You can put a price on safety – here’s how

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For anyone even slightly involved in the debate over British housing policy, there are few things more likely to live in their head rent-free than the ‘Two Staircase Rule’ – which probably ranks above even Martyn’s Law as the most egregious example of something-must-be-done policymaking in recent memory.

If you’re fortunate enough to be unfamiliar with it, it’s quite simply explained: in the wake of the Grenfell Tower fire, Michael Gove’s Housing Ministry decreed that all buildings over 18 metres in height must have two staircases.

Like many bad regulations, this one seems plausible enough at first glance; more stairwells equals more opportunities for escape, right? It was further argued by the law’s proponents that it would allow firefighters to designate one as the ‘escape stair’ while they operated using the other. 

And yet the moment you scratch the surface, the case does not stack up at all. The Centre for Cities has an excellent summary of the evidence, but the real killer statistic is this: according to the Government’s own impact assessment, imposing the two staircase rule will inflict £2.7 billion of costs to reap just £9 million of benefits. No, that isn’t a typo – the official BCR (Benefit Cost Ratio) of this policy is 0.0034. Again, no typo.

In a previous article for CapX, I covered not only the various non-monetary costs that this policy will impose on millions of people (smaller, dingier, more expensive flats – it also doesn’t count the cost of housing going unbuilt), but also the absurd yet very common regulatory mindset which produced it: that one simply cannot put a price on safety.

This is a very common position. At a Westminster drinks reception a few months ago, I crossed paths with one of the policy staff at the Royal Institute of British Architects, a leading advocate for the two staircase rule. Within minutes, they had offered in defence of it both that ‘you can’t put a price on life’ and, perhaps more remarkably still, ‘you can’t prove it won’t save lives’.

In the ordinary course of events, you might hope that the moment someone is reduced to demanding their opponent proves a negative is the moment they reconsider their initial position. Even I, pessimist though I am, expected to have to waterboard such concessions out of them. 

But it remains very common, and it isn’t hard to see why. Serious policy work involves dealing with often very complex cost/benefit calculations and trade-offs. That’s bad news for policy campaigners: not only is it difficult, but it’s harder to guarantee arriving at a popular or fashionable conclusion or demonstrating that vital impact in your annual review (most people are not, by default, inclined to detailed cost/benefit thinking either).

It is much easier to simply declare one particular metric to be an unalloyed good and turn the whole debate into a dividing line between goodies and baddies; for the same reason, it is much easier for politicians to cave in to such campaigns than to try and explain a complicated calculation to a baying crowd. As a result, ‘you can’t have too much safety’ has become the baseline operating principle of British regulators from housing to nuclear power and more, despite it being a straightforwardly unintelligent approach to policymaking with predictably dire results. 

We can and should deplore politicians who give in to this sort of pressure, to say nothing of those who steal a living in the policy sphere advocating on such a manifestly inadequate basis. But lamentations won’t deliver better policy; this is a structural problem, and it requires a structural solution.

Fortunately, we have the basis for just such a solution, for there is one part of the state where the actual value of human life, in policy terms, is calculated in painstaking detail. That is, of course, in the NHS.

The hero of our story is the National Institute of Health and Care Excellence (formerly the National Institute of Clinical Excellence – it retained the acronym NICE) and its cost-effectiveness threshold. This is the metric used to determine whether or not a given medicine or course of treatment should be provided on the NHS. 

NICE’s calculation is based on something called ‘Quality-Adjusted Life Years’, or QALY, a complex metric which assesses not only how many extra years of life a given intervention might secure but how well that life might be lived. A treatment which would restore a hypothetical patient to full physical health, for example, would have a higher QALY return than one which merely prolonged life without alleviating suffering, even if the patients gained the same amount of time on Earth.

The NHS has no option but to consider such questions extremely carefully. As a publicly funded system completely segregated from the private sector, it has no means of allowing patients to contribute towards the costs of expensive, lower-return care and nor can it simply refuse treatment to someone who qualifies for it. The result of those considerations is the QALY threshold:

Generally, NICE considers medicines costing between £20,000 and £30,000 per additional QALY gained to represent good value for money for the NHS. This means that for a medicine to be considered cost effective, it should typically generate 1 additional year of perfect health (or an equivalent combination of additional life expectancy and quality of life improvements) for no more than £20,000-£30,000. 

My proposal is simple: that this system, and the NICE threshold, be adopted universally across all government regulation. The basis for a sensible cost-benefit valuation of safety has already been done; if the state would not accept a given cost to save someone’s life in a hospital, it is absurd for it to accept a much higher cost to mitigate the possibility of someone falling out of a window.

Such calculations would, of course, be necessarily somewhat hazy. But that is also the case in the medical context – and in any event, part of the purpose of adopting this policy is to wean British policymaking off of its addiction to edge cases. And if the evidence base for assessing the impact of some policies is sparse (e.g. very few people actually fall out of windows) that is itself a reason to doubt the urgent need for a particular intervention.

One might also argue that the NICE valuation is too low, because it is drawn up with a sharp eye on the NHS’s actual budget. The QALY threshold in the Treasury’s Green Book is a more generous £70,000 (although even that is not, as we see in the two staircase example, actually enforced as a ceiling), so why not use that?

In fact, I suggest that the constrained circumstances that produce the NICE figure make it a better figure – it is the figure produced by an organisation which actually has to internalise its costs and bear, directly and tangibly, the consequences of its decision-making. The Treasury figure, on the other hand, reflects an assessment of costs which are both more abstract (growth forgone, etc.) and more likely to be paid by other people (businesses, consumers) – and it is always much easier to decide that something is worth a sacrifice on someone else’s part than on one’s own.

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