Thursday, 29 October 2015

"Lord Carter's plans for saving the NHS £5bn a year"

From the BBC:

Lord Patrick Carter, a Labour peer as it happens, is advising Health Secretary Jeremy Hunt on how hospital budgets can be better spent.

In June he said up to £5bn a year could be saved annually by 2020. In his first report then he argued that some of it could be delivered by smarter procurement of hospital supplies and some by better management of staff rosters.

Now he has attempted to put more flesh on the bone, outlining other areas which could contribute to that £5bn figure.

All sounds lovely, but that reminds me of another topic, the notion that organisations have to pay their more senior employees "competitive salaries".

Clearly, at lower and middle levels, you have to pay people roughly the same as the competition would pay them or as much as they could earn in similar level jobs in a different kind of business.

But I'm not sure that applies to the higher echelons.

When deciding the salary of all these NHS senior managers on six and seven figure salaries, the only real comparative is how much they - with their particular skills - could earn by doing something else, which in most cases would be four or five figures.

As to doctors, there is no particular need to pay as well as in other countries. Let's assume 3 million qualify worldwide as doctors each year; America wants to take on 1 million new doctors for $200,000 each. Is there any particular need for all other countries to offer $200,000?

Of course not; once those 1 million jobs are taken, the other 2 million will have to take whatever is left. As long as the lowest paying country is still paying enough to make seven years of medical school (or however many years it is) worthwhile, then that is enough. Many European countries recruit doctors and nurses from low-income countries - all they have to offer such people is enough to make sure that they end up slightly better off than they would have been working as a doctor in their own country.

Compare and contrast with footballers' salaries; the top teams have to attract the top players to remain top teams, so wages get bid up in the Premier League, the top football players can thus soak up all the super-profits which top clubs make (i.e. they collect rent). Does that affect wages in the Championship where the super-profits are much lower? No, not really. Why would it? Salaries in the Championship are based on those lower super-profits.

Furthermore, football teams in the same league are directly competing with each other - so Chelsea has to try and outbid Arsenal etc. But one hospital is not really competing against other hospitals in any meaningful sense, and they are certainly not competing across borders.

Just sayin', is all.


The Stigler said...

You can't really compare football clubs to anything else because they aren't really businesses that have to think too much in terms of value of inputs and outputs. They're playthings for people with excess money, and that's not a new thing (most of the board of minor clubs are fans of the club who made their money and want the team to do well).

I find it all a joke. You meet some Man City supporter talking about how well his team is doing, but that's not down to someone finding a better way to use their resources, it's because the Abu Dhabis are chucking money at it. And that's not an investment, it's just spending on the better players.

Graeme said...

It seems to happen everywhere. For example, one person at the London Symphony Orchestra, presumably the manager because the conductors and musicians are treated as contractors, earns £170k. This is an organisation that picks up £4m from public funds, £2m from sponsorship and £6m from concerts. It is surreal for an organsiation that turns over £15m to have a boss on that sort of salary, when the actual musicians will be getting around £30k.

Bayard said...

I am convinced that senior managers' pay is a gigantic cartel. They are ALL overpaid, because they are all overpaid and have convinced the general public, who end up paying for them, whether through taxes or smaller dividends, that it is necessary to pay the "going rate", and, with the people who set the pay rates also being in receipt of the same "going rate", they are effectively marking their own homework.

Mark Wadsworth said...

TS, Premier League is actually like any other business or market. The "suppliers" are the football players and the "consumers" are the billionaires who pay their wages. It's like prostitutes and punters, with the fans playing the role of voyeurs.

Down in the lower leagues, you can add "fans" to the list of customers. In the amateur leagues, the suppliers and consumers are the same people - the people who like playing football and who pay the running costs.

G, that is another good example of the same thing.

B, oh yes, of course. They all sit on each others' "remuneration committees". See Stigler's recent rant about TalkTalk.