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Tax
Jun 13, 2017 14:32:27 GMT
Post by racingteatray on Jun 13, 2017 14:32:27 GMT
I am sure John or others can point out the flaws in this:
TAX Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this... The first four men (the poorest) would pay nothing. The fifth would pay £1. The sixth would pay £3. The seventh would pay £7. The eighth would pay £12. The ninth would pay £18. And the tenth man (the richest) would pay £59. So, that's what they decided to do. The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20." Drinks for the ten men would now cost just £80. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realized that £20 divided by six is £3.33but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay. And so, the fifth man, like the first four, now paid nothing (a100% saving). The sixth man now paid £2 instead of £3 (a 33% saving). The seventh man now paid £5 instead of £7 (a 28% saving). The eighth man now paid £9 instead of £12 (a 25% saving). The ninth man now paid £14 instead of £18 (a 22% saving). And the tenth man now paid £49 instead of £59 (a 16% saving). Each of the last six was better off than before with the first four continuing to drink for free. But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10!" "Yeah, that's right," exclaimed the fifth man. "I only saved a £1 too. It's unfair that he got ten times more benefit than me!" "That's true!" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"The nine men surrounded the tenth and beat him up. The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill! And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier. For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
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Tax
Jun 13, 2017 14:41:25 GMT
Post by michael on Jun 13, 2017 14:41:25 GMT
The reality is to ask the tenth man to pay 'a little bit more' so that everybody else can have a free lunch too.
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Tax
Jun 13, 2017 14:45:06 GMT
Post by scouse on Jun 13, 2017 14:45:06 GMT
But the tax system doesn't ask. It demands money with menaces.
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Tax
Jun 13, 2017 15:50:55 GMT
Post by Big Blue on Jun 13, 2017 15:50:55 GMT
The issue is with elements of society that cannot get over the fact that some earn more than they and therefore need to be penalised as such.
The very nature of the stepped taxation system is a penalty for the wealthier. In reality the tax system should be something along the lines of the average national salary should be tax free, so anyone earning £22k or less pays no tax. As it stands a lot of the people in this bracket are paying tax over the current 0% threshold then being paid back via a convoluted algorithm based on several tax credits and allowances that they have to reapply for every year.
The tax point after that should be a single percentage paid on every penny earned over £22k, whether it's 25%, 27% whatever. The number would need to be derived from the existing data (they've got a few decades of it at the HMRC FFS!) so that the overall tax take would be similar or equal to the previous year's stepped-tax income. I recognise that this would cause outrage as compered to the current system it looks like a huge tax cut for the well-paid but the truth is those that are reasonably well paid are not all driving around in Ferraris but tend to live lives like most of us on here, with families and mortgages. Those that are monumentally overpaid have various tax-efficient vehicles at their disposal to keep their actual income for tax purposes as low as possible so any form of new tax regime only affects them marginally.
The main cause of the outrage would be, however, that in ridding the higher rate tax the wealthy are "not paying their share". This is the real issue I have: 25% of £100k is more than 25% of £20k no matter how you do maths. Additionally the tax free element as a proportion means that currently someone on £23k gets 50% of their income free of income tax whereas someone on £69k gets only 16.66% of their income free of income tax and as you go over £100k it starts to tend rapidly towards 0%. As can be seen from the outcome of the familiar pseudo-scenario in Racing's OP these finer points are consistently ignored, not only by the HMRC but by large sections of the electorate that don't like the fact that they are not given new Ferraris every three years and might have to take ferocious risks, both legal and illegal, to get one.
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Tax
Jun 13, 2017 16:17:54 GMT
Post by Ben on Jun 13, 2017 16:17:54 GMT
The richest man should buy drinks for everyone.
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Tax
Jun 13, 2017 16:27:22 GMT
Post by johnc on Jun 13, 2017 16:27:22 GMT
I'd really like to see a system such as the one BB has suggested. A percentage is by definition a means of taking more in £'s from those who have more to give.
As for Racing's post, it is the perfect analogy. I think it describes human nature though: everyone wants an equal share when they are receiving something but when it comes to paying, they would prefer if someone else took care of it. Jealousy will always make people blind to the truth.
