Rachel Reeves must think the only job a government has is to balance its books. There can be no other explanation for the insanity of calling in bankers to advise on the NHS.
And for those noticing that I do not actually appear in the video, this was made yesterday, but when Thomas arrived to record, he took one look at me and declared he was not filming someone who looked as unwell as I did - and so I recorded an audio instead, which he made into a YouTube. I appear to have caught one of the viruses that is going around.
This is the audio version:
This is the transcript:
Does the NHS need advice from bankers? The question needs to be asked because Rachel Reeves as Chancellor of the Exchequer and Darren Jones as Chief Secretary to the Treasury are apparently going to be pulling in all the Secretaries of State for all the main government spending departments and they're going to interrogate their plans for the coming year.
To assist them, they are apparently going to request that some bankers sit in on the interviews in question, with those bankers being tasked with finding savings in the departments in question.
Now this is a quite extraordinary idea because it has been suggested that the NHS should be the focus of one of these reviews.
What do bankers know about the NHS? I would politely suggest that the answer is not a lot. After all, bankers exist to extract money from people, and whilst that might be the model for healthcare in the USA, it is not in the UK, where things are run very differently indeed.
But more than that, what do bankers actually know about business?
If we look back not very long into the history of the UK, we will find that banks are actually one of the worst-run sectors in the whole of our economy. How do I know? Well, that's because banking crashed in 2008.
It wasn't a minor crash. It wasn't the odd moment of failure. The entire sector basically fell.
Yes, it's true that Barclays appeared to avoid this fate, but ever since they have been involved in all sorts of inquiries as to how they managed to do so. There were, therefore, in effect, no exceptions to the 2008 crash where every bank, either failed or survived only because of government support.
Now, I suppose you could say that as a consequence, the bankers know more about extracting money from the government than the managers of the NHS do and they are therefore perfectly placed to assist the managers in the NHS to extract all the money that they can from the Treasury, but, with respect, I don't think that's what Rachel Reeves and Darren Jones have in mind by calling these bankers in.
In fact, what we know is that these bankers are supposedly going to identify savings of up to 5 per cent each year in the NHS budget, which is, as a consequence, going to shrink for the benefit of Rachel Reeves' task of supposedly balancing the books.
Where are they going to find 5 per cent from in the NHS budget? Well, this is hard to imagine, because, let's also be honest, bankers don't know about cutting costs. They run enormous budgets with vast numbers of people undertaking tasks in activities that seem very hard to explain to the world outside and where the value added is decidedly questionable and, as a consequence, they actually would know almost nothing about an organisation where admin costs are reckoned to be 5 per cent or less of total budgets.
They are, therefore, not going to find slack to cut in that area, which is the chosen obsession of every person in finance who believes that if only you can sack some admin people, you can turn an organisation around. The reality is that that isn't going to be possible in the NHS.
The only thing that is going to be possible in the NHS is to cut frontline services.
The vast majority of people working in the NHS are either directly providing those services or work in some facility that supports the provision of those services, and who are therefore, fundamental to the well-being of the service.
How will bankers identify who those people are key are?
Well, they will use a standard banker's logic? What is the rate of return on investment they will say. And they will look at this and say, children under the age of five have very limited economic value. and make very high demands on the NHS, so maybe paediatric care of all sorts should be cut.
And they'll look at people over the age of 65 and say, they are no longer contributing to the economy, so why do we need them? Let's cut them as well. The rate of return on investment in these two categories is tiny, and yet they apparently absorb the majority of the NHS's cost, so let's cut that out and everyone will be happy.
Unless, of course, you happen to be the parent of children, and you happen to have parents who are still alive, or you are a grandparent, or a person simply over the age of 65 who is still alive, who needs medical care, in which case you may not be so happy.
But of course, bankers won't understand that either, because the bankers in question are very wealthy. And what they won't understand is that the people who will be suffering as a consequence of any outcomes they devise will not be wealthy in the main. There will be this fundamental understanding divide between them and the people to whom the NHS provides services.
First of all, the people to whom the NHS supplies services will, to the amazement of the bankers, not have private health insurance. They will presume that they will because, after all, the banker always does.
And the person to whom the NHS supplies services will probably not have an annual health checkup paid for by their employer. But the banker will.
And the person to whom the NHS supplies services might even be in poverty, a state that is simply unknown to a banker at the top of the pile who will inevitably be the ones who will be called in to advise Rachel Reeves.
There will, therefore, be the most staggering comprehension gap, and I believe that will be insurmountable.
