I watched Stephen Barclay, who is our Health Secretary for the next few weeks, saying on Channel 4 News last night that the provision of better healthcare was entirely dependent on growing the UK's private sector economy. In response I write these tweets:
All I am describing, of course, is a multiplier effect. The evidence from research is very clear that a pound spent on healthcare provides a boost of maybe four times that sum to the economy as a whole, and therefore collects more in tax as a result than the amount spent.
I do, of course, accept that all multiplier estimates are open to wide ranges of uncertainty. This goes with the territory because causality is hard to prove, but the reality is that ratios of this size are consistently found, and the reasons for them are not hard to guess.
A fit person can work.
A fit person who does not have the worry about caring for another person can work.
A person on a waiting list is not optimally fit and may get progressively worse.
People worried about getting Covid will not work if they can avoid doing so.
All f these things are obvious. It is as obvious in that case that spending on health is the necessary precursor of economic recovery and not something we can only afford when it has happened.
Why is it so hard for politicians to appreciate this? There are three reasons. The first is that they have been taught tax must come before spend, which is glaringly obviously wrong, since that is not how the government spending cycle works in practice, where spend always precedes tax.
Second, they are frightened of deficits and raising taxes by the right-wing media and so believe that they can never break the downward cycle we are in.
Third, they want a small state and spending on healthcare is contrary to that.
And so people suffer as a result. In this case the causality is really not hard to work out.
Stephen Barclay was wrong. Bit so too are all other politicians who believe this.
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Just a personal point about the much maligned Scottish N.H.S. I consulted my pharmacist on Tuesday. Advised to see my G.P. Appointment yesterday. Arranged to see a consultant today. On my way to hospital shortly.
Good luck. I hope all goes well
Alex, I do hope you recognise that the “much maligned” is the concerted efforts of a hostile press and broadcasting service here. John Robertson writing his blog is regularly picking apart the misrepresentations of statistics and suchlike re our health service among other subjects on his blog. Easy to find on Twitter @ProfJWR He seems to keep renaming the blog, maybe gets too much troll attention? If Twitter not your thing then try a direct search for the blog. “Reporting Scotland Up ( Talking-up Scotland )” seems to work today.
I agree our health service could be better but does still outperform our larger neighbour, and apparently the pay and conditions of our workers is better.
I echo Richards message of good wishes that all goes well for you.
He also said that the wage rise being asked for by nurses would ‘cost’ £9 billion p.ann. However, every wage increase raises the amount of income tax paid and much of the rest, particularly for lower paid staff, will be spent back into the economy. Yet Barclay’s assertion went unchallenged by the interviewer. The BBC, Ch4 etc. all need to provide a crash course in simple economics to all their journalists.
Agreed
BBC presenters have an uncanny sense of what not to ask and what not to challenge. Can’t believe that’s only because they dont know enough economics. They know what Govt wants to convey or not to be conveyed. Does it come from the top, or are they all trained to pick up the signals without being explicitly instructed?
They know covid is ‘over’ despite thousands of deaths in last few weeks, so they never mention deaths, never ask whether it would help if there was official advice as to how to protect people – clean air, masks, etc.
They repeatedly treat IEA Tufton street oil-funded lobbyists as ‘think tanks’ – implying they are independent economists. Rarely have Prikka, Blanchflower,, Murphy, Mazzucato been invited to comment on govt. tax and spend pronouncements.
It seems clear that the Barclay narrative – ‘ we cant afford health care’ and the terrifying third wave of austerity – with increasingly fascistic means to implement it
( https://www.theguardian.com/commentisfree/2022/nov/10/poor-rich-tories-brexit-austerity-cameron-osborne-sunak)
will only be challenged by mass refusal to accept it – across society – and especially in public services. Beginning to look like the twenties in UK and/or thirties in Germany.
Exactly so. This is because money is like water: as long as it doesn’t end up pooling somewhere (eg savings) it pumps around and lubricates the economy.
A nurse earning £35,000 will take home £27,576. It will actually cost about £39,000 as the employer will pay just under £4,000 of employer NIC on top, and the individual will pay £4,484 in income tax and £2,940 in NIC themselves. So that is about 28% of the £39k cost straight back to the government.
