Death and taxes
This will put a severe strain on the country’s health and welfare budget. It is already doing so. The annual healthcare costs of a person aged 85 or over are five times higher than those of somebody in their early 60s and ten times higher than somebody in their 40s. The extent to which ageing has necessitated the spiralling budget of the NHS in recent decades is a matter of debate, but there is no doubt that it has been an important factor.
Significant though they are, healthcare costs are a relatively small part of the costs of ageing when compared to pensions and other old age welfare payments. When the basic state pension was introduced after the Second World War, life expectancy was 68. It is now 81 and is expected to rise to 87 in the next fifteen years. It may not be long before people spend more years of life out of work than in work. The Office for Budget Responsibility expects increased demand for healthcare, long-term care and state pensions – mostly caused by greater longevity – to gobble up an additional five per cent of GDP by 2065.
While acknowledging this fact, many of us are able to hold the separate and contradictory belief that people who lead unhealthy lifestyles are a drain on the taxpayer. We are told that efforts to prevent obesity, smoking and binge-drinking will save lives and therefore save money. Last week we were warned, once again, that obesity could ‘bankrupt the NHS’.
Leaving aside the fact that the NHS is a state monopoly which cannot be bankrupted, the central contradiction here is that people cannot be a drain on the taxpayer by both living too long and dying too soon. Either unhealthy lifestyles cost us a fortune by killing us prematurely or healthy lifestyles are breaking the bank by enlarging the ranks of the elderly. Which is it?
The bulk of economic evidence favours the latter of these two theories. Health economists have long argued that policies designed to extend life should be promoted on the basis that better health has intrinsic benefits rather than on spurious claims about saving money. Old age is associated with much higher costs than premature mortality. We all have to die of something and the cost of dying is not much different for a 90 year old than a 70 year old, but the 90 year old uses an extra twenty years of health care and takes an extra twenty years of pensions, benefits and subsidies.
While the treasury braces itself for more spending on the elderly, we are told that we must live healthier lives for the sake of the public purse. And yet it is precisely because we are living healthier lives – smoking less, eating better and breathing cleaner air – that more and more of us are living to a ripe old age. If we took more exercise and ate more vegetables there would be even more of us in nursing homes drawing our state pensions and awaiting our expensive hip operations.
Of course there are costs associated with treating diseases caused by unhealthy habits, but they are dwarfed by the costs of living a healthy life and making it to the age of 95. At that age – assuming you left school at 18 and retired at 65 – you will have spent less than half your life as a working taxpayer. You will have spent at least 48 years paying less in tax than you received in benefits and services.
When the government cut the UK’s £3 billion public health budget by £200 million recently, the Faculty of Public Health claimed that it would cost the NHS ‘at least £1 billion’ in the long run. This is based on the assumption that preventive health saves money, that a stitch in time saves nine. But while prevention may be better than cure from the perspective of health, the exact opposite is true from the perspective of government finances. In Death and Taxes, a report released today by the Institute of Economic Affairs, I cite numerous studies showing that prevention raises costs in the long run by creating a larger cohort of frail old people who need working taxpayers to pay for them.
It should go without saying that this is not an argument for poorer health and more death. The macabre business of counting financial savings from premature mortality would not be necessary if people stopped pretending that we can achieve an implausible win-win of longer lives at lower cost. The reality is that increased life expectancy has led to significantly higher costs to government budgets in the last fifty years and it will continue to do so.
To claim otherwise is to raise false expectations. There are many benefits from people living healthier and longer lives but those benefits are social, not economic. Throughout the western world and beyond, people are living longer than ever. This is to be celebrated, but it also has to be paid for. How we pay for it is one of the great economic challenges of our time. Blaming those who are least likely to get a telegram from the Queen is not the way to go about it.