We do find this productivity story amusing
Apparently it is just terrible that market competition is going to lead to some Asda workers losing or changing their jobs:
More than 800 senior Asda shopfloor workers are facing a pay cut or redundancy in the new year after the supermarket chain embarked on another cost-cutting exercise.
Store staff have been briefed this week on a proposal that could mean 842 section leaders being removed from its store management teams. Thousands of other workers will also be affected by a wider move to cut the number of hours spent on stacking and tidying shelves at 600 supermarkets.
In a document given to staff, and seen by the Guardian, the retailer said it needed to cut costs so it could “close the price gap” with rivals Aldi and Lidl.
It said: “We need to continuously review our operating model. … being the cheapest of the big four is no longer a viable business model. We need to be able to look at ways to reduce our operating costs in order to close the price gap.”
No, that's not the amusing part.,What is amusing is to compare this with the very loud complaints currently being made about British productivity.
For this is exactly the sort of thing which increases productivity, that very thing which all are shouting must be improved. To use less labour to perform a task is the very definition of increased labour productivity. So, why isn't this being hailed as a - partial to be sure - solution to what ails our economy?
Note also how this comes about. Aldi and Lidl have shown that the Great British Public appears to be just fine with hauling their comestibles out of their packing boxes, not actually requiring teams to shelf stock for them. The competition from that lower labour using - and thus more productive - method of retailing being exactly what is pushing Asda into similarly trying to be more productive in its use of labour. Market competition leads to productivity rises.
Except, of course, when people insist that there's something wrong with anyone increasing the productivity of their use of labour.
Too many zombie companies - support for the Austrian view again
An accurate and useful description of economic models and theories is that there's a nugget at least of truth in each one of them. Yea even unto some of the corners of Marxism, a monopsonist employer of labour is indeed a bad idea. The trick is in deciding which model should be applied to the analysis of which problem and when.
Which brings us to the Austrian view of recessions and their aftermath:
There are as many as 100,000 “zombie companies” holding back the economy by soaking up credit that could be used to finance the businesses of the future, a study has claimed.
The Organisation of Economic Co-operation and Development has assessed the impact on productivity of zombie firms kept on life support by their banks and has found that Britain would be growing more quickly if it encouraged a clearout.
Zombie companies have been cited as one of the reasons for Britain’s weak productivity growth, as they soak up capital that successful businesses could use. The OECD defined zombie firms as being more than ten years old and having “persistent problems meeting their interest payments”.
It added: “Zombie firms represent a drag on productivity growth as they congest markets and divert credit, investment and skills from flowing to more productive and successful firms and contribute to slowing down the diffusion of best practices and new technologies across our economies.”
A crude - very crude indeed - sketch of that Austrian view is that mistakes are made in economies. That's fine, that's what the market is, an error detection machine. But the crucial next part is that those errors must be killed off. Bankruptcy the mechanism by which this happens.
We can and should add in that comment of Warren Buffett's - it's when the tide goes out that you see who has been swimming in the nuddy. When times are generally good, in the upswing of a boom, mistakes can be and are covered up by that general enthusiasm. Recessions are, in this Austrian view, the necessary countervailing force, revealing and wiping out those accumulated errors. All of which is rather what the OECD is saying here.
The policy implications of this view are harsh - when recession strikes just let it happen. Clear out that dead wood so that asset and production factors can be and are reallocated to more productive uses. Short sharp recessions are the way to deal with it, not ameliorative action which prevents economic pain for that simply extends the time span of said economic pain.
Agreed, many don't like this view - but as the OECD is pointing out there's more than a nugget of truth to it all the same.
Avocados smashing the case for socialism
Good news everybody! Scientists and capitalists have worked together to save the world (again)! That’s right, our A&E departments across the Western world will no longer be plagued by throngs of millennials who’ve cut their hands preparing their mortgage-breaking breakfasts – for now we'll all be able to buy stoneless avocados. The Tories might not be interested in winning over the hearts, minds or votes of millennials but clearly Marks and Spencers have spotted a gap in the market and are determined to exploit it.