(It is even more if they are consultants earning £100,000. That would be £27,428 income tax, £6,241 employee NIC and £13,208 employer NIC. So about 40% of the £113k overall employment cost goes straight back. )
Numbers from here: https://www.theaccountancy.co.uk/calculators/salary-calculator
Of the remaining 72% or 60%, much of that may be spent directly on goods and services that bear 20% VAT and other taxes (petrol, or alcohol, for example). And each of the suppliers will be employing people who pay income tax and NIC, and paying their suppliers who charge VAT, and so on.
Given these numbers, you might wonder why so little of our GDP is paid in tax. And the answer is that labour is taxed much more heavily than capital.
Indeed, and thank you
The data showing the number of people unable to work because they are waiting for treatment is but one piece of evidence of how wrong Barclay is. Contributing to the labour shortages in the wider workforce as well as the NHS.
https://www.nhsconfed.org/news/investment-health-boosts-labour-productivity-and-economic-activity
It should be compulsory for ministers to use the NHS. What’s the betting they all jump the queues with private treatment.
“It should be compulsory for ministers to use the NHS”
Perhaps this could be extended – if your income/wealth is above a certain level the only option is the NHS – no more private.
Using transport as an example; in 1900 there was exactly one option for fast long distance transport: trains. The network was fast and effective and went to places we can only dream of now (post Beeching – and the reason for Beeching was private cars).
If the option for health case was either a) NHS, b) no health care, the rich would vote accordingly & the NHS would be transformed. Sadly, politicos are far far to soft minded to implement such a reasonable proposal. One could ditto it with eduction – no more private shcools? State schools transformed. All the discussions on “where would the money come from” would vanish in a puff of smoke.
For far far too long, issues of national importance such health & education have been treated as if it was all about which chocolate bar we want – choice above all. Fine for chocolate bars, imbecilic with regard to these two areas (and others, energy provision etc).
Education is the key one here…
Spot on Mike Parr,
All this right wing nonsense about freedom of choice justifying private healthcare and private education can be flipped to show that it’s a freedom for a small minority that clearly takes freedom of choice away from the greater number of people who cannot afford private healthcare or private education.
If we had only the NHS healthcare system and only the State schools we would rightly see huge increases of investment in both.
State run trains and buses and a return of Council house building too.
It should be compulsory for surgeons trained in the NHS to give at least half their time to the NHS. I heard yesrerday of someone in her 80s who fractured her femur last Tuesday. After all the scans, etc., she has to wait until next Friday to be operated on, because the surgeon only works on Fridays in the NHS.
In the meantime she has to lie flat in a hospital bed. Apparently he’s the only surgeon in that hospital who can perform such operations.
They might only work part time
Wise doctors do
It is so frustrating that so much that could be done to improve our economy and the well being of so many is deliberately ignored for reasons of vested interest and political dogma. Andy Verity was on the Today program this morning pointing out the myth of the “black hole “
No doubt you saw the report that a former central banker – so probably someone with a rather different politico-economic view – shares the idea the poor funding of the NHS is hurting the wider economy.
https://www.theguardian.com/business/2022/nov/09/uk-economy-being-held-back-by-worsening-health-of-british-public-andy-haldane-warns
I did
I do not agree with Haldane on much and am no longer an FRSA but he is right on this
“And so people suffer as a result. In this case the causality is really not hard to work out.”
This might be slightly off topic, but below is a story which should tell us everything that is wrong with the Tory approach. This really is outrageous considering everything that is going on right now, but hardly surprising in Tory Britain.
“National Grid raises future outlook following soaring £2.2bn profit”
https://www.msn.com/en-gb/money/other/national-grid-raises-future-outlook-following-soaring-c2-a322bn-profit/ar-AA13WVaU
Then there is this today.
“British Gas owner Centrica has unveiled a new £250million share buyback as its bottom line continues to be bolstered by high gas and electricity prices.
Solid performances across its energy trading arm, and gas production and electricity production assets mean Centrica now expects annual profit to come in at the top end of forecasts. ”
https://www.msn.com/en-gb/money/other/british-gas-owner-centrica-capitalises-on-soaring-energy-prices-as-national-grid-profits-jump-by-50-to-21bn/ar-AA13X0Dk
Criminal, especially when you consider the following.
