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GST compensation and shortfall in GDP growth

GST compensation and shortfall in GDP growth

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The Goods and Services Tax (GST) Compensation to states is a real issue. States want to hold the Union government responsible for the shortfall and for compensating them. The agreement was that States would get 14% annual growth in their GST share for five years, up to March 2022. Mind you, states were not seeing their sales tax collections grow 14% every year before.

In fact, some states (e.g., Tamil Nadu) have seen their GST collections rise faster post-GST than during the pre-GST years. Tamil Nadu was one of the states that was reluctant to let go off its autonomy to levy sales tax. True, states lost their fiscal autonomy. However, it is also true that states do not use all their revenue generation mechanisms. Property tax, user charges for water and electricity, road transport fares, etc., are not revised at all for years.

The promise was that a cess (levy) would be applied on luxury and sin goods and that would be credited to a GST Compensation Fund to pay states in case the actual GST collections (due to states) fell short of the 14% annual growth rate. It was never the intention that the Union government would pay out of the Consolidated Fund of India (i.e, out of pocket).

Fungibility was not a good thing

But, the atmosphere of trust and goodwill was vitiated when the Union Government dipped into this cess in 2017-18 and in 2018-19 and took the amount into the Consolidated Fund of India. That has been rectified and states – that fell short of the 14% growth in GST collection – have been compensated fully up to 31st March 2020. That was one drawback.

Arvind Subramanian points this out:

First, in 2017-18, the Centre played fast and loose with the IGST settlement, delaying and reducing the amounts paid to the states. Second, in 2018, it did something similar, transferring the compensation cess to its own coffers, the Consolidated Fund of India, rather than to the compensation kitty. [Link]

However, Arvind, says that GST compensation for 2019-20 has not been paid yet. I am not sure that is the case.

But, growth slowdown is not the Union Government’s sin

The second implicit criticism of the states, sometimes made explicitly, is that the economic slowdown itself has been caused by the Union government’s acts of commission and omission. That is a stretch. That is what I argue in my column in Mint today. I checked the real GDP growth rates of about nine key emerging economies. All of them have witnessed sharp deceleration in growth rates since 2010.

Data are from the IMF World Economic Outlook Database with forecasts for 2020 updated based on the Fund’s June 2020 projections.

In addition, there are other players like the Reserve Bank of India, the Supreme Court, the National Statistics Organisation, etc. All of them have played a role in the economic slowdown. I discuss them briefly in my column in Mint today.

A promise without ownership

A long article in scroll.in makes a factual error. It states:

To this, the Union government agreed, assuring that the agreed-on compensation would be paid even if the cess fell short. The council itself decided that the law should be amended. [Link]

According to the Government of India and as per the Minutes of the Meeting, Arun Jaitley, the then Finance Minister said this in the GST Council Meeting held in December 2016:

the demand for payment of compensation from the Consolidated Fund of India essentially meant funding compensation from Income Tax or non-tax revenues of the Central Government, which would be a challenge as the Central Government also had its own committed expenditure. He said that based on these considerations, certain principles had been agreed upon, namely that the compensation would be funded out of the cess mechanism, which would have a pool of revenue and if there was any shortfall in this pool, it could be supplemented by some mechanism that the Council might decide” [Link]

Again in January 2017, it was reiterated:

“…..in case the amount in the GST Compensation Fund fell short of the compensation payable in any bimonthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be repaid by collection of cess in the sixth year or further subsequent years” [Link]

In fact, a member of Parliament moved a resolution to have the shortfall compensated from the Consolidated Fund of India and the motion was voted upon and defeated.

So, clearly the intent was not to pay the compensation for GST shortfall out of the Consolidated Fund of India.

Also, as I point out in my column for Mint, it was a collective decision of the country to go for GST. It was not an idea foisted by the Union Government on states. The idea was that there would be a single market; more efficiency; faster economic growth and more revenues hence. Therefore, everyone would benefit. If the benefit was solely meant for the Union government, then it has a moral obligation to make up the shortfall by itself. That is not the case and hence, I do not agree that the Union Government has a moral obligation to make up the shortfall.

We can discuss – as I do below – the efficiency of Union vs. States’ borrowing. But, it is not a moral thing.

