Author: Matthew

Europe’s financial crisis gets dangerous

While the British news media and politicos alike obsess with the unfolding of the News of the World hacking scandal, Europe’s financial crisis enters a dangerous stage.  In fact this crisis seems to unfolding just as quickly, and with much more important potential consequences.  Was I being too sanguine last Friday, when I blogged that it was a learning curve rather than a fundamental problem?  Well, probably.

I had hardly posted it than a flood of dire articles about the crisis came out.  One of the best is by  eminent US economist Larry Summers in this morning’s FT(£); alongside it an equally gloomy article from FT regular Wolfgang Munchau (£).  Mr Summers points to the critical issue of confidence that could be destroyed in a default, drawing a parallel with Lehman in 2008.  He then offers quite a plausible way out.  But the problem, as Mr Munchau points out, is:

I often hear that Ms Merkel in particular has moved a long way from her original position 18 months ago, when she ruled out any money for Greece. This is true. But the crisis now moves at a rate that exceeds her political speed limit.

There’s clearly a problem.  One issue is the expectation that European leaders will muddle through, as they always have.  This, unfortunately, is a self-destroying prophesy.  Because Europe’s leaders expect everything to come right in the end, they don’t have the incentive to make it actually happen.  Actually Europe’s greatest achievements have required some strong leadership, with Helmut Kohl, Germany’s Chancellor in the 1990s standing out.  Mr Kohl achieved German unification on his own terms, pushed through monetary union and the massive eastward expansion of NATO and the EU right into the former Soviet Empire.  Mrs Merkel does not fill his shoes.

Still, there are plenty of bright ideas for ways out, without the Eurozone collapsing, Mr Summers’s among them.  They will all require Mrs Merkel to shift her current stance.  Things could get worse before they get better.  At any rate it looks more soluble than the US budgetary stand-off.

The Euro crisis: structural failure or learning curve?

Coverage of the crisis in the Eurozone is astonishingly poor.  Commentators scarcely try to analyse the situation properly; instead they revert to one of two unsatisfactory critiques.  First, the Eurosceptic one, is that the Eurozone was always an unworkable idea and the best thing to do is abandon the whole thing.  The alternative, the Europhile critique, is that a currency union without political integration was a major mistake, and the best thing to do is move further towards the political integration of the union.

These positions are both unhelpful.  The Eurosceptics fail to see the benefits of the currency union, the awful logistics involved in unpicking it, or the unsatisfactory nature of floating currencies for most countries.  The Europhiles want to drag European peoples down a road they do not want to go.  There is a third way: that Eurozone governments change their countries’ economic arrangements so that they can live within the currency zone, more or less as it is currently configured.  This crisis is a learning experience.

The more far-sighted of the Eurozone’s designers did not want full political integration.  It was never to be a currency zone like the USA, with a federal government able to make massive fiscal transfers across the union to help balance out asymmetric crises.  Instead the single currency, alongside the single market, was meant to act as a discipline on national governments.  This would address the widespread failure of floating currencies, which allowed governments to buy time through currency depreciation rather than addressing economic inefficiency.  This was a process leading inexorably to hyperinflation and economic collapse – which was very clearly beckoning for Portugal in particular before the Euro project was taken on board.

Discipline was required in two particular areas: government finances and labour markets.  In the former case discipline is to be provided by the threat of default; in the zone it was impossible to evade default by debauching the currency.  The consquences of a sovereign default are very severe, and European leaders sought to prevent it through the muddled Growth & Stability Pact, which sought to restrict deficits and levels of government debt.  For labour markets the discipline was that without flexible labour markets, economies would become uncompetitive, creating unemployment.

But things went badly wrong almost immediately.  Bond markets did not seem to believe the default story, as spreads between the more creditworthy governments (like Germany) and the less so (Italy and Greece) were impossibly narrow.  Governments in the shakier countries (especially Italy, Portugal and Greece) found it much too easy to borrow cheaply and used this as an excuse for not proceeding with reform.

Labour markets were largely untouched by reform, as were other economic inflexibilities.  This caused major problems in Spain, Portugal, Italy and Greece whose economies became increasingly uncompetitive.  Only one country (apart from Ireland perhaps) really grasped the implications of living inside the Euro, and that was Germany.  After unification the German economy lost competitiveness and unemployment became a real problem.  But through its system of corporate deal-making between employers and unions, pay was restrained and other reforms instituted.  Competitiveness was duly restored, as was employment.  Unfortunately that made things worse for the laggards.