Innovation comes in many forms: from the over 700 varieties of cheese produced in the United Kingdom (quick nod to Liz Truss’ speechwriter there) to the myriad of insurance contracts brokered and underwritten at Lloyds of London. These innovations come not because government is in the business of writing one-size-fits-all central policy, but precisely because it is not.
These avocados are a glorious part of the capitalist revolution. No pressure group has demanded them, no party has campaigned for cultivation programmes to develop them, and no grey bureaucrat would have been able to draw in all the various individuals from across the world needed to cultivate, grow and transport them to your shopping basket.
In fact the British Association of Plastic, Reconstructive and Aesthetic Surgeons demonstrated the lack of imagination in all central planning in their response to the original news of a spike in avocado hand injuries as they said they wanted: “safety-warning labels placed on avocados” as “there is minimal understanding of how to handle them.”
Biologists, farmers, the retailers and now consumers will be free to tackle the negative externality of our increasingly international palate and reduce the unnecessary suffering caused by slicing your hand. They also, helpfully, get rid of the imperfect information that avocados nearly always come with–just how much of this very expensive fruit is pit. All-in-all consumer surplus looks like it is on the up.
Guess what, they do it all because of the profit motive. I just can’t understand why millennials aren’t all rabid capitalists like me!
Index funds and monopoly power
Like many other people I have a stocks and shares ISA that puts my money into a set of index funds, which are baskets of investments in every publicly traded company in various stock markets, weighted by the market cap of each company. Effectively, it allows me to invest in ‘the market’ as a whole, with investments proportional to the size and value of the firms as judged by active investors. It is cheaper and less risky than trying to ‘beat the market’ with an active fund manager, and since I believe that financial markets are quite efficient I don’t see much point in trying that anyway.
The two biggest firms that run ‘passive’ funds of this kind, BlackRock and Vanguard, manage over ten trillion dollars between them. An interesting Bloomberg article raises the possibility that this could lead, effectively, to collusion within markets, and create effective monopoly control even in markets that appear to be competitive.
The logic is straightforward enough. If all major players in a sector are part-owned owned by, say, Vanguard, there is an incentive for the owner to instruct firms to compete less and maintain, across the board, higher prices than would be impossible in a competitive market.
There is some evidence that this is happening: some recent papers suggest that increased ownership by ‘passive’ institutional investors was associated with higher airfares and banking prices in the United States. The airline study is particularly interesting because the data is so rich. Usually separating cause and effect in price rises can be pretty difficult, but since there are so many different airline routes, each effectively operating as a separate market, with such good public data on prices, etc, there’s more scope for like-with-like comparisons that minimise confounders.
Factoring in this kind of ownership, market concentration is ten times greater than what conventional measures suggest is a threshold for anti-competitive activity. Concentration is an indication, not proof, of monopoly power, but prices also rose as well when passive fund ownership rose. When, for example, a privately-owned airline like JetBlue went public and hence became part-owned by the same index funds that part-owned Delta, American Airlines, etc), prices would rise by 3-7% on that route. The study includes several methods of testing causation, including a demonstration that prices are not rising because of greater passenger demand – in fact, passenger volume falls as passive investor ownership rises, consistent with the oligopoly thesis. Similar results were found for banks.
If this is really what’s going on, then it’s potentially a very big problem. But there are a few questions that linger. Are company managers actually being told by BlackRock and Vanguard that their individual firms’ profits don’t actually matter, and they should try not to rock the boat? Are these investors helping to appoint managers that they expect will be worse than other candidates, intending to depress competition in the sector?
It’s not even clear that the managers of these funds actually are trying to maximise their funds’ returns, as opposed to straightforwardly managing them and mechanically making sure they’re doing what they’re meant to – reflect the market. So do the fund managers themselves have an incentive to promote maximum returns? The mechanism proposed by Azar et al is less sinister: that firm managers prefer a ‘quiet life’ and won’t act competitively to boost their firms’ profits unless they’re pushed into doing so by their investors, and passive investors are just that – passive.