Energy firms remotely swap homes to prepay meters
“Kelly from south London, who did not want to us to use her last name, was a direct debit customer with EDF when price rises saw her bills more than double from £200 a month to more than £430.
Then, in October, she simply got a text telling her that she was now on a prepayment plan. “I suddenly only had £3 on my electric until payday. I was so unhappy.”
https://www.bbc.co.uk/news/business-63554879
I’m just too angry. Words fail me.
Appropriately so
Quite early on I learnt that context is important for historical ‘facts’. One doesn’t just quote one set of facts (such as, sadly, we often see with people who argue that Russia is not to blame for the war in Ukraine)
I doubt more than about one in ten knows what the GDP of this country is in 2022.
It is about £2,200 billion. The “massive black hole of £40 -50 billion” is in the region of 2%.The deficit has not been below 2% in the last 10 years at least. There is no doubt the economy is in for a rough ride but we are entitled to query the narrative we are being fed.
It leads to journalists asking ‘will you cut or increase taxes?’ In their position they should know the GDP and be able to work out those questions for themselves. I feel it is not just some politicians who are failing us.
Andrew Verity on the BBC website has an article questioning the ‘black hole”. he is an exception
Agreed
Andy is good.
2 different questions, 2 different answers.
1. How much does the NHS cost the government?
2. How much does the NHS cost the economy?
Answer 1. The NHS cost the government £152 billion in 2019 (HOC Library)
Answer 2. The NHS doesn’t cost the economy anything. In fact for the same year it will have actually boosted the economy by £547 billion (using the Kings Fund estimate of a multipli
er of 3.6)
The impression given by Tory politicians is that there is this thing here, called the economy, that produces money, some of which gets sent to the government in taxes. The government takes this money and pays for the NHS, which is that thing over there, separate from the economy. Then the money disappears down a big hole and out of the economy.
Nothing could be further from the truth.The amount spent on the NHS is being spent into the economy. Having provided healthcare, a huge part of the economy in itself, it then goes on to produce further economic activity by the multiplier effect. It creates demand for the production of stuff that makes our lives better. And the NHS is a crucial part of the economic infrastructure, it keeps the workforce healthy & at work.
The NHS is not a sponge soaking up expenditure or ‘tax payers money’.
It is vehicle for investment and should be treated as such.
That’s how it was set up – if anyone these days can be bothered to look. We’d just been on the winning side of an expensive war, were in hock to the Americans for war materiel and we still set it up. It is nothing to do with government revenue.
Ongoing accessible healthcare makes itself cheaper by dealing with problems earlier before they get worse and more expensive.
Our future seems increasingly one of exploitation.
Pilgrim Slight Return hits the nail on the head when he says that the NHS is a vehicle for investment and should be treated as such.
HS2 was justified during the first austerity programme because it was ‘an investment’. This was true (one of the government’s few truthful statements. It was of course the austerity programme that was based on a lie)
As Richard says, the NHS is an investment multiplier. All that happens when it is starved of investment is that, like any business, it withers and dies. This is clearly the Tory aim for the NHS. They know that would-be doctors and nurses will be reluctant to join an organisation that is being wilfully run down, Even funding for training is being withheld.
To blame this Machiavellian policy on affordability is shameful. But then to this government, there is no such thing as shame (or society!)
But again one asks, where is Starmer?
Imagine if you were very wealthy and greedy perhaps from a family line of similar thinking would you perhaps want to convince the population that lower taxes cause trickle down of money to poorer people.
Would you perhaps want to separate your childrens education so that you could use your wealth to educate them to a higher degree giving them a better chance of continuing your family wealth .
Would it benefit you to persuade people that tax pays for services provided by government and then say how generous you are in paying any tax at all because you obtain your family healthcare and education privately at great extra but don’t ask for a refund of your tax.
Would you like to keep the masses worried , frightened , of nhs cuts , education cuts , council tax hikes , food price hikes , being attacked by other countries being overwhelmed by asylum seekers et etc perhaps keeping them worried diverts their attention from the weakness of the rich – their number , few, compared to the masses.
Would you carry out a planned campaign to fill the media with people who receive reward for saying what you want them to say.