While the Eurozone had proved a failure in these two areas it proved a bit too successful in another: capital flows.  There was a lot of reckless lending, with quasi-public banks in Germany in prominence.  Capital flowed freely to countries, like Spain and Ireland, that didn’t really deserve it, allowing problems to be hidden in a property bubble.  And then Pop!  The Eurozone has lurched from one crisis to the next.

But the basic idea remains intact.  Markets now fully appreciate the risks of default and are pricing debt accordingly.  This is applying pressure on governments like Italy’s that the Growth & Stability Pact simply could not.  And the pressure to make market reforms is likewise proving unbearable.  It’s been a horrible experience for many, but this is not a structural failure: it’s a learning curve.

So what next?  The Greek government must default, and default properly (i.e. the principal must be cut rather than repayment simply deferred).  Maybe it will be forced out of the Euro.  If so, it will be a terrible example.  Some eurosceptics make it all sound rather easy (“decouple, default, devalue”), but it involves the utter collapse of the Greek economy with private savings being wiped out.  The hope would be that it would be easier to rebuild from the ashes than interminable limping along inside the zone.  Portugal and Ireland (whose crime was not to manage its banking system properly) may also go through some form of de-facto default.  But they will stay in the zone.  Portugal must go through a painful period of reforms, but at least for them this path is clearly better than being outside the Euro.

Meanwhile the Euro governments need to keep “kicking the can down the road”.  This is not as short-sighted as it sounds, since with each kick the various parties invovled understand the situation better and what needs to be done.  The default word is now openly talked of.  German bluster over not bailing out the profligate is gradually having to come to terms with the role German banks played in the disaster.  There is learning for the Germans too.  Bold decisive action can be disastrous – it didn’t help the Irish.  This way things are properly thought through.

Reforms?  Fiscal reforms are unnecessary.  But the banking system does need serious attention.  The regulatory system is badly coordinated.  There are too many cosy quasi-public banks who have been allowed to make silly investments.  Banks remain largely national affairs, with only a limited number of transnationals.  There is strong case for a centralised banking regulator.  And cross-border banking mergers need to be encouraged.

But the Eurozone is not dead; and neither are we on the verge of a more centralised European government.

Affording the NHS

The British government has been talking darkly about the exploding demands on the National Health Service, which will rapidly make it unaffordable if it is not reformed.  This has recently been challenged by Professor John Appleby, at the health think tank King’s Fund.  This was in a recent article in the British Medical Journal, behind a paywall, but summarised by the BBC here.  This question goes to the heart of health policy in the UK, but politicians dare not discuss it – because it puts the very principles of the sacred NHS in question.  But the problem will not go away.

According to some figures on Wikipedia Britian spent an unremarkable 8% of its national income on health, compared to over 16% in the US, before the financial crisis struck.  Those figures will be higher now, since our income has shrunk, but the relativities will be much the same.  The comparison between the two countries is usually held up to show how ineffective US health spending is, since health outcomes look generally pretty poor there.  But the comparison can be looked at the other way.  The US can afford to spend more than 16% of its national income on health and still remain one of the most prosperous countries on the planet.  There is nothing mysterious about this.  Developed countries are long past the level where basic human needs of food and shelter are met; how we choose to spend the surplus is up to us, and there is no reason why we can’t choose health care over cars, designer clothes or big holidays.  It’s not as if it requires massive imports to sustain it.

You can take this line of reasoning further.  The basic proposition of health care is to reduce pain and prolong life; these are consumer propositions to, well, die for.  Suppose we lived in the economist’s free market utopia, where health spending was a matter of individual choice in a perfectly competitive free market with no information asymmetries.   There is no reason to think that health expenditure would not be higher than the 8% or so we currently spend in Britain, or indeed as high the US figure.  We can perfectly easily afford it.

That’s not the problem.  The problem is paying for it almost entirely through unspecific taxes, the core design principle of the NHS.  And here the government is on much stronger ground.  There is an upper limit to how much tax we can raise for health care.  Up to a certain point, of course, the NHS model works perfectly well.  Look on the taxes as an insurance premium and it helps spread risk in a way that people like.  But the more you spend, the more the weaknesses of the model are exposed.

  • There is no direct line of sight between what you pay and what you get.  How on earth are you supposed to decide whether you are getting value for money?
  • You have no choice in the level of service you get.  One size fits all.
  • People who are better off may feel that they are paying too much relative to what they get.  This may not be quite as strong an argument as it first appears, since the less well off pay a lot of tax through cigarettes, alcohol, petrol and VAT – but the perception is still a problem.
  • Taxes create a drag on the rest of the economy, reducing incentives to work and therefore shrinking the resources available.

