There's something that's been bugging me for a while, and I really can't get my head round it.
OK, so we currently pay more in taxes than we ever have done, or so I'm led to believe. Our taxes go to pay for healthcare, education, stuff like that.
So how come, despite more and more money being allocated to these things, we are constantly seeing services being cut back, closed, and what have you? Only the other day I heard on the radio news about an old peoples' home that was being closed down, and all the chaos it was causing to rehome all the inhabitants. My mum works for the council as someone who travels round to care for the elderly, yet their office has been drastically cut back and they now run on the very bare minimum, and are rumoured to be facing redundancy in the near future. And we all have heard stories about hospitals closing, blah blah blah, not sure I believe half of that but it's in the Daily Mail a lot
It's not just in the public sector, either, we see it with practically all companies these days, making cutbacks in order to increase profit. Not wanting to name the company I work for, but these days we seem to run with about half the staff we used to. The company is turning more and more to other streams of revenue, but this added income doesn't seem to be translated into improvements in service.
Why does everything seem to be being cut back, and where does all the money go?
The money goes to consultants who set up complicated contracts between organisations and departments and create jobs for themselves to manage said contracts.
James Hatts wrote:The money goes to consultants who set up complicated contracts between organisations and departments and create jobs for themselves to manage said contracts.
Part of last week's "Kim and Aggie go to Hospital" demonstrated this well. When Kim complained to the Hospital Manager that the cleaner in the A&E department needed help, the manager organised a "cleaning consultant" to come in to investigate.
How many hours of a cleaner's rate would this have cost?
I've been lurking around at Metropol for sometime, but seeing a question on economics - a field very close to my heart - has given me a compelling reason to finally join.
You've really asked two questions - one about taxes and government expenditure, and the other about the private sector and the desire for firms to maximise profits.
Are you getting value for your tax dollar? Maybe, maybe not. It's hard for me half way across the world to make a definitive judgment on that. What I can say is that in many areas, such as health, costs have risen dramatically. Health is a really great example, and it's one you point to Phil, with respect of hospitals and aged care. The fact is, old people are living longer. Medicine is helping them live longer. We've got lots of new expensive treatments, thanks to fancy machines, revolutionary drugs, and in many cases, simply reinventing the wheel. These things do not come cheap. So we're spending more and more money to keep people alive longer. Now, I'm of course not saying that that's necessarily a bad thing, but what I am highlighting is that it's not costless. So, healthcare costs are on the rise and will continue to rise for some time.
I don't know specifically the situation in the UK, but I'm fairly sure it's the same there as it is in much (if not all) of the Western world. Not only are old people living longer, people have been having less kids. After World War II, pretty much everyone, it seems, went out and had sex - even the Germans - and lots of babies were created... The so-called "baby boomers". The birth rate increased, yet the baby boomers, when they grew up and became fully fledged adults, decided they didn't want to have as many kids as their parents did. They wanted to go on holidays a lot, spend money on fancy TVs, and pursue their careers instead. As a result, the birth rate has declined.
Most social welfare systems are built on the assumption that each subsequent generation will be larger than (or at least the same size as) the last - like a pyramid, going from the top down, each layer gets bigger. If it doesn't, the pyramid (apart from looking stupid) struggles to hold up the upper layers. Each block of the lower layers has greater pressure exerted on it (so the engineers tell me, anyway - I'm just an economist, what would I know about structural integrity). Similarly, each of us in the younger generations will have to do more to support those who've retired - the generations above us. Our tax burden will either increase, or government budget deficits will blow out, or both. So, over time, we should certainly expect to see our taxes rise, even if we don't necessarily feel we're getting value for money personally.
The other problem though is that the government doesn't operate in an environment of perfect information. It has to be decisions about where to spend money, and how much of it should be spent in each of those places. The government is not omniscient - how the hell should it know how much it actually costs to run a school in Manchester or a hospital in Birmingham? So invariably, the government either spends too much money (and gets accused of waste), or it spends too little (and gets accused of mismanagement, incompetence, negligence, and anything else you can think of). This is not the story of Goldilocks - very rarely does a government ever get anything "just right". Thankfully for the government though, it's only the monumental (or at least the comparatively more severe) cock-ups that ever get any serious attention.
A government should in principle seek to spend the least amount it has to. Quite simply, why spend more than you have to to get a desired outcome. If however any of us knew precisely what that optimal amount was in any circumstance, then Sir Humphrey and his ilk in the civil service would well and truly be out of a job.
It isn't simply governments that try to spend the least amount of money they have to - which brings us to the private sector, and the second part of your post Phil. While there are plenty who would call companies evil-bastards that-should-be-wiped-off-the-face-of-the-earth-so-we-can-all-live-in-hippie-communes, I'm certainly not one of them. Businesses are, however, profit maximisers. They exist with the primary goal of making money. Over the past few decades, there's been a tremendous increase in emphasis on efficiency. Companies have pursued a variety of ways to drive costs down, while pushing profits up, either by cutting staff, achieving economies of scale through mergers and expansions, relocating (either within a country, or outsourcing operations overseas), and embracing new technologies among other things.
You mention Phil that you probably have about half the amount of employees where you work than you used to. It's easy to say that - the question is, did you have too many employees to begin with? No business should seek to have more workers than it actually needs - it's too costly. I'm very conscious of the fact that at the moment where I work, we probably have too many employees, or at least, the employees we have are being rostered on for shifts longer than is really necessary. As an employee, I don't want to lose my job, or have my hours cut. But standing back and assessing things more objectively, I know that it's not at all sustainable (or fair) for the business to pay me to come in so that I can sit on my arse for an hour or more each day doing nothing, because business has been quiet.
Ultimately, if businesses can lower costs, then in a competitive environment, that means consumers are made better off - because they'll get to enjoy lower prices for the goods and services they're buying. That's ultimately a good thing. Of course, not all businesses operate in a competitive environment, and so lower costs don't necessarily equate to lower prices for consumers - but for that you have price and access regulation, if you have an effective regulatory regime. That however is a whole other discussion.
I'm sure that's a longer answer than what you were probably looking for, but that's my two cents (+VAT) anyway.
