Mental Health and the UK Economy

March 2007

Oxford Economics
121, St Aldates, Oxford, OX1 1HB
: 01865 268900, : 01865 268906
: www.oxfordeconomics.com
 Mental Health and the UK Economy

March 2007

Contents

Contents................................................................................................................................................. 2

1 Executive summary...................................................................................................................... 3

2 Introduction................................................................................................................................... 5
2.1 The brief................................................................................................................................. 5
2.2 Definition of mental health used in this study ........................................................................ 5
2.3 Report structure ..................................................................................................................... 5

3 Analysis of the growth in mental health incapacity.................................................................. 7

3.1 Incapacity Benefit claimant due to mental health problems .................................................. 7
3.2 Projections of Incapacity Benefit recipients due to mental health reasons ......................... 10
3.3 Mental Health Problems for those people in work ............................................................... 11
3.4 People in work projection..................................................................................................... 15

4 Evaluation of spending on mental health services................................................................. 16

4.1 Investment in mental health................................................................................................. 16
4.2 Charities’ role in mental health spending............................................................................. 19

5 Impact of government spending on mental health services ................................................. 20

5.1 Introduction .......................................................................................................................... 20
5.2 Costs of mental health treatment......................................................................................... 20
5.3 Labour market benefits of treatment of mental health problems ......................................... 22
5.4 Conclusion ........................................................................................................................... 26

6 Economic Benefit Analysis ....................................................................................................... 27

6.1 Introduction .......................................................................................................................... 27
6.2 Approach.............................................................................................................................. 27
6.3 Results ................................................................................................................................. 28
6.4 Comparisons with other studies .......................................................................................... 30
6.5 Conclusion ........................................................................................................................... 30

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 Mental Health and the UK Economy

March 2007

1 Executive summary

A substantial number of people in the UK suffer from a mental health illness…

• In 2006 there were nearly one million recipients of Incapacity Benefit due to mental and
behavioural disorders. This is 40% of total Incapacity Benefit recipients. This is similar to the total
number of unemployment benefits claims in the UK.

• The annual average growth rate for mental and behavioural disorders claims since 2000 is 5.4%.
This compares to 0.8% for overall Incapacity Benefit claims.

• The government has an aspiration to reduce Incapacity Benefits recipients, in total, by one million
over the next ten years. This implies, on a pro rata basis, a reduction of 400,000 Incapacity
Benefit recipients due to mental and behavioural disorders.
…affecting people in work as well as those out of work

• The self-reported health related illness survey showed over ten million working days were lost due
to stress, depression and anxiety. This is most prevalent in professional occupations and the
public sector.
Spending on mental health services has grown significantly in the last 5 years….

• Investment in mental health was nearly £5 billion in 2005/06 and the real average annual growth
rate since 2001/02 has been 5.8%.
…but the growth has lagged that of overall health spending over this period

• Whilst this level of growth is above that of total government spending it has lagged someway
behind overall health spending, and the growth rate fell back significantly in the last year
(2005/06).

• There are concerns that not all reported investment ends up being spent on mental health
services; the high number of no star mental health trusts has been attributed to funding
constraints.
Studies demonstrate that people suffering from a mental health illness can be supported to
gain or retain employment…

• There are some evaluation studies that point to an improved labour market performance following
increases in spending to tackle mental health problems.
…the cost of this support may not be substantial

• Some of the factors that are important for successful job retention and return to work for people
with a mental health problem are not necessarily expensive.

• Our own statistical research supports the view that the costs of helping someone with a common
mental health problem to gain or retain a job may be as low as £2,500.

• However, given the range of illnesses that can be described as a mental health related illness, the
cost of support will vary enormously between individual cases.
The benefits to both the economy and Exchequer from supporting someone with a mental
health illness to gain or retain a job are significant

• The value from a single person working for a full year, rather than claiming benefits is nearly
£20,000 for the Exchequer and over £33,000 for the economy. Over an average persons working

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 Mental Health and the UK Economy

March 2007

life this value could amount to over £530,000 for the Exchequer and nearly £900,000 for the
economy.

• The economic benefits from an individual, of average age, reducing the number of sick days they
take due to stress, anxiety or depression could amount to nearly £100,000 over their life time.

• It total, we estimate that mental health costs the economy over £10 billion, and exerts a negative
drag on government finances of over £6 billion.

• The available evidence suggests that carefully targeted increases in government spending on
mental health could bring net benefits to both the economy and Exchequer.