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Tax
Jun 13, 2017 16:31:21 GMT
Post by Deleted on Jun 13, 2017 16:31:21 GMT
Using my childhood as a point for my experience, there was no culture of "Someone else has got more than I have and I want it". This seems not to be the case now. If someone else has more than me and there are a lot, good luck to them. How about a single low tax rate that does not change, for everyone. Make that rate reasonable and remove all these exceptions and claiming for having to buy a car for work or whatever it might be. I know, just an example. Why should anyone be ripped off?
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Tax
Jun 13, 2017 16:49:24 GMT
Post by racingteatray on Jun 13, 2017 16:49:24 GMT
We are also forgetting NI. There is no minimum on that.
In the UK, assuming nil pension contributions for the sake of the example:
A person earning £20k pa takes home just shy of £17k, or 84.5%, net, giving them a blended tax rate (including NI) of 15.5%.
A person earning the national average wage of £27.6k pa takes home £22k, or 80%, net, giving them a blended tax rate (including NI) of 20%
A person earning £50k pa takes home £36.8k, or 73.5%, net, giving them a blended tax rate (including NI) of 26.5%.
A person earning £80k pa (the point at which Labour thinks you are rich) takes home just over £54k, or 67.5%, net, giving them a blended tax rate (including NI) of 32.5%.
A person earning £100k pa takes home £65.8k, or 65.8%, net, giving them a blended tax rate (including NI) of 34.2%.
A person earning £150k pa (the point at which Labour thinks you are filthy rich) takes home just over £90k, or 60%, net, giving them a blended tax rate (including NI) of 40%.
So despite the person on £150k notionally earning 5.5x the national average wage, they actually only receive in their pocket 4x as much. And moreover, HMRC earns as much tax from one person on £150k as from 11 people earning the national average wage. That's despite the fact the high earner does not earn the same amount as 11 people on the national average wage.
However, your average socialist still thinks the rich should pay more.
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Tax
Jun 13, 2017 17:00:45 GMT
Post by johnc on Jun 13, 2017 17:00:45 GMT
We are also forgetting NI. There is no minimum on that. In the UK, assuming nil pension contributions for the sake of the example: A person earning £20k pa takes home just shy of £17k, or 84.5%, net, giving them a blended tax rate (including NI) of 15.5%. A person earning the national average wage of £27.6k pa takes home £22k, or 80%, net, giving them a blended tax rate (including NI) of 20% A person earning £50k pa takes home £36.8k, or 73.5%, net, giving them a blended tax rate (including NI) of 26.5%. A person earning £80k pa (the point at which Labour thinks you are rich) takes home just over £54k, or 67.5%, net, giving them a blended tax rate (including NI) of 32.5%. A person earning £100k pa takes home £65.8k, or 65.8%, net, giving them a blended tax rate (including NI) of 34.2%. A person earning £150k pa (the point at which Labour thinks you are filthy rich) takes home just over £90k, or 60%, net, giving them a blended tax rate (including NI) of 40%. So despite the person on £150k notionally earning 5.5x the national average wage, they actually only receive in their pocket 4x as much. And moreover, HMRC earns as much tax from one person on £150k as from 11 people earning the national average wage. That's despite the fact the high earner does not earn the same amount as 11 people on the national average wage. However, your average socialist still thinks the rich should pay more.
NI does have a "sort of" limit for employees and the self employed. It is only employer's NI (the employment disincentive) which is charged at 13.8% on limitless earnings.
Employees pay 12% NI on gross earnings between £680/mth up to a maximum of £3,752/mth (£45,000 in round money). Any earnings after that are subject to an NI rate of 2%.
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Tax
Jun 14, 2017 7:25:48 GMT
Post by Deleted on Jun 14, 2017 7:25:48 GMT
I certainly feel that I understand the OP more than I did when I first saw it many years ago!
The problem with trying to simplify the tax regime is that it's not just taxes on income, such as NI and Income Tax. There are also different (potential) taxes on unearned income, dividends, removal of family credit (or whatever it's called), capital gains (in several forms - treated slightly differently), inheritances etc. In my experience, everyone thinks themselves hard done by when they come up against something that is new to them, or which worsens significantly. A one rate for all scenario would have to see tax rates equalised for all these things, which in turn would mean the allowances having to be significantly reduced in most instances to maintain tax take. With IHT, this would mean a significant lowering of the threshold and many more of us in the IHT bracket. The cries of 'not fair!' would ring in the air, and this is why tax rates will vary.
