Does a fall in the UK's healthy life expectancy mean what you think it means?

Summary

More or Less – May 27, 2026

Does a fall in the UK's healthy life expectancy mean what you think it means?

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Episode Overview

This episode of BBC Radio 4’s "More or Less," hosted by Tim Harford, tackles the headline statistic: "UK Healthy Life Expectancy falls by two years in the past decade." Tim and team dive into what "healthy life expectancy" actually means, question whether the recent figures signal a genuine health crisis, examine the drivers behind the number, and discuss the broader implications. The episode also brings updates on Britain’s troubled HS2 rail project and investigates whether a VAT cut on summer attractions will benefit consumers.

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Key Discussion Points & Insights

1. What is Healthy Life Expectancy? [01:04 – 05:40]

• Definition & Misconceptions:
  Tim Harford explains the term and dispels common misunderstandings. Healthy life expectancy does not mean people are healthy up to a certain age and then suddenly unwell.

  "Does it mean someone aged 52 can expect nine more years in perfect health and will then collapse into a morass of health conditions...?"
  — Tim Harford, [02:26]

• How It’s Calculated:
  Lizzie McNeil (vitality correspondent) and guest Stuart McDonald (LCP actuary) outline that healthy life expectancy combines observed death rates with self-reported health data from surveys. The crucial question: “How is your health in general?" on a scale from "very good" to "very bad." Only "good" or "very good" are counted as healthy.

  “Anyone who answered good or very good is treated as being in good health. Anyone that answered fair, bad or very bad is treated as not in good.”
  — Stuart McDonald, [03:14]

• Subjectivity & Limitations:
  This measure is subjective and can be influenced by mood, interpretation, and societal expectations, not just physical or mental health.

  “Different groups may interpret … the health categories differently depending on their age, their generation, their culture, their expectations around what good health looks like and their socioeconomic background.”
  — Stuart McDonald, [04:11]

2. Why Has Healthy Life Expectancy ‘Fallen’? [05:40 – 08:55]

• Role of Young People’s Mental Health:
  Data journalist John Burn-Murdoch (Financial Times) investigates and points out that, while physical health metrics have remained mostly steady or improved, declines in self-reported mental health—especially among the 16–24 age group—drive the overall decrease.

  “If we look at physical capacity scores, stable trends... If anything, we actually see a slight improvement... Whereas... mental health... this is where we see this marked decline for young people in particular.”
  — John Burn-Murdoch, [06:28, 07:22]

• Changing Attitudes & Reporting:
  Increased awareness and willingness to report mental health issues now may contribute to a lower average, rather than a true decline in health.

  “An increase in awareness and cultural acceptance of mental health issues can lead to more people identifying and being open about their mental health struggles... This also means the data is vulnerable to being skewed.”
  — Lizzie McNeil, [07:36]

3. Is Midlife Health Actually Worse? [08:41 – 09:18]

• Health of Over-60s:
  Despite the headline, most people in their 60s (and even late 70s) still report good health, and trends are stable or improving in those age groups.

  “People in their 60s and above are not the answer. They’re actually doing reasonably well if anything slightly improving.”
  — John Burn-Murdoch, [08:52]
  “Around two-thirds of people in their early 60s report that they’re in good health. And actually right up until the late 70s, a majority report good health.”
  — Stuart McDonald, [09:03]

4. How Useful is Healthy Life Expectancy? [09:18 – 10:05]

• Inequality Insights, But Beware Over-Simplification:
  Healthy life expectancy can reveal gaps (e.g., between rich and poor) but should be used carefully and in context.

  “It does seem like a measure that’s fine if you know what it means, but it’s misleading if you don’t.”
  — Tim Harford, [09:50]
  “It’s just not entirely clear what this particular stat is telling you about that.”
  — Lizzie McNeil, [09:55]

5. Bonus: The Great VAT Cut on Theme Parks & Roller Coasters [23:52 – 29:23]

• Policy Announcement:
  Summer VAT on tickets to attractions is being cut from 20% to 5%. It should mean a £10 saving on a £68 ticket.

• Will Savings Be Passed On?
  Tax policy expert Dan Neidle says no: in narrowly targeted VAT cuts, businesses usually keep the savings rather than pass them to consumers, proven by multiple studies.

