On the NHS, Sunak and company seem unable to grasp Economics 101: Pay more | Larry Elliott Economics Editor

B.Before it became the gathering place for the world’s elite, Davos was known as a place where tuberculosis patients went for treatment. Thomas Mann set his story The Magic Mountain in a sanatorium in the small Swiss town and rarely did the links to Davos’s literary past seem more appropriate than now, with the global economy rehabbing after a three-year illness yet to be recovered. has shaken There have been many relapses since the beginning of the Covid-19 pandemic.

The first few weeks of 2023 have seen a modest improvement in short-term prospects, but that doesn’t mean the long-term problems have been fixed. The structural problems facing the global economy (weak investment, low productivity, climate emergency, rising inequality, political fragmentation) are still with us.

Klaus Schwab, the man who has run Davos since the early 1970s, said last week that it was time to “develop a longer-term constructive perspective and to shape the future in a more sustainable, more inclusive and more resilient way.” ”. And he is right. Indeed, that is the challenge.

But getting out of a crisis mentality is not easy, especially in a country like the UK, which has made a virtue of being on the streets, and where the long-term consequences of short-termism are evident.

Neither Rishi Sunak nor Jeremy Hunt will be at Davos and it’s not hard to see why. The UK economy has performed a little better (or, more accurately, a little less worse) than expected, but they have a country in crisis to deal with at home.

The NHS is on the brink of collapse. In the early 1980s, Lindsay Anderson directed Britannia Hospital, a black comedy in which an underfunded hospital harassed by its picket staff was a satire on the early years of Thatcherism. Forty years later, the movie seems eerily prescient.

Excess deaths, a measure of how many more people are dying than normal, in the UK is at its highest level in 50 years, apart from the pandemic. Ambulance waiting times in England are the highest on record, as are the number of emergency room waits for more than 12 hours. There are over seven million people on hospital waiting lists in England. Meanwhile, a study by think tank King’s Fund last year found the vacancy rate for nurses to be 12%.

It’s currently fashionable to say that the NHS’s problems have nothing to do with money, but that argument doesn’t hold up. Of course the NHS could be run better, but so can many other organisations. Sure, there are other healthcare models the UK could learn from. But the reason it’s hard to attract nurses is because the salary of a senior nurse has fallen in real terms by 10% since 2010.

And the reason hospitals are caving in under the pressure of soaring winter demand is because a decade of austerity is taking its toll. The average increase in spending on the NHS from its creation in 1948 to 2010 was 3.7% per year. In the years between 2001 and 2010, the increase in spending in real terms averaged 7% and waiting lists were reduced. Since then it has been 1.4% and the charts have gone up again.

It is not only the salary that has been squeezed. The UK spends 0.3% of national income on capital spending on health (new hospitals and their supporting equipment), which is half the level of other high-income nations. The idea that the NHS is a bottomless pit into which governments left and right have indiscriminately dumped endless amounts of taxpayers’ cash is a myth. The generous funding provided by Tony Blair and Gordon Brown had an impact. Much less generous spending deals since then have also had an impact.

It’s been a similar story with social care. More than a decade ago, the coalition government commissioned a report by Sir Andrew Dilnot which concluded that the system was not fit for purpose and required more funding, both from individuals and from the state. The report was never acted on, with the result that there are half a million people waiting for help, more than 150,000 vacancies and hospital beds filled by people who should be in nursing homes. Again, the solution seems simple: get a plan and provide the necessary long-term investment. Economics 101 says that if you’re short-staffed, the solution is to pay more.

Government ministers seem strangely incapable of grasping this basic point, which means that the NHS will continue to be in crisis, or on the brink of it, no matter what plaster fix the Treasury comes up with in response to a chronic funding crisis. An aging population and advances in medical treatment mean that real increases of 3% to 4% a year are needed to cover the rising costs of care. The fact that healthcare has been treated less harshly than other parts of the public sector is neither here nor there. Other services, like the justice system, for example, have had an even tougher time since 2010, but they are less visible.

Sunak knows there is a problem. The public has never fully trusted the conservatives with the NHS and remains attached to the idea of ​​a free service at the point of use, even if few today would describe healthcare as the envy of the world. Preventing the NHS crisis from being the first news is vital for the prime minister. There’s not exactly a lot of good news right now, but what there is is being drowned out by a crisis that could have been avoided and is 10 years in the making.

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