No accounting for governments

Why are governments so obsessed with spending, budgets, and accounts? Most have taken to frequent announcements of intended increased spending on health, education, and so on, to the point where we must be hearing the same recycled stories every few weeks. But they hardly ever mention effectiveness or quality of services.

Of course those running countries have always had to have one eye on their treasury, usually to ensure that their pals aren’t dipping their hands into it whenever they fancy. But most of the great reforms and changes that we in the UK have seen – education, pensions, other welfare, and most of all the NHS – were visionary changes in service with alarmingly little understanding of the real costs at the time.

In the last few decades in particular, finance and accountancy have come to dominate businesses, institutions, and government at all levels. I well remember the change as a Medical Officer in the Royal Navy some 25 years ago. We received a personal letter from the head of our branch, an internationally eminent physician with post-nominals that spilt over into much of a second line. He effectively told us that he was being run by an accountant, who had probably struggled with his A levels. Yet said physician rolled over, and our branch headed into a downward spiral.

Let me illustrate my point with reference to the public spending most dear to many of our hearts: our wonderfully free health service. The problem with all healthcare systems is that they will relentlessly consume more and more of a nation’s wealth, although demonstrating that increasing investment brings commensurate benefit is difficult, if not impossible. But I have mentioned that dirty combination of words: cost and benefit. How can any service possibly know how it is performing relative to its cost if it does not know the benefits that it is achieving?

By benefits I am not talking about crude, illusory, or wholly fictitious ‘performance targets’ such as waiting times in A&E or for different types of treatment. Many patients who attend A&E could in truth safely wait until seen the following day in far less costly and specialised settings. More to the point are figures such as 5 year survival rates for different types of cancer, quality of life in stroke survivors, and both maternal and infant survival. I don’t recall any UK politician ever targeting improvements in such service outcomes, although some relatively uncommon issues in the general population, such as MRSA rates, have been a focus on occasion.

Behind the pretence of the importance of accounts and budgets is the claim told by your parents, that money doesn’t grow on trees. Not unless you are a central bank, that is, when you can print your own money and pretend that you didn’t by calling it ‘quantitative easing’. Or if you are despotic enough, you can oppress your population by imposing another swingeing tax, on windows, OS X, or something else that will encourage growth in certain economic sectors, and not hurt your rich pals.

There are more subtle ways of fiddling the books too. Most figures in public accounts seem to be ‘subject to revision’, so if you don’t like them, go back a few weeks later and make adjustments. If they are really getting tiresome, you can always change the basis of calculation, or tell everyone that you have found a new or better way of expressing the figure, relative perhaps to GDP, or corrected for change in RPI, or was that CPI, or perhaps even AEI. If my bank sent me a statement one week that I was £1000 in credit, then the next week corrected it to £1000 in debt, I would change bank: wouldn’t you?

So the cost of services is almost anything that you care to make of it. But the benefits to you and me result from how effectively that money is spent. The £12 billion and more that the NHS has squandered on over-ambitious and flawed computer systems did absolutely nothing for the health of the nation. I have yet to see any evidence of such benefits in the even larger sums that have been consumed as a result of the major changes in regulation and monitoring of professional standards of doctors, nurses, and other healthcare professionals that have taken place over the last decade. Indeed, I do not think that anyone knows how much those changes have really cost.

Try to find out answers to a simple question and the accounting does not add up. So how much did the UK spend on healthcare in FY 2010-11? According to NHS England’s The NHS Belongs to the People: a Call to Action, “real spending on healthcare” was around 8.5 percent of GDP, or just under £120 billion, with a total (public plus private) of 9.6 percent of GDP (which tallies with the figure published by the World Bank). However actual NHS expenditure seems to be rather less than that. July and October 2012 estimates (that worrying term again) in the official Public Spending Statistics gave total NHS (Health) expenditure limits of £104 billion. Quite where the missing £16 billion went is anyone’s guess. However figures quoted by the King’s Fund from OECD estimates made in 2012 give “UK NHS spending” as rather less, under 8.2 percent of GDP (Spending on health and social care over the next 50 years. Why think long term?, John Appleby, 2013).

Indeed, there is a telling sentence in The NHS Belongs to the People: a Call to Action:
It should be noted that under many measures of health outcomes the highest performing European country is Italy, which has lower spend as a percentage of GDP compared to the UK.
Not that this report bothers to consider those measures in health outcomes. However World Bank figures for total healthcare spending by Italy are very similar (2010 9.5 percent of GDP) to those of the UK. Against such fascinating evidence, that report follows the trend and pushes for increased spending on the NHS, perhaps towards the 11.7 percent of GDP in France or 11.5 percent in Germany, or even the astonishing 17.6 percent in the USA. It is good to see that the NHS is also spending our money on studies which justify spending more of our money on the NHS.

Look back at NHS England’s much-vaunted 2012 report Everyone Counts: Planning for Patients 2013/14, and the word ‘count’ as in ‘accounting’ appears in its title. But look for ‘service’, ‘quality’, or ‘benefit’ and not only are they omitted there, but they don’t even make it into the grand five guiding principles. ‘Facilitate change’ yes, but change for the better?

Change is another major issue in most public services. Sectors such as the NHS, education, end even defence have been locked into a series of change cycles that have left the few that care pleading for stability. Seldom are we ever allowed to know the cost of changes, and I can never recall anyone demonstrating the benefits that have been achieved in any major public service by recent change. Indeed the changed service usually rushes headlong into the next change cycle before such measurements could be made.

I have raised many issues, few of them perhaps new, but hope that they have shown how government accounting is illusory and manipulated, and distracts us from knowing whether any of our taxes are being spent wisely or effectively – which is surely what we really care most about.