Paying the doctors would not only solve an NHS pay dispute, it might well boost the economy as well

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The government is as adamant as ever this morning that it cannot afford to address the NHS doctor's pay dispute.

They are offering 2% when inflation has been 10%, and junior doctors have seen their pay fall by more than 25% on average over a decade. There is, I suspect, no one but health secretary Steve Barclay (and maybe his shadow, Wes Streeting) who think that is a sensible offer, but they insist it is all that can be afforded. What is more, they claim inflation will result if they concede.

Inflation cannot result. Presuming the eventual deal is no more than 10% (and I am being an optimist when suggesting that) there will be no wage spiral. What is more, the NHS does not charge for its services: there can be no price impact as a consequence. In that case, most of the government's argument falls away.

But so too does that on affordability. A 2013 paper looked at this issue in the journal Globalization and Health. This is US based. I suspect the findings very readily transfer to the UK. The question asked was whether in the post-2008 downturn extra spending on health might increase overall economic wellbeing. The short answer was that it could. This is the abstract:

The research focused on the fiscal multiplier effects of medical spending. As the authors neatly summarised the multiplier:

The fiscal multiplier is an estimate of the effect of government spending on economic growth. A multiplier greater than 1 corresponds to a positive growth stimulus (returning more than $1 for each dollar invested), whereas a multiplier less than one reflects a net loss from spending.

To summarise the findings, over a range of scenarios the authors found that this was always the case. Using unadjusted data they came up with these multipliers pre-2007:

Adjusting for a range of variables they came up with lower estimates:

The disparities are big: the paper explains them, reasonably. But the point is that in a stable environment healthcare spending pays for itself. In a recession, it is likely to yield significant positive returns. That is not true of all government spending, with defence always coming out worst.

The question is, why in that case is the government denying medics the pay rises they so obviously deserve and which society requires to be paid? Is it stupidity, spite, or some darker motive?


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