  “If you have a cut in something which is a small slice of consumer spending... it does not get passed on... The evidence for that is really robust.”
  — Dan Neidle, [25:59]

• Recent UK Examples:
  The removal of VAT on tampons and ebooks didn’t result in lower prices.

  “We couldn’t see any effect at all.”
  — Dan Neidle, [26:33]

• Government Response:
  The government “calls on businesses to do the right thing,” and some large attraction operators (e.g., Merlin Entertainment) intend to pass on some savings, but many may not.

  “Some of the very largest providers may be aware that people are watching and may drop the price, but not by the whole amount... others won’t drop it at all. That’s my bet.”
  — Dan Neidle, [29:12]

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Notable Quotes & Memorable Moments

• “The subjectivity of this healthy life expectancy calculation is its key limitation.”
  — Stuart McDonald, [04:11]

• “So it’s different to life expectancy because you can become unhealthy and then you can become healthy again. But you can’t become dead and then become alive again.”
  — Tim Harford, [04:34]

• “The boomers are blooming!”
  — Lizzie McNeil, [09:15]

• “It’s just not entirely clear what this particular stat is telling you.”
  — Lizzie McNeil, [09:55]

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Timestamps for Important Segments

• Healthy Life Expectancy: Meaning & Calculation........[01:04 – 05:40]
• Why the Number is Falling: Mental Health's Role.......[05:40 – 08:55]
• Health of Over-60s & What’s Really Happening..........[08:41 – 09:18]
• How Useful is the Metric? Pros & Pitfalls.............[09:18 – 10:05]
• Will the VAT Cut Benefit Consumers?...................[23:52 – 29:23]

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Tone & Language

Engaging, gently humorous, and skeptical—Tim Harford and team keep the discussion both accessible and nuanced, repeatedly emphasizing the limits and context of statistics used in headlines and policy debates.

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For Listeners Who Haven't Tuned In

This episode demystifies a worrying-sounding health stat, demonstrating that the story behind "healthy life expectancy" is more about changing attitudes and mental health in young people than about Britons getting sicker. The team also casts a skeptical eye on whether a VAT cut will really make days out cheaper, and gives a typically wry update on Tim’s marathon exploits. If you care about what’s behind numbers in the news—and how statistics can mislead—this is a must-listen.

Transcript

[A]

This BBC podcast is supported by ads outside the UK

[B]

Seeking, pushing, optimizing, creating, learning, Discovering. At Aramco, we believe in harnessing the power of data to push the limits of what's possible. That's how we deliver reliable energy to

[A]

millions across the world.

[B]

Aramco, an integrated energy and chemicals company. Learn more about [e-mail]

[C]

enjoy the sunshine with sales on grill ready favorites from Whole Foods Market take cookouts to sizzling new heights with their marinated salmon and Maiden House marinated beef and chicken. Entertain with low priced 365 brand chips and dips like hummus and guacamole and sweeten every party with brown butter chocolate chip cookies. Remember to pack the cooler with probiotic sodas, sparkling waters and more Summer savings await you at Whole Foods Market.

[A]

Hello and welcome to More or Less, your effortlessly cool guide to the numbers all around us in the news and in life. This week, two things that are rarely combined, but maybe they should be high speed trains and roller coasters. We ask why the budget for HS2 keeps overrunning and we'll also ponder the impact of a temporary VAT cut on roller coasters and and other fun things. And the team are chasing me for a marathon update. If they can catch me, that is. But first, loyal listener Alison got in touch to ask us to look into recent reports about something called healthy life expectancy. Here's the headline from the BBC news story UK Healthy life expectancy falls by two years in past decade. The title is pretty self explanatory. The claim comes from an analysis by the Health foundation which found that healthy life expectancy is now just under the age of 61 for both men and women in the UK. That's two years lower than a decade ago. However, our listener Alison and many others who emailed had a healthy skepticism about the number. Our vitality correspondent Lizzie McNeil has been figuring it out. Hello Lizzie.

[D]

Hi Tim.

[A]

Try again.

[D]

Hi Tim.

[A]

Better. So Lizzy, this term healthy life expectancy, what does it actually mean? Or put it this way, does it mean that someone aged 52 can expect nine more years in perfect health and will then collapse into a morass of health conditions so serious that they might as well be dead? I'm asking for a friend.

