment and clinical supplies used, and the hospitals and other premises where care is provided. This ratio of outputs to inputs can be constructed at national level to assess the productivity of the entire NHS or of different parts of the system, or sub-nationally to look at the productivity of hospitals or other organisations engaged in producing health care. The productivity ratio simply divides outputs by inputs at any particular point of time. Productivity growth can also be calculated, by comparing the change in outputs produced to the change in inputs utilised from one period to the next. Political interest is focused primarily on productivity growth. Maximising productivity is a necessary but not sufficient condition for attaining overall efficiency: merely maximising output from available inputs does not necessarily imply an optimum mix of outputs. Assessing this broader concept of efficiency is, however, problematic in the context of a free-at-the-point-of-use health service such as the NHS, where willingness to pay for the output generated is not directly assessed by the conventional means of market prices. As individuals are not able to forgo NHS outputs – treatment – in order to purchase other goods in a market, we cannot directly assess in this conventional sense the overall economic efficiency of the health service. Our approach is therefore a narrower, but valuable, assessment of the outputs produced from the health service's inputs.