I don't believe these people know anything that is relevant to the NHS.
Their own business has failed spectacularly under their leadership.
They do not understand what a service business that does not charge at the point of supply does.
They cannot, I suspect, comprehend a business which is as efficient as the NHS and they do not understand that the way to value the quality of the service supplied is not by calculating an economic rate of return on the investment put into any particular person.
As a result, why is Rachel Reeves asking the bankers to advise her on the NHS? It can only suggest that she is, herself, completely unable to comprehend what the NHS, its management, its services, and the people to whom it supplies them are all about. And that suggests that the forthcoming spending review by the Labour government is going to be a complete disaster for it, for the country, for the people in this country, and for the quality of the services that we might enjoy.
Happy days, then.
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Buy me a coffee!
Richard,
Get well soon
Thanks
Feeling grotty this morning.
Back to bed soon.
Soak a bank statement in cold vinegar and apply to the chest. If no improvement in 3 days, try a foreclosure notice instead.
get well quickly – and remember what Oscar Wilde said “Whenever I feel the urge to exercise I lie down until it passes” so, stay in bed!
I admit to having not maanaged to get dressed so far today.
Bankers? You would think they would seek the advice of some political economists
[…] said that bankers should not advise the NHS this morning, I did a quick consultation with a retired NHS employee who was previously a member of both the […]
Perchance the Bankers are in the room to find “5 per cent from in the NHS budget”, perhaps they – the NHS – should be reminded Reeves & Co have £1.5 trillion down the back of the sofa they could use to fix the under funding of the NHS.
https://www.taxresearch.org.uk/Blog/2024/11/29/the-governments-latest-accounts-show-its-debts-fallen-massively/
Of course, this £1.5 trillion could be used to give extra financial resources for all HMG departments, allow pensioners their winter fuel allowance, raise the benefit cap, fill the imaginary £22bn black whole and much more. She’d have change probably; which she could put on account, get a nice interest rate on; and then use during the next four years of HMG tenure.
Will it happen? No. Why? Because Reeves and her cohort haven’t a clue
1. I hope they realise that “answers are needed by next Friday” (acc to McFadden)
2. Will “Sir Desmond Glazebrook” be on the NHS advisory panel?
https://m.youtube.com/watch?v=KgUemV4brDU
(Plenty more if you search on his name)
Get well soon.
What do bankers know about the NHS? In the last twenty years I have come to wonder what bankers know about banking.
Thank you and well said, John.
It would be interesting to know who these bankers are. It would not surprise me if they are from private equity and hedge funds, not banking.
Five pc savings to balance her books could be more than achieved by restructuring the NHS’s massive PFI debts that an earlier Labour pretend-socialists (i.e. ‘neoliberal’) Chancellor imposed.
MOREOVER, ‘restructuring’ Brown/Blair’s PFI-debts could avoid a repeat of 2012, when three London hospitals were put into administration due entirely to the high costs of PFI contracts, and the wider, inevitable de-naturing of NHS budgets, which PFI causes.
This, though, is beyond Ms Reeves’ vision and abilities. She is, after all, an admin manager, not an economist.
“[Reeves] is, after all, an admin manager, not an economist.”.
The problem with that observation is that economists know nothing about business. They are bought by Big Business and monopolists, not for their insight into business (I refuse to believe anyone could be that stupid), but rather to tell them in what general direction the banker lemmings, their gopher politicians and the cheaply purchased economic automatons are currently running.
That’s an incisive comment sir, but I was just alluding to the exaggeration and lies on the woman’s CV, John (her shameless wiki-plagiarisms can keep for another time).
But to paraphrase Labour legend Tony Benn, I’m sure some economists can be signposts not weathervanes – the person whose site we’re on comes to mind.
Thanks
Thank you and well said, Richard.
This bankster, who in his early days in regulatory policy met the bank bosses responsible for 2008, does not understand what banksters have to offer in this and other fields.
Declaration: Dad is a retired doctor, including nearly three decades in the RAF, and more.
Thanks
Reminds me of the Oscar Wilde -know the price of everything and value of nothing.
I’m a bit cynical today, Colonel.
Thank you, Ian. I feel the same.
So silly, so patronising.