• Controlled, well designed evaluation studies should be undertaken to provide stronger evidence
of the existence, and scale, of these net benefits.

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2 Introduction

2.1 The brief

Oxford Economics has been commissioned to undertake a study looking at mental health and the UK
economy. Specifically, the study investigates the recent trends in mental health incapacity,
government spending on mental health services, and the benefits to both the economy and the
Exchequer from supporting a representative individual to gain or retain employment rather than claim
Incapacity Benefit. The report does not consider what policies or treatments would be required to
achieve this aim although we do comment on some relevant studies in this area.

2.2 Definition of mental health used in this study

There are many problems associated with the term mentally ill, including the lack of any universal
agreement as to the point at which normal behaviour becomes mental illness. This study considers
1
individuals with a range of mental health illness; from common health problems such as everyday
stresses and bereavement, phobias and anxiety disorders to the more acute forms of depression, and
illnesses such as schizophrenia. The final chapter, where we consider the benefits to the economy
and Exchequer of supporting an individual with a mental health illness into work, is more relevant to
former. However, in all sections of this report we have been constrained in our analysis by the
definitions used in the published datasets that we have had access to. For example, in analysing
people on Incapacity Benefit we have used Department of Work and Pensions (DWP) statistics where
the closest definition of mental health is those individuals with “Mental and Behavioural Disorders”.
When analysing those people in work we have used the Self-reported Work related Illness survey
(SWI) published by the Health and Safety Executive (HSE), and this survey highlights people suffering
from stress, depression and anxiety. Finally, when analysing spending statistics we have used data
from the National Survey of Investment in Mental Health which collects data for spending on “mental
health services”. We recognise that these data cover a broad, and in some cases differing, subset of
people with metal health problems, but are constrained by the publicly available statistics.

2.3 Report structure

The report is structured as follows:

• Section 3 analyses the characteristics of Incapacity Benefit recipients due to mental and
behavioural disorders, and those people reporting work related illness due to stress, depression
and anxiety.

• Section 4 contains an evaluation of investment in mental health services.

• Section 5 examines some of the literature on the impact of government spending on mental
health services.

1
Seymour and Grove (2005) define “Common Mental Health Problems” as those that: occur most
frequently and are more prevalent; are mostly successfully treated in primary rather than secondary
care settings; are least disabling in terms of stigmatising attitudes and discriminatory behaviour.

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March 2007

• Section 6 discusses the benefits to the economy and Exchequer associated with removing
barriers to work and enabling a representative individual to no longer claim benefits, or miss fewer
days of work.

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3 Analysis of the growth in mental health incapacity

Key Points

• The total number of Incapacity Benefit recipients due to mental and behavioural disorder reasons
in 2006 was roughly one million, representing 40% of total Incapacity Benefits recipients.

• To put this in perspective, there are a similar number of Incapacity Benefit recipients due to
mental and behavioural disorder as there are Job Seekers Allowance recipients in the UK.

• In terms of the age profile of Incapacity Benefit recipients due to mental and behavioural disorder
reasons; younger people are least likely to claim, and as people get older, the percentage of
recipients within each age-group increases incrementally.

• The self-reported health related illness survey showed over ten million working days are lost due
to stress, depression and anxiety in 2005/06.

• The professional occupations had the highest prevalence of stress, depression and anxiety while
in terms of industry: public administration, education and health had the highest prevalence.

3.1 Incapacity Benefit claimant due to mental health problems

For thousands of people with mental health problems their illness leaves them unable to work. If
people are out of work for mental health reasons they can claim Incapacity Benefit – subject to
restrictions. The Department of Work & Pensions (DWP) records all recipients, and we have made
use of these statistics. In particular, our research has used the data indicating those receiving
Incapacity Benefits due to mental and behavioural disorders. These data are broken down by sex,
local authority, age and duration of claim. The time-series of these data are relatively short as details
are only available on a consistent basis from 1999. However, some trends can be drawn from the
data and will be discussed in this section.