We have disposed off three questions:

(1) The Union government did indeed act in bad faith in 2017-18 and in 2018-19

(2) The Union government cannot be held solely responsible for the growth slowdown in the last few years.

(3) There was no intent to make up the shortfall from the Consolidated Fund of India and for the Union Government to pick up the bill.

Who borrows to make up the shortfall?

Ira Dugal raises three questions in her good column for BloombergQuint and she concludes that it would be complicated for the state governments to borrow, each one with different cost of capital, etc.:

If the RBI lends to states, will the central bank hold state government debt on its balance sheet? It has not done so in the past. Equally, how will it price these loans? If, as the government suggested, it is priced at a spread above central government g-secs, how will that spread be determined and will it be homogeneous across states? As a peripheral issue, if the RBI does take that route and lends at the same rate to all states, it goes back on its long-held dream of creating a differentiated market for state debt based on fiscal parameters. [Link]

Option 1 combined with states doing the borrowing

In the two options that the Union government presented the states, the Government of India seems to favour option 1 whereby it limits its support to the States to the extent of shortfall arising out of GST implementation. That amount is 97,000 crores of rupees.

The Union government offers to provide an interest subsidy of 0.5% for this borrowing; interest and principal payment would be paid out of future cess collections and, three, this option also unlocks the 0.5% of conditional borrowing limit granted States in May. That is around 1.0 lakh crores of rupees. Further, there is a likely 65,000 crores of compensation cess that is expected to be available this year from GST collections. That is an estimate only.

On that basis, the states would get Rs.2.62 lakh crores out of their expected shortfall of Rupees 3.0 lakh crores from GST collections. Further, if the states agree to have 0.0% increment (and not 14%) for 2020-21 as Arvind Subramanian suggests, then the amount of borrowing will be correspondingly lower.

Former CEA wants the Union Government to borrow and make up shortfall

Arvind’s proposal:

The agreement would have three parts. First, for fiscal 2020-21, the states would receive a compensation of X per cent, where X is somewhere in between –Y per cent (the expected shortfall in GST revenues) and 14 per cent, the original compensation guarantee. Second, for 2021-22, the Centre should commit to going back to the 14 per cent commitment, recognising that this is the last year of the compensation window. And finally, to the extent that the agreed compensation exceeds collections, the Centre, not the states, should secure the needed amounts through borrowing in financial markets.

Many possible formulas for X could be envisaged. For example, the Centre and states could agree that X should be: the same level of compensation as last year; equal to the average of –Y per cent and 14 per cent; or sufficient to ensure that state GST receipts are the same as last year. [Link]

Notice he also proposes that the Union Government borrows and gives it to States.

Ira Dugal concurs:

Beyond the technicalities, if one takes a wider view, it is the sovereign which is the ultimate risk-bearer. In an unprecedented situation such as the one we are facing, the sovereign will need to step in to provide support. It has shown its willingness to do so for private corporations via schemes such as guarantees offered to small businesses.

As such, the sovereign ought to be willing to step in to support states as well. Should it decide that it is willing to do so, the RBI steps in, in some ways, as the agent of the sovereign. It can then design a special window of support in a way that distortion of market signals is kept to a minimum.

Such special support from the central bank, while technically possible for entities beyond the sovereign, should ideally be restricted to the Government of India to avoid setting a poor precedent.

Isn’t it against federalism for the Union Government to borrow on states’ behalf?

But, Ira might be contradicting herself somewhat. If the Union Government borrows, then the idea of differentiated market for state debt with their own fiscal parameters will be lost. So, it cannot be an open-ended precedent. In fact, stretching the logic to its conclusion, one can then have a situation of states not borrowing at all since the Union Government is at least as efficient as if not better than states as a borrower. In that case, once the states’ budgets are approved, the Union Government borrows and gives the money to states. Can it, will it or should it do without imposing any conditions on how states earn their revenues and spend and on how much it would borrow for them? That would be anti-federalism in full force.

So, this has to be strictly one-off.

Who makes up the shortfall is not independent of the quantum of shortfall estimation

The sticking point is that this philosophical principle – as Ira puts it – of who borrows is also tied to the amount of shortfall that the states are willing to accept as arising out of GST implementation and the amount that is owing to the Covid Pandemic and the overall economic slowdown.