What a sad state of affairs that the country has politicians like Rachel Reeves and Keir Starmer who can’t work out that like another form of life bacteria, which uses “chemical messaging,” human beings in modern societies use “money messaging.” However, as James K Galbraith pointed out in 2010 there’s a problem with “money messaging” which is:-
“Bankers don’t like budget deficits because they compete with bank loans as a source of growth.”
http://ankara.lti.cs.cmu.edu/11780/sites/default/files/BacterialLinguisticsandSocialIntelligence.pdf
https://www.thenation.com/article/archive/defense-deficits/
I like that quote
Once human beings recognise that a key attribute of our use of money is to use it for “messaging” each other but it’s open to abuse therefore democratic control is always vital to set rules in the interest of all not just the few we are beginning to get somewhere. It’s sad, for example, no political party in the UK recognises that private sector bankers are in competition with the government in using this messaging tool because of the profit element. Same applies to “free trade” it isn’t “free” it has to have rules and the chief one which isn’t being observed is that currencies must float freely to allow price point in markets to be an autonomous process.
Reeves is hoping that the bankers can look at complex reams of excel spreadsheets to ‘spot things’ no doubt and ask questions.
But hang on? Don’t auditors do that?
Oops – sorry – no – they don’t tend to do that do they these days.
I’ve no idea why Reeves feels compelled to pull bankers in except to say that she (1) trusts them, worships them even, they are her hinterland and (2) it suggests that exploitative means of generating cash might be on the cards? If anyone can smell profit to be made, it will be banker – they’re like piranhas in the presence of blood in the water.
Are the bankers going to be attending free for the love of their country or will they be adding to the ludicrous farce of this exercise by topping it off with an exorbitant bill?
Good question….
It’s a puzzle to me why the financial sector is held in such high regard (apologies to the honourable exceptions).
1. All the main accountancy firms have been caught up in massive scandals. They carry on regardless (except for Andersen), often with a rebrand or acronym.
2. Banks rely on massive public subsidy and/or temporary nationalisation to stay afloat, after deliberately flagrantly engaging in highly risky lending practices (a practice they seem about to repeat). The money spent on banking support is needed elsewhere.
3. Not content with mere incompetence, they have a habit of allowing managers to engage in criminal and corrupt practices regarding their treatment of small commercial customers (Spank the Banker et al).
4. They respond with the alacrity of constipated slugs, to weaknesses in their systems (ATMs, card security, blagging, phishing, BACS hacks), claiming for years that their systems are infallible, then admitting to massive longstanding weaknesses, such that financial fraud/scams are the biggest growth area in crime today, and far too late, grudgingly introducing limited customer protections.
On reflection, perhaps these failings make them a good source of advice for Rachel Reeves, they are certainly her sort of people, a perfect fit for Starmer’s inept, sold out party.
“Send in the clowns”.
BBC and co report it with a straight face.
My daughter is a nurse in an NHS Acute Assessment Unit. She is supposed to cover 6 bays during her 12 hour shift. Currently she covers 14! Let’s see what cuts can be achieved there shall we?
That’s what ‘productivity’ demands. It maximises risk.
I hesitate to comment on this at all, because what we are really talking about here is productivity, and productivity efficiency; this is really complex, and here I do not believe Reeves or her idea or relevant advice have anything to offer. The standard measure of productivity efficiency (theoretically) still seems to be the Farrell Measure (or Debreu-Farrell), in spite of its age (at least until AI and quantum computing take over). The basic starting point is very simple: in his original paper Farrell defined a firm’s efficiency as success in achieving as large as possible an output for a given set of inputs (provided they are both correctly measured). In order to create the Farrell method, Farrell was attempting to provide a technique applicable to the competing firms in an industry. Farrell designed a complex statistical analysis by defining a frontier production function and then compared it with the observed (not the theoretical potential) results of productive efficiency from production units, along with
radial measures for returns to scale (output changes for the same input change); okay, that is a very crude attempted summation, and I am not a statistician. The problem here is multifold. There are no competitors in the NHS. The measurement of ‘output’ is deeply complex, and I would suggest, unlike any other industry; indeed. what does ‘output’ mean here – for example in Mr Atkins case?
This matter requires completely fresh thinking, not off-the-shelf answers that are really not applicable. I suspect the candid answer is that for the outputs required, a great deal more input is needed, and there is no way round that (and more input will produce better and more output), as long as it isn’t tied to unattainable and irrelevant measurement. Did Farrell ever contemplate this issue – he died in 1975?
You are right, John. Anyone with the slightest sense is aware of the problems with productivity management in anything but production, and even then the quality of the design makes a big difference to the value of the output, which this analysis has to otherwise assume is homogenous, and it never is.