Figure 3.1: Incapacity Benefit recipients due to mental and behavioural disorders

000s
1,200 Mental & behavioural disorders (Female)
Mental & behavioural disorders (Male)
1,000

800

600

400

200

0
2 0 9q3
2 0 0q1
2 0 0q3
2 0 1q1
2 0 1q3
2 0 2q1
2 0 2q3
2 0 3q1
2 0 3q3
2 0 4q1
2 0 q3
2 0 5q1
2 0 5q3
q1
04

06
9
0
0
0
0
0
0
0
0
0

0
0
19

Source : DWP

Figure 3.1 shows the level of Incapacity Benefit recipients for mental and behavioural disorders over
the period 1999 to 2006. In general, the number of recipients has seen a fairly smooth increase since
1999 with the proportion of female recipients remaining larger than the proportion of male recipients.
The annual growth rate for mental and behavioural disorders claims since 2000 is 5.4% with the male

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 Mental Health and the UK Economy

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annual growth rate running at an average of 5.8% while the female growth rate was lower at 5.1%.
This compares with an average annual growth rate of 0.8% for total Incapacity Benefit receipts. The
total number of mental and behavioural disorders recipients in the second quarter of 2006 was
977,910. This represented 40% of total Incapacity Benefit recipients. This means that there are a
similar number of Incapacity Benefit recipients due to mental and behavioural disorders as there are
Job Seekers Allowance recipients in the UK.

Figure 3.2: Age breakdown of mental and behavioural disorder and total Incapacity Benefit
recipients
%
14

12 Mental & behavioural

disorders
10 Incapacity Benefit total

0
16-17 18-24 25-34 35-44 45-49 50-54 55-59 60-64
Source : DWP

The age breakdown of mental and behavioural disorder and total Incapacity Benefit recipients shows
a clear trend. Younger people are least likely to claim, and as people get older a higher percentage of
people claim. The largest group of recipients are those aged 55-59 years, with nearly 14% of the
population claiming Incapacity Benefit – with around 4% claiming due to mental and behavioural
disorders. The proportion of recipients then drops back for the 60-64 age group due to the lower
retirement age for women. The rate of increase for total Incapacity Benefit recipients is far steeper
than for Incapacity Benefit recipients due to mental and behavioural disorders suggesting that
physical illness tends to increase with age whereas the rate of increase with age is much less
pronounced for mental illness.

Figure 3.3: Growth in Incapacity Benefits and JSA Recipients

annual % change
20

Total Incapacity IB claimants due to

15
Benefit mental and
10
behavioural disorders

-5

Unemployment
-10

-15
2000q3
2000q4
2001q1
2001q2
2001q3
2001q4
2002q1
2002q2
2002q3
2002q4
2003q1
2003q2
2003q3
2003q4
2004q1
2004q2
2004q3
2004q4
2005q1
2005q2
2005q3
2005q4
2006q1
2006q2

Source : DWP/ONS

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The annual growth of Incapacity Benefit recipients due to mental and behavioural disorders reasons
has been higher than total Incapacity Benefit recipients over the 1999-2006 time period. Interestingly,
the gap does appear to be narrowing over time. There is no noticeable correlation between the
growth/contraction in unemployment and Incapacity Benefit growth/contraction for the time period
concerned.

Figures 3.4 and 3.5 present the geographic spread of recipients once account is taken of population.
Figure 4.3 shows the dominance of urban areas; Liverpool, Manchester and Glasgow all in the top
ten. Figure 3.5 shows the data for Greater London where Islington has the highest proportion of
recipients and Richmond-upon-Thames the lowest.

Figure 3.4: Incapacity Benefit recipients due to mental and behavioural disorders per head of
population

Sources: DWP, Oxford Economics

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Figure 3.5: Incapacity Benefit recipients due to mental and behavioural disorders per head of
population – London boroughs

Sources: DWP, Oxford Economics

3.2 Projections of Incapacity Benefit recipients due to mental health reasons

We have produced two projections to investigate how Incapacity Benefit recipients due to mental and
behavioural disorders may change over the next ten years. The first projection is based on
Government Actuaries’ demographic projections. They do not take into account government forecasts
of spending, investment, or other possible economic shocks that may occur. By making use of the age
projections we are seeking to capture the implications of an ageing population on Incapacity Benefit
recipients. The second projection is based around stated government aspirations. These projections
have been preferred to an extrapolation of past trends, partly due to the lack of robust time series
data, but also as past growth may not be a good indicator of future trends. Some reasons for this are
discussed in box 3.1.

Box 3.1: The growth in UK disability recipients

A recent paper by economists at the Bank of England “Health, disability insurance and labour force
participation” highlighted how disability benefits can distort the labour market.