The other factor is that tax rates and allowances are used to encourage desired behaviours. The state wants us to save for retirement, thus is gives us tax relief on pension contributions. It used to want to help us by a house, so we had MIRAS. Then it ceased to be bothered, and MIRAS bit the bullet. Now it wants to help again, so we have ISAs geared to first time buyers. It's much harder to have the flexibility to influence behaviour without the flexibility to alter tax rates and allowances.
The other factor which is often forgotten (and I am always reminded of it when someone makes a value-laded statement as though it is fact) is that for as long as I have been aware, the trend through governments of both hues has been to decrease the tax burden on the poorest through increasing allowances, but most particularly through reducing the basic rate of tax. It was 27% when I first started paying tax, and even though I was earning two parts of fuck all, I still noticed it. Quite a lot.
I was talking to 13th about how your priorities change, and he observed that generally people become more right wing as they age (not aimed at me, I hasten to add). I said that, in my case at least, it was far less simple than that. I still believe in the same things, the same principles, but my expectations of the world are lower. I have seen that idealism seems seldom rewarded, and that when a candidate or party you favour is elected, things don't tend to go as well as you hope they will. And the purpose of power is to stay in power, with governing well coming some way down the list of priorities. Large organisations place a high value on covering their own arses, from government and regulatory bodies to the councils and the upper echelons of the police (I am thinking in particular of the Rochdale child trafficking saga here). We are a million miles from legitimately feeling that our taxes are like funding a third world country via its corrupt leadership, but there is just the very faintest whiff of it about. I'm also in the final decade before I retire, and when it comes to tax have in my mind more how much I have paid over the years (and indeed continue to pay), not how big my future debt to society should be because I've done reasonably well for myself.
Oops. Should that be in rants?!
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Tax
Jun 14, 2017 7:59:41 GMT
Post by Roadsterstu on Jun 14, 2017 7:59:41 GMT
Using my childhood as a point for my experience, there was no culture of "Someone else has got more than I have and I want it". This seems not to be the case now. If someone else has more than me and there are a lot, good luck to them. How about a single low tax rate that does not change, for everyone. Make that rate reasonable and remove all these exceptions and claiming for having to buy a car for work or whatever it might be. I know, just an example. Why should anyone be ripped off? Quite. Everyone seems now to think that they deserve what everyone else has. Yet they expect to get it free or for less or without having to work for it. Too many people are far too demanding and have a vastly over-inflated sense of entitlement.
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Tax
Jun 14, 2017 9:16:46 GMT
Post by Big Blue on Jun 14, 2017 9:16:46 GMT
Sorry, I meant to say my post was related to Income tax only, not other forms of taxation, which as Twelfth says are for more circumstantial (on the understanding that everyone is supposed to "work" with regard to the income tax scenario). Hence a flat rate of income tax could be assessed as I proposed.
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Tax
Jun 14, 2017 9:41:30 GMT
Post by Deleted on Jun 14, 2017 9:41:30 GMT
Hey, I'd be in favour (as long as I was better off)...
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Tax
Jun 14, 2017 10:12:50 GMT
Post by michael on Jun 14, 2017 10:12:50 GMT
I'm a marketers dream as when I read 'tax' I always think, "it doesn't have to be taxing". That's not true.
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Tax
Jun 14, 2017 12:50:13 GMT
Post by johnc on Jun 14, 2017 12:50:13 GMT
.... and this were graded up to the highest earner paying their contribution plus a little more but at a lower % it would be more accurate I'm not really sure what that means. For someone earning more than £45,000 in England and Wales the rate of tax and NI is an effective 42%. (In Scotland the rate between £43,000 and £45,000 is an effective 52%) If you assume someone has 3 children, the rate of tax between £50,000 and £60,000 is 67% (60% if you have 2 children and 53% if you have one child) The rate between £60,001 and £100,000 is back to 42% The rate between £100,001 and £123,000 is 60% The rate between £123,001 and £150,000 is 42% The rate above £150,000 is 47% A decent personal allowance of say £15,000, an additional age related allowance of say another £2,500 and flat rate tax of say 35% would at least keep the calculations simple.
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Tax
Jun 14, 2017 15:40:10 GMT
Post by grampa on Jun 14, 2017 15:40:10 GMT
Racing's story has been doing the rounds for many years, but it's a great illustration of my biggest beef with the Labour party - they always seem to be preaching politics of envy and encourage people, for instance to be jealous of someone driving a Rolls Royce - far better to encourage the lesser well off to go and shake his hand and thank him for paying for their child's education, their refuse collection, their hospital appointments etc etc.