America is able to get away with much higher levels of health expenditure because so much of it comes from private insurance premiums and direct private payments for treatment.  But even there a battle royal is developing over how to balance taxes and government support.

Of course, to some putting up taxes is the right way to go.  France and Sweden get away with higher tax burdens than the UK after all.  But this is very fraught.  Some think you can go after big companies and very rich people and leave everybody else.  This is not as easy as it sounds though, since this wealth is very mobile.  Property is not mobile, of course, but raising taxes on property is probably as politically toxic in Britain as taxing fuel is in the US.  There is also a problem if too much tax revenue comes from the very rich or corporations – these start to acquire more political weight.  Which leaves the not-so-rich.  But these people are under pressure and feel over-taxed – Ed Miliband’s “squeezed middle”.

So I think the government is right.  We have hit the limit of what the country can afford for tax-funded free-at-the-point-of-use health system.  But we have not hit the limit of what people are prepared to spend if it’s their own money and for their own benefit.  The risk to the NHS is that the more affluent middle classes start to opt out of NHS services, depriving them of critical mass and undermining the principle of social solidarity.  This has already happened to NHS dentistry.

Nasty.  In the last years of the previous government the issue of co-payments was quite high up the political agenda: the possibility of NHS patients topping up their treatments with their own money to get things not on the basic menu.  This had become politically charged because of the costs of some rather questionable cancer treatments which the NHS were denying but which people were prepared to pay for.  The Conservatives clearly considered the topic politically toxic, since they have fudged the issue of cancer treatments with a bit of extra funding.  Labour and the Lib Dems were inching towards accepting co-payments, though I expect both parties are now bouncing back.

But in my view co-payments is the best way to relieve the pressure.  The NHS should define a basic menu of treatments that everybody is entitled to, but accept payments for anything outside this.  This undermines one of the sacred founding ideas of the NHS, that everybody gets the same, no matter how wealthy.  But it is better than the alternatives.  It’s the debate we should be having.

Hacking scandal – enjoy it while it lasts

We haven’t seen anything like this since the MPs expenses scandal in 2009.  Rupert Murdoch’s newspaper empire is the centre of a media and political feeding frenzy provoked initially by outrage over mobile phone hacking, and now taking in dodgy relationships with the Police and management cover-up and dissembling.  Murdoch has had to close one highly successful paper, and now he’s  withdrawn his bid for 100% of BSkyB.  Commentators are using metaphors such as earthquakes and the shifting of tectonic plates.

Frankly I find it impossible not to enjoy this spectacle.  Murdoch and his acolytes are hard-nosed businessmen who would not have thought twice about meting out the sort of stuff they are now victims of.  We can only imaging what The Sun would be saying about the photogenic Rebecca Brooks, the senior manager at the centre of the scandal, where it not part of the Murdoch empire.  What’s more Mr Murdoch clearly had undue political influence, and liked hold politicians in fear – and now it is wonderful to see how politicians behave once that fear is lost.  And his influence was in no way benign, in favour of biased news, extreme Euroscepticism, and stoking up prejudice generally.

But will any lasting good come of it?  It doesn’t bother me that other, equally evil press barons have so far escaped unscathed.  Indeed widening the scope might diminish the punishment – it is surely more effective to totally dismantle one evil empire than damage several a bit.  The others will draw conclusions from Murdoch’s fate.

But the political earthquake of the MPs expenses scandal did not change very much, after its deserved and undeserved victims were buried.  The same prejudices and appetites that Murdoch fed on persist.  Others will move into any empty space that he vacates.  And it is almost impossible to regulate it properly.  It is difficult to believe that the public enquiry will change very much.  Indeed the political consensus around keeping its scope very broad might serve to weaken and dilute its effect.

But in amongst this battle there is one thing worth fighting to protect.  That is the regulation of news broadcasting in TV and radio, and the primacy of the BBC.  As this Bagehot column makes clear (see the end of the article), Murdoch clearly wants to establish a Fox News in the UK to do to TV what his print newspapers have done to that medium.  The BSkyB takeover was part of that strategy.  The baleful influence of this is all too clear from this poll which shows that TV and radio are the only medium that retains a high degree of trust in the UK, and that distrust of the press here is much higher than elsewhere in Europe.

The savages were circling.  They’ve been seen off for now.  But we must stay vigilant.

