The IFS Green Budget 2025 analysis estimates the Government's plans imply average productivity growth of 1.0% per year between 2025–26 and 2028–29, compared with historical averages of 0.7% per year between 2009 and 2019 and just 0.2% per year between 1997 and 2019.

More than half of total planned productivity improvements are expected to be made in the NHS, the IFS notes,  adding these plans imply that hospitals will only return to pre-pandemic levels of productivity by 2028–29.

The IFS said AI provides some grounds for optimism about the Government's ability to deliver faster productivity growth than in the recent past but warns it is very possible that productivity targets will be missed.

Olly Harvey-Rich, a research economist at the IFS and an author of the report, said: ‘This isn't the first Government to promise to reduce waste, raise productivity and improve the efficiency of public services. The previous Government set out an almost identical ambition for departments to make 5% efficiency gains over a three-year period. Such promises haven't always materialised.

‘But if this Government wants to stick to its spending plans while also fulfilling its ambitious commitments on public services, delivering serious productivity growth is essential. Failure would increase pressure on the chancellor to top up spending plans. In the longer term, productivity gains are perhaps even more important, as they are one of the few ways that public services will be able to meet growing demand without ever-increasing taxes.'