Would you infiltrate organisations that help the poorer masses and change their focus.
It doesn’t take much thought to figure out how wealthy people behave and unfortunately to a great extent so many people we rely on to effect changes we vote for get turned and become part of the problem.
But rich people don’t have to behave that way. Nobody forces them to. As I said on a different thread, at the beginning of the last century many rich people built houses for their workers, through philanthropy, many of them Quakers, as Richard said.
Here’s one rich person who realises that we need foreigners to work here, and the importance of workers to the economy.
https://www.euronews.com/2022/11/10/brexit-backing-boss-says-lack-of-overseas-workers-crippling-uk-economy
Strangely enough I read about him in a different article, about how much money he gave to the tory party over the years, in order to become a lord. He was also an adviser to Osborne.
I think there’s another factor in play that applies across the public sector. For today’s Conservatives, ‘public service – serving the public’ – is to be despised and seen as beneath serving oneself. Public service is therefore to be kept to and paid the minimum.
We all agree that there is a lot of unmet demand for health services. The only question is how to pay for that demand.
I suspect we are hitting the limits of what government spending can do, remembering also that generally government spending is highly inefficient.
So, how to get more money into the NHS? It seems to me that there are a lot of people who would pay out of their own pockets, as indeed happens in many other western countries. All business people know that the profits in a business are almost invariably generated by a small number of premium customers. The same goes for the NHS. At a rough educated guess we could increase the income of the NHS by around 30%-50% if the right private insurance provision was permitted to fund care provided by the NHS, again in a similar way to many other Western European nations.
The real problem is that the NHS has become a religion, a belief system that tells us that there is only one way. See what damage that kind of mono-thinking has done over history.
Let’s reframe the debate and ask HOW can we get more money into the NHS rather than simply shouting louder than our fellows that it needs to come from taxes.
Would you like to substantiate your claims in para 2?
And why should we ask for direct payments when these would in effect be taxes on the ill?
Can you suggest why the most vulnerable should pay more?
Paragraph 2: the difference between state funded health spending in Germany and the UK is about 30% per capita. The German healthcare industry is also roughly 30% funded by private insurance. Increasing private funding of healthcare to 30% of total healthcare industry income (from zero – not technically correct, I grant you) we’d generate 43% more funds to the healthcare industry.
The whole point of this approach (as successfully demonstrated in other western countries) is that the poor do not pay more. It’s entirely funded by the rich who are happy to pay for bells and whistles for essentially the same healthcare outcome, intermediated by the insurance companies. So it’s not a tax on the bill, it’s an insurance policy paid for by the rich. The poor are not involved. That’s how lost businesses /industries make their money – from the premium end.
The real problem in the UK as mentioned earlier is the fixation with taxation as the solution to funding healthcare. It’s a symptom of an industry that is essentially producer driven rather than demand led. Or, put another way, it’s a symptom of being entirely government controlled and funded. Governments are never good at figuring out ways of extracting more money from those who are willing to pay, unlike commercial organisations. So let’s harness the commercial world’s expertise.
Sorry, but this is nonsense
The insurance is an extra tax
It’s paid because the basis service is made very basic and the worried well (the middle classes) want a) early access b) consultant led services rather than GP services, often resulting in over treatment and considerable waste
What is needed is universal access to high quality triage to give best population based outcomes
You wholly miss the point that the more wealthy have never voluntarily paid for anything that a) dies not make them feel superior b) may actually be superior
In other words, you and they want two tier health care and the only thing that delivers is 3xces# cost for wasted activity, most without medical justification
Some revealing choice of language, ‘demand’ vs need. Seeing treatment for cancer for instance as ‘demand’…
Government spending is highly inefficient.. A lazy assertion revealing a naked political bias. Having worked across all the sectors, mostly business, I know its fundamentally untrue. A small amount of research – try the Kings Fund – will show that the NHS is remarkably efficient and productive compared to its peers, despite a shortage of resources and, shock, horror, managers.
The business world is by comparison far less complex with a narrow and simple set of goals. Pretty much just profit. The NHS by comparison has a far larger and more complex set of goals. Their bottom line is life and death. Not just maximising their (personal) profits.
