At the Autumn Statement, the Chancellor was clear in his intention to boost the “supply side” of the economy – to increase our productive capacity by encouraging more investment, reforming planning to build more infrastructure, and getting more people into work. Yet he did not dwell on the ongoing harm that ill health does to our economic potential, overlooking analysis published that same week that put the cost of smoking, alcohol and obesity to the economy at £31bn per year.
Jeremy Hunt’s speech did highlight the government’s plans to create a smoke-free generation, raising the minimum purchase age for cigarettes, and backed this up with an increase on taxes on hand-rolling tobacco. Yet he paired that with the announcement of a freeze on alcohol duty as part of a package to boost pubs and the scotch whisky industry, despite studies indicating that lower alcohol taxes means more premature deaths, disproportionately of men in their forties and fifties, who are in their economic prime.
This tension between supporting industries peddling unhealthy commodities and tackling their harms bedevils public health policy. It’s not just taxes: efforts to regulate advertising and promotions for junk food and alcohol have also been resisted as “anti-business”.
Such arguments invariably fail to think through the full economic consequences of public health regulations. Some interventions have minimal commercial impact on the industry affected. The sugar tax didn’t, by design, stop people buying soft drinks, but just encouraged producers to switch to lower sugar formulas. Minimum alcohol pricing in Scotland has people drinking less but more expensive stuff, and so has not adversely affected the industry.
Yet in most cases, the objective is to get people to consume less of the harmful product, which will be bad news for those who make their money selling it. But that doesn’t mean it is bad for the economy overall. If people do not spend their money on booze, cigarettes or calorific foods, that money does not disappear. They will spend it on other things instead – maybe clothes or games or travel. One sector’s loss is just another’s gain.
In broad terms these effects cancel each other out, and the overall impact on the economy tends to be rather small. Restaurants, pubs, clubs and bars are labour-intensive, low-productivity sectors and so anything that results in people spending less money would marginally lower employment, by replacing low-paid jobs with better-remunerated ones. Conversely, shifting spending from retail to hospitality would create a few more jobs, but lower-paid ones.
Unlike the impact on specific industries – with increased demand for some sectors being offset by lower demand for others – the health benefits of less smoking, drinking and obesity are unambiguously good for the economy. Being sick means that people are less likely to be in work, more likely to have days off if they do have a job, and more likely to have impaired job performance when they make it in. There are more pressing moral reasons to save people’s lives, but deaths from these behavioural causes also represent a loss of working-age people from the labour market.
If we could wave a magic wand and prevent all those people suffering ill health, it would likely add tens of billions to the economy. Unfortunately, we don’t have any such magic wand – the most effective interventions can only realistically reduce the harm from smoking, drinking and obesity by a few percentage points at a time. This means the size of the prize is likely to be in the hundreds of millions, rather than the billions, in any given year. Cutting that £31bn drag on the economy by 5 per cent – a pretty dramatic gain – would be worth just £1.5bn and would raise GDP by less than 0.1 per cent.
To some extent, that’s the nature of supply-side economics – small, incremental improvements can add up to bigger economic benefits over time. The Office for Budget Responsibility sounded positively impressed that the measures in the Autumn Statement increased the long-term size of the economy by 0.3 per cent. But health advocates should not get too carried away and overstate the economic gains of their proposed measures.
The upshot, then, is that we should not give too much weight to the economic arguments around public health policies. We should pay little heed to incumbent industries that tend to over-emphasise their value and neglect the harm that they do. By contrast, while measures to reduce sickness can increase labour supply and productivity, the gains are more in the “every little helps” category than the basis for a full economic strategy.
Given the high stakes of public health policy – trying to balance individual freedoms and collective responsibilities on matters of literal life and death – reducing the issue to economics can seem crass. And the numbers involved mean it’s also misguided.
[See also: Why industrial policy is the growth engine of modern economies]
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