The NHS is in crisis. That's not just because of money. It's also because its management structure is hopelessly inappropriate and prevents the possibility of truly effective working. But cash is at the heart of its problems.
And now schools are also facing a crisis. And not just ordinary schools, but the government's preferred ones where private sector involvement is meant to solve the problem of scarce resources, like money. Except it isn't. That, of course, is partly because the management structure of schools is hopelessly inappropriate and prevents the possibility of truly effective working. But cash is still at the heart of its problems.
As it also is in the crisis in social care, across the justice system, armed forces, local government, and so much else. There are many management problems in many of these as well, for the record, which prevent the possibility of truly effective working. And as in all the other cases those management problems all arise from pretending there is a market and attempting to operate at a scale that is far too small to be effective, and so too expensive to be viable. But solving these issues, vital as it is, will not realise the savings to resolve the shortage of money. The simple fact is that austerity has now run out of cuts to make and those made to date are now creating new costs that ensure service delivery simply cannot happen in a way that anyone can any longer pretend meets need.
We have reached that point that always arises when a crisis is postponed where, at long last, something simply has to happen. In this case pretending service delivery reform can solve problems any more is not possible, especially when both PFI and outsourcing all too obviously no longer work. Instead the choices left are to suffer reduced services or to pay for for the services we need.
We can have less health care.
Children need not be properly educated.
Justice need not be done.
Care may not be delivered.
Flood defences can fail.
Troops can be told their equipment does not work. Or will not protect them.
Pensions need not be paid.
People can be destitute.
Those are choices that can be made. And there are those who would make those choices even though they know people would suffer as a result. Indeed, some might make them precisely because they know people will suffer as a result - their dogma says that without suffering people will not help themselves.
Many more though know that dogma is wrong. People without socks cannot pull them up.
I also know it is unnecessary because we can have all the money we need to pay for the services we require. That's because in an economy where there are people to do jobs that are not being done, which is the prospect we face in all the situations I describe, it is simply not possible to say that there is not enough money to pay. That's as impossible as saying that in a football game played on an appropriate pitch in accordance with the normal rules that there can be a shortage of goals to be scored. Goals are, after all, simply the currency of football: there are always enough to keep score, because that's all they are. They're a scoring system. And so too is money that when used to make the economy work.
Saying that there's a shortage of money to make the economy work is then like saying that in any match there may only be three goals, after which the game will end, and the remaining capacity for entertainment that it might have delivered will be abandoned, at cost to us all. The economic equivalent is to say that although more was possible in the economy it wasn't done because money was rationed.
But that's absurd. Goals aren't rationed. There can never be a shortage of goals in the world. So long as football is played more will be scored. And it's the same with money: as more economic activity takes place more money will be made. It's playing football that creates goals. It's the process of exchange that is implicit in economic activity that creates the promises to pay that are what money is.
And nor is it possible to say that some economic activity, in the government sector, is constrained by the extent of activity in another sector. So long as there are idle resources that could be used either at all, or to better effect, then constraining government sector activity is as absurd as saying that the number of goals scored in the women's game is dependent upon the number of those scored in the men's game.
I make clear there are capacity constraints to consider in both cases: so, in football, allocation of available pitches can be an issue, and getting the balance right in that allocation is important if the overall best outcome is to be achieved of (but only if) that shortage exists. So too might finding the right balance between private and public sectors be important if and when we ever get back to full employment with high productivity, but we're nowhere near that now. Or to put it another way, the constraint is not real right now.
So, in that case to pretend action cannot take place because there is a shortage of money is just wrong. The reality is that what pays for the NHS is people working in the NHS: the wages they are paid result in taxes due, additional spending and so growth elsewhere, as well as more taxes being paid by those in those other activities, and so on. All that is needed is for the government to realise that there isn't a finite sum of money constraining anything.
