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State must spend to kick start the economy

This has been a dreadful month for jobs, the high profile names of Blockbuster, Jessops and HMV will disappear from the high street, but the real sadness is the lost jobs that follow.

Now I don’t profess to be an economist but is seems to me that Paul Krugman, the winner of the Nobel Prize for economics in 2008 has got a point. Simply put, he argues that in a worldwide recession, the problem is lack of demand by consumers (or an unwillingness to spend their precious resources) and it is up to the state to spend to kick start the economy.

We see the effect on a lack of demand/spending on the high street, but it came home to me this week in dealing with two GP practices. One practice, PMS, is worried about the loss of its PMS resources, the other, a GMS practice, is worried about the loss of income from the withdrawal of the QOF organisational domain. The upshot of these two issues is that both practices are going to make their salaried GPs redundant.

When budgets are cut, the normal (and natural) response is to try to make savings – in this case the salaried GPs’ salaries. So the cut in funding will be ameliorated by savings before it hits the GPs’ bottom line, and the result is a smaller hit in the GPs’ profits, but the salaried GPs will be gone, and the patients will have less of their demands met.

Sadly, I think this is just the start…

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