[D]

Yeah, I mean it sounds like that, but you can reassure your friend that it's really not. Oh yeah. So the figures used by the Health foundation came from an analysis by the

[A]

ons, the Office for National Statistics, and presumably they were looking at data from medical records and GP records and hospital

[D]

admissions Nah, it's based on what people say about their health in surveys. Here's friend of the programme and an actual actuary at LCP, Stuart McDonald.

[E]

To calculate healthy life expectancy, we combine actual observed death rates, which with survey data on whether people say that they're in good general health in the uk. This is based on the survey question, how is your health in general? People answer on a five point scale of very good, good, fair, bad and very bad. And to get to the calculation of healthy life expectancy, anyone who answered good or very good is treated as being in good health. Anyone that answered fair, bad or very bad is treated as not in good.

[A]

So it's self reported health and there aren't many options. And the fact that people who say their health is fair aren't counted in the healthy life expectancy figure means it's quite a high bar.

[D]

Yep. And because it's self reported, it's heavily influenced by people's mood on the day of the survey and how healthy they think they should be.

[E]

The subjectivity of this healthy life expectancy calculation is its key limitation. Different groups may interpret and do interpret the health categories differently depending on their age, their generation, their culture, their expectations around what good health looks like and their socioeconomic background.

[A]

Right, so the way this is worked out means there's nothing stopping someone ranking their health as fair one year if they have a heavy cold or a bad back, or maybe just the grumps and then good the next time they're asked if they've had a lovely night's sleep or the sun shining. So it's different to life expectancy because you can become unhealthy and then you can become healthy again, but you can't become dead and then become alive again.

[D]

Yeah, not so much. So the ONS have just tried to calculate how many years, on average, a person is likely to rate their health as good or very good across a lifetime, not when those years actually take place.

[E]

Healthy life expectancy of 60 does not mean that people are healthy until age 60 and then suddenly becomes unhealthy. It means that on average, across the population, they're spending 60 years in reported good health across their full lives. And as an example, somebody might report poor health in their 20s and 30s, then they might recover later and spend much of their older age in good health.

[A]

Oh, so that also means that people who report being in poor health when they're young can pull down this healthy life expectancy figure.

[D]

Yep.

[A]

So that could make a real difference with the numbers, because we know that Poor mental health's a problem for young people in the uk.

[D]

Yeah, so that's a really good point. And John Byrne Murdoch, Financial Times data journalist and yet another friend of the programme.

[A]

We're so popular.

[D]

I know, right? Anyway, John had the same thought as you, so he dug into the figures used by the ONS and combine them with data from other surveys to see the overall mental and physical capacity trends across the different age groups over the past 10 years. Now, to be clear, these trends aren't tracking actual diagnosed health conditions. John's still using what people say about

[F]

their lives on the physical capacity scores, you tend to see pretty stable trends for all age groups. So this is true for people in their teens and twenties, it's true for people in their fifties and sixties. And if anything, we actually see a slight improvement in the answers people are giving about specific physical health functioning over that same period. Whereas if we look at people's responses to questions about mental health, which refers to their worries, anxiety, depression, the extent to which their mood and mindset is sort of a struggle for them, this is where we see this marked decline for young people in particular.

[D]

In John's broader survey data, the decline in mental health is largest in the people aged 16 to 24 and the decline gets smaller as the age gets higher. And when he ran a statistical analysis on the overall trend, the pattern was clear.

[F]

What we see is that the physical health score has had very little impact on this decline in self reported general health. Whereas the mental health scores, the responses to those questions track very, very closely with what people are saying on their overall health questions.

[D]

And this is where the subjective nature of the survey data is really important. So John pointed out that an increase in awareness and cultural acceptance of mental health issues can lead to more people identifying and being open about their mental health struggles. So they're more likely to report these issues, which would show up as a deterioration of healthy life expectancy. I mean, bad for healthy life averages, but in other contexts, arguably a good thing. This also means the data is vulnerable to being skewed, as this awareness and acceptance may not have spread evenly throughout society. So healthy life expectancy could be tracking an actual decline in mental health, or it could be tracking different ways of thinking about mental health.