Even if all this was right, we’d generally expect this sort of situation to be unstable in markets where entry costs are reasonably low – there is basically money on the table for a firm that is not part-owned by the index funds to come in and grab through more aggressive competition (like privately-owned firms). In sectors where barriers to entry are high, then of course this is less likely to happen in the short run, and it may not happen at all in markets where entry is impossible (eg, utilities markets where adding new infrastructure isn’t possible).
What’s more, though, index funds are usually country-specific – Vanguard has a US fund, a UK fund, and so on, and these are run by different people. Why aren’t foreign firms, which may find it easier to compete than startups, entering these markets if cartel-like behaviour is going on? Here I think it’s important to note that that both airlines and banking, in the United States, have quite strict rules that hurt foreign firms’ ability to compete. Non-US airlines simply are not allowed to run domestic flights in the United States, and the fact that financial regulations are both stringent and in many respects very different to other countries’ may remove the advantage that we’d expect an existing firm to have entering a new market. It could be that in markets like these, this effect takes place, but that it doesn’t generalise outwards.
Or maybe the problem is illusory altogether. A Federal Reserve paper from early 2017 proposed a different way of measuring the effect on competition of common ownership, which tries to estimate in the case of banks how much ‘weight’ firm managers would put on their own firms’ profitability compared to that of their rivals under different levels of common ownership, and finds a very small effect. Another, by one of the same authors, argues that activist investors (who try to influence corporate decisions) are strengthened by passive investors, which would militate against the ‘quiet life’ theory.
If this is a real issue, there are several options that could fix it. One, proposed by Eric Posner and Glen Weyl, would be to limit how much of a certain ‘industry’ a fund could own or to limit ownership to a single firm in each industry. This would defeat the point of index funds, though – they would cease to be impartial reflections of the market as a whole. A more light-handed approach might be to take away these funds’ voting rights above a certain fraction, so that their influence over firm management was limited but their ability to produce returns and diversify was not.
Alertness to the dangers of monopoly is important as well, though – if airlines and banks are special cases because of regulation, that is an argument for deregulation that opens up those sectors to greater competition from overseas. If it’s a broader problem, that might not be enough and we may need to intervene in some way. But those eager to rapidly put constraints on passive investment should be careful. Index funds are a convenient and relatively safe way for normal people to invest for the future. The costs of pushing them into a riskier and more volatile sector, or drying up their investment entirely, could well be worse.
Banking for the poor is about savings not borrowings
That the very poor of the world have been largely unbanked is entirely true. As is it almost certainly a good thing that they gain access to banking services. But it's not, not so much at least, the ability to borrow which is most desired, it's the ability to save:
As a sex worker in Kolkata, Rita Roy had no access to her own money. The brothel madam kept her earnings “safe” – shoving the notes into her bra – and whenever Roy needed money, she would never get the full amount she asked for.
Roy, 36, did not have a bank account. When she needed money to treat her father’s heart condition seven years ago, she was forced to visit a loan shark to borrow 2,000 rupees (£23). In one year, 13,000 rupees extra (£150) was due from the interest.
“When I couldn’t repay it, the money lender posted two men outside the kotha[brothel] to harass me every time I went out to shop,” says Roy. But now she has a bank account with the Usha Multipurpose Cooperative Society, which is run by and for sex workers. It began with 13 women pooling their savings – 30,000 rupees – in 1995. Today, the bank’s turnover is 300m rupees a year and it has a membership of 31,000 sex workers from across West Bengal.
We've seen much the same thing in other such adventures, Grameen Bank in Bangladesh, M-Pesa in East Africa. A secure method of transacting is desired, sure, some would like to borrow to invest or consume. But the thing which really has the poor beating down the doors of a financial system is a safe and secure method of savings.
One lesson of which is that - again - Milton Friedman was right. When a middle aged (for that place she is) woman turning tricks for pennies is looking to save them we think that there must, quite obviously, be a large amount of truth in both the lifetime income hypothesis and in the smoothing of it that people wish to do.
