Fact-checking a few claims about the NHS

What with the campaigning for the general election having gotten into full swing last week, many claims have been made regarding which Party would be better for which aspect of security, the economy, education etc. One particular video regarding the NHS started doing the rounds on Facebook a few days ago. This video makes a number of claims regarding the supposed impact that the recent Coalition and Conservative governments have had on the NHS, with the video then going on to suggest that a Conservative government would be bad for the NHS. For a bit of excitement, here is said video:

 

 

The claims made in that video are many. Some are valid, whereas others are not. Let’s take each of them in turn.

Claim 1: We are experiencing the largest sustained drop in NHS funding as a percentage of GDP since the NHS was founded.

Reality: This claim is false. As per the information shown in the graph below (from the Institute for Fiscal Studies) NHS spending as a proportion of GDP has been stable over the past couple of years, and the decrease between 2009 and 2012 was no larger or longer than decreases in the mid-to-late 1970s or mid-1990s.

bn201_fig1

Moreover, the more relevant metric of NHS spending per capita continues to increase – in other words, more is spent per person on the NHS than ever before, although the rate of that increase has slowed in recent years.

bn201_fig2

Claim 2: If the internal market was abolished we [i.e. the NHS] could save billions.

Reality: This claim is also false. The internal market actually creates savings and is not “wasteful” as is claimed in the video. On the contrary, it promotes competition and stimulates the NHS to provide better services – importantly, the benefits of competition in healthcare are well established. Furthermore, it is actually the refusal of many within the NHS to accept the proven benefits of competition that is causing some harm to the NHS – indeed one of NHS Improvement’s main aims is to promote and encourage “buy-in” of competition among those in the NHS. Hence, abolishing the internal market would actually cost billions rather than save them.

Claim 3: Health tourism costs the NHS £200 million per year, which is insignificant in terms of the overall cost of the NHS.

Reality: This is generally true – although the costs to the NHS associated with people who are not ordinarily resident in the UK are of the order of £2 billion per year, that includes many people who did not come to the UK specifically and solely to use the NHS (i.e. it includes people who are not “health tourists”. Instead, estimates put the upper bound of the costs associated with those who travel to the UK for the sole purpose of using the NHS at around £300 million per year. When compared to the total annual NHS budget of about £90 billion, the costs associated with health tourism are indeed a trivial amount.

Claim 4: Immigrants are not ruining the NHS, they’re running the NHS.

Reality: True. Immigrants from within the EU currently represent about 10% of doctors and 4% of nurses. If non-EU immigrants are included, therefore, the figures are likely to be slightly (although probably not a huge amount) higher. Given that there are already quite severe labour shortages within the NHS, it is clear that without the immigrants currently working within the NHS, the functioning of the NHS would be severely hampered. Moreover, immigrants are net contributors in terms of taxes vs benefits, so also contribute to the NHS in that way. Hence, the claim that immigrants are not ruining the NHS is clearly valid.

Claim 5: 1 in 10 nursing posts are vacant and the nursing bursary has been scrapped

Reality: True. The nursing bursary was indeed scrapped at the start of the year – this means that there is a much-reduced incentive for people to train to become nurses as they will now have to pay £9,000 in tuition fees per year in order to do so. This is likely to lead to problems recruiting sufficient nurses in future. Notwithstanding that, there are also problems recruiting nurses now – the Royal College of Nursing suggests that 1 in 9 nursing posts are now vacant. This figure is actually marginally worse than that claimed (11% vacancy rate vs the 10% claimed).

Claim 6: Tens of thousands of sick patients waited on A&E trolleys this past winter

Reality: Likely to be true. Using data from Quality Watch (and a bit of approximation / extrapolation), roughly 6 million people attended A&E last winter. Of these, around 15% were not seen within the government target of four hours – i.e. about 900,000 people waited more than four hours in A&E. Now, it seems unlikely that all of these people waited on trolleys specifically, but even if only 10% of these people (i.e. 1.5% of all admittances to A&E) did then the “tens of thousands” figure would be accurate. Hence, this claim seems plausible.