I do, genuinely, think that Rachel Reeves thinks her only job is to balance the books. I suspect that most members of the cabinet, including the Prime Minister think likewise. This has dire implications for the NHS and all public services.
Yesterday I had a long discussion with an old friend. I was saying that no modern government should run a balanced budget. All governments need to run a perpetual deficit of, perhaps, about 5%. He’s a clever, well-informed guy, who worked in a socially useful job his whole career, but it wasn’t an easy sell.
A balanced budget means collecting back as much money in taxes as the government spends (“over the economic cycle”). If you believe a balanced budget is “the right thing to do”, that “there is no alternative”, it implies that taxes do indeed fund public services (never mind the “technical nuance” that spend comes before taxation). This is a disastrous mindset which seems to infect almost every government.
Consider what happens if you do try to run a balanced budget. Let’s say the “economic cycle” is 5 years. Assume that inflation is 2%. Then, after 5 years, the money in circulation is worth 10% less in real terms. And let’s assume growth is also 2%. So, at the end of the cycle, there is 10% less money, chasing 10% more goods and services. Private savings also reduces the amount of money circulating. This is serious deflation. It is highly undesirable. It also contradicts the initial assumption that there was 2% inflation, which shows there is something seriously wrong with the argument for balanced budgets. Yet our government does seem to believe it.
But, my friend said, “if a government runs a permanent deficit, the government debt will grow indefinitely, and that’s not possible”. I had to gently explain that not only is an ever increasing “government debt” entirely possible and is not just desirable but is essential. I tried to explain that an increasing government “debt” means an increasing overdraft (or equivalent) with the Bank of England. And since the government owns the Bank of England it essentially owes the money to itself. It is not possible, in reality, for an entity to owe money to itself. So, government debt is irrelevant. A rational person, if they thought about it, would conclude that any apparent debt of that nature should be cancelled. I suspect further conversations may be needed to completely convince my friend. Sadly, I suspect that the government doesn’t think about this rationally, or probably at all, and completely buys in to the false notion of a balanced budget.
Back to the NHS. Of course, the government doesn’t need advice from bankers. They are the prime purveyors of the balanced budget nonsense. I see lots of good sensible discussion, on this blog and elsewhere, about things that should happen in the NHS and other public services. And it is usually right. But at the core of all these problems is the issue, with which you started your post, that “Rachel Reeves must think the only job a government has is to balance its books”. Unless and until the government starts to understand that a balance budget is a pernicious falsehood, our society won’t be able to improve.
I do not think your example works
You ignore compounding
And you are ignoring bank created money
You are in the right ballpark in the second part, but not in the first. And I literally do not have the energy to correct it today.
@ Richard
I’m disappointed that I wasn’t as clear as I would have liked. Yes, I did ignore both compounding and bank money creation. That was deliberate. I was trying to focus on the key points. I don’t think that these change the core argument that trying to balance the government’s books is very wrong headed and, unless corrected, prevents progress in restoring our public services including the NHS.
If you don’t mind, I’ll happily fill in the blanks as far as I can.
On compounding, of course 2% compounded over 5 years is (1.02^5 -1)*100 = 10.41%. I assumed anyone who spotted that 2% compounded over 5 years wasn’t exactly 10% would understand my broad meaning. So, to be strictly correct, if you tried to balance the books over 5 years there would be 10.41% less money, in real terms, chasing 10.41% more goods and services. But I don’t think that materially affects the argument.
And, yes, banks certainly do create money when they make loans. As a result of a bank loan more money circulates in the economy. This money creation is “temporary” in the sense that it must be repaid. And when it is repaid the money is destroyed. The economy can carry on for quite a while based on bank money creation. However, there is a limit to bank money creation.
One key source of bank money creation is mortgages. It was this source of bank money creation that at least triggered the banking financial crisis in 2007-2008. So, let’s look at it. To achieve net money creation through bank lending there has to be a continuous increase in net borrowing. Some people will repay their mortgages, but this must be replaced by other people taking out even larger mortgages. Eventually people cannot take out bigger mortgages, even if the loan rate falls to zero percent. That’s because they have to repay the mortgage within their lifetime. Is there evidence for his? Well, averaged over time, interest rates seem to have been falling (emphasis on “averaged over time, obviously load rates go up and down). House prices have been steadily rising for decades. Sub-prime mortgages, an attempt to create even more money, triggered the GFC. These seem indicative to me, but it is difficult to have absolute proof in macroeconomics.