If the Union Government’s view of the shortfall being 97,000 crores ‘only’ arising out of GST implementation is accepted, plus/minus an agreement to limit the increment to something less than 14% and plus/minus the amount of cess collected above or below 65,000 crores of Rupees that is currently anticipated, then the question of who borrows becomes somewhat irrelevant. The amount is much smaller.

Revenue shortfall of the states is a worldwide problem due to the economic slowdown. States have to borrow and pay the market rate (or whatever rate the lender demands, if it is RBI), instead of expecting the Union government to borrow and give it to the States.

Letting each state borrow will also let them know their true credit standing and the risk profile of the debt. It will have short-term negative implications for their finances if their interest cost is much higher than the rate the Union government would pay. So, it is a familiar short-term vs. long-term trade-off. There are no easy answers.

Are the Union Government’s concerns exaggerated?

The Union Government appears reluctant to borrow in its name. The Government of India G-Sec yield is the benchmark even for private sector borrowers. Therefore, if the explicit borrowing by the Union Government increases, it could raise the cost of capital all around. This is the government’s argument.

The counter-argument is that the market takes the consolidated government debt and deficit into account and not the Union government’s debt and deficit ratios alone. Therefore, by letting the states borrow at higher interest rate is inefficient and it does not help as the market would, in any case, assume that the Union government stands behind state debt, eventually. It would only mean a higher consolidated deficit on account of states borrowing at a higher interest rate. Therefore, eventually the G-Sec yield too would rise, negating the purpose of letting states borrow directly. This is the counter-argument. Perhaps, this is more likely.

Admittedly, it is all a guessing game anyway.

The final proposal

(i) It would make sense for the Union Government to borrow 97000 crores of Rupees (based on its Option 1), put it in the cess account and compensate the States.

(ii) For 2021-22, the GST Council can negotiate the incremental growth rate for States’ GST amount, instead of assuming it would be 14%. It should be brought down to a number, say, between 5% and 7%.

(iii) States will borrow the shortfall. Centre can facilitate with some interest subsidy up to a ceiling, as it is proposing to do now.

(iv) No support or subsidy from the Union government after 2021-22

‘Tough love’ is the right policy at the wrong time

Overall, the sense one gets is that the Union Government is being ultra-cautious and it has not benefited from its own caution and conservatism. It imposed a stringent lockdown – perhaps rather early in the process – and at short notice to the public. The economic slowdown in 1Q2020-21 (23.9% in constant prices and 22.1% in current prices compared to 1Q2019-20) can be partly or largely attributed to the stringent nation-wide lockdown that was in place for the first quarter.

That statistic might be historical but the depth of contraction affects future economic activity. It induces stasis. Soumya Kanti-Ghosh thinks so:

The pandemic is unlikely to have hit a peak and it is most likely that Q2 GDP will also witness a double-digit contraction, and we might not get a positive GDP growth in any of the forthcoming quarters in FY21. [Link]

The government might have been worried about hurting the economy through higher borrowing cost if its credit rating went down consequent to a fiscal stimulus. But, it has to reflect on whether its caution is appropriate to the context. A risk management approach to fiscal deficit suggests that it is prudent to be less cautious now.

‘Expansionary austerity’ does work if fiscal credibility is low. India meets that condition. But, there is another factor to consider. Going into 2020-21, the Indian economy was fragile and the banking system was still reeling from accumulated bad debts. The private sector – formal and informal – had to adjust to the effects of demonetisation, the introduction of the Goods and Services Tax, the introduction of the Insolvency and Bankruptcy Code, the collapse of IL&FS and hence the drying up of credit from non-banking channels as well. On its part, the central bank preached tough-love. State governments were reneging on contracts for purchase of power and state electricity boards were in default too.

On top of that, global growth is weak. There is no support to growth from external demand. When Canada embarked on expansionary austerity in the mid-1990s, America was growing briskly and so was Europe. I am also wondering if the case of Canada is the only positive data point in favour of ‘expansionary austerity’. It failed in Asia in the aftermath of the Asian crisis and again in Europe after 2010, when imposed on Greece.

So, that leaves the government as the only player in town, along with the central bank. If they do not act in time, the fruits of fiscal austerity and central bank independence and prudence would be lost. The resulting economic misery would force both of them to pursue more audacious policies but too late. The country risk premium would rise rather than fall and these approaches will have achieved nothing.

