Long-term disease crisis threatens UK economy

LONDON — Along with soaring inflation and energy costs, a Brexit-related trade slump and an ongoing recession, Britain’s economy is being hammered by a record number of workers declaring long-term illness.

The Office for National Statistics reported that between June and August 2022 around 2.5 million people cited long-term illness as the main reason for economic inactivity, an increase of around half a million since 2019.

The number of “economically inactive” people – those not working or looking for work – aged 16 to 64 has risen by more than 630,000 since 2019. Unlike other major economies, recent data from the UK United show no signs that these lost workers are returning to the workforce, even as inflation and energy costs put enormous pressure on household finances.

The UK avoided massive job losses during the Covid-19 pandemic as the government’s furlough scheme subsidized businesses to retain workers. But since the lifting of containment measures, the country has experienced a labor market exodus of unique proportions among advanced economies.

In its report last month, the ONS said a range of factors could be behind the recent spike, including National Health Service waiting lists reaching record highs, an aging population and the effects of the long Covid.

“Young people have also seen some of the largest relative increases, and some industries such as wholesale and retail are more affected than others,” the ONS said.

Although the effects of the problems mentioned above were not quantified, the report suggests that the increase was driven by “other health conditions or disabilities”, “mental illnesses and nervous disorders” and ” problems related to [the] back or neck.”

Jonathan Portes, professor of economics and public policy at King’s College London, told CNBC that the extent of labor market exhaustion is likely a combination of long Covid; other pandemic-related health issues such as mental illness; and the current NHS crisis.

On top of that, he noted that factors that directly harm public health — such as increased wait times for treatment — could have a ripple effect: people might have to leave the market. work to take care of sick relatives.

“It’s worth remembering that the UK has been here before, arguably at least twice. In the early 1990s, the UK experienced a strong recovery, with unemployment falling, after ‘Black Wednesday’ , but it has also seen a large and sustained increase in the number of people claiming disability-related benefits,” Portes said, adding that not working is generally bad for health and employability.

“There is clearly not much the government is doing about it. Apart from addressing the NHS crisis, the other key policy area is supporting sick and disabled people to get back to work, and that is not happening. not enough about it – instead the government is harassing people on Universal Credit with penalties and sanctions which we know don’t help much.”

In his recent autumn statement, Finance Minister Jeremy Hunt announced that the government would ask more than 600,000 people on Universal Credit – a means-tested social security payment for low-income households or unemployment – to meet a “work coach” in order to establish plans. to increase hours and income.

Hunt also announced a review of issues preventing re-entry into the labor market and committed £280m ($340.3m) to ‘clamp down on benefit fraud and error’ over the next two months. years.

Although the pandemic has dramatically worsened the health crisis, leaving a hole in Britain’s economy, the rise in claims for long-term sickness benefits actually began in 2019, and economists see several possible reasons why the country was particularly vulnerable.

Portes suggested that the government’s austerity policies – a decade of sweeping public spending cuts implemented after former Prime Minister David Cameron took office in 2010 and aimed at bringing the national debt under control – had a role important to play to leave the UK exposed.

“The UK was particularly vulnerable due to austerity – NHS waiting lists were rising sharply and performance/satisfaction was falling sharply, long before the pandemic hit,” Portes said.

“And support for people on incapacity and invalidity benefits was hollowed out in the early 2010s. More broadly, austerity has led to a steeper gradient in health outcomes by income/class.”

This is confirmed by national data: the ONS estimates that between 2018 and 2020, men living in the most deprived areas of England live on average 9.7 years less than those in the least deprived areas, with a gap of 7.9 years for women.

The ONS noted that both sexes have seen “statistically significant increases in inequality in life expectancy at birth since 2015 to 2017”.

In the aftermath of the pandemic, NHS waiting lists have grown at their fastest rate since records began in August 2007, a recent House of Commons report pointed out, with more than 7 million patients on the waiting list for hospital treatment led by a consultant in England in September. .

However, the report notes that this is not a recent phenomenon and that the waiting list has been growing rapidly since 2012.

“Before the pandemic, in December 2019, the waiting list was over 4.5 million, almost two million more than in December 2012, an increase of 74%,” he said. he declares.

“In other words, if the rise in waiting lists was accelerated by the pandemic, it had also been happening for several years before the pandemic.”

Former Bank of England policymaker Michael Saunders, now a senior policy adviser at Oxford Economics, also told CNBC that the UK has been hit particularly hard by Covid in terms of severity, and that some this could be the result of the country’s higher rates. pre-existing health conditions – such as obesity – which may have been exacerbated by Covid.

“The UK is a relatively unequal country, so that may be part of the reason why even though we had the same wave of Covid as other countries, we might have a bigger effect on public health, because if you love, you have a bigger queue of people who would be most affected by it,” he added.

Saunders suggested that any government growth strategy should include measures to address these health care challenges, which are now inextricable from the labor force participation rate and the broader economy.

“It’s not just a health issue, it’s an economic issue. It’s important in both ways. I think it’s quite important as a health issue, but it deserves additional importance in because of the effects on potential output that then trickle down to these other economic problems.”