[A]

So the fall in healthy life expectancy is driven by more young people saying their mental health is fair or bad, and some unknown proportion of that is tracking changing attitudes towards mental illness. Yeah, and it's not because people are getting chronic illnesses any earlier in their 60s again.

[D]

Yep.

[A]

Well, the obvious question at this point is how people who hit the healthy life expectancy age in their early 60s are actually doing.

[D]

Basically, they're doing okay.

[F]

If we're talking about what's changed over recent years during which we've seen this fall in healthy life expectancy, people in their 60s and above are not the answer. They're actually doing reasonably well if anything's slightly improving.

[E]

Around 2/3 of people in their early 60s report that they're in good health. And actually right up until the late 70s, a majority of people report that they're in good health.

[D]

So the boomers are blooming. Now. Despite the drawbacks we've discussed, Stewart says that healthy life expectancy can still be a useful tool in understanding where the public are at. For example, the huge differences in this measure between high and low income areas does tell you something important, but it's only useful if you know what's going on under the hood. But John still isn't convinced.

[F]

Yeah, look, I'm not a huge fan of it. I don't think there is a good reason for us in a country like the uk, where we have all this data, to try to lump everything together into this one statistic that has these flaws.

[A]

It does seem like a measure. That's fine if you know what it means, but it's misleading if you don't.

[D]

Yeah. And to be clear, none of this means that the UK's general health is in tip top shape. It's just not entirely clear what this particular stat is telling you about that.

[A]

Thank you, Lizzie. And thanks to Stuart MacDonald and John Byrne Murdoch. I really feel like we've got the old band back together with that one.

[D]

Wait a second, Tim, you think he can escape without telling us about the marathon? Cue the Sting breaking four. So, Tim, did you break the marathon?

[A]

No, the marathon broke me.

[D]

Oh, did you finish?

[A]

I did finish, but I didn't come in in under four hours.

[D]

Oh, well, you know, it was probably just a really hard marathon on a really hard day.

[A]

Yeah, I'd like to say, but actually it was the fastest marathon in history.

[D]

Oh, wow. Well, what a thing to witness.

[A]

I didn't really witness it, did I? I was hours behind, but in fact it was quite a lot hotter by the time I got round to finishing it.

[D]

So what time did you do it in?

[A]

I did it in 4 hours, 26 minutes and a few seconds.

[D]

Oh, nice. You achieved your goal.

[A]

Wait, I did?

[D]

Yeah, yeah, yeah. Let me play you the whole Sting.

[A]

Bray King for and a half. I'm not sure we're fooling anyone, but I would like to say thanks to all the self described loyal listeners who were kind enough to sponsor me. We raised almost 20,000 pounds for the teenage Cancer Trust, which is a cause very dear to my family. So thank you to everyone who contributed and thanks to you, Lizzie. The UK is famous for many things. The monarchy, reign, sarcasm and of course, trains. Despite being the forefathers of locomotion, we hadn't dipped our toe into the realm of high speed trains until HS1. That's the high speed connection between London and the Channel Tunnel. And it came in on time and under budget. As any movie executive knows, once you've had one success, you need to follow it with another, such as Toy Story 2, the Godfather Part II and of course Highlander 2. But unlike those cinematic giants, HS2 has not lived up to its predecessor. In fact, just last week the government released a new report stating that HS2 is projected to cost twice as much as originally predicted and be hundreds of miles of track shorter. With me to explain the story of the little high speed train that couldn't is the presenter of Derailed the story of HS2, Kate Lamball. Most importantly, you used to be serious producer of More or Less.

[G]

I was.

[A]

And we miss you.

[G]

For my sins.

[A]

Well, welcome back for a special guest appearance. So, HS2, this is a numbers programme. You will remember what were the original cost estimates for HS2.

[G]

So if we go all the way back to 2011, the estimate for the whole route, which then was London to Birmingham and then that Y shaped route up to Leeds and Manchester, that was thought to cost 32.7 billion pounds. The government is now estimating 87.7 billion pounds to 102.7 billion pounds.

[A]

So how much of the original budget have they spent?

[G]

So they've so far spent £46.8 billion. Now, some of that went on the plans for phase two, which is the route north of Birmingham, which is now not happening. So on the route from London to Birmingham, it's been just over 44 billion. So about half of the total predicted budget now.

