Health and the Economy

As part of a blog series on health inequalities, to celebrate the launch of the Fabian Society's pamphlet 'Prescription for Fairness', Matthew Oulton untangles the link between health and economic injustice.

Nestled right at the heart of the British welfare state at its best is a simple truth: there is no separation between economic and health injustice. Where there is deprivation, there is disease. Where there is poverty, there cannot be public health. Where there is crime and squalor, there will also be chronic illness. We have always known this, and indeed, the welfare state has sought to combat this since its conception in the Beveridge report.

Progressive taxation is a solution to both of these issues. It discourages firms from concentrating wages on a few high-skilled individuals because they receive less of a post-tax salary increase. As a result, companies have a strong incentive to train more broadly, rather than focussing training on those already with valuable skills, reducing pre-tax income and skills inequality. At the same time, it raises revenue from those with the broadest shoulders, allowing targeted interventions in the health system to benefit the neediest.

A Cameronite utopia in which incomes are incredibly unequal, but the NHS is well-funded enough to ensure a high level of health for everyone, is a fantasy. A lot can be done in the UK to improve health outcomes for the working poor and the unemployed, not least keeping the Universal Credit uplift implemented during the pandemic, but nothing is going to be as good as getting them well-paid jobs and alleviating poverty. Without good health, economic opportunity is impossible, but without economic opportunity, good health is much, much more challenging.

This brings me to the need for a strong public realm –  the shared services and spaces we occupy collectively. Everything from the health service to our public parks to the criminal justice system – must be robust, efficient, and well-funded. The atomistic view of healthcare expediently adopted by the Tories is a recipe for disaster and inefficiency. Cutting public health spending, social care spending, and provision for the disabled is obviously going to impact the NHS. It also drives citizens away from the most cost effective and suitable forms of treatment, towards explicitly medical interventions which are state-funded.

The need for a strong public realm to facilitate a healthy society reaches deeper, however. As well as other elements of healthcare, the NHS has been heavily affected by funding cuts in policing, social work, the criminal justice system, and housing. The last of these is a particular focus of mine, because my mum is a partner in an NHS GP Practice in Liverpool, where her practice has a sizeable homeless population. The health needs of the homeless both contribute to and arise from their homelessness. Trying, as my mum must, to treat these issues without the capacity to provide broader social and housing support, is a costly and difficult experience. Many of the health issues that she works tirelessly to resolve are a direct product of precarious and inadequate housing, the hostile environment, or a poor and under-funded life-long education system. It is not possible to have a healthy nation and an efficient health service whilst also imposing austerity on the rest of the public realm.

Therefore, Labour must make a more complex political case. We must defend the ethos of our beloved NHS against the narrow conservative focus on the institution itself. The NHS should not be an exception in British public life, we should extend the same thinking to other parts of our public sector.

The policy implications of this are myriad and pressing. Firstly, we need to establish a new long-term settlement for the funding of British health. Politicians must be upfront with the public about the trade-off between better health outcomes and higher taxes. An increase in direct taxation, of which the Conservatives’ National Insurance hike is a version, is probably going to be required in the long-run to fund the NHS. To deliver this, we need to demonstrate public sector reform, high efficiency, and improved health outcomes.

More immediately, Labour need to have a coherent plan for funding social care. Given the existing generational inequalities and the demographic that makes use of social care, this should primarily seek to redistribute between the elderly. As a result, some form of wealth tax or a comprehensive reform of capital gains or inheritance taxation, is the most just and financially feasible option. An updated social insurance system, in which the state is the insurer of last resort, may also be an adequate, and perhaps more politically acceptable, option.

Finally, political leaders must communicate to the public the extent to which health spending is intimately tied up with the rest of the public realm. Food poverty, poor educational attainment, and other social ills all need to be addressed if our health system is going to be improved and sustainable. The decision to cut Universal Credit, for example, should be thought of as a direct attack to the NHS’s budget. It may not directly reduce spending on health, but by increasing demand for healthcare, the effect is the same.

The NHS is not separate to the rest of the public sector, or indeed to the rest of the country. It’s staffed mainly by British people, who have largely been educated in British schools, it is funded by British taxes, and it exists to better British health. The attempts by the Conservatives to treat it as a ‘special case’ are misguided and, ultimately, counterproductive. To generate high health outcomes in the UK on a sustainable basis, as well as to engender healthier, longer, and happier lives in the British public, we have to address system-wide challenges. This requires accepting that the health of the British people is inextricable from other economic goals. A strong economy requires good health, and good health requires a strong economy.


From Merseyside, Matthew is final-year Economics Student at the University of Warwick. He’s the Secretary of the Economy and Finance Network and writes frequently on economic issues. In his spare time, he worries about Labour’s path to victory and daydreams about a progressive Government.

This blog was written as part of a series on health inequalities, to mark the publication of the Fabian Society's pamphlet, 'Prescription for Fairness: remedying health inequalities in a post-covid era'. You can find out more and read the pamphlet here.

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