Like so many descriptions of human behaviour we'd not say that it is 100% universal across all people all of the time. But most certainly enough that it's a reasonable description of human behaviour. It also has certain implications for policy - one of the best ways of enabling the poor it to create a system in which they can save, not necessarily borrow.
Where Paul Ryan and Matt Bruenig agree
Writing for the New York Times, Matt Bruenig proposes an idea to fix America’s ‘Massive Inequality Problem’. Noah Smith goes further and argues that Bruenig’s not only solved inequality but has also found “a way to insure the American middle and working class against technological change.”
So what’s Bruenig’s idea?
“It’s called a social wealth fund, a pool of investment assets in some ways like the giant index or mutual funds already popular with retirement savings accounts or pension funds, but one owned collectively by society as a whole. One that paid dividends not to the few, or even just to the shrinking middle class lucky enough to have their savings invested, but to everyone.
“The federal government would create and run a new investment fund, and issue every adult citizen one share of ownership. The fund would gradually come to own a substantial and diverse portfolio of stocks, bonds and real estate. The investment return that the fund generates would be paid out to each citizen in the form of a universal basic dividend, and the shares would be nontransferable to preserve the institution’s egalitarian purpose.”
Bruenig suggests that this could be funded through raising income tax, by swapping shares for government assets, raising taxes on the wealthy or simply printing the money. But, let’s put the funding to one side. Because there’s a more important point to make.
Bruenig’s proposed policy is, as the Tax Foundation’s Scott Greenberg points out, indistinguishable from a tax on business cash flow. And that’s not a bad thing.
Taxing cash flow is far superior to our existing system of taxing corporate income. As I’ve argued before, we can turn corporation tax into a cash flow tax with two simple tweaks. First, allow firms to deduct the cost of investments from their taxable income up front. Second, allow firms to carry forward the true tax value of past losses. As Sam Bowman points out, allowing firms to expense their investments up front could substantially increase rates of investment leading to higher wages and economic growth.
Gavin Ekins, also at the Tax Foundation, explains why full expensing is the equivalent to the government investing in an index fund (that covers the whole economy) with a neat example.
“Assume that each time a business purchases equipment or a building, the government purchases a portion of the equipment. For example, a bakery purchases a $1,000 professional oven for baking bread. The government tells the baker it will purchase $350 of the oven and the baker must provide the remaining $650. In return, the government receives a 35 percent stake in the oven, which gives the government 35 percent of all the capital income from the oven.
"After paying for all the flour, utilities, facilities, and labor costs, the oven makes $200 per year for 10 years, at which point the oven must be retired. Each year the baker returns to the government $70 for its stake in the oven, and the baker keeps $130 for herself. Both the baker and the government receive 20 cents per year for each dollar they spent on the oven. Not a bad return for both investors."
“If the government did not purchase the 35 percent share, the baker would have to pay the entire $1,000 for the oven. The baker would still receive $200 per year, but could keep it all for herself. Just as before, the baker receives 20 cents per year for each dollar spent. The baker receives the same income per dollar per year as she would with the government as a co-investor but has laid out $350 more than if the government were a co-investor.”
“Full expensing has a similar effect to the government directly investing in a portion of the equipment or building purchased by businesses. Assume the government has a 35 percent tax rate on business income along with full expensing. When the baker purchases a $1,000 oven, she can deduct the expense from her taxable income, which reduces her taxes by $350. This effectively returns to the baker $350 when she files her taxes.
“Just as before the baker makes $200 from the oven each year. The baker pays her taxes, $70, and keeps the remaining $130 for herself. In both cases, the baker receives $130 after-tax per year for an investment of $650 after-tax rebate. Similarly, the government receives $70 per year but loses $350 initially. As such, full expensing with a tax is equivalent to an investment by the government without a tax.”
Full expensing is an idea that’s growing in popularity, is included temporarily in the Tax Cuts and Reform Act passed by the Senate, and was the key feature in Paul Ryan’s A Better Way plan for tax reform.