What I would say is that since the “big bang” in the city, several decades ago, around the time neoliberalism was becoming dominant courtesy of Mrs Thatcher, Mr Reagan, and others, economies have been growing based on bank created money; some trends persist for a long time. But now, we are approaching the time when it becomes ever more difficult to create still more bank money; basically, people have leveraged themselves as far as they are able. Without net commercial bank money creation, and in the absence of government money creation, economies are faltering.
Of course governments have created money in response to both the GFC and to covid (via quantitative easing). But these were uncontrolled panic measures, which is hardly the way to manage an economy effectively. This money filtered up to the most well off in society, where it caused asset price inflation, and the money has never properly been taxed back out of existence (from the wealthy where it ended up) as it should have been.
Nor did I mention in my comments anything about fiscal multipliers and many other things.
None of which, I submit, affects the main thrust of my argument that the root of many of problems we currently have, including in the NHS, is the failure of the government to spend the money that is needed. And it could do this, to a fair extent, without evoking an inflationary response.
This is a much longer response that I had in mind. Arguably it is out of place here. I was trying to construct a concise argument about why balanced budgets are wrong.
In summary the core of many of our current problems is the failure of government to spend sufficient money, and this I based on the fallacious belief that they must balance the budget. Until this changes it is unlikely that much will improve.
Sorry Tim – I am posting this without reading it. I do not have the energy for this today.
P.S. my best wishes for a speed recovery.
Thanks
I hope that you make a good, speedy recover Richard.
The hard money act from the no steer Starmer and Reeves just to impress the City and media is utterly crass.
New 5% cuts across the board plus the current no money approach will produce a recession any time soon.
Perhaps that’s the plan. A severe economic shock to the majority of the UK population to shake everyone up.
Richard, take a break!
I know that if you want something done, ask the busiest person.
But I still think you do too much {on our behalf}
Ease up till New Year.
I have done this morning. I have slept most of it.
But there is no chance of resting until Christmas. There is too much to do for others as yet. I will over it.
My wife is currently on the list for a very serious operation which this morning we were told is 10 weeks away , I’ll spare everyone the detail but she’s in some pretty serious discomfort to say the least .
I’m going to contact the Financial Conduct Authority and see what they advise .
🙂
And good luck to you and your wife
Many thanks Richard
Rachel Reeves appoints Bankers to advise on the NHS? What’s coming next — Wes Streeting appoints Count Dracula to lead the Blood Transfusion Service?
Well Streeting has already appointed Alan Milburn who did a lot of the original privatisation structure of the NHS, and has spent the past 14 years working as advisor for private healthcare and is now a member of the Dept for Health.
I’ve been assured that he declares his conflict of interest (when he deems appropriate) so there is no issue with this appointment !
Get well soon Richard.
Interestingly the NHS is chaired by a banker, as of 6 months ago.
https://calderdaleandkirklees999callforthenhs.wordpress.com/2024/06/17/why-is-nhs-england-chaired-by-a-banker-who-was-instrumental-in-the-collapse-of-banking-giant-credit-suisse/
And talking about money, anecdotally some NHS Hospital Trusts are using Epic, an imported ‘billing IT system’ from the US, as in-patient hospital records which the consultants find difficult to use but which has a patient friendly portal for them to access their records etc. Why Epic exactly?
Increasingly patients are finding delay ( someone with symptoms of Parkinson’s, waiting 13 months for a diagnosis) which resulted in symptom relieving drugs although those had been denied during the wait, and other instances of ‘denial’ via hurdles for people with zero hours contracts for example, or caring duties limiting availability, or the internet capability needed now to access services and/or appointments. NHS decline is reversible but not for long. The Integrated Care Boards are supposed to be run like Councils which will not be bailed out and therefore ‘go bust’. The denigration of staff happened in teaching in the ‘90s to assist in removing opposition to the privatisation of the school system via Academisation.
The weakening of the Unions and rampant management culture, as mentioned in a previous post, has had a big effect on the lowering of standards for staff. But it is a part of the ’managed decline’ which has been inching along since 2012. Even before that the Carter report stipulated the reduction in hospitals from 147 to around 42. (Interestingly that would equate to one per Integrated Care Board as they now stand). Maybe there can be hospitals ‘in network’ as Jeremy Hunt told Emily Thornberry at a Select Committee I saw, per Integrated Care System. There are increasing similarities with the US creeping in. I wish it was not so.
Thanks for the link. Talk about “something rotten in the state of Denmark!”