The UK public sector has expanded to its largest size since 2011, even as the wider economy grapples with slowing recruitment and weak productivity growth. New figures from the Office for National Statistics (ONS) reveal that nearly 6.2 million people are now employed in the public sector, an increase of 75,000 in the past year.
The surge includes a record two million NHS staff and the biggest civil service workforce since 2006. The expansion contrasts with the private sector, where hiring has cooled following increases in employment taxes and the National Living Wage earlier this year.
The trend poses a fresh challenge for Chancellor Rachel Reeves, who is preparing to deliver her first autumn Budget on 26 November. Reeves faces pressure to raise up to £30 billion in new taxes to plug fiscal gaps left by weaker growth forecasts and demands from the Office for Budget Responsibility (OBR) for a credible fiscal plan.
Economists warn that the rising public payroll, coupled with persistently low productivity, leaves Reeves with limited room to manoeuvre. Despite employing nearly 600,000 more people since the pandemic, the public sector is producing less. ONS data show productivity was 4.2% lower last year than before Covid-19, meaning taxpayers are paying more for diminished efficiency.
Professor Jagjit Chadha of Cambridge University said the government must confront the issue head-on: “A lot of state employment is incredibly valuable – NHS, police, schools – but it’s become a little bloated over the last few years. If you could reduce the number of people employed by the state and improve productivity, you wouldn’t need to raise taxes as much.”
The financial backdrop is increasingly strained. UK debt is nearing the size of the £2.8 trillion economy, while yields on 30-year gilts have risen to their highest level in 27 years, reflecting investor unease over the sustainability of government borrowing.
Reeves has pledged to deliver 1% annual efficiency gains across the public sector until 2029, a target economists at Oxford Economics and the Institute for Fiscal Studies (IFS) call “ambitious.” They note that historic productivity growth has averaged just 0.2% a year. Falling short could leave the Chancellor facing a funding shortfall of up to £18 billion.
Andrew Goodwin, chief UK economist at Oxford Economics, stressed the urgency of reform: “If we’re thinking about how the public finances are put back on an even keel, it is imperative the government improves public sector productivity. We can’t just keep raising taxes.”
Prime Minister Sir Keir Starmer has touted artificial intelligence and digital technology as tools to reduce administrative burdens and boost frontline efficiency. But without a credible plan to restrain the growth of the state or raise its productivity, analysts warn Reeves may be forced into further rounds of tax increases, leaving both businesses and households to shoulder the burden.