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Tax
Jun 14, 2017 16:17:37 GMT
Post by Bob Sacamano v2.0 on Jun 14, 2017 16:17:37 GMT
I'm not sure continually raising the personal tax allowance is the way to go - we're getting more and more people without "skin in the game" and that just breeds a culture of taxes being something that only the wealthy pay and that how those taxes are spent being of little interest.
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Tax
Jun 14, 2017 17:05:56 GMT
Post by johnc on Jun 14, 2017 17:05:56 GMT
I'm not sure continually raising the personal tax allowance is the way to go - we're getting more and more people without "skin in the game" and that just breeds a culture of taxes being something that only the wealthy pay and that how those taxes are spent being of little interest. I understand that part of the drive to increase personal allowances is to allow a smoother transfer to MTD (Making Tax Digital). By removing lots of people from tax altogether they can basically forget about them and concentrate on those that are left.
I agree that it would be better if everyone paid something but can you just imagine the outcry that would bring?
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Tax
Jun 14, 2017 17:48:47 GMT
Post by Alex on Jun 14, 2017 17:48:47 GMT
I'm not sure continually raising the personal tax allowance is the way to go - we're getting more and more people without "skin in the game" and that just breeds a culture of taxes being something that only the wealthy pay and that how those taxes are spent being of little interest. I understand that part of the drive to increase personal allowances is to allow a smoother transfer to MTD (Making Tax Digital). By removing lots of people from tax altogether they can basically forget about them and concentrate on those that are left.
I agree that it would be better if everyone paid something but can you just imagine the outcry that would bring?
But isn't that just simply looking at the direct tax that is taken from earnings? You can argue that everyone should pay something but by raising the personal allowance from about £7k to £11.5k anyone earning minimum wage (not sure what that is now but based on 35hrs a week isn't it about £13k) has had an extra £75 a month in their pocket which will invariably be spent on goods or services, which are themselves subject to VAT and duties and also pays some of the wages of those delivering the services or selling the goods. So although someone earning £11.5k PA no longer pays income tax, they do at least have more to spend on VAT - which could well increase above 20% during the next parliament.
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Tax
Jun 14, 2017 19:38:19 GMT
Post by ChrisM on Jun 14, 2017 19:38:19 GMT
I;m pretty sure that National Insurance only used to be about 4% (within my working lifetime) Also I can remember when the standard rate of VAT was 8% yet it's now 20%
Why have taxes risen so much, particularly as we don't seem to get anything like the service we got when taxes were lower? (and yes, I appreciaet that the base rate of income tax was a little higher in years gone by, but even so, a 12% hike in the rate of VAT......)
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Jun 14, 2017 20:26:43 GMT
Post by ChrisM on Jun 14, 2017 20:26:43 GMT
^ Weren't we still doing things like that and running the NHS back in the 1980's ??
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Jun 14, 2017 20:46:12 GMT
Post by Big Blue on Jun 14, 2017 20:46:12 GMT
That's the biggest problem with the NHS. Not only are we living longer and therefore needing medical car for longer but the medical procedures available are now vast in number, require hugely expensive equipment and aftercare and because of the Hippocratic oath are made available to those that need them, even if they're on a waiting list. In the early days of the NHS some of the ailments we now expect to be treated for were treated with a hearty daily dose of morphine and the option of dying on your own bed (hence having a bed with the foot opposite the door is called the "coffin position" - people died at home a lot.
So the NHS (or "our NHS" as the myriad articles my lefties cousin sends me on Facebook call it) is now ridiculously expensive to run as a 100% taxpayer funded service and the miniscule claw backs from charges for outsourced car parking, emergency ambulance charges etc are a drop in the ocean of the cost of medical care.
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Tax
Jun 15, 2017 7:47:43 GMT
Post by Deleted on Jun 15, 2017 7:47:43 GMT
^ Weren't we still doing things like that and running the NHS back in the 1980's ?? To the extent we are now? Er, no... Indeed.
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Jun 15, 2017 8:13:49 GMT
Post by Alex on Jun 15, 2017 8:13:49 GMT
To the extent we are now? Er, no... Indeed. It's a common problem these days that we want the NHS to be a world class medical service but a lot of people are not willing to pay for it. Not suggesting that's you Chris, but many people would baulk at the idea of having an extra 2% levied on tax or NI to cover rising costs of healthcare.