And nor is it required that the government's books balance. That is a rule as absurd as, in footballing terms, demanding every game end in a draw. It's not only unnecessary, but it also very obviously defeats the object of the exercise. And if a government deficit simply represents new money injected into the economy to facilitate the growth in things that need doing then, within reason, deficits are not an issue to worry about. And they can be controlled at will in any case by simply charging more tax, where the footballing equivalent was introducing the offside rule.
The point is a simple one then. Suggesting we cannot pay for things because there is a shortage of money is absurd. Money is just a promise to pay. And it's created by economic activity, and most particularly (because people want to use government created money) by the government doing what's necessary to meet demand in the economy. In the light of that understanding saying we cannot afford to undertake economic activity because there is no money shows three things. The first is a profound misunderstanding of what money is. The second is a profound misunderstanding of how the economy works. And the thirds is a lack of willingness to learn.
All three are serious.
The last is the worst.
We can pay for the services we need and want right now: the government just has to promise to pay, knowing it can then tax the money it creates back out of existence in due course.
The fact is that the services we need are paid for by providing them.
Just as a football match can only be won by playing it so too can the economy only provide the services we need by letting it. The goal of making the money to pay for it will follow: even the models are congruent if only we seek to understand things properly. And at its core that means that we have to understand that just as goals aren't the product of games of football, because winning and entertainment are, with goals just marking progression towards achieving those aims, so too is money creation not the aim of an economy. Full, gainful employment that meets need is that goal and money just marks progression on the way.
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“It’s playing football that creates goals,” you say. Well, normally I agree with your ideas but as a long-suffering supporter of Hamilton Academical FC . . .
I edited out the references to Ipswich Twon for roughly the same reason
I’d be interested to hear what, in your opinion, is “hopelessly inappropriate” about the management structure of the NHS and our schools.
Now done
On the blog this morning
Continuing the theme above, I remember a time when (as an Arsenal supporter) goals were rationed. Not only that, but they were only allowed to be scored at one end. The terrace chant “one nil to the Arsenal!” was coined to celebrate this fact!
To stretch your analogy further, in those days the Gunners were known as a very boring team (rationing goals equals lack of entertainment) just as now austerity results in lack of happiness/fulfillment.
Of course now at Arsenal matches any number of goals can go in at either end – therefore I suggest Wenger for Prime Minister! He could hardly be any worse 🙂
🙂
Yes, it’s both depressing and frustrating. On behalf of its people, a UK government has all the tools required to repair the damage and provide the long-term framework for our society to prosper at all levels. As the Tories are the principal architects of these problems they must go in order for sustainable solutions to be implemented.
The forthcoming local elections may give some indication as to the level of public dissatisfaction but I don’t envisage a landslide in favour of the Labour Party. It is deeply regrettable that the binary Brexit debate overshadows the much more important task of tackling these domestic issues, which have precious little – if anything at all – to do with our EU membership. I think the government is happy to have this distraction and probably fuels the social division created by it, typified by the popularist rhetoric of MPs like Rees-Mogg.
The burden of change therefore rests on the shoulders of the Labour Party. But, thus far, it hasn’t projected into the public consciousness that it has the skillset to lead the nation forward to a better place. Its strategy appears to be to allow the Tories to implode and then step into the vacuum, rather than confidently and proactively promoting a progressive programme of reform based on the principles you have outlined. Either they’re afraid of their own shadow or – worse still – don’t even understand what can be achieved.
It always seems to come back to the same old issue, doesn’t it? Until neo-liberal ideology is seen for what it is by the electorate, nothing will radically change so long as successive governments fearfully cling to out-dated economic dogma, continually tinkering with Keynes, thereby prolonging the chance of better long-term future for the many not the few (now that would make a good Party slogan).
Based on an extrapolation of where we stand today (viz. your list of failing public infrastructure) the majority public will only demand change when they are personally affected. It’s the frog in boiling water analogy. One can only hope they hop out before they (we) are cooked to death! I’d feel more confident if the Labour Party articulated a coherent, realistic message as to how essential change can be achieved and managed.