Therefore, the government has to re-think its caution and whether it is following the right advice but at the wrong time. Yes, it is true that putting money in people’s hands – normally considered the most efficient way of providing stimulus – is not the best way when they are afraid to go out and spend. So, the question is one of figuring out the best possible way of providing immediate stimulus rather than one of sticking to caution. Even if the public saves 40% of the stimulus payment, the economy gets the benefit of them spending the other 60%.

The other player that needs to rethink its caution, associated with the mantra of independence is Reserve Bank of India. There does not appear to be any discussion of central bank financing of government debt between them and the Union Government. That is unfortunate.

The discussion the country needs right now is between the central bank and the central government on how best to spend, how quickly to spend, how much would the central bank finance it and for how long.

Principles of fiscal austerity and central bank independence are only instruments in the service of larger economic goals. They cannot be allowed to stand in the way of rescuing the economy. After the first quarter GDP contraction and the downward revision of forecast for the rest of the year, the time to cast off the shackles is now.

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Government

Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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International

‘I couldn’t stand the pain’: the Turkish holiday resort that’s become an emergency dental centre for Britons who can’t get treated at home

The crisis in NHS dentistry is driving increasing numbers abroad for treatment. Here are some of their stories.

This clinic in the Turkish resort of Antalya is the official 'dental sponsor' of the Miss England competition. Diana Ibanez-Tirado, Author provided

It’s a hot summer day in the Turkish city of Antalya, a Mediterranean resort with golden beaches, deep blue sea and vibrant nightlife. The pool area of the all-inclusive resort is crammed with British people on sun loungers – but they aren’t here for a holiday. This hotel is linked to a dental clinic that organises treatment packages, and most of these guests are here to see a dentist.

From Norwich, two women talk about gums and injections. A man from Wales holds a tissue close to his mouth and spits blood – he has just had two molars extracted.

The dental clinic organises everything for these dental “tourists” throughout their treatment, which typically lasts from three to 15 days. The stories I hear of what has caused them to travel to Turkey are strikingly similar: all have struggled to secure dental treatment at home on the NHS.

“The hotel is nice and some days I go to the beach,” says Susan*, a hairdresser in her mid-30s from Norwich. “But really, we aren’t tourists like in a proper holiday. We come here because we have no choice. I couldn’t stand the pain.”

Seaside beach resort with mountains in the distance
The Turkish Mediterranean resort of Antalya. Akimov Konstantin/Shutterstock

This is Susan’s second visit to Antalya. She explains that her ordeal started two years earlier:

I went to an NHS dentist who told me I had gum disease … She did some cleaning to my teeth and gums but it got worse. When I ate, my teeth were moving … the gums were bleeding and it was very painful. I called to say I was in pain but the clinic was not accepting NHS patients any more.

The only option the dentist offered Susan was to register as a private patient:

I asked how much. They said £50 for x-rays and then if the gum disease got worse, £300 or so for extraction. Four of them were moving – imagine: £1,200 for losing your teeth! Without teeth I’d lose my clients, but I didn’t have the money. I’m a single mum. I called my mum and cried.

Susan’s mother told her about a friend of hers who had been to Turkey for treatment, then together they found a suitable clinic:

The prices are so much cheaper! Tooth extraction, x-rays, consultations – it all comes included. The flight and hotel for seven days cost the same as losing four teeth in Norwich … I had my lower teeth removed here six months ago, now I’ve got implants … £2,800 for everything – hotel, transfer, treatments. I only paid the flights separately.

In the UK, roughly half the adult population suffers from periodontitis – inflammation of the gums caused by plaque bacteria that can lead to irreversible loss of gums, teeth, and bone. Regular reviews by a dentist or hygienist are required to manage this condition. But nine out of ten dental practices cannot offer NHS appointments to new adult patients, while eight in ten are not accepting new child patients.

Some UK dentists argue that Britons who travel abroad for treatment do so mainly for cosmetic procedures. They warn that dental tourism is dangerous, and that if their treatment goes wrong, dentists in the UK will be unable to help because they don’t want to be responsible for further damage. Susan shrugs this off:

Dentists in England say: ‘If you go to Turkey, we won’t touch you [afterwards].’ But I don’t worry because there are no appointments at home anyway. They couldn’t help in the first place, and this is why we are in Turkey.