[A]

So they've basically already spent the original budget and we will never get trains to Leeds or to Manchester and we're not that close to getting trains between London and Birmingham either.

[G]

Well, if you put it that way, Tim, it doesn't sound great.

[A]

It seems that there's no end to the number of times this estimate can increase. So talk me through the various steps in this number creeping up from 30 something billion to over 100 billion, while the actual railway line gets shorter.

[G]

So early on in the process, there's a lot of guesswork. One former chair of HST told me that costs were set at a time when only 3 or 4% of the facts about the railway were known. So, for example, they initially assumed that any land owned by National Rail would be given to the project for free. It wasn't. They initially thought they'd need 25 square kilometers of land and then they realized they need 70 square kilometres of land. There's also assumptions about how much buildings would cost when you need to go in. So one former council leader in London, when it's running into Euston, talked to me about it being what they call piss poor preparation. So they had meetings about how much certain blocks would cost. They thought, well, it's a social housing block, how much can it cost? But this is land in central London. It cost more than £40 million. So there's a lot of this initial escalation is basically figuring out, oh, God, we actually need a lot more than we think we do.

[A]

That explains why some of the initial estimates were back over the envelope and badly wrong. But then the costs have continued to escalate and that can't just be poor preparation at the start.

[G]

So what we then go into is a period of what I'd probably call costly compromise. So essentially, they decide to do this process to get HS2 approved, called a hybrid bill. It's not done very often at all, and in some ways it's like a normal government bill. Politicians vote on it. But in between those votes, anyone affected by the scheme can go to Parliament and basically campaign for how they're being affected and for changes to be made to the scheme. And thousands of assurances were added to the bill. £10,000 to renovate a drinking fountain, A quarter of a million pounds to insulate a church. Half a million pounds for a new park in Aylesbury, tens of millions for community funds that funded irrigation for bowling greens, solar panels for village.

[A]

So basically, all these side deals that aren't necessarily, well, they're not anything to do with the railway, they're just to do with getting people who have some kind of veto power to stop making a fuss and say, okay, you can build it, essentially.

[G]

And most expensive of all, there's the tunnels. So currently there are so many tunnels, cuttings and noise barriers that on a 49 minute journey from London to Birmingham, passengers are only going to be able to see the countryside outside the window for nine minutes. They're still paying for extra planning officers to support councils to carry out this work. And there's still opposition and delays, which is also causing increased costs up to tens of millions of pounds. They keep increasing the estimate and by 2019, they think it's going to take almost £74 billion to do the full leg, which is the equivalent of about 95 billion in today's money. And then something else hits them, which is the contracts. And I know what you're saying. Tell me more about contracts, Kate. They're fascinating.

[A]

That is exactly what I was thinking.

[G]

They're really important. Right? So 2017, they get Royal assent and they sign the first contracts for the civil engineering, which is this really important work to clear the land, build all your bridges, all the basics you need to do. But instead of saying, this is what I want you to build for this price, they start with the company's help drawing up the detailed design, drawing in every single support structure, every rivet, all of those engineering details. And what people see happening is that they see companies gold plating, designing extra support structures where frankly they might not be needed. And the reason they think this happened is, is because companies knew that after that contract was signed, they'd have to take on the risk of any additional cost. So if things ended up costing more than the initial calculation, they're the ones footing the lion's share of that bill. So the best way to protect yourself is to make that first estimate, the bit HS2 are going to cover as high as possible.

[A]

Okay, so that sounds bad because we don't like gold plating. In compensation, the taxpayer is not on the hook for unexpected cost increases. And yet somehow there have been unexpected cost increases.

[G]

Yeah, so it's an effort to protect taxpayers. But within a year of contractors taking on this detailed design work, the forecasted prices were 83% above the government's target. So they think, okay, we can't do this anymore, we're going to renegotiate it. What they do is when they renegotiate it, instead of the contractors being liable for any future cost increase, is that risk is going to be paid by the government. Now, later chairs of HS2 described this reversal as extraordinary because the gold plated design is already done. And now the government are taking on all the risk of inflation and the unforeseen. And they signed these at the beginning of 2020. And so as Covid runs its course and Russia attacks Ukraine, the price of raw materials and energy soars. And in the three years after 2020, it's estimated these revised contracts increase the cost of HS2 by £6 billion online.

