The cost of saving lives in this lockdown is too high

Shopping in London during lockdown
The cost of lost education and shouldering high debt outweighs the lives saved by the lockdown Credit: Kirsty Wigglesworth  /AP

How do you put a cost on a life? It’s often said that human life is priceless, but that of course is a nonsense. Insurers and actuaries weigh it in their scales every day and now Boris Johnson has the biggest call for any prime minister to make outside of a war: the trade-off between “health and wealth” as he plots a path out of lockdown.

Politicians are deeply uncomfortable discussing such issues in public for fear of being portrayed as callous. Behind every cold statistic in the mounting Covid-19 death toll is, after all, an individual personal tragedy. But the Cabinet has been divided into hawkish and dovish camps for weeks now, and the calls from the Government’s own backbenches for reopening have been getting louder.

Those of us unburdened by the disadvantage of facing the voters can also speak with more candour. And it is clear that the internment of the UK population is now doing more harm than good. It will make us poorer, entrench intergenerational inequalities, and potentially scar the incomes of millions of people for generations to come. 

Although the exact figure is disputed, you may be surprised to learn that the Treasury puts a £2m price tag on the cost of a life. This is the “value of a prevented fatality” (VPF) based on the death of an average person in an incident such as a road traffic accident, and used by hard-headed regulators to work out the trade-off between the cost of a life saved and the cost of implementing new rules.

Two LSE researchers, Paul Dolan and Pinar Jenkins, used that number and Imperial College’s modelling of the expected spread of Covid-19, to estimate that the suppression strategy adopted in March saved around 189,000 lives. Purely on the basic VPF, that saves the UK a vast looking £378bn: around £6,000 per head and a chunky 17pc of GDP.

Worth every penny then? Not quite. The average age of a Covid-19 fatality is around 75 and when the duo adjusted their calculations for the five years of expected life gained from a prevented death – they came up with the much smaller number of £60bn.

To put that figure into context: it is less than a quarter of our expected deficit in the current financial year, and it is about the size of what the Treasury’s Debt Management Office will be raising in a single month to pay for the deep freezing of the world’s fifth largest economy.

Even if it is beyond the pale for a politician to acknowledge it, the LSE estimates illustrate the wider point that the cost-benefit analysis of this lockdown simply doesn’t stack up any more. The former Governor of the Bank of England, Lord King, put it well: “The younger generations have suffered in the last 20 years. Why on earth is our future being put at stake in order to help prolong life expectancy of older people, whose life expectancy will not be very high in any event?”

For the avoidance of doubt, the UK’s elderly should not be thrown to the Covid-19 wolves. Indeed, the most vulnerable groups still need to be protected. But I’ve argued previously that we need the economic contribution of our silver spenders to help get the economy back on track; and we also have to confront the fact that so far the protection of an aged, mostly retired, cohort has been pushed to the fore to prevent the NHS from being overwhelmed. 

That job is done. So now we have to acknowledge that the economic victims of this crisis are mostly the young, in lower paid jobs more likely to be furloughed or axed altogether, and – over the longer-term at least – school children missing out on education.

The hundreds of billions of pounds in government debt being taken on to pay for the crisis is a cost which will be shouldered by younger generations, not the old, and exacerbates the existing strain on the public finances from ageing demographics.

Meanwhile the emergency monetary policy measures from the Bank squeeze savers but also tend to support the prices of the assets more typically held by the old. The quicker we get out of lockdown, the sooner the talk of a Piketty-esque wealth tax to help pay for the aftermath might fade.

Think of the shuttered pubs and restaurants, or the closed building sites, in the past month and it’s hard to avoid the conclusion that the better paid white-collar workers beavering away in spare rooms have been the coronavirus “winners”. They also have the least to lose when the UK opens up again with social distancing in place, unlike the bar workers. 

No wonder then that studies of previous pandemics by the Centre for Economic Policy Research found that earlier outbreaks raised the Gini coefficient, a scale from 0 to 1 ranging between total income equality and one person owning all wealth. 

CEPR says past events like SARS or MERS raised the income shares of the wealthiest, and lowered the share of the population with basic education in jobs, compared to those with degrees. More worrying still as nations around the world face up to record collapses in growth, “the inequality effect increases with the negative effect of pandemic events on economic activity”.

Finally, take education. The scarring effect of lower wages on young people entering the job market in a recession is well-documented. But the cost of losing months of learning on earnings is no less significant.

The Brookings Institute’s initial estimates suggest a 2.5pc per year drop in salary per student – or $1,337 (£1,063) in lost pay. Across the wider economy it reckons the cost to the US in lost earnings could be $2.5 trillion, or 12.7pc of GDP.

In a more extreme example, economists Andrea Ichino and Rudolf Winter-Ebmer studied the impact of lost education among 1930s-born children in World War 2, contrasting Germany and Austria with non-combatants Switzerland and Sweden. In Germany and Austria the pair found “an earnings loss that is still noticeable in the 1980s”. 

That in essence is why the PM needs to lift the lockdown as soon as he possibly can: to prevent damage lasting decades. After putting our older people first, now we have to do the same for our children.