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Tax
Jun 15, 2017 8:41:01 GMT
Post by michael on Jun 15, 2017 8:41:01 GMT
So the NHS (or "our NHS" as the myriad articles my lefties cousin sends me on Facebook call it) is now ridiculously expensive to run as a 100% taxpayer funded service and the miniscule claw backs from charges for outsourced car parking, emergency ambulance charges etc are a drop in the ocean of the cost of medical care. "Save our NHS" is a regular cry from lefties who moan that the tories are going to privatise it. Except that they don't and haven't, the largest privatisation of the NHS taking place instead under Labour. Just like coal mines, most closed under Labour. The NHS is not fit for purpose and it needs major reform. People are living longer but many of those years are in poor health so the years lived in poor health is increasing yearly and currently stands at about 20% men and 23% for women.
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Tax
Jun 15, 2017 8:53:03 GMT
Post by Deleted on Jun 15, 2017 8:53:03 GMT
Our NHS is simply doing far too much, it is called the National HEALTH (Emphasis only) Service and it should return to that core mission rather than so many plastic procedures etc. Consultants are effectively self employed and do as they please pretty much. Tail wagging the dog.
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Tax
Jun 15, 2017 11:40:09 GMT
Post by Deleted on Jun 15, 2017 11:40:09 GMT
So the NHS (or "our NHS" as the myriad articles my lefties cousin sends me on Facebook call it) is now ridiculously expensive to run as a 100% taxpayer funded service and the miniscule claw backs from charges for outsourced car parking, emergency ambulance charges etc are a drop in the ocean of the cost of medical care. "Save our NHS" is a regular cry from lefties who moan that the tories are going to privatise it. Except that they don't and haven't, the largest privatisation of the NHS taking place instead under Labour. Just like coal mines, most closed under Labour. The NHS is not fit for purpose and it needs major reform. People are living longer but many of those years are in poor health so the years lived in poor health is increasing yearly and currently stands at about 20% men and 23% for women.
'Not fit for purpose' is a very big statement. I probably see far more of how people feel about their NHS care than the average person as I see how my clients deal with their health concerns, as well as the usual experiences of family, friends etc. Few people I know have much bad to say about it, and many are at pains to praise the care they've had. There are always exceptions (our local ambulance service is woefully under-resourced) but where I live at least, 'not fit for purpose' would be massively unfair.
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Jun 15, 2017 11:45:17 GMT
Post by Bob Sacamano v2.0 on Jun 15, 2017 11:45:17 GMT
Surveys have repeatedly shown that those people who have had no need of the NHS's services have a far lower opinion of it than those who have been treated by it.
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Jun 15, 2017 11:45:18 GMT
Post by Big Blue on Jun 15, 2017 11:45:18 GMT
"Save our NHS" is a regular cry from lefties who moan that the tories are going to privatise it. Except that they don't and haven't, the largest privatisation of the NHS taking place instead under Labour. Just like coal mines, most closed under Labour. The NHS is not fit for purpose and it needs major reform. People are living longer but many of those years are in poor health so the years lived in poor health is increasing yearly and currently stands at about 20% men and 23% for women.
'Not fit for purpose' is a very big statement. I probably see far more of how people feel about their NHS care than the average person as I see how my clients deal with their health concerns, as well as the usual experiences of family, friends etc. Few people I know have much bad to say about it, and many are at pains to praise the care they've had. There are always exceptions (our local ambulance service is woefully under-resourced) but where I live at least, 'not fit for purpose' would be massively unfair.
I would look at discussing what we see as the purpose of the NHS then assessing its fitness to fulfil that purpose. FB has already said his hospital's A&E unit looks more like a care home than a blood bath: is that the purpose of A&E, or indeed the NHS?
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Jun 15, 2017 11:55:24 GMT
Post by michael on Jun 15, 2017 11:55:24 GMT
'Not fit for purpose' is a very big statement.
It may be a big statement but it's very different to voicing an opinion on care outcomes, which I have not done. As BB suggests the question that needs to be addressed is one of purpose. The NHS should should not be a care home but that is becoming an increasing role/expectation. I happen to know a fair bit about the NHS myself. I know that it needs major reform and simply chucking more money at it is not sustainable.
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