Putting money into mental health services would boost the economy, report finds

Spending more money on mental health would do more to boost economic growth than building new roads, according to a new analysis from the London School of Economics (LSE).

In a new report, entitled Value for Money: How to improve wellbeing and reduce misery, the LSE researchers argue that government should rethink how it approaches spending decisions, with a greater focus on how money improves people’s lives. Analysing the cost-benefit ratio of policies in a number of departments, the report argues that the chancellor should downgrade expensive road projects such as the Lower Thames Crossing in favour of putting more cash into health, education and skills to boost to the economy.

The report argues that a “fundamental” question should be asked of every government policy: Does it deliver value for money? In other words, it argues, each policy should be measured on the benefits it delivers to people relative to its net cost to government. “This benefit/cost ratio is the key single number the government should be looking at when it makes its spending decisions,” it says.

Using this principle, the researchers calculated the net benefits of a range of different policies. At the top of the list of cost-effective policies were those that provide major benefits but no net cost because they generate savings greater than the original cost. These include NHS Talking Therapies, psychological therapy services for addiction, employment support for moderate mental illness, mental health support teams in schools and relaxing green belt near commuter stations.

NHS Talking Therapies pays for itself within two years

Of the Talking Therapies service, the report says: “Against the cost of £1,000 per patient must be set the subsequent savings on disability benefits and increases in tax payments. This depends on the effect of treatment on the likelihood that the patient will work. If 4% of those treated worked for two extra years, this would be enough to cover the cost. And there is convincing evidence for a figure of at least 4%, both in England and in other countries which have introduced a comparable service.”

It adds: “Taking together the effects on taxes and disability benefits with the (less cashable) savings on physical healthcare, there can be no doubt that NHS Talking Therapies pays for itself within two years in terms of the government budget.”

Other policies, however, do cost the government money, but nonetheless provide very high benefits for every pound spent. A promise to guarantee every person’s entitlement to an apprenticeship, for example, was judged to deliver benefits with a worth 14 times more than the cost.

Similarly, they found more police officers would produce benefits through reduced crime worth more than 10 times their cost in terms of their impact on people’s wellbeing.

An assessment of road projects, however, concluded that the average scheme produces benefits worth just three times the cost, while the proposed Lower Thames Crossing, connecting north Kent and south Essex, offered benefits equivalent to just 1.5 times the cost.

Richard Layard, emeritus professor of economics at the LSE and one of the report’s authors, told the Guardian that the savings to be gained from people having fewer health problems, going back to work earlier and claiming fewer benefits should all be prioritised as they reduce overall costs to the government.

He said that the method used by the LSE team was based on the cost-benefit analysis used by the National Institute for Health and Care Excellence, which assesses the value for money that new drugs and therapies offer the NHS.

He added: “We now have the science to estimate benefit-cost ratios for most policies, and these should be the basis of the next spending review.”

Gus O’Donnell, a former head of the civil service, said: “This is an exceptionally important report. It should lead to major improvements in how the government uses our money to improve lives.”