Four-day week would cost the public sector billions, says CPS
At its recent party conference, the Labour Party committed to reducing average working hours to 32 hours a week – effectively creating a four-day week.
A new paper by Jethro Elsden, data analyst at the Centre for Policy Studies, attempts to evaluate the costs for the public sector. The report featured in The Times this morning.
While it is extremely difficult to predict the state of the labour market in 10 years’ time, Elsden shows that at current productivity levels, the cost of this measure would be £45bn – the equivalent of a 10p rise in the basic rate of income tax.
Making extremely generous assumptions about the productivity gains from employees working more efficiently during those shorter hours, this might fall to £17bn – though it should be stressed that there is very little academic evidence to support such an optimistic forecast.
The Labour Party have argued that the costs of a four-day week could be covered by wider productivity increases across the economy and within the public sector. But this is highly unpersuasive.
ONS data shows that public sector productivity between 1998 and 2016 grew at just 0.2% a year – far below the figures needed to support such a reduction in hours.
Even if Labour’s economic management did result in a productivity miracle, the fall in hours – if not supported by hiring extra staff – would come at the cost of worse public sector performance, as workers who improved their efficiency by 10% were allowed to cut their hours rather than seeing the gains channelled into improved public sector performance. This does not seem terribly advantageous to the taxpayer.
Indeed, even the paper which Labour commissioned on this topic admits that the imposition of a 35-hour week in France resulted in a shortage of hospital staff, and that sectors such as health and social care are likely to deliver lower productivity increases than the wider economy.
To appreciate the scale of this measure, the £17bn figure would represent the combined budgets of the Home Office and Ministry of Justice. The £45bn figure is equivalent to the entire defence budget.
In short, in the absence of historically unprecedented productivity gains, a four-day week in the public sector would mean delivering significant cuts to wider government, or a huge increase in taxes – or accepting a lower standard of public services as any productivity gains went towards cutting workers’ hours rather than improving output.
Jethro Elsden, data analyst at the Centre for Policy Studies, said:
‘This proposal puts the cart before the horse. We need to raise productivity before we can afford to shorten the working week, not vice versa – and public sector productivity growth over the last couple of decades has been almost static.
‘There appears to be no evidence showing such a cut in hours could be cost-neutral. So either other spending would have to be cut, or taxes would have to rise, with an hefty cost of between 4p and 10p in the pound on the basic rate of income tax, and the evidence pointing to the higher end of that range.’
Robert Colvile, director of the Centre for Policy Studies, said:
‘Even the paper Labour commissioned on this topic accepts that higher productivity can lead to shorter hours, rather than vice versa. And given the terrible productivity record of Britain’s public sector, it is very hard to see how such gains could be made, or why taxpayers should be asked to accept a worse service so that public sector staff can have shorter hours.’
