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Mr Bright-side

As the impact of the depressed global economy hits, there is no reason to smile

An illustration of a miserable clownI am indebted to the excellent Jonathan Guthrie, the enterprise editor of the Financial Times, writing in the autumn issue of the RSA magazine, for these thoughts.

It appears we both share a dislike of the 'glad game'; that insufferable manner of the fictional orphan Pollyanna who was determined to find the silver lining in every cloud. This irritating, freckle-faced freak used to drive me to distraction.

I will not do the right thing, be happy, smile, be nice. There is nothing going on that I can find remotely spirit lifting. It's all crap.

The weather has been disgusting, the banking sector is down the toilet, the economy is shot to pieces. I was ill for the whole of August (some mystery virus that nearly finished me off), then a wasp-sting that ended up as a septic thumb (excruciatingly painful), and now a dose of crippling man flu (and no sign of a bunch of flowers from the editor of PM).

As if this is not enough of a crushing burden for one man to bear, today my washing machine waited until I was out and deposited a flood all over the floor.

Do not expect me to look on the bright-side, cheer up, smile or make an effort to be cheerful.

My glamorous loft-style, to-die-for, bachelor apartment that cost me a small fortune is probably not worth as much as a garden shed, my share portfolio is worth less than a Zimbabwe postage stamp and my bank has become a subsidiary of a subsidiary of a foreign outfit that, given another week or two, will also see its shares shoved into the shredder.

Even the Japanese banking sector has had its problems. In the last seven days the Origami Bank has folded, the Sumo Bank has gone belly up, Bonsai Bank announced plans to cut some of its branches, and yesterday it was announced that Karaoke Bank is up for sale and will likely go for a song. Today, shares in Kamikaze Bank were suspended after they nose-dived. Happily the Samurai Bank is soldiering on following sharp cutbacks, however the Ninja Bank is reported to have taken a hit, but they remain in the black.

If that's not bad enough, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared staff will be dealt a raw deal.

Yes, yes I know. But, I'm in that suicidal groove that creates its own dark humour. Welcome to it.

No surprise
We should have seen it coming. A year ago this August the sub-prime fiasco started in the US and the seeds of our destruction were planted by Alan Greenspan, the US Federal Reserve chairman, when he relaxed credit policies. Lenders threw money at so-called ninja borrowers; those with no incomes, jobs or assets. Worthless mortgages were bundled-up and sold on to become toxic securities.
We are all finding out what the real impact of a globalised economy means. In a word, it means trouble.

History tells us low inflation, low interest rates and near vertical increases in house and asset prices means a bang is on the way.
Kondratieff, the 19th century Russian economist described a boom-bust cycle and predicted we would be in a mess in mid-2000. 
It's all getting worse. The once-poor people in India and China are getting a taste for better food and more fuel. In consequence, commodity prices are going through the roof. I'm telling you, this is not getting any better. The trouble is, there are a bunch of idiots around, many in senior positions, that think we are alright.

At a recent conference I heard a very senior person tell everyone that they were impervious to the credit-crunch as they have bomb-proof public sector customers. Do we live in the same reality?

Here's the message. We are in a big, bloody, awful, mother-of-an-all-time mess. The government is going to have to borrow like hell to keep afloat. According to the Institute of Fiscal Studies, the economy (in 2010-11) will be 2.75 per cent smaller than the treasury expected. A small percentage that, in real terms, means a £56bn shortfall in the public accounts. That's enough to keep the NHS running for six months, or pay for the whole of the Ministry of Defence and the wars in Afghanistan and Iraq. Add in tax-cuts to draw the sting of the 10p tax revolt – say £3.5bn; lower corporation tax receipts; a down-turn in VAT income and almost no stamp-duty income, and you are looking at a shortfall equal to £1000 per head of population. Twenty quid a week.

Increase taxes? I don't think so – not with an election in two years. Borrow? Yes, from Saudi Arabia, India and China. The only other thing is to slash government spending. The NHS is the biggest user of taxpayers' money.

Expect cuts, economies, savings, and cut-backs. Anticipate increases in generic prescribing targets, NICE to raise the bar and a slowdown in activity.

Your job is to protect shareholder value and to do this I suggest four things:
1. Focus everyone's attention on the seriousness of this – cut all budgets by an arbitrary 12.7 per cent.
2. Dump field staff, the ABPI says 80 per cent of rep/GP appointments are cancelled. Call a halt to all joint working with the NHS – they just want your money and will deliver nothing in return. Only talk to people who hold a pharmacy budget.
3. Focus on medicines of value to patients quicker. Park exotic drugs that don't really produce lasting benefit. Squeeze the R&D people until they bleed.
4. Start measuring your marketing budget. No, don't do that. Cancel it and see what happens – you'll be surprised. The NHS can buy its own pens, do without sticky jotter pads, coffee mugs and cuddly toys. In fact, stab anyone that suggests the opposite. It's cheaper than redundancy.

Oh, and look on the bright-side, this will only last for three years.

The Author:
Roy Lilley is a (sometimes controversial) healthcare author and broadcaster

24th November 2008


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