In the meantime here’s a message for Generations X, Y and Z – https://www.fastcompany.com/40454254/dont-be-scared-about-the-end-of-capitalism-be-excited-to-build-what-comes-next.
I admit I am looking forward with interest to these results
But equally I suspect May will keep buggering on after them, somehow or other
I can do pessimism….
John,
“”The burden of change therefore rests on the shoulders of the Labour Party.”
Yes
“Its strategy appears to be to allow the Tories to implode and then step into the vacuum”
True and the strategy is cynical but, historically, it has worked well for others.
“rather than confidently and proactively promoting a progressive programme of reform based on the principles you have outlined”
Be fair. They have only just recently consolidated post GE (thanks, Mrs May) before that the leadership was consumed with fighting off the chicken coup, its allies and its aftermath, which was quite a battle. You are expecting a bit much within a few months.
I don’t know how well they will follow through but I would say that it is early days yet. What’s more in FPTP realpolitik terms they need to do more than promote a progressive programme. They need to convert increased vote share into seats in the HoC, pick up the marginals and hopefully some more of those surprises seats like Canterbury and Kensington.
All in all we should not only think about what Labour should do but how they could do it.
John D,
Fast Company looks interesting. Thanks for that link.
They are not tinkering with Keynes. They are actively shunning him and worshipping Friedman. Friedman’s ideas don’t spring from Keynes, they reject Keynes and take us back to before Marx, or even Adam Smith.
I don’t understand how the 2008 cap on places at medical school is a cash problem. There are fewer trained doctors coming through the system than we would like. Printing money to increase the pay of currently qualified doctors isn’t going to increase supply if the unions have a claw grip on training numbers, unless you’re thinking about making the UK more attractive for immigrant doctors.
Or as discussed in Davos, the money printed is used to increase the technological feasibility for people to diagnose and treat/operate on themselves at home without the need for a doctor.
We are rejecting immigrant doctors right now
Your mentioning of unions here is facile
Oh, and as for self diagnosis it is not possible. Doctors know that. I am married to one. We discussed the issue this afternoon, at length.
“Your mentioning of unions here is facile”
Glad you picked up on that. I winced when I read it.
Are we ever going to stop blaming Trades Unions for the incompetency of management I wonder?
People say that if money isn’t the problem and it is all as simple as we say, why hasn’t any government done anything about it in the past?
I also find that disbelief seems far easier than people getting off their rear ends to find things out for themselves. Some thing which the establishment uses to their advantage, knowing no one will check what they say is true, the BBC are past masters at it it.
Propaganda has amazing powers, which allows people to accept what they want to believe, although it is in fact working against their own interests.
Corporate power to day is not only depriving people of a better life, but is destroying its own foundations in the process.
The bizarre thing is corporates are harming themselves in the process
In education, the central underfunding to what are now business units – academy schools – has only one aim: to reduce the wage bill. That’s how I see it anyway. How many times have we heard the Tories say that ‘anyone can teach’? Lower wages bills equals better returns potential for investors who are always asking for more.
Taking education in the round with other statutory services/NHS it is clear to me that the chronic and deliberate underfunding is just yet another example of neo-liberal derived ‘shock therapy’ with the aim of creating structural changes in the funding and ownership of the provision of public services.
Richard Werner in his book ‘The Princes of the Yen’ says that the Bank of Japan could have printed money at any time to alleviate matters after the overheated credit driven boom that it created led to stagnation in the Japanese economy. In Japan’s case this restructuring was because of pressure from the USA.
But they did not print money. And clearly it was to make people change by giving them no choice.
And here we are in a supposed democracy subject to the same underhand strategy. Here we are about to cut ties with Europe which may mean us having closer ties with the USA who increasingly need to invest overseas having hollowed out so much of their own country and its middle class in the name of short term profit.
We should really know better, shouldn’t we?
We should
It seems we don’t
Pilgrim Slight Return says:
“Tories say that ‘anyone can teach’?”
Ah, but they also espouse the contradictory theory that you need a subject expert to teach, and that is an equally dubious claim.
