Four-day week would cost public sector billions

The Centre for Policy Studies has argued that moving to a 32-hour week over the coming decade would cost the public sector alone £45 billion on current productivity levels.

At it’s party conference, the Labour Party committed to reducing average working hours to 32 hours a week - effectively creating a four-day week - with no loss of pay for workers. However, a new paper by the Centre for Policy Studies’ Jethro Elsden attempts to evaluate the costs for the public sector.

While it is extremely difficult to predict the state of the labour market in 10 years' time, the paper, featured in The Times, shows that at current productivity levels, the cost of this measure would be £45 billion - 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 £17 billion - though it should be stressed that there is very little academic evidence to support such an optimistic forecast.

ONS data shows that public sector productivity between 1998 and 2016 grew at just 0.2 per cent a year - far below the figures needed to support such a reduction in hours. This means that Labour’s suggestion that the costs of a four-day week could be covered by wider productivity increases across the economy and within the public sector are hard to believe.

To appreciate the scale of this measure, the £17 billion figure would represent the combined budgets of the Home Office and Ministry of Justice. The £45 billion figure is equivalent to the entire defence budget.

Elsden 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.”