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The proportion of disability recipients can be due to both labour market conditions and the
characteristics of the benefits themselves. In the 1990s in the UK the labour market saw a loss of over
half a million working age men. This research suggests that this was due to the structure of the
benefits system, with the generosity of the benefits system for long-term illness encouraging workers
to leave the labour market. To put it another way, it was more beneficial to claim Incapacity Benefit
than to work. The paper shows that during the 1990s the participation rate of prime-age males fell by
2.9%, but by only 0.7% between 1971 and 1989. In addition, the decline was more pronounced in
occupations that had few formal qualifications. Indeed, for people with no qualifications the
participation rate dropped 13% over the course of the 1990s.

The research suggests that there is evidence to show that the decline in participation is almost exactly
matched by a rise in disability benefit recipients, while over the same period there was no change in
the number of inactive males who do not claim disability benefits.

However, the authors propose that this type of out-flow from the labour market is unlikely to happen
again, as since the early 1990s the generosity of disability benefits relative to unemployment benefits
has fallen considerably.

Figure 3.6: Projection of Incapacity Benefit recipients due to mental and behavioural disorders
Incapacity Benefit recipients due to mental and behavioural
disorders, 000s
1,100

1,000

900 Demographic based

projection
800

700 Government
aspiration
600

500
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source : Oxford Economics/DWP

The blue line in Figure 3.6 shows our projection of how Incapacity Benefit claimants due to mental
and behavioural disorders may grow over time given the likely changes in the age structure of the
population. As can be seen, the growth is expected to be very modest, in-line with recent slower
growth in claims. The red line indicates the type of path that Incapacity Benefit receipts due to mental
and behavioural disorders would have to follow to meet the government’s aspiration, as announced in
their Green Paper in January last year, “A new deal for welfare: empowering people to work”. Their
aspiration is to reduce Incapacity Benefit recipients by one million over the next decade. Mental and
behavioural disorders make up approximately 40% of the total Incapacity Benefit numbers.

3.3 Mental Health Problems for those people in work

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Even if people have mental health problems that do not inhibit their ability to work their performance at
work may suffer through time-off, lower productivity, or other associated problems. The main data
source for people suffering from a work related illness is the Self-reported Health Related Illness
(SWI) study published by the Health and Safety Executive (HSE). This has been surveyed as part of
the Labour Force Survey. The survey covers a wide range of injuries and ailments although in this
section we have made use of the statistics for stress, depression and anxiety. This part of the survey
is broken down by age, region, occupation, and industry.

The SWI data is comprehensive, but changes in survey structure, as well as sample size and timing of
collection have meant that some of the data are not comparable. The data are comprehensive and
comparable for 2001/02, 2003/04 and 2004/05. Before these data points the survey methodology and
timing changed, but we do have some data available for 1990, 1995 and 1998/99 which are
presented, with interpolated data, in Figure 3.7.

Figure 3.7: Prevalence of SWI and Stress, Depression and Anxiety

Number of people reporting, 000s

2500

Self reported work

2000 related illness

1500

1000

Stress, depression and

500
anxiety

0
1990 1994 1998 2001/2002 2005/2006

Source : HSE

The prevalence of stress, depression and anxiety does appear to rise somewhat in the late 1990s,
peaking at 557,000 cases in 2003/04 although some of the increase in the latter part of the last
decade may be due to a different survey methodology being used. The overall number of people
reporting SWI seems to have been trending upwards, although the data are quite volatile.

The survey also reports the numbers of days lost and states that around twenty seven million days
are lost annually due to self-reported work related illness, while over ten million are lost annually due
to stress, depression and anxiety. This equates to around one day off per person per year for the
former and under a half a day per person per year for the latter. To put this in perspective, the CBI
2
survey of workplace absence estimates that a hundred and sixty one million days are lost per year
(6.6 days per employee) through all types of absence. Therefore, work related illness accounts for
around a sixth of all absence.

2
CBI (2006). “Absence Minded, absence and labour turnover”

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Figure 3.8: Work related illness - working days lost

Working days lost 000s
Total
35000
Stress, depression &
30000 anxiety

25000

20000

15000

10000

5000

0
2003/2004 2004/2005 2005/2006
Sources : Oxford Economics/SWI

The CBI also reports the sectors with the highest absence levels, with transport & communications
reporting the highest, followed by utilities and then banking, finance and insurance. Meanwhile, the
regional breakdown of the report shows that Yorkshire and Humberside is the region with the highest
absence followed by Wales. At the other end of the scale the two regions with the lowest absence are
Northern Ireland and Greater London.