The enduring legacy of paganism

Tennis stars Rafael Nadal or Andy Murray  throw their (sweat-soaked) wrist-bands into the crowd after winning a match at Wimbledon.  To me this is rather bizarre.  What on earth would I do if one of them landed in my lap?  But the Romans would have understood, and I would not be surprised if victorious gladiators did something quite similar.  The latest exhibition at the British Museum looks at another variation of this behaviour, on a massive scale, that overtook Christianity for over 1,000 years, up to the Reformation in the 1500s.  This was the collection of relics associated with saints (usually body parts) and with Jesus Christ (pieces of the cross, thorns from the crown of thorns, etc.).

This is the Treasures of Heaven exhibition.  At one level it is a showcase for many wonderful artefacts of exquisite craftsmanship.  But the exhibition also explains the practices of this aspect of medieval faith, and gives us an opportunity to reflect on it.  There are three aspects in particular that are interesting.  First is the obsession with relics – seeing, possessing, touching physical objects that have been associated with somebody holy, in the belief that some of the holiness will be passed on.  Second, the importance of saints acting as intermediaries between the faithful and God after their death.  Third, the dismemberment of saints’ bodies for use as relics.

The general idea of relics does have a strong resonance in our culture, which persist still – witness the tennis stars’ wrist bands, the obsession with original artworks over copies, and so on.  The interest is in their use in this religious context, as that is much less common.  It wasn’t part of the Jewish faith from which Christianity grew.  This looks like a pagan inheritance from the Romans.  An obsession with sacred places, to which pilgrimages are made, was also an important part of medieval devotion, but this is unremarkable by comparison; pretty much all faiths have something similar.

The practice of worshipping saints looks like an inheritance from pagan polytheism.  The jump to monotheism from animism and polytheism is a huge one.  In the Jewish faith this seems to have taken quite a long period of time; in the Far East it doesn’t seem to have happened at all, with polytheism evolving directly in atheistic faiths such as Buddhism.  Worshipping saints looks like an intermediate step; a similar thing seems to be the case in Shia Islam.

The dismemberment of bodies really is strange though.  According to the British Museum, this doesn’t seem to have pagan roots.  There is a strong human instinct that bodies should be kept whole.  Perhaps it started because so often martyrs’ bodies where dismembered in early Roman persecution.

Once the cult of relics got going, it is very difficult not to be cynical.  Most of the relics were clearly forgeries.  The practice suited clerical and secular authorities and was exploited by them.  Eventually there was a backlash, started by Martin Luther and flowing on through the Reformation.  Many relics were destroyed, including virtually all those in Britain.  A number have ended up in museums, and so to this exhibition.  The Catholic church persists with the practice, but somehow I think most of the power has gone.  Saints are seen as examples, and sainthood a sort of posthumous honour – and not as active intermediaries.  Relics might be seen as objects for meditation, and not much more.

Meanwhile in popular culture, we have reverted to the idea that dead bodies should be kept whole.  A huge fuss was created when a hospital was found to have retained some children’s body parts for research.  We expend a lot of effort trying to find bodies after a catastrophe, to act as a focus for memorial and “closure”.  As people in Britain drift away from Christianity, they drift back into to a pagan, pre-Christian outlook.  Sports and entertainment stars take up the role of deities; people collect and worship their possessions and even sweat; they conduct pilgrimages to their holy sites.  But we don’t dismember their bodies after death.

Is Britain about to go bust?

The debate about Britain’s economic policy rumbles on, with a speech by the Shadow Chancellor Ed Balls last week.  In previous posts I have dismissed the claim made by some that the government’s cuts are unnecessary, and most commentators, including Mr Balls, seem to accept this, even if they don’t say so explicitly. But there is a furious debate about how quickly the cuts should be implemented: 5 years as the government plans, or 8 years as Labour suggests, apparently including Mr Balls, though in the past he has been suggested longer.  An impressive array of economists seem to support the Labour argument.

The basis of the critics’ argument rests on conventional macroeconomics, and runs that cutting too fast creates needless unemployment and risks a spiral of lower demand which will make things worse.  This argument is open to challenge on its own terms (see The Economist’s Buttonwood column here, or Bagehot here), but the government’s defenders don’t generally try; instead they trump it with an argument about unsustainable levels of government debt.  I want to look at the macroeconomic argument in a future post.  Today I will consider whether unsustainable debt really is such a risk.