Conclusion: As with most of these election video type things, the video contains some claims that are true, some that are likely to be true, and some that are demonstrably false. Does this mean that the Conservatives are the worst Party for the NHS? Who knows?! That’s for you to decide and take into account (if you want to) when you vote. But at least when doing so, you’ll now have a more complete set of facts when you do.

 

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The (supposed) rationale for the National Living Wage

What with Aldi’s recent announcement that they are going to be paying the “Living Wage” to their employees (see here), it seems as good a time as any to re-visit the possible motivations behind the UK government’s introduction of a National Living Wage above the level of the National Minimum Wage recommended by the Low Pay Commission.

It seems as though the standard theoretical argument that imposing a minimum price on a product results in the oversupply of that product (resulting in more people wanting to work than there are jobs available – i.e. higher unemployment) has been put to bed, albeit perhaps for the wrong reasons. For example, the simple argument that unemployment did not increase after the introduction of the Minimum Wage in 1999 is fallacious because it fails to take into account the fact that the economy was growing at the time and, as such, does not use the correct counterfactual (i.e. it does not compare what did happen to what would have happened to unemployment had the minimum wage not been introduced).

Instead, the more relevant results are those that allow one to control for other factors that might have changed over time.  For example, Dube at al. account for this by comparing areas of the US that introduced minimum wages with those that did not do so, and find that the introduction of a minimum wage did not result in an increase in unemployment.Similarly, Leonard et al. conducted a meta-study for the UK and found that the national minimum wage did not affect unemployment. For an interesting discussion regarding why the predictions of standard theory are not borne out by reality, see Schmitt.

These results are, of course, conditional on the minimum wage not being set “too high” – obviously, if the minimum wage was set at some absurd figure, then the aforementioned results would not apply.  However, it is not clear at what level the “absurdity” kicks in. It could well be that anything above the current UK minimum wage could result in unemployment (indeed, the Low Pay Commission takes the impact on unemployment into account when determining the minimum wage).  In other words, it is still entirely possible that the introduction of the National Living Wage could result in an increase in unemployment, albeit perhaps a rather negligible one.

So, given the limited downsides of the Living Wage, what are the (economic) upsides from the government’s perspective? First, and most obviously, is that the population has more disposable income, leading to them being able to spend more, thereby resulting in an increase in GDP.  Moreover, one can expect (almost) the full amount of the difference between the minimum wage and the Living wage to be spent rather than saved, due to lower-income people having a higher propensity to spend rather than save.

Second, and more insidiously, the fact that the Living Wage is higher than the National Minimum wage means that the government can keep its pledge of ensuring that all those who are paid the Minimum wage do not pay income tax (although note that they would still pay National Insurance), while making sure that they still receive income tax from those low earners.  To see this, note that a 25 year old working 30 hours a week at the National Minimum wage of £6.50 per hour would earn about £195 per week, whereas if after the change to being paid the Living Wage they would earn about £216.

Given that the personal income tax allowance amounts to £204 per week, it is clear that someone earning the Minimum wage does not pay any income tax, but someone earning the Living Wage would do so (they would pay about £2.40 income tax per week). While just over £2 per person per week might not seem like a lot for a government that runs a deficit in the billions of pounds, when combined with the number of people affected by the increase, the amount of tax raised is quite substantial.  Indeed, assuming that roughly five million employees are paid less than the Living Wage (see here) and also assuming that all of these would subsequently be paid the Living Wage (i.e. it does not include any of the “grey economy”) the implementation of the Living Wage would benefit the government by about £10 million per week – i.e. £520 million per year.  (Note that this figure may well be an underestimate of the benefit to the government because it does not include the extra National Insurance receipts that would also be obtained.)

Hence, it is possible that, rather than being for the benefit of the working people, the government has introduced the Living Wage as a somewhat roundabout way of increasing tax receipts, making it a very cunning ploy (almost worthy of Baldrick).