In my experience people who are expert, are often/sometimes incapable of understanding what is screamingly obvious to them and totally opaque to their pupils.
The best teachers understand the extent of their own ignorance, and pass on to their pupils the gift of curiosity.
1960, Hampden Park, 127,000 spectators, Real Madrid 7 – Frankfurt Eintracht 3. Some say possibly the greatest game ever played. I could hear the famous “Hampden Roar” from my house several miles away. Di Stefano: Hat-trick; Puskas: 4 goals.
They knew what the 3 sticks at each end were for and where to put the ball, both sides scoring a load of goals on the way to that fantastic final, both entertaining and winning. Our politicians are playing in a different league, almost a “different game” with no hope of promotion.
G Hewitt says:
“1960, Hampden Park, 127,000 spectators, Real Madrid 7 — Frankfurt Eintracht 3.
They knew what the 3 sticks at each end were for and where to put the ball, . Our politicians are playing in a different league, almost a “different game” with no hope of promotion.”
Three sticks at each end and a ball…..sounds like cricket to me. 🙂
Definitely a “different game”.
Andy
What do you think the cross bar is?
🙂
“What do you think the cross bar is?”
It’s the part of the bicycle that bruises your ‘groin’ when your foot slips off the pedals 🙂
Why is it that accountants can see clearly what’s wrong with the management in the NHS and probably education too (both schools and universities) yet 50% of those in parliament are lawyers – well known for their inability to make 2 + 2 = 4 ?
It’s all so obvious to us accountants but we do not get a look in.
There are very few accountants in politics
And few out their heads above the political commentary parapet
Money is made by doing the wrong thing in accountancy as a rule
“Money is made by doing the wrong thing in accountancy as a rule”
A friend of mine used to say (and probably still does of there’s anybody to say it to) that :
If an engineer runs a company it will never make money. But if an accountant runs it it will never make anything.
If we allow ourselves to assume only a binary choice is available this is a counsel of despair.
It’s a pity Tony Blair did so much to taint the currency of ‘The Third Way’.
Ha ha
There are a few decent honest accountants around Richard.
And their numbers include you and me
I know others as well
Wally says:
“There are a few decent honest accountants around ..”
There are decent people in all walks of life. (There are even decent politicians) I’d go so far as to say most people are decent. The villains really are only a small minority, but somehow they get to be disproportionately powerful.
In 2014 NHS England published a 5 Year Plan in which it states (undemocratically and presumably with the aid of a crystal ball) that the NHS in England will never have the money it needs ever again to provide services in the way it has done to date. It therefore sets out an entirely new way of providing health services.
The money projected for the NHS really is not enough to provide the kind of system we are used to. That is to say the local GP family practice, cottage or community hospitals, local District Generals with A&E (especially not A&E it is very expensive). So we have been sold a message that the NHS needs to change because it is not fit for purpose in the 21st century and that an ageing population with complex needs is bringing it to its knees.
Persistent de-funding of public service leads to a hemmorhage of staff (early retirement, leave the country, change career, move to the private sector). Not that the 5 Year Plan mentions that. But staff is the biggest cost to the NHS.
If your business plan includes reduced funding and your current fixed costs or those which will cost more in the future (PFI, commercial rents, IT, etc) are limiting the options for other ‘economies’ then staff need to be got rid of, paid less or substituted with lower paid professionals or para-professionals. Not having enough staff provides the perfect rationale for carrying out the reshaping of the system to fit the future funding restrictions. After all if you have 100 establishments with only the staff for 80 you move the staff from the places you want to get rid of in your plan and say it is unfortunate, temporary pending recruitment or unavoidable. In the case of NHS service reductions and hospital closures it is usually patient safety that is quoted as the reason. And as a bonus!! Look!!! We can sell off the empty buildings to give us some cash to put in the pot!!!! Hurrah….
But all the time the actual re-shaping of services as described in the 5 Year Plan and all its extensive ancillary documents is being put into place. There is ‘no money’ but Super Hospitals are being built. There is ‘no money’ but £billions are spent on management consultants and the Big 4 to make the changes happen. Hospitals, GP surgeries and other health facilities are being emptied of their staff and services to be sold.