If government debt gets too high, it can derail the whole economy.  A default, when governments renege on the terms of their debt, can be absolutely catastrophic.  The problem is that if governments can’t raise the money then all the functions of government are threatened.  For countries like Greece who are part of the Euro, this means that they literally can’t pay the bills – salary payments are stopped and so on.  This is such a frightening prospect that there are strong incentives for other members of the zone to organise a rescue.  Countries like the UK do have another option: they can debauch their currency by paying bills with newly created money.  That’s how hyperinflation starts; the most recent example is Zimbabwe, and its implications are hardly less disastrous than default.

So what are the risks for Britain?  The good news is that before the crisis struck overall debt was modest by international standards at a shade over 50% of GDP.  Even better, the maturity profile of this debt, i.e. how soon it has to be rolled over, was long term – longer than any other major economy.  The bad news is the massive size of the current deficit – 11% in 2009, and the fact that 8% is “structural” or won’t bounce back with the economic cycle.  That means that total debt is increasing rapidly; by the end of 2010 it was already 75% of GDP. This gives two main problems.

The first problem is that debt risks spiralling out of control.  Few think that the current economy is capable of more than modest growth, austerity or not, which means that extra wealth is not being generated fast enough to get us out of trouble.  And debt comes with an interest bill.  There are some classic economic models of this, and on these the warning lights are flashing red furiously.  At some point lenders (characterised as the “bond markets”, but potentially including you and me) refuse to lend, or at least start to put the rate of interest up, making things worse.

The second problem is more subtle.  If total national debt levels off at a high level, this will drag down the whole economy for a long while to come, as we spend too much resource servicing the debt.  One study suggested that serious problems start to happen when debt reaches 90% of GDP – less than two years away at the current trajectory.  Taking longer to eliminate the deficit means that overall debt will level off at a higher amount, unless the aggressive option really does lead to meltdown.

There are three further overlapping problems for the UK.  Debt markets are very open; there is a degree of dependence on overseas support; and the pound is a floating currency.  Government debt problems are much easier to handle if there is ready access to lenders who are effectively forced to lend to you; this has helped such high debt countries as Japan and Italy.  Superficially the UK seems to look this way: pension funds are massive, and traditionally hold lots of government debt (gilts) for actuarial reasons.  But such funds are aggressively and independently managed, helping to make our financial services industry internationally competitive.   That means they switch away from buying gilts as soon as they think it is not such a good deal.  Dependence on overseas investors appears to be relatively modest, as buyers of gilts are overwhelmingly domestic (or so I believe).  But the country still runs a significant current account deficit (unlike Japan, and even Italy), meaning that the economy as a whole does need foreign lenders.  The floating pound is often presented as a get out of jail free card – but the benefits of being able to devalue are two edged.  Foreign investors will be wary of sterling if they think it will devalue; domestic investors will likewise increase their overseas exposures in the same event, reducing their ability to buy gilts (unless these are  issued in foreign currency, but let’s not go there).

But, the government’s critics maintain, there’s no sign of trouble, and never has been.  The government has had no trouble selling gilts, at very low interest rates.  The trouble with this argument is that markets can turn in an instant, and you won’t know until too late.  An investment decision depends on a judgement looking far into the future, and this can move very quickly.  Government ministers seem to have got a genuine fright in May 2010 with the Greek crisis.  By and large the closer a commentator actually is to the debt markets, the less sanguine they are about the whole thing.  There are just too many risk factors.

So what to think?  The Labour plan is probably viable, if backed by a real determination to follow it through (and Alistair Darling, the outgoing Labour chancellor would have been an excellent figurehead, unlike Mr Balls).  But it undoubtedly takes more risks with catastrophe.  Whether it is worth doing so does come back to your view on the macroeconomic risks.  If you think that the austerity programme really will lead to meltdown, then this has real power.  But neither is the government argument implausible.  It’s about the risks you are prepared to run.

The wonderful world of Scilly

I have recently returned from a holiday in the Isles of Scilly (note for pedants: “Scilly” for short, not “the Scillies”).  I have been going there every two years or so for over 20 years, and it’s still one of my favourite places.

Some of the attractions are obvious.  White, sandy beaches (though the water is still cold); beautiful rocks (pictured in the title to this blog); a kind climate, notably better than the mainland; the ever-fascinating and ever-present sea.  But it is also a wonderful, miniature world apart.  Everything is smaller: roads, cars, shops , castles.  Each island has its own post office, even though in many cases the number of inhabitants is less than a single London street (well not quite true; the post office on Bryher, the smallest island has closd down – but a new one is being built to replace it!).  It’s very English too; relations with the mainland may be a bit strained sometimes, but you hear nothing of Cornish nationalism.