In a way, Ryan’s plan is more radical than Bruenig’s. Bruenig wants to compensate firms for their shares, Ryan simply takes his cut of their income without compensation. The only parts missing are Bruenig’s suggestion to print money, raise income taxes and dole out extra spending.
Why then go to all the effort of setting up a investment fund and coming up with creative ways to fund it? When you could just spend the money raised through higher income taxes and money printing directly. Will Wilkinson’s suggestion is probably why.
“The structure of rights and interests is radically different, which is why the politics are radically different, which is why there's basically zero chance that a real-world SWF would fund the same flow of transfers as a cashflow tax on privately held capital income.”
Or as Scott Greenberg puts it:
“It's almost as if someone got tired of arguments about the government "spending taxpayer money" and "taking money away from hard-working businesses" decided instead to call it "government ownership of equity".
If only Paul Mason understood social mobility
Paul Mason tells us that we should have more social mobility. Hmm, OK, but the problem is that he's misunderstood what it was that actually happened. This was not the cause of that great shift in the 1950s and 60s:
My father lived through the thing that terrified Richard Hoggart, in The Uses of Literacy, and then Eric Hobsbawm: the decline of the implicitly brutal and subliterate “proletarian way of life”. Watch a movie such as Saturday Night and Sunday Morning or This Sporting Life to understand the yearning for improvement, non-brutality, tenderness and advancement that gripped working-class people in the 1950s.
This, in turn, had material roots: cheap rents, free education, aggressively interventionist social work against dysfunctional families, TV stations run by philanthropists rather than, as now, people determined to promoting ignorance.
If I wanted to save capitalism, I would tell Theresa May to implement all this urgently – and more.
No, really, that's not what happened. We agree entirely that this was not unusual:
I know this kind of social mobility is possible because I am a product of it. My paternal line on Ancestry.co.uk reads: hatmaker, hatmaker, hatmaker, miner, miner, economics editor of Newsnight.
The paternal line of a lot of us is very similar. It is of this writer for example even if shifted by a generation.
What did actually happen is something that even Polly Toynbee occasionally manages to get right. The British class system is not purely economic - everyone should know that. Further, there's a very strong tone in it of manual labour being working class, indoor work no heavy lifting being middle class of one sort or another. So, what is it that happened over the decades of that burst in social mobility?
We moved from a society in which a goodly percentage of the population, 30, 40, perhaps 50% dependent upon date, did manual labour to one where some 10% do now. The percentage of the population engaged in agriculture fell at the same time, near everyone works in some form of services these days. That's that indoor work no heavy lifting which our class system defines as middle class of some form or other. We're not going to have a similar movement again in the future as there just isn't that portion of the population to move out of manufacturing and manual labour.
It's worth noting that Mason is one of those who complains bitterly about the fact that we've no longer got all those manufacturing jobs. Exactly the change which caused, not just allowed, the social mobility he's celebrating. After all, if 50% of the people still need to report to a production line each day then we're not going to have a great deal of that class mobility away from working class jobs, are we?
But by far the most embarrassing point we can make about Mason's argument is that he's not grasped something which even Polly Toynbee can.
Really, less perceptive than Polly? It's not a recommendation, is it?
MPs need to be more enterprising to win the hearts of innovators
Facebook picked Britain as the location for its largest engineering hub outside the US. A Facebook spokeswoman said we were chosen due to our “entrepreneurial ecosystems and engineering excellence”. Making Britain the best place to start and grow a business and attracting big tech companies, is part of the answer to solve our productivity problem and boost dreary growth forecasts.
The Entrepreneurs Network, in a survey conducted by YouGov and released today, asked MPs which policies would encourage and help entrepreneurship in the UK: Conservative MPs reckon a ‘hard Brexit’ will help founders, while Labour MPs think we’d be better off stopping Brexit altogether; Labour are less keen than in previous years to lower business taxes; and all of Westminster are warming to the idea of making it easier for highly skilled workers to venture to the UK.