‘How can we pay all this money?’

As a social anthropologist, I travelled to Turkey a number of times in 2023 to investigate the crisis of NHS dentistry, and the journeys abroad that UK patients are increasingly making as a result. I have relatives in Istanbul and have been researching migration and trading patterns in Turkey’s largest city since 2016.

In August 2023, I visited the resort in Antalya, nearly 400 miles south of Istanbul. As well as Susan, I met a group from a village in Wales who said there was no provision of NHS dentistry back home. They had organised a two-week trip to Turkey: the 12-strong group included a middle-aged couple with two sons in their early 20s, and two couples who were pensioners. By going together, Anya tells me, they could support each other through their different treatments:

I’ve had many cavities since I was little … Before, you could see a dentist regularly – you didn’t even think about it. If you had pain or wanted a regular visit, you phoned and you went … That was in the 1990s, when I went to the dentist maybe every year.

Anya says that once she had children, her family and work commitments meant she had no time to go to the dentist. Then, years later, she started having serious toothache:

Every time I chewed something, it hurt. I ate soups and soft food, and I also lost weight … Even drinking was painful – tea: pain, cold water: pain. I was taking paracetamol all the time! I went to the dentist to fix all this, but there were no appointments.

Anya was told she would have to wait months, or find a dentist elsewhere:

A private clinic gave me a list of things I needed done. Oh my God, almost £6,000. My husband went too – same story. How can we pay all this money? So we decided to come to Turkey. Some people we know had been here, and others in the village wanted to come too. We’ve brought our sons too – they also need to be checked and fixed. Our whole family could be fixed for less than £6,000.

By the time they travelled, Anya’s dental problems had turned into a dental emergency. She says she could not live with the pain anymore, and was relying on paracetamol.

In 2023, about 6 million adults in the UK experienced protracted pain (lasting more than two weeks) caused by toothache. Unintentional paracetamol overdose due to dental pain is a significant cause of admissions to acute medical units. If left untreated, tooth infections can spread to other parts of the body and cause life-threatening complications – and on rare occasions, death.

In February 2024, police were called to manage hundreds of people queuing outside a newly opened dental clinic in Bristol, all hoping to be registered or seen by an NHS dentist. One in ten Britons have admitted to performing “DIY dentistry”, of which 20% did so because they could not find a timely appointment. This includes people pulling out their teeth with pliers and using superglue to repair their teeth.

In the 1990s, dentistry was almost entirely provided through NHS services, with only around 500 solely private dentists registered. Today, NHS dentist numbers in England are at their lowest level in a decade, with 23,577 dentists registered to perform NHS work in 2022-23, down 695 on the previous year. Furthermore, the precise division of NHS and private work that each dentist provides is not measured.

The COVID pandemic created longer waiting lists for NHS treatment in an already stretched public service. In Bridlington, Yorkshire, people are now reportedly having to wait eight-to-nine years to get an NHS dental appointment with the only remaining NHS dentist in the town.

In his book Patients of the State (2012), Argentine sociologist Javier Auyero describes the “indignities of waiting”. It is the poor who are mostly forced to wait, he writes. Queues for state benefits and public services constitute a tangible form of power over the marginalised. There is an ethnic dimension to this story, too. Data suggests that in the UK, patients less likely to be effective in booking an NHS dental appointment are non-white ethnic groups and Gypsy or Irish travellers, and that it is particularly challenging for refugees and asylum-seekers to access dental care.


This article is part of Conversation Insights
The Insights team generates long-form journalism derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.


In 2022, I experienced my own dental emergency. An infected tooth was causing me debilitating pain, and needed root canal treatment. I was advised this would cost £71 on the NHS, plus £307 for a follow-up crown – but that I would have to wait months for an appointment. The pain became excruciating – I could not sleep, let alone wait for months. In the same clinic, privately, I was quoted £1,300 for the treatment (more than half my monthly income at the time), or £295 for a tooth extraction.

