After nearly a decade of earnings attrition, everyone no doubt deserves a pay rise, but perhaps none more so – at least in the eyes of the British public – than those working for the cash starved National Health Service. Who would begrudge nurses and paramedics their rise?

Politically, the extra £4.2 billion over three years now promised for NHS pay has gone down well. In terms of its wider messaging, too, it’s an important concession, for it seems to signal that the austerity and belt-tightening of recent years is finally over.

The economics of what ministers are doing is, on the other hand, much more questionable. Introduced by the Conservative/Liberal Democrat Coalition in 2010, the public...