A majority of the entrepreneurs in our network voted to remain, and business polls pre-referendum showed most businesses felt the same way. Conservative MPs don’t share the same sentiment: a healthy majority of 66% of Conservative MPs want a ‘hard Brexit’ compared to only 8% of Labour MPs, when asked what would be best for UK entrepreneurship. In a similar vein, 71% of the Labour Party think remaining in the EU would be best for entrepreneurial activity in the UK, compared to 10% of the Conservative Party. If the Conservative Party want to remain the party of business, they will need to find other ways to appeal to entrepreneurs.
Perhaps one of these other ways could be in their continued support of low personal and business taxes. Our entrepreneurs will be pleased to hear that 91% of Conservative MPs think lowering personal taxes would be good for entrepreneurship, compared to just 26% of Labour MPs. Corbyn appealed to entrepreneurs and small business owners in his manifesto with penalties for late payments and scrapping quarterly reporting for businesses with a turnover of less than £85,000. Corbyn must drop his ‘tax ‘em high’ mindset, if he wishes to have continued support from these groups.
For our entrepreneurs, both main parties are like one of those sweetened vitamin tablets: they might be sweet on the outside, but they leave a nasty taste in your mouth when you get to their core. Vote Conservative and you might get a Hard Brexit but low taxes, vote Labour and you could get a soft Brexit or even remaining in the EU but with higher taxes.
The Parliamentary Snapshot did find something for every entrepreneur to smile about: MPs are increasingly open to the idea of welcoming highly skilled workers into the UK. Conservatives went from 40% to 50% from 2014-2017 and Labour, 53% to 70% in the same time frame. Despite differences over taxes and Brexit, MPs open minded attitude towards immigration of high skilled workers serves as an antidote for entrepreneurs.
Our parliamentarians are increasingly aware of the issues facing entrepreneurs and are increasingly willing to help. But there is some way to go yet, too often tax relief and investment schemes that remain highly prized by innovators but unknown and undervalued by elected officials.
At least MPs are beginning recognise the importance of skilled talent, both to brand UK and to solving our productivity crisis. So, if they want more successes like Facebook, they should listen to what entrepreneurs are saying would be good for them.
Time for our biannual complaint that British rail tickets are too cheap
One of our little modern rituals is to point out twice a year that British rail tickets are too cheap. Once when the amount they will rise by is announced, sometime in the summer, and once when they are about to rise, at this time of year:
Rail passengers will be hit by the largest fares hike in five years next month.
Average ticket prices across Britain will go up by 3.4 per cent on January 2, industry body the Rail Delivery Group (RDG) said.
It is the sharpest rise since 2013, when fares increased by 3.9 per cent.
Passenger watchdog Transport Focus compared the news to "a chill wind" blowing down platforms as many passengers' incomes are stagnating or falling.
Contrary to much wibbling around the place the British system of railways is not notably more expensive than those of other countries. Rather, the difference is in who pays for it all. Here, passenger ticket prices pay for some 99% of operating costs. In many other countries there is a substantial contribution from the general taxpayer. That's what explains the difference in ticket prices.
We think it's just fine that those doing the travelling pay for the travel to be done. We do not see the point of taxing the dustman so that the Duke may go shooting.
There are parts of the network which really do need subsidy - the commuter lines around the largest cities. They also get that subsidy. Other parts of the network make a profit and the two largely balance each other. This might not be perfect but we do indeed insist that it's better than a general levy upon non-travellers to pay for those who travel.
That tickets are still too cheap is proven by the manner in which only operating costs are being covered - capital costs still largely devolve to the taxpayer. This should not be therefore tickets should cost more.
Why is the government dumb on health?
All Whitehall departments want more money than is good for them but they cannot all have a bigger share of the pot. The bigger the spenders, notably Health and Defence, the more they demand. And, of course, the bigger the spender, the more they waste because, primarily, they have the money to do so.
