QUOTE OF THE MONTH

‘You don’t tax a loss. You only tax a profit. You raise more, the more profit there is to tax. We all live on the profits of British industry. It’s a truism. And those people have been gravely misled, who imagine that there is one set of people, remote people, somewhere over there, who live on profits, but the rest of us don’t. We all do. We are all in this together. And the future of all of us is bound up with the future of free British industry’.

Enoch Powell

There is this quaint view, which has not been challenged by anyone during the general election campaign, that those in the NHS who have been happily running up huge debts are in some way morally superior to the rest of us. That the fact that they do not have to concern themselves with anything as vulgar as making a profit, is a sign of the NHS ethos.

This is the socialist view.

And that is the problem.

Like it or not, and there are very many who do not like to hear this, but the price mechanism and the profit motive are the most efficient way of distributing resources. When the price mechanism is abolished, then there are either shortages or surpluses. There are no exceptions.

This is not a dogmatic view. In war, rationing is introduced in order to ensure that everyone receives their fair share of basic commodities. But this is only an example of an exception to the rule, and an example of the alternative administration of shortages. Rationing should not have to apply to the NHS.

There are many examples today of the effects of abolishing the price mechanism. The EU Common Agricultural Policy is a prime example. Prices are fixed artificially high in order to encourage production (and that was the original deliberate intention). This policy was very successful, and the result was butter mountains and wine lakes.

In Zimbabwe, as in many other African countries, the communists fixed the price of maize, which was the staple food of the African diet, at an artificially low price - in order to win support and votes. They were not concerned with the fact that the price was uneconomic. Within 6 years, maize production in Zimbabwe (the former breadbasket of southern Africa) had halved and widespread starvation followed (and subsequently the communists started to murder white farmers and expropriate white owned farms, which only made matters much worse).

The price of NHS treatment is zero. This means that the NHS faces unlimited demand, including demand for healthcare from immigrants (the NHS is in fact trying to be an International Health Service). Other continental European countries have a subsidised health insurance system, in which the insurance companies pay the cost of hospital treatment in return for insurance payments from individuals. There are no queues, no recruitment of 3rd World nurses and doctors, nor any waiting lists in these countries. In fact those countries are amazed at what goes on in the UK.

But Labour have ruled out the introduction of such a system in the UK. This stance is supported by both the Conservatives and the Liberal Democrats.

All 3 main parties prefer to try and micro-manage the NHS and are happy for the UK to have the British Leyland of the world’s healthcare systems.

The main source of funds for investment in business, is retained profit - not borrowing, nor share issues nor government grants. Retained profit is the means by which equity finance is attracted, the means from which higher salaries can be paid, and the primary means by which investment is funded.

The NHS does not make a profit. It runs up huge debts and is dependent upon government grants (ie tax income from the profits made by the rest of us). This means that the NHS will be permanently short of money to pay extra staff wages, higher wages, or to make necessary capital investment for the future. Due to the nil pricing, it will also face unlimited demand and a misallocation of resources as those parts of the NHS which have surplus capacity will be unaffected by a falling price for their service, and those parts of the NHS which insufficient capacity will be permanently underfunded as they do not receive the benefit of higher prices/profits.

Until such time as any party is prepared to even consider denationalising the NHS, there will continue to be waiting lists (official and unofficial), low wages, shortages, inefficiencies and a lack of capital investment. This is inevitable. The NHS will continue to fail.