🔔 There's No Such Thing As A Free Lunch

Handing the reins over to The Veteran today for a look at a universal law of human stupidity and the huge presence of the NHS in the UK economy.

That phrase (or something close to it) was coined by Robert Heinlein in his 1966 sci-fi novel the moon is a harsh mistress. It has since become synonymous with the idea that there is always a cost, and that acts of genuine altruism are rare in the same way that unicorns are.

We won't get into a debate about the merits of that position, as interesting a subject as that would be - though perhaps we will return to it at a later date.

But we will look through the lens of human phenotypes, forms of ingrained behaviour as advanced by the Italian economic historian Carlo Cipolla in his book the (five) basic laws of human stupidity.

The first law:

The reality of that statement is visible all around us. But Cippola wasn't speaking about relative levels of intelligence (clever people can be just as 'stupid' as those that are educationally challenged). Instead, he was referring to the way that people behaved and acted, often stupidly, against the interests of the community and even themselves.

Now, I am told that I can be quite intimidating in a discussion. That’s probably because I ask people to justify their views, and to back them up with tangible facts and not just anecdotes or hearsay.

That apparently makes people feel uncomfortable. If that's the case, well... good. People often need to engage their brains before they open their mouths.

Never more so than when they are talking about the UK’s sacred cow, the National Health Service (NHS).

Somehow, people have fallen under the misapprehension that healthcare in the UK is free! They fail to comprehend that free (at the point of delivery) is not the same as FREE.

That's a very big mistake which bares out Cippola’s first law, simply because that naive assumption affects how people consume the services that the NHS offers.

I don't propose to debate the rights or wrongs of universal healthcare and the level of service provision within the NHS.

What I would like to do is to look at the economic cost of the National Health Service and its place within the UK economy. It's enormous! 👇

For the NHS a typical day includes:

• Over 835,000 people visiting their GP practice or practice nurse

• Almost 50,000 people visiting accident and emergency departments

• 49,000 outpatient consultations

• 94,000 people admitted to hospital as an emergency admission

• 36,000 people in hospital for planned treatment

The NHS is a subject that I believe very few people stop to consider, which is odd in itself because it's hard to form a view about any subject without having some context.

In 2020/21 the UK Department for Health and Social Care spent £192 billion. That figure was up by £50 billion from 2019/20 largely due to the impact of Covid and the increased spending that created.

That additional spending will hopefully be a one-off, however, the expectation in the October 2021 spending reviews was for a departmental budget in the order of more than £170.0 billion.

The current UK population is some 67 million people. Simple arithmetic tells us that if we divide healthcare spending by population it equates to a government healthcare spend per capita (per head of population), of just under £2540. That's approximately £6000 per annum for the average UK household of 2.3 occupants.

Now according to ONS statistics, the Average Household Income in the UK is just under £32000 (I have rounded the numbers slightly for convenience). If we assume that each household contains two working adults, each earning £16000 per annum.

Under the current schedule of UK income taxes and national insurance contributions for 2022/3, they will each pay £686 of income tax, and £544 of national insurance per annum: a total of £1230 each, or a collective £2460.

Which, (as I am sure you have already worked out) is less than the annual UK spend on healthcare provision for one person, let alone two.

We have calculated that the spending on health per average household is very close to £6000 per annum, which means there is a funding shortfall of some £3540 per household.

Assuming both adults are working and earning equally, then they will need to have an income of some £25,500 each just to be covering the costs of the government’s per household healthcare spending.

But of course, that takes no account of the funding requirements of other government departments and services.  

There is plenty to think about here, however, if we take inflation into account then we open another can of worms.

UK CPI is running at 7% per annum currently however RPI is higher at 9%.

Let's take an average of 8.0% per annum for UK inflation, and use that to compound the healthcare budget under the assumption that as a nation we would wish to maintain healthcare spending parity.

We find that in six years the annual healthcare budget would be just shy of £250 billion per annum, or £8805 per average household. In 10 years that figure could be £340 billion.

Health Spending vs The UK Budget

According to The independent Office for Budget Responsibility total UK Government spending in Financial Year 2022/23 is likely to reach £1.087 trillion

Health and Social Care is amongst the biggest items in the UK budget and is only eclipsed by debt interest and other spending.

The government is expected to take in £987 billion in receipts in 2022/23 most in the form of various types of taxation, which will leave us, as a nation, with a deficit of £99 billion which of course the government will borrow to ensure that the books balance.

Debt that in the long term, the country, as things stand, probably can’t afford.

Don't know what financial news stories are important and what's complete bullsh*t? Hop onto our filtered news channel.

It's completely free 👇👇👇

Subscribe to our YouTube Channel and stay up to date with all of our videos as they're posted. We'll keep expanding and adding more formats as we go!

Check out our reviews on TrustPilot 👇👇👇