In this autumn’s budget season, the clamour to increase the NHS England budget, sizably and immediately, has been intense, not just from the NHS but from almost all interested parties such as the chairman of the Commons Health Committee, the King’s Fund and the professions. In the event, the Chancellor provided about half the amount demanded but without any rationale for his decision. In the previous week, The Times had led us to expect the Chancellor to require that the NHS make good their promises of savings before they should expect their claims to be met. In riposte, NHS England asked which targets should be abandoned but they did concede that the NHS bill could be reduced by £200M p.a. if doctors stopped prescribing medications available over the counter. But we have heard that many times before - in 2012 for example. GPs are not employed by the NHS and are pretty much free to prescribe what they like.
No solid estimate exists for waste in the NHS. It could be as much as 10%, i.e. over £10bn p.a., but no one really knows. NHS England particularly do not want to know as it would undermine their case for more funding. The curious thing is that, after the Chancellor’s challenging words before the budget, there was no sign of them in his budget, no attempt to justify what most see as a miserly and inadequate handout. Why dumb? Why is the Chancellor shutting up without putting up?
The public deserve the truth. Waste in the NHS is in nobody’s interest. There have indeed been genuine improvements in the use of resources, such as reduced stays in hospital. There have also been unmet claims of increased future “productivity”. The Chancellor should insist upon a priced list, audited by the NAO, of the savings that can and should be made. As the Russians say “Doveryai, no proveryai” (trust, but verify). The waste within the Department of Health, those 30 or so quangos outside the purview of the NHS itself, would be quite a good place to start.
To help things on their way, here are a few examples of waste:
- Professor Briggs and his team “found huge variations in the cost and quality of common treatments, with low-performing hospitals routinely ignorant about superior methods adopted elsewhere. The NHS could save hundreds of millions, if not billions, a year if the best and most efficient practices were applied across the country.” And “More than 300,000 patients a year are needlessly admitted to emergency surgery beds when they do not need an operation.” Their report did not total its examples but it reveals billions rather than millions of waste.
- The under-use of expensive facilities such as operating theatres. The surgeons are willing but the bureaucrats are not.
- Anything that takes doctors away from the treatment and cure of patients is, prima facie, waste. Clinical Commissioning Groups are an example. There are far simpler and fairer ways of allocating funds to GP practices which would involve GPs is far less admin.
- Bed blocking. Adult social care is under-represented in the upper levels of the Department of Health and perhaps as a result the NHS gets more than its fair share. As a direct consequence, inefficiencies are introduced into the NHS. Having the value of the blocked beds, for example, passed to the adult social services would not reduce NHS capability whilst also providing more relevant help to the elderly.
- The NHS should focus on the treatment and cure of individuals and not distractions such as general health. Of course prevention and dealing with epidemics are important but the Department of Health has the 5,500 staff in Public Health England to do that.
- Similarly, the NHS should not duplicate the well funded Medical Research Council with its own National Institute for Health Research at a cost of over £1bn.
- Bureaucracy is endemic throughout the primary and secondary NHS: “Bureaucracy takes up 3-4 hours [a week], of which maybe 50% is of any clinical value”according to one experienced GP practice head. Bureaucracy is compounded by having too many targets.
- The number of managers, long a matter of complaint, has reduced somewhat but there are still layers of hierarchy in hospital trusts which may give respectability but do little for patient care. Budgets are not set by boards but by battling consultants. The NHS would save a lot by recognising reality.
- Anyone who has spent time in a public ward will get the impression that medical staff spend more time nursing their computer terminals than nursing their patients. Of course each shift needs to brief the next but this misalignment aggravates shortage of nurses. On 22nd October 2017, in the otherwise excellent Frimley Park hospital, a 97 year old in a six patient ward was reportedly dead for up to three hours before the staff noticed.
The Chancellor has not made the case for his funding decision and he will not satisfy public opinion if he remains dumb. Likewise, the government has rejected Norman Lamb’s request, supported by 90 MPs, for a non-partisan, cross-party strategic review of the NHS to cover, inter alia, what it should fund and the extent to which patients should contribute, as we do with dentistry and prescriptions. Again, no rationale has been provided. Surely a Tory government should be glad to get the topic off the table? Dumb and dumber.