Nevertheless, the CBI report is not used in detail in this study, as it doesn’t separate absence by
reason, which is imperative for the purpose of this report.

Figure 3.9: Prevalence of Stress, Depression and Anxiety by Government Region

% of population
Scotland suffering stress,
depression and
Wales anxiety
South West

South East
% of workforce
suffering stress,
London depression and
anxiety
East

West Midlands

East Midlands

Yorks & Humber

North West

North East

0.0 1.0 2.0 3.0 %

Source : HSE

Figure 3.9 shows two different indicators for the prevalence of stress, depression and anxiety in the
latest year available - 2004/05. The purple bars show the prevalence of work related stress,
depression and anxiety across the population and the blue bars show the data across the workforce.
As can be seen, the data are fairly consistent across all regions with the exception of London, which
has a lower prevalence of work related stress, depression and anxiety than any other region.

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One interesting aspect of the data is to look at the prevalence by occupation and by industry. Figure
3.10 shows the prevalence of stress, depression and anxiety by occupation. Each occupation’s
caseload was divided by the employment in that occupation to give a percentage of stress,
depression and anxiety in each occupation.

Figure 3.10: Prevalence of stress, depression and anxiety by occupation

Skilled Trades Occupations

Elementary Occupations % of
stress,depression
Personal Service Occupations and Anxiety in each
occupation
Process, Plant & Machine
Operatives
Sales & Customer Service

Admin & Secretarial

Managers & Senior Officials

Associate Prof & Tech

Professional
%

Source : HSE 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

As can be seen from the figure above, the professional occupations had the highest prevalence of
stress, depression and anxiety (2.9%), followed by the associate professionals (2.4%). The lowest
prevalence of stress, depression and anxiety was in the skilled trade occupations, whose prevalence
was as low as 0.8%.

The data on prevalence of stress, depression and anxiety can also be broken down by industry. Here
again, the number of sufferers was divided by the numbers employed in each of the industries to give
a more accurate measure of prevalence in each of the industries.

Figure 3.11: Prevalence of stress, depression and anxiety by industry

Construction
% of
stress,depression
Other service
and anxiety in each
industry
Distribution, hotels & restaurants

Manufacturing

Transport & communication

Banking, finance & insurance etc

Public admin, education & health

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Source : HSE %

The highest prevalence of stress, depression and anxiety is in the public administration, education
and health category, which has 2.8% of its employees reporting to be sufferers. The figures may, in

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part, reflect the different culture and attitudes to stress, depression and anxiety within different sectors
of the economy. In terms of the age and sex of the people reporting stress, depression and anxiety (in
2004/05), for the former, the highest prevalence per head of population is in the 45-54 year old age
group. The age band with the lowest prevalence of stress, depression and anxiety is the over 55’s.
Elsewhere, 45% of males and 55% of females reported stress, depression and anxiety in 2004/05.

3.4 People in work projection

To project the numbers reporting stress, depression and anxiety in the coming years we used Oxford
Economics employment forecast by occupation. We have assumed that reporting stress, depression
and anxiety is more likely to be a function of your occupation rather than the industry you work in.
Therefore, the projections are based on the percentages of prevalence in each of the occupations
combined with the forecasts of employment in each of these occupations. It must be noted that these
are simple projections that do not take into account changes in government spending, treatment,
incidence of mental illness, economic shocks, or other events that could change the projections.

Figure 3.12: Projections of reported stress, depression and anxiety

000s
600

550

Number of people reporting

500
stress, depression and anxiety

450

400

350

300
1999 2001 2003 2005 2007 2009 2011 2013 2015

Source : HSE/Oxford Economics

Figure 3.12 shows a sharp rise in reported stress, depression and anxiety in the early part of this
decade, but in the past two years the numbers have fallen considerably. Based solely on the forecasts
of employment in the nine different main occupations we may expect to see a gradual rise in reports
of stress, depression and anxiety over the coming years, as employment shifts towards professional
and service sector occupations where the prevalence of stress, depression and anxiety is reportedly
higher.

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4 Evaluation of spending on mental health services

Key Points

• The annual average growth rate for mental health investment has been 5.8% over the last five
years; a slower rate than for the total health resource budget at 7.1%.

• In 2005/06 the growth rate for investment in mental health fell to 3.1%.

