Economic policies carry consequences far beyond fiscal balance sheets - they can shape the health, well-being, and even the life expectancy of societies
Economic policies have consequences that extend far beyond the fiscal balance sheet. They shape the health, well-being, and even the life expectancy of societies. Our recent IZA Discussion Paper reveals that austerity measures introduced in the United Kingdom after 2010 to control public debt have imposed a profound human cost. These measures contributed to approximately 190,000 excess deaths over a decade and severely slowed gains in life expectancy. Understanding these effects is crucial for policymakers and the public to assess the long-term trade-offs inherent in fiscal austerity.
In the wake of the global financial crisis, the UK government introduced deep spending cuts, particularly to welfare benefits and by levelling off healthcare expenditure. Based on a causal analysis of UK data from 2002 to 2019, we find that austerity measures implemented after 2010 slowed progress in life expectancy by nearly three years. On average, individuals in the UK lost between 2.5 and 5 months of life expectancy by 2019, with women nearly twice as affected as men. This corresponds to an estimated 190,000 excess deaths, representing a 3% increase in overall mortality during the period.
The primary driver of this loss was the reduction in welfare benefits. While cuts to healthcare spending were smaller in scale, each pound withdrawn had a disproportionately large effect. Reductions in welfare directly lowered household incomes and led to worse health outcomes, including higher rates of obesity and diabetes. Moreover, austerity deepened existing inequalities, disproportionately affecting poorer regions such as the North East of England, South Wales, and the Glasgow City Region. By 2019, the gap in life expectancy between the most and least affected areas had widened considerably, reflecting growing health disparities between socio-economic groups.
Crucially, austerity policies also contributed to a sharp increase in so-called ‘deaths of despair,’ including deaths from drug overdoses. We estimate that austerity led to approximately 9,000 additional drug-poisoning deaths, accounting for around 27% of all such deaths in England and Wales during this period. Reduced healthcare funding also weakened essential services, such as ambulance response times, placing thousands at heightened risk of death, particularly in cases of cardiac arrest.
Our analysis underscores the importance of fully considering the societal costs of public spending decisions. While austerity was presented as an exercise in fiscal responsibility, our calculations using the Marginal Value of Public Funds, which evaluates the welfare benefits of spending relative to its costs, show that the health and welfare losses far outweighed the fiscal savings achieved. Healthcare spending, in particular, proved to be a highly valuable investment, with cuts to health services imposing far greater societal costs than the short-term fiscal gains they delivered.
These findings carry important implications for future policy, especially during periods of economic stress. Austerity is not merely an economic strategy; it profoundly shapes outcomes for vulnerable populations in ways that can persist across generations. Policymakers must weigh fiscal goals against the fundamental need to protect public health and address inequality. The evidence is clear: short-term fiscal savings can exact a heavy long-term toll on the health and well-being of society.
© Yonatan Berman and Tora Hovland
Yonatan Berman is Lecturer in Economics (Assistant Professor) at the Department of Political Economy at King's College London, UK, and IZA Research Affiliate
Tora Hovland is Research Assistant at London School of Economics and Political Science
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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.
Related IZA World of Labor content:
https://wol.iza.org/articles/relationship-between-recessions-and-health by Nick Drydakis
https://wol.iza.org/articles/do-youths-graduating-in-recession-incur-permanent-losses by Bart Cockx
https://wol.iza.org/articles/effects-of-entering-adulthood-during-recession by Lisa Dettling
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