Mr Ledzion,
“The real problem is that the NHS has become a religion, a belief system that tells us that there is only one way. See what damage that kind of mono-thinking has done over history.”
No, I think you are preaching a religious belief in a very narrow and naive model of how business works. Not all business works on premium customers. Mass market business depends on volume. Even from before the age of Henry Ford (and Ford’s iconic Model-T stopped production, not primarily because of premium customers moving on to enhanced GM models, but because its market by around 1930 was now absorbed by the cheaper second-hand market reaching volume viability). I offer that as a simple, well-established observation, because neoliberal apologists rarely offer more than unsustainable generalisations based on little evidence.
I wish apologists for free market business enterprise at least attempted to demonstrate a convincing knowledge of how businesses actually work (in all kinds of circumstances). This is really tedious, and does not understand just how ingenious captial is in thriving in very different circumstances; it really doesn’t need the help of neoliberals who confuse a monopoly environment with competitive enterprise. Neoliberalism more predictably destroys real competition, to preserve monopoly, and monopolist determination to support monopoly friendly political parties, and mononopoly profits (as in oil and gas).
“mononopoly profits”? Its a symptom of irritable neoliberal syndrome.
Michael Ledzion:
Do you know why Government spending is so ‘inefficient’?
1. Because they have to increasingly rely on the private banking system to distribute it (privatisation).
2. Because they have reduced their oversight capacity when they issue and tax it.
3. Because they have over-relied on their chums to spend it (think PPE).
4. Because they make it extremely hard for poorer people to claim it (unclaimed benefits every year).
5. Because they interfere too much in procurement processes (think about the Ministry of Defence).
6. Because they want to deliver policy as cheaply as possible – economy trumps effectiveness every time.
As for your rather misguided view of the NHS, the NHS was started with a commitment to meet the cost. The big lie that lies at the heart of your conceit is that all of a sudden Government was inundated with a ‘surprise’ growth in the elderly that we are told will bankrupt the NHS. A Government that runs regular censuses cannot really be surprised by anything can it?
The truth? The truth is that it is the post war commitment to provide the NHS, housing, education, social security etc., that is being purposefully withdrawn by our politicians who have been captured by profiteers.
And why is that? Well, it’s nothing to do with not being able to afford it because your country prints its own money as it did for the banking system from 2008. And that is how the NHS was created in the first place.
It is being withdrawn so that the rich can invest in public services like the NHS and make money out of rents derived from their ‘investment’ – the overhead that leads to cost rises on things like bus services, rail fares, utilities etc.
I find comments like yours Michael rather annoying. In the private sector, the budget wraps itself around demand and that is called being successful. And here we have a deliberately underfunded NHS that is artificially REDUCED in the face of demand and that is called what exactly?
Sneaky? Evil? Callous? Unacceptable? Or just Tory?
Why, I wonder, does Labour not explain that the cause of the problems of the NHS is that from day one in 2010 the aim of the government has been to fully privatise the NHS under the watchful eye of privatising gurus Lansley and Hunt, using the same stealth process which has seen NHS dentistry approaching full privatisation. Of course this could not be overt government policy – the country would not accept it. So the tactic has been to consistently underfund it so that the government can claim ‘there is no alternative’ (TINA) to ‘save’ it other than by privatisation.
Understanding this would explain why the hapless Truss embarked on her ludicrous tax cuts, which must have been approved by the Tory hierarchy, to justify huge spending cuts on the NHS which would finally push privatisation over the line. Truss probably hoped she would be remembered for achieving this, the Tory party’s privatisation ‘Holy Grail’. And in a wonderful ultimate irony it was the government’s normal allies, the markets, who sank her.
But where is Starmer’s in all this? Trying to ingratiate himself to the same power block with the same ultimate plan for the NHS?
I think we are all talking at cross purposes. The challenge is to get enough money into the health system. It’s cloud cuckoo land to believe we will be able to raise sufficient extra taxes to find that through general tax revenues. Economists talk about the Laffer curve of taxing the rich: You can only get so much out of them, and basically we’ve reached that point from what my economist friends tell me. Otherwise I am pretty confident that government would have found a way to get the money out of them. All I hear is more calls for more money to be spent by government. It’s just hopeless. Just one example: We are killing the even more important justice system (yes, no justice = no safe civil society = no NHS) in order to pay for the NHS and social care.