I did not want to lose my tooth because of lack of money. So I bought a flight to Istanbul immediately for the price of the extraction in the UK, and my tooth was treated with root canal therapy by a private dentist there for £80. Including the costs of travelling, the total was a third of what I was quoted to be treated privately in the UK. Two years on, my treated tooth hasn’t given me any more problems.

A better quality of life

Not everyone is in Antalya for emergency procedures. The pensioners from Wales had contacted numerous clinics they found on the internet, comparing prices, treatments and hotel packages at least a year in advance, in a carefully planned trip to get dental implants – artificial replacements for tooth roots that help support dentures, crowns and bridges.

Street view of a dental clinic in Antalya, Turkey
Dental clinic in Antalya, Turkey. Diana Ibanez-Tirado, CC BY-NC-ND

In Turkey, all the dentists I speak to (most of whom cater mainly for foreigners, including UK nationals) consider implants not a cosmetic or luxurious treatment, but a development in dentistry that gives patients who are able to have the procedure a much better quality of life. This procedure is not available on the NHS for most of the UK population, and the patients I meet in Turkey could not afford implants in private clinics back home.

Paul is in Antalya to replace his dentures, which have become uncomfortable and irritating to his gums, with implants. He says he couldn’t find an appointment to see an NHS dentist. His wife Sonia went through a similar procedure the year before and is very satisfied with the results, telling me: “Why have dentures that you need to put in a glass overnight, in the old style? If you can have implants, I say, you’re better off having them.”

Most of the dental tourists I meet in Antalya are white British: this city, known as the Turkish Riviera, has developed an entire economy catering to English-speaking tourists. In 2023, more than 1.3 million people visited the city from the UK, up almost 15% on the previous year.


Read more: NHS dentistry is in crisis – are overseas dentists the answer?


In contrast, the Britons I meet in Istanbul are predominantly from a non-white ethnic background. Omar, a pensioner of Pakistani origin in his early 70s, has come here after waiting “half a year” for an NHS appointment to fix the dental bridge that is causing him pain. Omar’s son had been previously for a hair transplant, and was offered a free dental checkup by the same clinic, so he suggested it to his father. Having worked as a driver for a manufacturing company for two decades in Birmingham, Omar says he feels disappointed to have contributed to the British economy for so long, only to be “let down” by the NHS:

At home, I must wait and wait and wait to get a bridge – and then I had many problems with it. I couldn’t eat because the bridge was uncomfortable and I was in pain, but there were no appointments on the NHS. I asked a private dentist and they recommended implants, but they are far too expensive [in the UK]. I started losing weight, which is not a bad thing at the beginning, but then I was worrying because I couldn’t chew and eat well and was losing more weight … Here in Istanbul, I got dental implants – US$500 each, problem solved! In England, each implant is maybe £2,000 or £3,000.

In the waiting area of another clinic in Istanbul, I meet Mariam, a British woman of Iraqi background in her late 40s, who is making her second visit to the dentist here. Initially, she needed root canal therapy after experiencing severe pain for weeks. Having been quoted £1,200 in a private clinic in outer London, Mariam decided to fly to Istanbul instead, where she was quoted £150 by a dentist she knew through her large family. Even considering the cost of the flight, Mariam says the decision was obvious:

Dentists in England are so expensive and NHS appointments so difficult to find. It’s awful there, isn’t it? Dentists there blamed me for my rotten teeth. They say it’s my fault: I don’t clean or I ate sugar, or this or that. I grew up in a village in Iraq and didn’t go to the dentist – we were very poor. Then we left because of war, so we didn’t go to a dentist … When I arrived in London more than 20 years ago, I didn’t speak English, so I still didn’t go to the dentist … I think when you move from one place to another, you don’t go to the dentist unless you are in real, real pain.

In Istanbul, Mariam has opted not only for the urgent root canal treatment but also a longer and more complex treatment suggested by her consultant, who she says is a renowned doctor from Syria. This will include several extractions and implants of back and front teeth, and when I ask what she thinks of achieving a “Hollywood smile”, Mariam says:

Who doesn’t want a nice smile? I didn’t come here to be a model. I came because I was in pain, but I know this doctor is the best for implants, and my front teeth were rotten anyway.

Dentists in the UK warn about the risks of “overtreatment” abroad, but Mariam appears confident that this is her opportunity to solve all her oral health problems. Two of her sisters have already been through a similar treatment, so they all trust this doctor.