[A]

People have been saying, people say a lot of things online, that in dollar terms, HS2 is 14 times more expensive per kilometer than French high speed rail and it's 10 times more expensive per kilometer than Italian high speed rail.

[G]

It's Certainly true that HS2 is expensive for what it is. If you think about it, London to Birmingham is 140 miles. And if we take the government's top estimate of just over £100 billion, you can kind of figure out how many billion per mile you're getting at that rate. Making international comparisons though, is a very, very difficult thing to do. Part of this is just to do with the way that Britain is. If you think about it, Britain is this really small, highly populated island, right, as compared to France, which is huge and has much more open space. There's also a question of just how difficult it was to thread a high speed line across Britain. In order for trains to run really, really fast, the track has to be as straight as possible. Right. And what the original engineers did was they basically traced all the possible ways they could get a straight line across Britain. It looks like a piece of knitting, that original diagram. And it's really difficult because if you follow initial motorways, the track would be too curvy. If you follow existing railway lines, you would have to flatten commuter towns. So they've had to trace it in this really, really difficult way. And it meant going through the Chilterns, this area of outstanding natural beauty. And it's actually really hard to draw a line across Britain without hitting something important. Right. If you just take a ruler and put it across a map, you normally hit something. And on top of just the fact that, that you're going to hit something, it's going to cost you money to get that thing out of the way. We're also a property owning island. We're a democratic island. We give homeowners and people who have an investment in this country a lot of say within what's happened and we pay them compensation. Now that you consider to be perfectly appropriate. But it does cost money.

[A]

Is that not true for France? I mean, I understand the comparison with say China, but I mean, they have property in France, right? And France is a democracy.

[G]

Yeah, but France is a much bigger space. They can run through much larger areas of empty countryside which is perfectly flat. You're not having to go through as many hills, you managed to go through flat areas. And also France, a lot of French high speed trains terminate outside major cities. They don't go right into the centre like we're trying to do with HS2.

[A]

So HS2 has suffered from a myriad of problems. Our country not being designed for straight lines, the government's desire for fair and democratic process, war, a pandemic and some really very questionable decisions. Extraordinary indeed. Thank you to Kate Lamble. And if you want to hear more from Kate and you like listening to in depth exposure of huge national infrastructure problems, tune in to her new series on Radio 4, a look into the water industry. It's available on BBC Sounds.

[D]

What if a marginal gain unlocked greater performance? What if an insight in data Data could change everything. At Aramco, our focus on detail helps us deliver reliable energy to millions across the world. Because margins aren't marginal, they're where we can truly push the limits of what's possible. Aramco, an integrated energy and chemicals company.

[C]

Learn [e-mail] enjoy the sunshine with sales on grill ready favorites from Whole Foods Market take cookouts to sizzling new heights with their marinated salmon and made in house marinated beef and chicken. Entertain with low priced 365 brand chips and dips like hummus and guacamole and sweeten every party with brown butter chocolate chip cookies. Remember to pack the cooler with probiotic sodas. Sparkling waters and more. Summer savings await you at Whole Foods Market.

[A]

It's half term and like many an exhausted parent, I'm trying to find ways to keep my children entertained over the school break. And by children, I mean fully grown up and allegedly capable production team. Josh wants to visit an aquarium, Nathan wants roller coasters, Lizzie's vanished into the woods again, and Richard demands what's it constantly. The summer holidays will be even worse, but low. What is this?

[G]

I can today announce a temporary cut in the rate of VAT on summer attractions from 20% to 5% over the summer holidays.

[A]

Manna from heaven. The government has stated that the standard 20% VAT rate on tickets to zoos, children's theatre shows, films, theme parks and other attractions will drop to 5% between June 25 and September 1. But is it a big number or indeed a big saving? Well, if a ticket to a theme park costs 68 pounds on the gate, and it does, we've looked, then this reduction would mean that it should cost you around £10 less. Welcome news for many, surely, Surely. Alas, maybe not. Our apologies. But once again we are the pooper of parties, the rain on your parade and the stealer of thunder. Well, not us. Exactly. Let's land the blame squarely on tax expert Dan Needle. Of tax policy associates.

