Well-being

Lord Layard Excerpts

Thursday 12th March 2020 Lords Chamber

[Lord Layard (Lab)]

My Lords, I really welcome this debate and congratulate the noble Baroness on securing it. As she said, this is a timely moment to consider the fundamental question of what the objective of government is, because that should be reflected in the spending review. In my view, the well-being of the people is the only really sensible objective. As Thomas Jefferson said:

“The care of human life and happiness … is the first and only legitimate objective of good government.”


I cannot think of any other equally defensible objective—provided that we also include the fairness with which the happiness and well-being is distributed.

What reason do we have to hope that the Government will follow this? The reason is that it is in the self-interest of the Government to follow it. There is now a massive volume of research on what determines the outcome of elections, and study after study shows that if you want to explain the share of the popular vote, it is better explained through the well-being of the people than through all the economic variables that we use and assume are the main influences upon it. Whereas Bill Clinton said, “It’s the economy, stupid” that determines elections, actually “It’s well-being, stupid.”

Let me press this point. One does not easily change the direction of the Government without appealing to their self-interest. The reason people vote the way they do is not surprising, because it reflects what matters to people. When we study the factors explaining the variation of happiness and well-being across the population, we find that economic factors play quite a small role. Unemployment is, of course, very serious, but it affects a relatively small number of people. Income explains only about 1% of the variation in happiness of the British population, and the same is true in most European countries. We can explain another 20% by measuring mental and physical health; those come top. Then, there are all the various human relationships we are involved in—family relationships, work relationships—and the quality of those relationships, at work and in the community. So it is in the Government’s interest to fundamentally rethink their priorities. First, they must change the methodology, as the noble Baroness said, and then change the policies in consequence. I shall say just a word about the methodology.

As we know, the Treasury is rethinking the Green Book, which is very helpful. We are told that it will now stress that when you have monetary measures of benefit, you should weight these according to the income of the beneficiary, because the extra money is more valuable to a poor person than to a rich person. That reweighting is going to benefit the north, which is why the Government are doing it. The more important point, looking to the longer term, is that it is not possible to measure in monetary terms the benefits of most public expenditure. You cannot put a monetary value on health, social care, child well-being, law and order, community services or redistribution of income; these are really important for people’s well-being. However, you can put a well-being value on the associated outcomes, because a science of well-being now makes this possible. We have to change the way the Treasury Green Book works, so that it combines the kind of thing it always did, weighted by income, with direct measures of well-being. That was to some extent foreshadowed in the way the Green Book was revised in 2018.

Well-being as a measure of output is not new to our system of government, because it has been used in the NHS for 20 years. The NHS authorises treatments only if they produce at least one quality-adjusted life year—QALY—for every £30,000 of expenditure. We want to apply this same general approach to all other fields of government expenditure. I tried applying that criterion to HS2, converting the monetary value into the equivalent well-being value through the well-being effects of money, and I found that HS2 produces only 1/40th of the benefits that would be required by the NHS from the same amount of spending.

We can get an integrated way of analysing these problems. Let us apply this lens of well-being fearlessly to all expenditure, and then we will see what priorities follow; much more for mental health, more for physical health, more for our social infrastructure. I beg the Chancellor to move from the obsession with physical infrastructure to the social infrastructure which has been so seriously cut, and which is crucial to our well-being.

As the noble Baroness said, this is a movement which will succeed; in the end, we will be doing this. The OECD and the European Union have already asked member Governments to analyse policy in this way, but only three countries have done it: New Zealand, Scotland and Iceland. They are all led by women, and they are all small. Surely it is the time for a large country, led by a large man, to do the same.