Why Welsh NHS is worth more than just healthcare
Economics experts Laura Reynolds, Annette Roberts and Max Munday explore the knock-on value of the NHS and its employees to the Welsh economy
ONE of the biggest Brexit worries is what will happen to the NHS when the UK leaves the EU. Among the many uncertainties is whether the NHS might be involved in a US trade deal.
Although international trade secretary Liz Truss has said that it “will not be put up for sale”, nothing has been agreed yet.
Likewise, the Welsh Government has clearly stated that NHS Wales would not be part of any US-UK trade deal either.
Wales’ minister for international relations, Eluned Morgan, has said there is “absolutely no prospect whatsoever” of the Welsh NHS being used as a bargaining chip. But despite the strong stances, uncertainty surrounds the legal and political weight of these claims.
No-one is sure what the post-Brexit landscape will mean for the NHS and public services more generally in Wales, or indeed, across the UK. Scrutiny over how it may affect the health and wellbeing of Wales’ people has already begun. And now our ongoing research has pointed to potential economic uncertainty for Wales if activity in the Welsh NHS is affected by the Brexit fallout.
The NHS requires the biggest input of public spending in Wales. For 2016-2017, our calculations put NHS Wales’ total revenue spending (everyday operational costs such as wages and buying goods, not capital investments like new hospitals) at £7.66bn. But we have found that there are wider economic and social benefits to this spending beyond immediate healthcare.
Almost 45% (£3.5bn) of NHS Wales’ revenue spending goes towards salaries and wages for the
76,600 staff, plus an extra 1,860 agency staff. This places the NHS as one of the country’s top employers, accounting for 6% of Welsh employment. And these figures do not include local community practitioners such as GPs and dentists.
In contrast to what we see in many other sectors of the economy (such as manufacturing), NHS employment is relatively evenly spread across Wales. This activity provides important contributions to local economies in some less prosperous parts of the country. The south-east Wales region, for example, has some of the highest rates of unemployment in Wales, in areas such as Blaenau Gwent and Caerphilly. But the Aneurin Bevan Health Board alone supports more than 11,000 jobs in this area.
Across Wales, NHS jobs are also better paid than the Welsh average. Average wages for NHS employees are almost £34,000 a year, while the Welsh average is £24,600.
The economic benefits of NHS Wales are not just linked to direct employment, however. Using data provided by NHS Wales, we have estimated the multiplier effects from NHS spending in the country. This is the extra income generated for the local economy from spending in a particular area. We measured these effects as gross value added (a measure of goods and services produced in an area) and the number of fulltime equivalent (FTE) jobs supported. Using NHS procurement data, we have also estimated the proportion of spending that remains within the Welsh economy. Total spending on everyday essentials, from medical and surgical equipment to food and utilities, is a little over £4.2bn.
This spending brings with it indirect economic consequences because the producers of the goods and services spend money on other industries in Wales. For example, a Welsh supplier of medical devices purchases metal goods in Wales when making its products. So NHS procurement encourages additional spending in the local economy – it creates what are known as “supplier effects”.
The size of these effects depends on the initial local sourcing by NHS Wales and the amount of local sourcing further down the supply chain. All in all our research suggests that 47% of the non-wage spending of NHS Wales remains in the Welsh economy.
Other indirect benefits of NHS spending include household spending effects – NHS employees spend money on Welsh goods and services. Similarly, workers in supplier firms spend their wages in the local economy, further boosting demand.
By adding these induced-income effects to the supplier effects we can estimate the full contribution of NHS Wales to regional economic activity.
Looking at these figures together, we estimate that almost 9% of total gross value added in Wales (£5.4bn) is supported by the combined direct impacts of NHS Wales spending, and affects the rest of the Welsh economy.
The number of jobs supported is very important for the Welsh economy. Adding to the nearly 78,500 directly employed (including agency workers), it is estimated a further 67,000 indirect FTE jobs are supported. The total impact stacks up to over 145,000 FTE jobs, or around 11% of the total employed and selfemployed in Wales. These figures are without considering the added benefits from the NHS Wales’ capital spending programme.
Breaking this down, we estimate that every £1 billion of direct NHS revenue spending supports almost 19,000 total jobs in Wales.
These are found across health and non-health-related sectors, including manufacturing, construction, retail and business and professional services.
Our research shows that the benefits of the NHS extend beyond health and wellbeing to include a number of social and economic consequences in Wales.
While we do not yet know whether a potential shake-up due to Brexit will bring unintended consequences to the Welsh economy, our research shows just how valuable the NHS is to Wales.
■ Ms Reynolds is a postdoctoral research associate, Dr Roberts is a reader in ecomonics and Professor Munday is director, all at Cardiff University’s Welsh Economy Research Unit.
■ This article first appeared on www.theconversation.com