Surge in Long-Term Sickness Causing ‘Triple Whammy’ to Economy: OBR

A general view of staff on an NHS hospital ward at Ealing Hospital in London, on Jan. 18, 2023. Jeff Moore/PA Media

The surge in long-term sickness will cause a “triple whammy” to the UK economy, potentially costing taxpayers billions in the coming decades, the Office for Budget Responsibility (OBR) has warned.

Peers heard on Tuesday that if current health trends persist, the country’s borrowing could rise by an additional 4 percent of GDP within the next 50 years—equivalent to more than £100 billion.

OBR Chairman Richard Hughes told the Lords economic affairs committee that another 1 million people could be out of work due to ill-health by 2070.

“It’s a sort of triple whammy in the sense that if the health of the population deteriorates, you lose tax revenue, you spend more in welfare, and you’ve got more pressure on the health service,” he said.

The watchdog has previously warned that the rise in an aging population, among other factors, could lead to UK national debt tripling over the next 50 years. At the same time, improved health could reduce debt by 40 percent of GDP in the long term.

Back to Work

In order to reduce the impact of poor public health on the economy, governments seek to extend working lives, reduce economic inactivity and encourage older people into the workforce.

Labour’s Back to Work Plan, announced shortly after the general election, aims to drive more people back to work and bring the benefits bill down.

As ministers seek to support more people with health conditions and disabilities into work, the OBR warned that “success rates are relatively low.”

According to Hughes, the impact of these models doesn’t make “huge differences to employment rates or huge amounts of extra revenue or benefit savings”.

Peers heard that “there doesn’t seem to be one clear template that you can just adopt.”

If solutions could be found, “this is one of the areas where you just get the biggest long-term return economically and fiscally from preventative interventions that can save you costs down the road,” Hughes said.

Poor Health

In its plans to achieve an 80 percent employment rate, Downing Street said it will tackle unemployment and economic inactivity. This includes reducing the number of people out of work due to long-term sickness.

A new Labour Market Advisory Board, advising the government, said that the root causes of economic inactivity are poor physical and mental health. It noted a sharp increase in both economic inactivity and long-term sickness among young people post-pandemic.

“Reversing these trends will be key to ensuring the long-term prosperity of the UK’s labour market,” said board chair Paul Gregg.

To reduce the number of people on waiting lists, the government launched its 10-year health plan, focused on preventative health care.

However, Hughes told peers that the economic impact of long-term sickness on the labour market and government revenue has little to do with NHS waiting lists.

A large number of people on the waiting lists are older and no longer working, he said, adding that the treatments they are waiting for are not barriers to work.

“The disruptions to the provision of healthcare during the pandemic and following it probably plays some part in some instances of people not being able to get back into the labour force. If you get the waiting list down, you can very easily sill have this problem left because it is actually not a barrier to most people,” Hughes told peers.

The latest OBR data suggests a record 2.8 million people making long-term sickness claims. The figures are consistent with the increase in incapacity benefits claims, which rose 36 percent from 2.3 to 3.1 million since 2019.

The OBR added that the recently announced increase to Employer National Insurance contributions by the Treasury will reduce labour market participation rate by 0.1 percent from 2025-2026 onwards.