We here at Continental Telegraph often opine on matters economic and political for your delight. You know that wonderful interface between the ways we do stuff normally and the ways our political masters think that things should be done. Tim’s particularly fond of this. On our side, we prefer just to be a bit of a sarky economist and tusk-tusk mildly when policy makers come up against one of the things that Tim likes to point out: unintended consequences.
Now you know, this could have been predicted:
Why UK pension rules are fuelling NHS staffing crisis
The FT is reporting that doctors are cutting their hours or taking early retirement because of curbs on pension tax breaks.
We wonder why this is newsworthy let alone something that comes as a surprise. Over in the dismal science pit Tim and I inhabit (you should be aware it’s seldom cleaned), we know this is the natural reaction to raising tax rates. As Tim is fond of reminding us, pensions are simply deferred income. Raise the tax on income and—it’s a real no brainer here—you get people deciding it isn’t worth the candle to deal with the sniffles and back complaints from Mrs Brown as she comes back week after week to the surgery. After a lifetime of such things, the idea of spending more time with the roses or thwacking a ball along a fairway seems eminently preferable.
So naturally, those doctors who, thanks to TB (that’s Tony Blair, not the disease,) are earning lots, have built up a full pension of sorts, and have endured years of Mrs Browns are looking at all that wonderful grass out there and, simply, chucking it in. Yours truly has had this very conversation with his medic neighbour on this as he nears that magic age when he can go on a full pension. The Stalinist NHS won’t let him go part time and insist at his ripe age he do what we’d politely call unsocial hours. Well, he isn’t that ripe an age as he goes off on Ironman challenges as a way of passing those few leisure hours his employer allows him. Personally, the roses and that fairway look much more appealing. But heck, everyone to their own, no?
Now where were we?
Ah yes! That little problem with retaining all those expensively trained, highly qualified, and most experienced consultants and GPs. As Tim would have it—and we’ve got to defer to his excellent understanding here—it’s the Laffer Curve, you see.
Well paid doctors facing steep rises in tax are opting for doing less or—and this really gets the goat of those bigwigs who run our National Health Service—chucking it all in.
In truth, there’s no such thing as a “national” health service as bits are devolved to those Scots and operate under a different dynamic. But whey hey, why not?
But we’re moving off topic again. Must stay focused!
We can blame the present situation on one of our politicians. Sorry, need to rephrase that. Ex-politician, a certain George (many jobs) Osborne when he was Chancellor of the Exchequer under a certain (it ain’t hard being leader) Prime Minister Cameron. You may recall that in response to howls of furry that people were sheltering their income by taking out mega pensions, GO decided to cap the lifetime contribution that was allowed before tax kicked in. One even vaguely remembers that this was subsequently reduced in a typical Treasury way (for those of you readers not of these gentle isles, that’s the Ministry of Finance in most other places) as they saw the prospect of getting a bit more from the peasantry. Sorry, that should be high income earners.
Now, there’s one thing we’re very fond of here in our economics pit and that’s incentives. Tim will tell you, its incentive this and disincentive that and soon, whey hey, everyone will be out there on the fairway. If this continues, you’ll need to book six months in advance to get a shot at that tinny wee hole you can’t see. Fortunately, they’ll provide a little flag to help your aim. Still lots of folk seem to manage to fail to hit it first time. They even celebrate that, apparently. No. Not the misses. Getting it in one.
But we’re in the rough here, really.
Back to our clinicians—my neighbour, if you prefer—the rational response to incentives and disincentives is to change behaviour. All those experienced doctors that this country so desperately need are quitting as the benefit (or incentive, if you prefer) of staying in post and having to deal with the NHS and those Mrs Browns is most significantly reduced.
They make a decision. They send a nice note to HR saying. “I quit”. And all of a sudden, said NHS bosses find themselves experiencing—yes, truly shocking that they hadn’t noticed this before they changed the pension rules—the departure before they needed to of their most accomplished staff.
Bit of a bummer really. Do you have any idea how much it costs to train up one of those specialists? One hundred and sixty three thousand pounds. Yep, 163,000 smackers. As its our NHS that needs ‘em, they have to pay to get ‘em trained. That’s quite a lot of tax there and then that we, the peasantry, have to fork out to replace those missing clinicians.
Someone might have thought about this before putting in place those rules.
To be honest, you’d have thought that those mandarins in the Treasury would have given us a job to look at the pension cap idea before they put in place. But no. Perhaps we’re too sarky for their like. Nevertheless, we’re sure that somewhere within the bowels (in a pit similar to ours, perhaps a bit cleaner—but who knows) of HM Treasury there’d be a grey haired, slightly balding and possibly paunchy economist sitting in front of the fire contemplating the impact of unintended consequences and all that. Did SO listen to him? NO. Should he have? Yes. Are we paying the price? Most certainly.
Next time you’re in the surgery or on the trolley at ‘ospital and the clinician who is staring at you looks to be the same age as your grandchildren, you’ll know why there’s not a single wise head around. They’re out there on the golf course or pruning their roses. Or perhaps they’re like my neighbour, swimming in Loch Ness as he attempts the Celtman!, an extreme triathlon in the Torridon mountains of Wester Ross.