Alt text
An Istanbul clinic founded by Afghan dentists has a message for its UK customers. Diana Ibanez-Tirado, CC BY-NC-ND

The UK’s ‘dental deserts’

To get a fuller understanding of the NHS dental crisis, I’ve also conducted 20 interviews in the UK with people who have travelled or were considering travelling abroad for dental treatment.

Joan, a 50-year-old woman from Exeter, tells me she considered going to Turkey and could have afforded it, but that her back and knee problems meant she could not brave the trip. She has lost all her lower front teeth due to gum disease and, when I meet her, has been waiting 13 months for an NHS dental appointment. Joan tells me she is living in “shame”, unable to smile.

In the UK, areas with extremely limited provision of NHS dental services – known as as “dental deserts” – include densely populated urban areas such as Portsmouth and Greater Manchester, as well as many rural and coastal areas.

In Felixstowe, the last dentist taking NHS patients went private in 2023, despite the efforts of the activist group Toothless in Suffolk to secure better access to NHS dentists in the area. It’s a similar story in Ripon, Yorkshire, and in Dumfries & Galloway, Scotland, where nearly 25,000 patients have been de-registered from NHS dentists since 2021.

Data shows that 2 million adults must travel at least 40 miles within the UK to access dental care. Branding travel for dental care as “tourism” carries the risk of disguising the elements of duress under which patients move to restore their oral health – nationally and internationally. It also hides the immobility of those who cannot undertake such journeys.

The 90-year-old woman in Dumfries & Galloway who now faces travelling for hours by bus to see an NHS dentist can hardly be considered “tourism” – nor the Ukrainian war refugees who travelled back from West Sussex and Norwich to Ukraine, rather than face the long wait to see an NHS dentist.

Many people I have spoken to cannot afford the cost of transport to attend dental appointments two hours away – or they have care responsibilities that make it impossible. Instead, they are forced to wait in pain, in the hope of one day securing an appointment closer to home.

Billboard advertising a dental clinic in Turkey
Dental clinics have mushroomed in recent years in Turkey, thanks to the influx of foreign patients seeking a wide range of treatments. Diana Ibanez-Tirado, CC BY-NC-ND

‘Your crisis is our business’

The indignities of waiting in the UK are having a big impact on the lives of some local and foreign dentists in Turkey. Some neighbourhoods are rapidly changing as dental and other health clinics, usually in luxurious multi-storey glass buildings, mushroom. In the office of one large Istanbul medical complex with sections for hair transplants and dentistry (plus one linked to a hospital for more extensive cosmetic surgery), its Turkish owner and main investor tells me:

Your crisis is our business, but this is a bazaar. There are good clinics and bad clinics, and unfortunately sometimes foreign patients do not know which one to choose. But for us, the business is very good.

This clinic only caters to foreign patients. The owner, an architect by profession who also developed medical clinics in Brazil, describes how COVID had a major impact on his business:

When in Europe you had COVID lockdowns, Turkey allowed foreigners to come. Many people came for ‘medical tourism’ – we had many patients for cosmetic surgery and hair transplants. And that was when the dental business started, because our patients couldn’t see a dentist in Germany or England. Then more and more patients started to come for dental treatments, especially from the UK and Ireland. For them, it’s very, very cheap here.

The reasons include the value of the Turkish lira relative to the British pound, the low cost of labour, the increasing competition among Turkish clinics, and the sheer motivation of dentists here. While most dentists catering to foreign patients are from Turkey, others have arrived seeking refuge from war and violence in Syria, Iraq, Afghanistan, Iran and beyond. They work diligently to rebuild their lives, careers and lost wealth.

Regardless of their origin, all dentists in Turkey must be registered and certified. Hamed, a Syrian dentist and co-owner of a new clinic in Istanbul catering to European and North American patients, tells me:

I know that you say ‘Syrian’ and people think ‘migrant’, ‘refugee’, and maybe think ‘how can this dentist be good?’ – but Syria, before the war, had very good doctors and dentists. Many of us came to Turkey and now I have a Turkish passport. I had to pass the exams to practise dentistry here – I study hard. The exams are in Turkish and they are difficult, so you cannot say that Syrian doctors are stupid.

