Yes Polly, this is why the NHS must be reformed

After two squeezed years, the new tariff hospitals receive for treatments has been announced as a 4% loss in real value.

The 212 new clinical commissioning groups launching next April and pointlessly replacing 151 primary care trusts, will get less than NHS inflation.

As you\’ve repeatedly told us, the NHS has a different inflation rate from the rest of the economy. 4% (that is, four percentage points) above the inflation rate of the rest of the economy.

That\’s why it has to be reformed: you don\’t need too many decades of that for the NHS to swallow the entire economy.

The change that we need is that we need the NHS to become more productive. Gain more treatment bang for our unit of tax money put in. This would not just reduce that NHS inflation rate, it is the very definition of reducing that NHS inflation rate.

And we know from William Baumol that such increases in productivity, such innovation (they are indeed the same thing) are promoted in market based systems, not planned ones.

Thus moving the NHS to a market based system. It\’s not about forking out profits to corporations. Not about breaking up that lovely solidarity. It\’s all about reducing that NHS specific inflation rate.

9 comments on “Yes Polly, this is why the NHS must be reformed

  1. Isn’t the reason for the higher NHS inflation rate because of historically very generous pay increases (GPs being the prime example).

    As all public sector salaries have been frozen for the last two years and are likely to remain frozen for the medium term shouldn’t we be seeing the relative inflation premium in the NHS falling sharply ?

  2. Shinsei67 – the NHS like most of the public sector is on a banded pay spine. Even if the wages at each pay level remain the same the workforce continue to get real term pay rises as they move up an increment each year. You can only freeze public sector wages if you stop the annual increments.

  3. But, dc96, aren’t you ignoring the fact that people leave from the top of a band (e.g. by retirement) and get recruited at the bottom?

  4. Consultants, who are enjoying a 3-year pay freeze, get automatic increases after 1,2,3,4,9,14,and 19 years. Over the whole 19 years, the compounded rate of increase is 1.6%.

  5. dearieme – yes some people go from the top of the escalator but it’s the vast majority in the middle who continually ratchet up.

  6. Thus moving the NHS to a market based system. It’s not about forking out profits to corporations. Not about breaking up that lovely solidarity.

    Actually, I’m willing to bet that these absurdly muddle-headed reforms will be pushing costs up, even as services are reduced. As for breaking up all that ‘lovely solidarity’… out here in the real world, it’s already happening – and it’s proving to be expensive. In emergency admissions, we are seeing a big increase in patients being (often inappropriately) palmed-off to NHS acute care by “partnered” providers. And in their own special clusterfcuk way, Serco have demonstrated what lies ahead for outsourced GP cover. But keep on churning out those market platitudes – it is amusing, if nothing else.

    Besides, if it’s all going so well, how come Circle’s golden boy Parsa has just deserted his post? Could it be that playing at doctors and nurses was a little bit more difficult than he thought?

  7. “But keep on churning out those market platitudes – it is amusing, if nothing else.”

    Yep, don’t these idiots realise that even though socialist (or any form of coercive) institutions are always more expensive, offer lower quality, and inadequate supply, this magically doesn’t apply to health care (or education).

    You’re right to be amused, after all it’s only the little people’s lives, nothing important.

  8. dc96: that doesn’t make sense. In any organization, you tend to lose older, more expensive staff to retirement, and recruit younger, cheaper staff. All your staff get more experienced and more expensive year by year. So long as the mix of experience stays the same overall, wage costs are unaffected by the process.

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