The worsening health of the British people is holding back economic growth for the first time since the Industrial Revolution after years of underinvestment in services, Andy Haldane has warned.
The chief executive of the Royal Society of Arts (RSA) said more than a century of progress on health and wellbeing was going into reverse, with a direct impact on the economy and the cost of living emergency.
“We’re in a situation for the first time, probably since the Industrial Revolution, where health and wellbeing are in retreat,” he said.
“Having been an accelerator of wellbeing for the last 200 years, health is now serving as a brake in the rise of growth and wellbeing of our citizens.”
Speaking at the Health Foundation thinktank’s annual REAL Challenge lecture, Haldane said the economy was being held back after a sharp fall in the number of people in the British workforce since the onset of the Covid pandemic.
However, the former chief economist at the Bank of England said the global health emergency had only served as a “tipping point”.
“Spending on healthcare systems, at least by G7 comparisons, the UK sits towards the bottom of the pack,” he said.
“It should come as no surprise that we therefore see macroeconomic headwinds such as a record number of unfilled vacancies. We haven’t got enough people.”
The Bank of England recently warned it may need to raise interest rates further to deter workers from demanding inflation-linked pay rises in response to labour shortages.
Interest rates have soared since last year to prevent what the central bank says are the second round effects from increases in earnings on inflation over the next couple of years.
A report by the newly established Commission on the Future of Employment Support found that the UK is one of only five countries in the industrialised world with a weaker labour market than before the Covid-19 pandemic and is on course to have the worst record by next year.
Only Iceland, Switzerland, Latvia, the UK and the US have recorded a lower employment rate than 2019. And while the UK’s employment rate, which measures the number of workers as a proportion of the total workforce, has remained weak, Iceland, Switzerland and the US have enjoyed a 2% avarage increase in the last 12 months.
“If these trends continue, then by the first quarter of 2023 the UK may be the only developed economy in the world with an employment rate lower than it was before the pandemic,” the report said.
About 600,000 workers have dropped out of the workforce, including 200,000 out of work for five years or more due to ill health.
An estimated 30,000 more people with long Covid and are unable to work. About 50,000 more people have retired early in the last two years, while the number of people who have never worked swelled by 250,000 with two-thirds of this group accounted for by students and a third by people with ill health or disabilities not being able to get into work rather than leaving it.
The situation is made worse by the baby boomer generation taking retirement and lower migration – “with half a million fewer non-UK born workers than there would have been on the pre-2016 trend”.
Tony Wilson, the head of the Institute for Employment Studies, which has supported the commission, said: “We’ve got a real opportunity now to look again at our approach and build something for the future that can support higher growth, better living standards and local economies.”