Hamed talks excitedly about the latest technology that is coming to his profession: “There are always new materials and techniques, and we cannot stop learning.” He is about to travel to Paris to an international conference:

I can say my techniques are very advanced … I bet I put more implants and do more bone grafting and surgeries every week than any dentist you know in England. A good dentist is about practice and hand skills and experience. I work hard, very hard, because more and more patients are arriving to my clinic, because in England they don’t find dentists.

Dental equipment in a Turkish treatment room
Dentists in Turkey boast of using the latest technology. Diana Ibanez-Tirado, CC BY-NC-ND

While there is no official data about the number of people travelling from the UK to Turkey for dental treatment, investors and dentists I speak to consider that numbers are rocketing. From all over the world, Turkey received 1.2 million visitors for “medical tourism” in 2022, an increase of 308% on the previous year. Of these, about 250,000 patients went for dentistry. One of the most renowned dental clinics in Istanbul had only 15 British patients in 2019, but that number increased to 2,200 in 2023 and is expected to reach 5,500 in 2024.

Like all forms of medical care, dental treatments carry risks. Most clinics in Turkey offer a ten-year guarantee for treatments and a printed clinical history of procedures carried out, so patients can show this to their local dentists and continue their regular annual care in the UK. Dental treatments, checkups and maintaining a good oral health is a life-time process, not a one-off event.

Many UK patients, however, are caught between a rock and a hard place – criticised for going abroad, yet unable to get affordable dental care in the UK before and after their return. The British Dental Association has called for more action to inform these patients about the risks of getting treated overseas – and has warned UK dentists about the legal implications of treating these patients on their return. But this does not address the difficulties faced by British patients who are being forced to go abroad in search of affordable, often urgent dental care.

A global emergency

The World Health Organization states that the explosion of oral disease around the world is a result of the “negligent attitude” that governments, policymakers and insurance companies have towards including oral healthcare under the umbrella of universal healthcare. It as if the health of our teeth and mouth is optional; somehow less important than treatment to the rest of our body. Yet complications from untreated tooth decay can lead to hospitalisation.

The main causes of oral health diseases are untreated tooth decay, severe gum disease, toothlessness, and cancers of the lip and oral cavity. Cases grew during the pandemic, when little or no attention was paid to oral health. Meanwhile, the global cosmetic dentistry market is predicted to continue growing at an annual rate of 13% for the rest of this decade, confirming the strong relationship between socioeconomic status and access to oral healthcare.

In the UK since 2018, there have been more than 218,000 admissions to hospital for rotting teeth, of which more than 100,000 were children. Some 40% of children in the UK have not seen a dentist in the past 12 months. The role of dentists in prevention of tooth decay and its complications, and in the early detection of mouth cancer, is vital. While there is a 90% survival rate for mouth cancer if spotted early, the lack of access to dental appointments is causing cases to go undetected.

The reasons for the crisis in NHS dentistry are complex, but include: the real-term cuts in funding to NHS dentistry; the challenges of recruitment and retention of dentists in rural and coastal areas; pay inequalities facing dental nurses, most of them women, who are being badly hit by the cost of living crisis; and, in England, the 2006 Dental Contract that does not remunerate dentists in a way that encourages them to continue seeing NHS patients.

The UK is suffering a mass exodus of the public dentistry workforce, with workers leaving the profession entirely or shifting to the private sector, where payments and life-work balance are better, bureaucracy is reduced, and prospects for career development look much better. A survey of general dental practitioners found that around half have reduced their NHS work since the pandemic – with 43% saying they were likely to go fully private, and 42% considering a career change or taking early retirement.

Reversing the UK’s dental crisis requires more commitment to substantial reform and funding than the “recovery plan” announced by Victoria Atkins, the secretary of state for health and social care, on February 7.

The stories I have gathered show that people travelling abroad for dental treatment don’t see themselves as “tourists” or vanity-driven consumers of the “Hollywood smile”. Rather, they have been forced by the crisis in NHS dentistry to seek out a service 1,500 miles away in Turkey that should be a basic, affordable right for all, on their own doorstep.

*Names in this article have been changed to protect the anonymity of the interviewees.


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Diana Ibanez Tirado receives funding from the School of Global Studies, University of Sussex.

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Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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