This year our visit coincided with a daytrip by the Queen – and we did catch a glimpse of her.  It was real shock to see so many policemen, though, including ones armed with machine guns.  The islands are nearly crimeless.  One of our guests accidentally dropped his wallet on the morning of his departure.  A passing chambermaid from one of the local hotels, picked it up, took it to the receptionist, who managed to locate us before we even knew it was gone.

We’ll be going back.

Service break

I am on holiday for a couple of weeks, and won’t be attempting to post while away.  I’ll be back later.  Last week has been busy, so I’ve not posted much – but I’ve got lots of ideas…

Why are NHS managers so unpopular?

Health Service Journal (HSJ) was on its high horse last week.  Its front cover says “The Big Lie exposed: the truth about NHS management”.  The proximate cause is a report by the King’s Fund called The Future of Leadership and Management in the NHS.  This report suggests that the NHS doesn’t have too many managers, and that, if anything the service is under-managed.  The HSJ is directed at NHS managers, and it is easy to see why they are so fed up.  But the HSJ coverage has a blind spot.  It doesn’t ask how the NHS got itself into this situation, and why NHS managers have become politically toxic.  It’s no use waving around King’s Fund reports; if NHS managers don’t understand of this, they will struggle to reverse it.

But let’s clear the decks first.  The idea that the NHS has too many managers as opposed to those “front line” staff is silly, and the political target to reduce their number is at best unhelpful and at worst positively damaging.  In order to deploy those front-line resources most effectively, they need to be properly managed.  Huge strides have been made by the NHS through more and better management over the last couple of decades.  Furthermore, my impression of the quality of NHS management is that it is easily up to the same quality as the private sector.  That, of course, is not as much comfort as it might be, given that crass management is pretty rampant in the private sector.  So a lot of the political comments made about NHS management are unjust, unfair and often just plain untrue.

So what’s gone wrong?  Well a clue comes in the frequent use of the word “bureaucrat” by politicians.  This is a word thick with negative connotations, of insensitivity to people’s real needs and of the arbitrary exercise of power.  Many of the public’s interactions with NHS management have left just this sort of impression.

The NHS is a hierarchical organisation, with pretty much all accountability through a single man at the top, the Secretary of State.  To most people this is no accountability at all.  One man can’t possibly grasp the intricacies of any particular local situation.  So local NHS officials have huge amounts of effectively arbitrary power.  And they rub our noses in it.

When the local NHS where I live executed a 180 degree turn and decided to close a local hospital rather than develop it, they rode roughshod over local feeling.  A local official just told us the area was too posh to have a hospital.  After a kerfuffle involving the local Labour (at the time) MP, more facilities were promised nearby in an appropriately less posh place – but of course these were soon cut, even before last year’s election.

The problem for most NHS managers is, I think, that they don’t remotely get what the problem here is.  Tough decisions have to be made.  If we followed local opinion all the time the NHS would go bust in days; if we kept consulting nothing would get done.  We have clear mission and we execute it.  NHS managers seem to bristle at the idea of genuine local accountability.  HSJ itself opposed the Lib Dem proposal of directly elected health boards.  Chaos.  Postcode lotteries.  Working for people that don’t understand.  And so on.  NHS managers are all too happy with their hierarchies, allowing them to pass the blame upwards the whole time.

But the local NHS is taking political decisions all the time.  For example, reducing health inequalities, a key local NHS objective, is loaded with political judgements.  A key political objective is to maintain middle class consent for the service; without middle class users the NHS would collapse (and we already have the example of NHS dentistry to show that).  So treating them like muck because they are on the wrong side of the equality equation should be a no-no.  Politicians can see that easily; bureaucrats can’t – it’s just not their problem.

And once you are perceived as an insensitive bureaucrat, the rest follows pretty quickly.  An organisation as large as the NHS will always throw up examples of crass management, which will be gleefully reported by patients and clinical staff alike.  And if managers are overstretched, they are bound to drop some balls too.  Episodes such as the Mid-Staffs fiasco add grist to the mill (and incidentally I did not sense much outrage from other NHS managers in the HSJ coverage of that sorry affair).  Throw in the management consultant blather dropped on the NHS (World Class Commissioning and such), and you have a massive stock of ammunition.

So NHS managers need a lot more political sensitivity, and should welcome more genuine political accountability instead of resisting it.  The NHS reforms are meant to help this, though whether do, of course, is another matter.