A new analysis from the London School of Economics (LSE) suggests that increasing funding for mental health services could significantly enhance economic growth and national well-being, potentially more than investing in new road projects.
The report argues that the UK government should reconsider its spending priorities. It emphasizes the need for a focus on how expenditures impact people’s lives, particularly their well-being, rather than solely on infrastructure projects.
Researchers evaluated the cost-benefit ratios of various policies across different government departments. Their findings are aimed at persuading Chancellor Rachel Reeves to prioritize health, education, and skills development over expensive road schemes, such as the Lower Thames Crossing.
Reeves is set to announce a new budget and comprehensive spending review next month, which will outline the government’s spending priorities for the next five years. It is expected that Reeves will implement significant cutbacks to adhere to budget constraints from the previous Conservative government. Already, some major road projects, including a planned tunnel near Stonehenge, have been canceled.
The LSE study found that targeted spending on mental health and addiction services not only benefits those directly affected but also reduces overall health and welfare costs. Additionally, it would generate revenue for the government as individuals return to work. The research indicates that psychological therapy and employment support for mental health issues would provide returns within two to three years.
In contrast, other policies, though costly, were found to offer high benefits. For example, guaranteeing apprenticeship opportunities was deemed to provide benefits worth 14 times its cost, while increasing the number of police officers was estimated to yield benefits more than 10 times their cost through reduced crime.
Conversely, road projects typically offer lower returns. The average road scheme was found to deliver benefits worth three times its cost, with the Lower Thames Crossing providing only 1.5 times its cost in benefits.
Richard Layard, a co-author of the report, highlighted that the savings from improved health and reduced benefit claims should be prioritized as they lower overall government costs. Layard, emeritus professor of economics at LSE and a former government adviser, noted that the report, titled “Value for Money,” was inspired by Keir Starmer’s promise to assess the impact of spending not just on national income but also on well-being.
The report will be officially launched on Tuesday at the Institute for Government think tank in London, supported by former civil service head Gus O’Donnell and Amanda Rowlatt, a former chief analyst at the Department for Transport.
Layard emphasized that the LSE’s methodology mirrors the cost-benefit analysis used by the National Institute for Health and Care Excellence (NICE), which evaluates the value of new drugs and therapies for the NHS. He urged that benefit-cost ratios should guide future spending reviews.
O’Donnell called the report “exceptionally important,” stating it could lead to significant improvements in how government funds are used to enhance lives.
The Treasury declined to comment on the report.