There is so much of the article that I agree with – investing in health has a huge economic return for example. But can you imagine the mortgage rates if we suddenly borrowed a further £40bn to fund the NHS? No government will take that risk nor will the lenders (aka our own pension funds) on whom all governments depend allow it.
I’m not arguing for a two tier system per se, however if you have a choice of a small number of people forking out a large mount of money for marginally more comfortable care and outcomes in order that the majority get the care that is really needed, or continuing with this madness of diverting all resources to publicly funded health, I know which I would take.new need creative thinking and I don’t see much of it in the article nor in the comments.
It reminds me of the arguments against privatising BT, BA, BG, British Leyland, and many others.
We are stuck. And this argument is showing the problem that we can’t even agree on what the real problem is. I suggest we reframe the problem and ask HOW to fund the NHS, not whether or not our society wishes to spend more on health, or whether the NHS is well run or or or. More tax is simply not going to be the answer.
Which leads to an aside: politics means that in order to fund health through the tax system we have a ridiculously complicated tax system that creates awful and perverse incentives. All Chancellors of all parties have engaged in this form of real-politik. But it is unfair, regressive, deceitful and usually stymies growth.
If I get time later today I will respond to some of the specifics of the other comments (eg government spending is efficient).
You are talking complete nonsense
We pay vastly less tax than most of our European neighbours precisely because the government does not spend enough
Go and learn how the economy works. Spend comes before tax
Spend generates the means to pay tax
Your arguments are wholly false
Don’t waste my time again
And don’t tell me about Laffer – I have debated with him and won hands down against his utter BS in a big vote
The NHS started when we as a country were probably at our poorest. My mother was a nurse before the war, and worked as a nurse until she retired at 60. She voted tory all her life because she believed what they told her, that she could get out of poverty if she worked hard and accepted a pittance for doing so.
Not even she would vote tory now because of the mess they have made of the NHS.
I spent most of today on a zoom call about the NHS, SOSNHS, and fortunatle everyone on there saw the inportance of keeping the NHS, and all agree that NHS staff going on strike will save it. It can’t be much worse than it is at the moment, and the chancellor is the person who made it into the state it is now,helped by the man who followed him, who now thinks that the best thing he can do is go to Australia, because he’s naver going to get in government again, so sod his constituents.
The government is criticising health workers for voting for strikes, but as many said today, how much worse can it get?
Sorry for the rant, but I get so angry at people suggesting we can’t afford the NHS. YES WE CAN, just as much as we could when it was formed.
I never met any of my grandparents. My mother’s father died before the NHS came into being because they could not afford medication for him. Her mother died when I was 6 months old, from cancer. My mother worked for the NHS all her working life, so don’t you dare say we can’t afford it. We can’t not afford it.
You are right
We can afford a well functioning NHS
I am interested in the idea that the government can end up receiving more in tax revenues than it spends in virtue of the multiplier effect.
Given that this extra money must have entered the economy somehow it must have come either from savings or have been created by commercial banks. I suspect that much of it will be in the form of loans to small businesses who now have customers for their products. and very little from individuals drawing down their savings.
If this is the case then wouldn’t enabling a recovery by spending on the NHS and other vital services also be an ideal time to take measures to encourage sustainable and socially useful investment in the private sector?
I know we need to watch the word ‘hate’ on this blog especially with all the Fascists out there who like to portray themselves as victims, but Alexi Sayle’s Imaginary Sandwich Bar on 10th November on BBC Sounds needs a listen between 08:50 to 11:50 which to me is one of the best summaries of where we are with politics and Stamer – AND Wes Streeting – in this befouled country.
https://www.bbc.co.uk/sounds/play/m001dxvh
Thoroughly enjoyed that podcast – and his other ones recently on BBC Sounds. Thank you.
Nice to see fiscal multipliers wrt the NHS getting a good airing. I’ve seen the NHS described as ‘the great engine that drives the UK economy’. In the same article, it is also pointed out that multipliers have a reverse gear. Maybe we should start looking at the affects AND costs of starving the NHS of funds. ‘1Bn in NHS cuts costs the UK 4Bn’ focuses the mind a little.