Pay doctors more – by slashing the salaries of useless bureaucrats

Telegraph

2 days ago

British state dysfunction is so all-encompassing that working out where one problem begins and another ends is a time-consuming activity all on its own.
Take the threatened resident doctors' strikes. It's not an unreasonable stance to point out that salaries are below their 2008 peak, and ask for a pay rise to make up for this. It is difficult to hand these out, however, when NHS productivity is down somewhere between 5pc and 11pc on 2019/20 levels, making pay awards hard to justify.
This is particularly so when the Government is spending £111bn on debt interest this year alone, local council budgets have already been shredded and social care is a mess.
If you're confused about how these things tie together, bear with me.
Let's start with the doctors. The British Medical Association (BMA) claims that below-inflation pay rises means that resident (junior) doctors are worse off in pay terms today than they were 17 years ago. This is hard to dispute: whether you prefer to measure inflation with the Consumer Price Index or the Retail Price Index (RPI), the broad thrust is that prices have risen faster than pay for residents.
In a market system, this would simply be how supply is matched to demand. In the UK healthcare system, however, there is no real market. The NHS is by far the largest provider of medical services in the country, which gives it an enormous degree of power over the wages of trained doctors.
For those starting out, the deal is even worse. In order to qualify to practice in Britain, med school graduates must complete two years of training. This, in turn, takes place with NHS employers.
It's not particularly difficult to see how this might lead to unwelcome compression of the wage premium for people who've just slogged through years of strenuous education: foundation year one doctors earn above median but below mean UK wages, with foundation year two still falling below the 75th percentile for the economy as a whole.
That there could be a relatively straightforward way to raise the pay of doctors: abolish the NHS, and let the market work. Unfortunately, given that Sir Keir Starmer has insisted that he would never, under any circumstances, pay for a loved one to be treated privately rather than wait their turn on an NHS list, this option is probably off the table.
This same opposition to reform and private sector involvement makes it hard to see a clean route to restoring lost productivity in the health service in the near future. In other words, if we're going to give doctors a pay rise, the money will have to come from other budgets.
Quite a lot of money, as it happens. The BMA wants 'pay restoration' to 2008 levels. So do many others: it is a testament to almost two decades of economic mismanagement that private sector wages earlier this year were also below their 2008 peak.
With the BMA increasingly aggressive in its negotiating stance, its critics are entitled to note that countries like Australia and Canada are far more stringent in restricting the ability of doctors to strike. Carry on in this vein, and they may well lose the sympathies of the public altogether.
Assume for a moment though that we choose to grant this rise. The increase the resident doctors are asking for is enough to make up for a 21pc fall in wages, so a raise in the region of 27pc.
According to the Nuffield Trust, each 1pc uptick in resident doctors' pay costs around £51m. The total cost of a 27pc rise would be somewhere in the region of £1.4bn. This is excessive, but it's a fair point that doctors may well feel undervalued relative to other jobs.
It can't feel particularly good for resident doctors on £46,000, for instance, to see the NHS hiring in diversity commissars on salaries of £122,000. And it doesn't seem quite right for highly skilled workers who work long hours in unpleasant conditions, risking exposure to dangerous infectious diseases, to be paid less than unemployable Whitehall apparatchiks dialling into Zoom calls in their dressing gowns.
Here, then, is a modest proposal. The total public sector pay bill was £270bn in 2023/24. If we can cut it by 0.5pc, then the doctors can have their pay rise.
Figures from the Taxpayers' Alliance suggest that local government spending on diversity roles cost roughly £23m in 2023, alongside £13 million in the NHS. Thirty-six million towards a £1.4bn black hole is not a promising start. In fact, even taking the maximal savings implied by one estimate of public sector spending on diversity, equity, and inclusion (DEI) jobs – £557m a year – would still only get us a third of the way towards paying for it.
And not all of these savings would be free to spend. Local government finances are in a shambolic state, with real budgets down 9pc on their 2010 levels. The slow squeeze of rising social care, school transport and housing costs, meanwhile, is eroding waste simply by erasing discretionary spending. Any savings made on woke waste might have to go towards social care, or if it does go to the NHS, it may actually risk making it worse.
How, you ask? The single biggest productivity challenge facing NHS executives is discharging patients on time. Blocked beds stymie the flow of patients through hospitals, in turn slowing the flow of patients off waiting lists. These delays are most often caused by waiting for support for the patient at home – often adult social care arranged by local government bodies scrabbling for cash. Spending more on social care might be better for NHS productivity than actually spending on the NHS itself.
At this point, however, I have some good news: we can do this, and still restore doctors' pay in real terms. The BMA's calculation of the fall in doctors' pay since 2010 is fundamentally flawed. It uses the now discredited RPI measure of inflation which is known to overestimate rises in the price level (among other problems, when prices rise and then fall back to their starting level, the RPI can still show prices as having risen).
This is obviously absurd, and after years of dragging its heels, the Government conceded as much. As a result, from 2030 onwards the RPI is set to simply mirror an alternative, better-calculated measure of inflation, saving the Government a couple of billion each year in the process.
In other words, the doctors' pay demands seemed excessive because they were excessive. If the BMA had used better measures of inflation, they would be looking for a 5pc pay rise, or £255m – less than half of the estimated DEI spend. And this, in turn, gives us our desired outcome: we can give the doctors actual pay restoration, pay for it by cutting public sector jobs that shouldn't exist in the first place, and have some money leftover to ease the strain on social care into the bargain, improving NHS productivity – an all-round win for taxpayers.