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Obesity and the Public Purse: Weighing up the true cost to the taxpayer

In 2014, a 120-page report called ‘How the world could better fight obesity’ was released by the McKinsey Global Institute. The authors were promoting to the world’s governments a set of 44 interventions, and in their appeal to the UK they wrote:

‘..the government currently spends about £6 billion a year on the direct medical costs related to being overweight or obese… It spends a further £10 billion on diabetes. The cost of obesity and diabetes to the healthcare system is equivalent to the United Kingdom’s combined ‘protection budget’ for the police and fire services, law courts and prisons; 40 percent of total spending on education; and about 35 percent of the country’s defence budget’ (McKinsey Global Institute 2014: 22).

Though the £6 billion and £10 billion look impressive together, especially when compared to various departmental budgets, they cannot legitimately be summed. The £6 billion is an inflation-adjusted version of a figure from a 2011 study by researchers at the University of Oxford, who included the proportion of diabetes costs attributable to overweight and obesity in their estimate. So the McKinsey report was double-counting, and also including costs wholly unrelated to body size when it added £10 billion on top. That did not stop the Telegraph, the Daily Mail, the Independent, the Guardian and even the Chief Executive of NHS England from uncritically reporting the offending figure.

Advocates for policy proposals have an incentive to exaggerate the problem they aim to fix, because it gets them a place in the news cycle and makes them more likely to gain traction with politicians. Though their intentions are good, campaigners who use these tactics incite a climate of resentment against obese people (BBC 2015). Ironically, this may exacerbate the very problem they seek to solve: fat shaming causes obese people to eat more (Brownell 2011).

This report counteracts the catastrophists’ claims, estimating the net cost of overweight and obesity at £2.47 billion (less than half of the most commonly cited estimate), which is about two per cent of the NHS budget or 0.3 per cent of the UK government’s total budget in 2016. This surprising conclusion is not based on the re-estimation of any existing figures; we did not pioneer some state-of-the-art statistical modelling, nor did we gain access to a game-changing dataset. The arithmetic used throughout the paper is quite simple, and could be replicated by any economist. The data are readily available to all.

This paper imbibes the lesson of Frederic Bastiat, the 19th century French economist, who wrote the essay ‘What is seen, and what is not seen’. In this classic work, Bastiat tells the story of an ‘incorrigible’ young boy who smashes his father’s window. One onlooker says by way of consolation that ‘such accidents keep industry going’, at which point Bastiat balks, pointing out that this focuses only on what is immediately seen. The unseen requires one to entertain the counterfactual: what would the money have been spent on had it not been necessary to pay the glaziers?

‘It is not seen that, since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library’ (Bastiat 1850: 1.10).

This basic concept of opportunity cost, taught immediately to every young economist, is sadly lacking from the public conversation surrounding body weight. This paper asks how UK government finances would be affected were overweight and obesity totally vanquished. In such a world, the government might not have to spend so much on treating hypertension, diabetes, heart disease, breast cancer, etc. Over 1600 people would be expunged from its Employment Support Allowance list overnight (Department of Work and Pensions 2016). But, crucially, it would also mean more people would live into their sunset years, incurring extra pension, healthcare and benefit costs.

This paper has produced the first estimate of the savings that overweight and obese people bring the government in England and Wales each year by dying early. Only by making such an estimate is it possible to find the only figure that is relevant to taxpayers: the net cost.