The NHS is being re-modelled on US lines – specialist superhospitals, multi speciality community providers – into 44 new commercial organisations which are being created to run these new systems. The buildings the NHS used to own will be gone, demolished to build luxury flats in areas where land value is high. The possibility of finding sufficient numbers of sufficiently large spaces in towns and cities to recreate in the future such an expansive and accessible health service as we have had for 70 years looks increasingly remote.
Bear in mind that the response we are seeing to a supposed growing and ageing population is the shrinking of the NHS. Meanwhile hospitals can earn up to 49% of their income from non-NHS sources and some are doing that with gusto. Expanding the private capability whilst shrinking (access in particular) the service overall. Private GP surgeries are being piloted in pharmacies. You can pay to have a telephone consultation with a GP on an app – ‘Uber’ style. The restrictions on the NHS creating market spaces for private profit.
And all pushed into place by the false assertion that the government ‘cannot’ raise the money even to maintain the NHS at its current level. ‘Look into my eyes ‘there is no money’. Rinse and repeat ‘there is no money’……. Meanwhile global health is an expanding market and McKinsey reckoned in 2010 that if the government would just allow the NHS to compete in private markets then it could become a £200bn a year business, twice what it costs now. As economic illiteracy/rentier money grabbing/obfuscation goes, it’s breathtaking. And as the loss of a brilliantly conceived public service, it’s heartbreaking.
Thank you
Your passion is welcome
Lallygag,
“As economic illiteracy/rentier money grabbing/obfuscation goes, it’s breathtaking. And as the loss of a brilliantly conceived public service, it’s heartbreaking.”
Heartbreaking.
“The fact is that the services we need are paid for by providing them.”
An excellent one sentence summary of the ‘Joy of Tax’ and a delightfully succinct answer to the ‘how are you going to pay for it?’ brigade.
I used it this afternoon with a sceptic
20 minutes later they were convinced
It also works for improving pay by the way
The way to get the higher pay the country needs is to increase wages: productivity has to increase in that case.
Hi Richard,
Absolutely agree with your last paragraph – productivity is low because it can be whilst still making the owners of capital a return. Increase the cost of labour and businesses have to invest in skills/machinery etc to turn a profit and productivity will therefore rise.
My nagging doubt whilst writing the above is regarding imports/offshoring of jobs. Do you think there is a case for revising (upwards) the tariff protection of the customs union (and whatever we have in its place post-Brexit)?
No
We gain by being more competitive internationally if we increase productivity
Tariffs will prevent us benefitting from that
I like this: “The reality is that what pays for the NHS is people working in the NHS: the wages they are paid result in taxes due, additional spending and so growth elsewhere, as well as more taxes being paid by those in those other activities, and so on. All that is needed is for the government to realise that there isn’t a finite sum of money constraining anything.”
Sadly the people who really need to read this never will.
Carol,
“I like this: “The reality is that what pays for the NHS is people working in the NHS: ”
There’s a fuller explanation of all this from way back which you might have missed.
Richard’s posting on of a piece from Progressive Pulse. in October.
http://www.taxresearch.org.uk/Blog/2017/10/16/can-we-afford-the-nhs/
I thought it was quite illuminating.
Several people have referred to that piece in the last day
Thank you so much for your enlightening articles, I truly appreciate them.
I have been in education all my 40 year career, my focus being the creative arts and special needs, teaching in schools and colleges.
Since retirement I have become very politically active fighting for equality, social justice and human rights particularly for our most vulnerable.
I have been very involved in health campaigns together to save our precious. NHS.
My economic knowledge is dire, although I realised that if you can find billions for vanity projects, for proxy wars, for HS2 etc then it can just as easily be produced to save our NHS If only the political will is there.
I have made use of your many articles to teach myself and others the truth, alongside learning about MMT , thank you so much…
Thank you
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