As Government Calls for Efficiency in Business, Can It Meet Its Own Standards?

When Chancellor Rachel Reeves announced a shift in employers National Insurance contributions, she said business needs to accept a cut to profits or look for efficiency savings. But what if the public sector faced that same challenge?

I’m fascinated by innovation and the science behind it. I thought it would be interesting to ask the question of how the government can look at itself from an innovation point of view, but also how even businesses can learn from this process. Our elected MPs love using the word innovation (sexy, isn’t it,) but do they understand it? They have visions of James Dyson’s and Elon Musk’s sweeping in with madcap inventions, but is that innovation? 

This isn’t a political piece—whether it’s Labour or Conservatives in charge, inefficiency seems to run deep. Both sides have taken turns squandering taxpayer money on public services that could surely benefit from just a hint of business-style efficiency. Efficiency reforms are the low-hanging fruit, and if businesses are expected to pick them, why not the public sector? But are businesses already ahead of public services after all? Rachel seems to think we have more to give. 

But is an efficiency saving an innovation? Of course it is. Simple tweaks to processes, new products, methods of delivery and reorganising a team structure are all innovations. Plus, we’ve not even stepped inside a science lab. 

Taxpayers fork out billions each year, and while many areas might genuinely need more funding, streamlining would help to make the most of every pound. So, I’ve drawn up a couple of straightforward ideas for how public services could do better. Not a criticism, more a vision for an effective government that practices what it preaches, but one that business can learn from as well. This is a vision of innovation and explores the complexity of innovation.  

Recent surveys back up this idea: an Ipsos poll in May 2024 showed that 68% of Brits think public services are underfunded, with complaints about healthcare and education topping the list. Another survey, by the British Social Attitudes team in March 2024, revealed NHS satisfaction at an all-time low of 24%. The public, it seems, would like both more funding and a more efficient use of it. 

While businesses are urged to cut costs and boost output, public services ought to lead by example. True efficiency calls for more than surface-level tweaks; it demands strategic thinking. Academics Joe Tidd and John Bessant argue that genuine innovation should shake up an entire model, not just parts of it, a lesson HM Revenue & Customs (HMRC) learned the hard way with a recent attempt at digital customer service.

In a bid to save costs, HMRC closed many traditional phone lines, pushing customers towards web chat and self-service tools. The strategy aimed to modernise their service and save money on phone support. But what did it achieve? Frustration. In 2022-2023, taxpayers spent a collective seven million hours (yes, you read that right 800 years) on hold, with the average wait time hitting 23 minutes. So much for efficiency!

HMRC’s efforts bring Tidd and Bessant’s point into focus: real innovation means rethinking the whole picture, not just one piece of it. A genuinely efficient public service must balance cost-cutting with real accessibility, or it risks replacing old problems with new ones.

I do think businesses are falling into the same traps, searching to replace humans with chatbots is not a simple solution. You’re changing the process of how customers communicate and that will change the paradigm (the business model). We can’t change one thing without the other being affected. I can quote you several research papers that support this argument. Plus, we always have to search out the perspectives of the key stakeholders. A mistake being made time and again by both business and public sector organisations. 

So, where do my 10 ideas for public services come in?

1. Cut Out Unnecessary Communications

Example: Child Benefit Letters from HMRC

HMRC still sends Child Benefit letters, even to those who’ve opted out or don’t qualify. They have the data, they know the person's income, so why send letters to people who don’t claim it? The cost? Taxpayers foot the bill for all that printing and postage. Moving some of these communications online or sending targeted notifications could save money and trees. I couldn’t find any statistics on what HMRC spends on printing, postage and stationery. Across businesses and individuals, there are approximately 36 million taxpayers if each receives 2.5 letters per year, that is 90 million letters. If we could achieve a cost of 0.50p a letter, that would be £45m spent on letters. A 1% reduction would lead to paying for at least 3 tax inspectors or at least 10 customer service advisors. Think about those 800 years taxpayers spent on hold, we could have up to 31,000 hours saved. Don’t mock my 1% savings ideas, there’s science to back all this up from marginal gains from David Brailsford, Kaizan with the idea of continuous improvement, behaviour sciences pointing towards small incremental changes and even Pareto looking for our 20% factors. 

2. Improve NHS Billing Accuracy

Example: Uncollected Fees

Some NHS facilities rent space to private businesses but often don’t bill correctly, leaving substantial revenue on the table. Automating billing could help recoup millions, redirecting funds back into healthcare rather than propping up administrative mistakes.

3. Tighten Control on Council Contracts

Example: Construction Waste

Council-funded projects are notorious for material waste and lacklustre oversight. With stricter management, councils could reduce waste, protect budgets, and get better results for taxpayer money.

4. Introduce Self-Driving in Public Transport

Example: TfL’s Automated Tube Trains

New TfL trains already have automation capabilities, yet they’re still operated manually. Gradually phasing in self-driving trains could reduce staffing costs and improve reliability. True, it’s an upfront investment, but automation pays off in the long run.

5. Streamline Housing Licensing

Example: Selective Licensing

Councils charge fees to improve rental standards, but properties often undergo repeated licensing with little improvement. Tying fees to genuine improvements or offering renewal discounts for compliance could push landlords to raise housing quality.

6. Standardise NHS Procurement

Example: Medical Equipment Costs

NHS procurement varies wildly, resulting in inconsistent equipment costs. Nationally standardising procurement could save money and improve supply chains, ensuring consistency across trusts.

 7. Reduce Tax Compliance Overlaps

Example: Duplicate Audits

Sometimes, HMRC’s tax audits overlap with other regulatory reviews, wasting resources. Better interdepartmental communication could reduce compliance costs and improve efficiency for both taxpayers and businesses. 

8. Digitise Council Paperwork

Example: Document Management

Local councils still rely on paper-based systems. Digitising records could save time, reduce storage needs, and create a more responsive, streamlined council.

9. Enhance Accountability in Subsidies

Example: Government Grants

Grants and subsidies are often handed out with limited monitoring, leaving room for misuse. Regular audits and clear reporting would help ensure funds go where they’re needed.

10. Boost Energy Efficiency in Government Buildings

Example: Greener Tech

Many government buildings still use outdated energy systems. Conducting energy audits and implementing green tech could save costs and promote sustainability goals. 

HMRC’s phone fiasco illustrates what happens when change is more about cost-cutting than service. For taxpayers, real efficiency isn’t a choice between budget cuts and reliable service; it’s both. A public service model that’s accessible, cost-effective, and responsive isn’t just wishful thinking; it’s essential.

Balancing budgets and maximising efficiency isn’t just a business challenge; it’s crucial in government too. Adopting practical, impactful measures that cut waste, enhance accountability, and incentivise meaningful change could transform public services. By holding itself to the same standards as the private sector, government can ensure taxpayer money truly serves the public good.

In outlining these solutions, I’m hopeful we can spark genuine change, where taxpayer funds aren’t just managed well, but are invested in a public sector that leads by example. I think there is much private business can learn from the ideas I've shared.