[B]

A lot of economists who haven't looked at this point think that if you have a cut in VAT in a competitive market, then it's going to be passed on to consumers.

[A]

But there's always a but.

[B]

This has been looked at quite a lot. There've been a lot of VAT cuts across Europe, not least because every business worth its salt is always frantically lobbying for some kind of special VAT deal or special VAT cut. So there's a wealth of natural experiments out there. People have analyzed this, hundreds of VAT cuts, so over 20 years, and what they found is that if you have a VAT cut, that's over a significant chunk of consumer spending, like we had here after the financial crisis, we had a temporary cut in all of vat. If you do that, it mostly gets passed on to consumers. You cut VAT from 20% to 15% and something like two thirds of that cut actually reduces prices.

[A]

Good news, you might think, but there's always a bigger but if you have

[B]

a cut in something which is a small slice of consumer spending, like one product or one service, it does not get passed on. And the evidence for that is really robust.

[A]

This summertime, reduced VAT rate is indeed a cut. That's a small slice of consumer spending, namely days out to the cinema, theatre, theme parks and kids meals. Dan says it's not a wide enough range of commodities to ensure the savings are passed on to consumers. In the uk, we've been stung by this before.

[B]

There was the abolition of the tampon tax. 5% VAT on tampons. We looked at that and we could see no evidence it was passed on. Possibly out of that 5%, 1% was passed on. Unclear. Then even clearer. Ebooks. Ebooks used to be taxed at 20% VAT. There was a massive campaign funded, of course, by the publishers to abolish it, saying it would reduce prices for consumers. We looked at that. It's very clear it did not reduce prices for consumers. We couldn't see any effect at all. So our studies on those two recent UK examples confirm what's been found across the whole of Europe, that If you cut the 80 on one product, it doesn't get passed on in the short to medium term. Maybe in the long term it does. Unclear.

[A]

So if you go to your local theme park on June 25th and notice you're paying the same as you were the week before, what are your rights? Can you whip out your calculator and demand your VAT rebate? Well, no, there is A difference between

[B]

the person who pays a tax has what we call the legal incidence and the person who economically is carrying the cost. The economic incidents. If I go and buy a chocolate bar, I'm not paying vat, I'm paying the shop. The shop has to pay VAT to hmrc and what the shop does is it adds on an amount to the price. So if it turns out that they charge too much vat, I'm not going to get any money back. The shop is going to go to HMRC and say, oi, can you give us some money back?

[A]

We put this to the government who told us we're calling on businesses to

[F]

do the right thing and pass on the full VAT savings to hard working families so they can enjoy life's little treats for less.

[A]

This summer and so far they do seem to have brought people on board. Merlin Entertainment, operators of places such as Alton Towers, Legoland and Sea Life Aquariums, have promised to pass on the VAT savings for admissions tickets and children's meals. Good news for the summer holidays. But Dan says there is another problem with some of the activities that are enjoying this summer tax cut. Namely, have you seen the queues at Alton Towers? Even without a tax break, can they

[B]

actually take more people in the summer? I'm not sure they can. So if they did pass the price on, that's not going to be more people get to go in. It probably means that that the same number will get in but would pay less and there'll be bigger queues outside. So the basic concept seems problematic, but as I said, there's no reason to think it's actually going to be passed on.

[A]

For those of you who like a flutter, what is Dan's money on?

[B]

My money is that some of the very largest providers may be aware that people are watching and may drop the price, but not by the whole amount and others won't drop it at all. That's my bet. I would put five quid on this.

[A]

I think we will be keeping an eye on this. Thank you to Dan Needle. And that's all we have room for this time. But you can follow us on BBC Sounds or any podcast app, search for More or Less behind the Stats and catch our Saturday edition too. In any case, please keep your questions and comments coming in to more or lessbc.co.uk. until next time, Goodbye. More or Less was presented by me, Tim Harford. The producer was Lizzie McNeil with Tom Coles, Nathan Gower and Josh McMinn. The production coordinator is Brenda Brown, Neil Churchill recorded and mixed the show. The Breaking Four and a Half Sting was by James Beard, and our editor is Richard Varden.

[H]

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