Questions and answers about
the economy.

The health of nations

While the Christmas holidays are often cause for celebration, winter can also bring added pressures on the NHS, extreme weather that exacerbates existing health inequalities, and concerns for high street retailers at what should be their busiest time of year.

Newsletter from 15 December 2023

The United Nations Framework Convention on Climate Change published the ‘decision text’ from its latest annual conference on Wednesday – a new international agreement on tackling the climate crisis. From seeking to limit the global temperature rise to 1.5°C to protecting vulnerable communities from extreme weather events, the pledges indicate the scale of the challenge.

For some, the outcome of the COP28 summit in Dubai should be acknowledged as a historic achievement, representing the first unified commitment to make the transition away from fossil fuels. Others believe the so-called ‘UAE Consensus’ is weakened by multiple loopholes that oil companies and other polluters will find easy to exploit.

The communiqué announced many bold promises, including tripling renewable energy capacity and doubling average efficiency by 2030; accelerating the phasing-out of coal power; and reducing energy systems’ reliance on fossil fuels in a just, orderly and equitable manner, with the aim of a complete phase-out by 2050. At first glance, this is cause for optimism.

But there are potential stumbling blocks. References to ‘transition fuels’ are simply code for fossil-fuel gases, critics argue. They are concerned that this allows the continued use of gas on the basis that it is less polluting than coal. But research suggests that liquefied natural gas (LNG) could be worse than coal due to methane leaks. If the main outcome of COP28 is an uptick in LNG production, then it might be a case of one step forward and two steps back.

It is also important to consider what is not included in the agreement – notably concrete pledges on climate financing. Vast sums of money are needed to expand clean energy production, protect vulnerable communities (such as those living in small island states) and build resilience to natural disasters associated with extreme weather.

According to Damian Carrington, environment editor at The Guardian, the decision text ‘acknowledges that trillions of dollars of investment will be needed but fails to provide numbers on what will be provided and when’. Recognising the cost of the job in hand without offering a clear funding strategy is not useful. More heavyweight proposals are urgently needed.

Poorly planet, poorly people

This year’s COP was the first to include a dedicated health day, in recognition of the effects of climate change on public health. In a recent Economics Observatory article, Dheeya Rizmie and Colleen Psomas (both based at Mathematica, a research and data analytics consultancy focused on improving wellbeing) examine how a changing climate can magnify existing health inequalities.

For example, higher sustained temperatures can compound health disparities between communities. Those who can afford air conditioning at home can shelter from sweltering heat, avoiding the health complications associated with being too hot. In contrast, those on lower incomes, who typically live in more densely populated areas with less green space, cannot necessarily avoid being exposed to these dangerous temperatures.

The effects can be compounding. Dheeya and Colleen highlight that communities living in lower-income neighbourhoods are also more likely to have chronic diseases, which make them more susceptible to heat-related health problems. Looking at data from a study of extreme temperature days in the United States, they note that non-Hispanic black adults experienced higher mortality rates associated with heat. This is an example of a group that is already marginalised in socio-economic terms bearing the additional burden of extreme weather.

The trend is evident on a global scale too. In many cases, it is less economically developed countries in exposed locations that face the greatest threats from the climate crisis. Despite having polluted the least historically, they are now set to pay the highest price – in some cases, by watching their homes and histories vanish beneath rising seas. From public health to national identity, there is no solution to climate change without climate justice.

Going private

Resilient healthcare systems are vital, irrespective of the threat of climate change. In the UK, ever-increasing pressures on the NHS are a concern for the public, policy-makers and researchers alike. One issue that consistently sparks passionate debate is privatisation. On Tuesday, we posted a new article by Michael Calnan (University of Kent) exploring the potential costs of privatising the UK’s healthcare system.

Michael sets out the many different forms in which privatisation have happened in recent years. But whatever its shape, he points out that there have been notable costs, including ‘fragmentation, waste, loss of patients’ trust, inequities in access, the creation of a self-seeking for-profit service sector and the potential emergence of a two-tier healthcare system’.

These risks have been flagged by campaigners for many years. But to what extent has the NHS actually been privatised? Michael suggests that one way of measuring privatisation is the extent of public funding for private provision. According to the data, the share of the NHS budget spent on private providers rose from 3.9% in 2008/09 to 7.3% in 2018/19 (an issue we also covered in detail back in late-November).

This alarming jump could even be an underestimate. Further research by the Centre for Health and the Public Interest, which includes analysis of spending by local authorities, charities, the voluntary sector and social care, indicates that the true proportion is at least 18%.

Taking a step back, Michael situates these trends against the backdrop of a struggling system. Underinvestment, record waiting times and ‘the reluctance of the government to negotiate with junior doctors over pay’ are all critical factors when considering the state of the health service.

Christmas flopping

For the past three winters at the Observatory – just ahead of the Christmas holidays – Leigh Sparks (University of Stirling) has assessed how the retail sector is coping during this vital sales period. From the pandemic in 2020 and 2021 to the cost of living crisis in 2022, for many shops in the UK, it has been a case of moving ‘out of the fire and into the frying pan’. The outlook this year is not much better.

Leigh notes that despite falls in headline inflation, predictions for Christmas consumer spending in 2023 remain downbeat. Families are worried about household bills and the pressure of interest rate rises, while retailers are concerned about the supply of products, running costs and recent slowdowns in spending.

For shops to flourish, they need consumers who feel willing and able to splash the cash. But using data from Asda (the UK supermarket), Leigh shows that the sustained period of falling real wages over the past few years has led to a sharp decline in household disposable income, starting in late 2021 (see Figure 1). These data also highlight the depth of the crisis and reveal that only very recently have people’s fortunes slowly started to change.

Figure 1: Asda income tracker, year-on-year change, 2015-23

Source: Sparks, 2023

But not all families are affected equally. Figure 2 shows the large disparity between households’ income increases/decreases, as well as their absolute positions. The extent of the crisis for large parts of the population is obvious, as is the pattern – with those at the bottom of the income distribution facing the tightest squeeze.

Figure 2: Asda Income Tracker, by income group

Source: Sparks, 2023

As with challenges around climate change and healthcare systems, the cost of living crisis most hurts those already struggling to make ends meet. Traditionally, the winter holidays are a time for people to spend a little more money, enjoy some time off work and be with those they love.

In 2020 and 2021, the pandemic ruined that celebration for many households. While the particular challenge of Covid-19 lockdowns is now over, for some, the Christmas lights might still look a little dimmer this year.

Observatory news

  • Over the next three weeks, we will be publishing articles from the University of Bristol’s Communicating Economics class of 2023/24. Look out for a range of short pieces, covering everything from a potential ban on e-cigarettes to record-breaking ticket sales for Taylor Swift’s world tour.
  • We will be back to our regular posting schedule by Monday 8 January, with lots of exciting new articles already in the pipeline, including a themed week on productivity in the UK.
  • If you haven’t already, don’t forget to listen back to the fascinating discussions from this year’s Festival of Economics in Bristol. It was an eye-opening event packed with excellent speakers including top researchers, journalists, policy-makers and practitioners.
  • Finally, from the health of nations to The Wealth of Nations: a reminder of the most recent issue of our ECO magazine, which explores the enduring impact of founding father of economics Adam Smith, 300 years after his birth.
Author: Charlie Meyrick
Picture by shansekala on iStock
Recent Questions
View all articles
Do you have a question surrounding any of these topics? Or are you an economist and have an answer?
Ask a Question
Submit Evidence