Because, not despite
This shouldn’t be this difficult for people to understand:
The NHS is nearly a fifth less effective than it was before the pandemic despite a £30bn funding boost, official figures show.
Productivity has fallen to its lowest level outside of the pandemic amid growing concern about the rapid expansion of the public sector.
It comes despite a £31.5bn boost to the Department of Health and Social Care’s budget compared to 2019, which is mainly spent on NHS England. The healthcare system also now employs a record 2m people, 313,000 more than prior to the pandemic.
If you use the labour of more people to gain roughly the same output then that is, definitionally, a fall in labour productivity. For that’s what it means, how it is calculated. Value of output divided by number of labour hours to gain it.
The healthcare system’s productivity has fallen by 18.5pc since the end of 2019, new data from the Office for National Statistics (ONS) show.
Annual NHS productivity is now lower than at any point since 1997 apart from during the pandemic in 2020, although the ONS cautioned that the data are experimental.
The numbers measure NHS resources, including staff and agency workers, hospital buildings, equipment and medicines, against the volume of services delivered to patients.
If we measure all inputs then that’s akin to total factor productivity. And if we’re pouring more inputs in and not gaining even proportionate output then that’s a fall in tfp.
As Paul Krugman pointed out productivity isn’t everything but in the long run it’s pretty much everything.
Given that central importance we’ve got to do something. Which brings us back to our oft repeated insistence. We know how to improve productivity - markets. No, doesn’t have to be capitalism, the Co Op competing with Waitrose improves both even as they are both socialist organisations. Markets. The ability to choose who to cooperate with on a specific transaction - that’s what drives up both labour and total factor productivity.
This is not one of those arguable and well maybes. It’s a simple truth.
Therefore, in order to gain a better NHS we require more markets in the NHS. Simples.
So Wes, get on with it then.
Tim Worstall