• The Healthcare Commission performance ratings (2004) showed that mental health trusts had
the highest number of no star trusts; funding constraints were often cited as a reason for
difficulties.

• The biggest proportion of mental health investment comes from clinical services which accounts
for 22-26% of all direct service investment.

• The highest investment per head is in London with over £180 being spent per weighted head of
population.

• Charities’ spending is a small proportion of total mental health investment accounting for around
2-5% of overall investment.

4.1 Investment in mental health

Key to the ‘health offer’ of mental health services is the investment in these services. It is important to
assess whether the spending on mental health services has been in-line with other health service
spending and Government spending in general. The main source for mental health
spending/investment data used here is the National Survey of Investment in Mental Health Services
(NSIMHS). This survey is carried out by Mental Health Strategies on behalf of the Department of
Health.

Figure 4.1 shows the level of reported mental health investment over the time-series available for
these data (2001/02 to 2005/06). There has been a marked increase in mental health spending over
the past few years with a slight dip last financial year.

Figure 4.1: Reported mental health investment

£bn at 2005/06 price and pay levels

4.9

4.7

4.5

4.3

4.1

3.9

3.7

3.5
2001/02 2002/03 2003/04 2004/05 2005/06
Source : NSIMHS

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The national trend is fairly clear with more money being invested in mental health services. However,
it is important to put this growth in the context of overall growth in government spending. Table 4.1
shows the average growth in government resource budgets (total and health) compared with mental
health investment over the past five financial years.

Table 4.1: Growth in Government spending, health and mental health investment (2001/02 to
2005/06)

Average annual
growth
Mental health investment 5.8%
Health resource budget 7.1%
Total government resource budget 4.1%
Sources: NSIMHS, PESA, Haver

The main point that comes across from the Table 4.1 is that mental health investment has been
growing at a slower rate than the total health resource budget. Indeed, the difference between the
annual growth rates in the health budget compared with growth in mental health investment is around
1.3%. Nevertheless, mental health investment has been growing faster than the overall government
3
resource budget which in turn has been above GDP growth .

However, there have been reports that the investment in mental health has not necessarily been
reaching mental health services. Rethink, a leading mental health charity, published a report in May of
4
2006 suggesting that there have been budget cuts in mental health services across a number of
regions in the UK. They provide anecdotal evidence that suggests that due to some overall deficits in
healthcare trusts some mental health budgets, which were in surplus, have had to be cut to make up
the shortfall. Furthermore, they detail £30m of cuts in over thirty areas across the UK.

Indeed, according to the Institute for Public Policy Research and Rethink, the standard of mental
health trusts is, on the whole, lower than average health trusts. As an explanation for the highest
number of no star trusts in the Healthcare Commissions performance ratings for 2004, mental health
trusts often cite funding constraints as causes for difficulties.

This reported investment in mental health can be split into broad cost categories: direct, indirect,
overheads, and capital charges. For the direct category we have a more detailed breakdown of how
the investment is distributed, see Table 4.2.

3
Current price data on mental illness expenditure as a percentage of NHS spend indicates only a
small fall from 8.46% in 2002/03 to 8.41% in 2005/06. Source: Audited summarisation schedules of
primary care trusts.
4
Rethink (2006) “A cut too far: a Rethink report into budget cuts affecting mental health services.”

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Table 4.2: Planned real terms investment in direct service categories (£ million)

Expenditure by service category 2001/02 2002/03 2003/04 2004/05 2005/06

Communitty mental health teams 483 526 530 570 549
Access and crisis services 170 203 254 316 369
Clinical services including acute inpatient care 764 754 811 878 838
Secure and high dependency provision 330 376 474 621 661
Continuing care 349 372 380 404 384
Services for mentally disordered offenders 35 33 53 43 38
Other community and hospital professional team/specialists 52 50 47 67 86
Psychological therapy services 125 142 143 149 142
Home support services 59 63 70 108 91
Day services 178 163 172 156 151
Support services 37 47 43 43 43
Services for carers 10 11 15 18 19
Accommodation 301 315 369 366 362
Mental health promotion 6 3 3 2 3
Direct payments 6 3 6 3 2
Personality Disorder Services - - 1 4 10
Total 2,905 3,061 3,371 3,748 3,748

Source: “The 2005/06 National Survey of Investment in Mental Health Services” prepared by Mental
Health Strategies

As can be seen from Table 4.2, the largest proportion of mental health investment is spent on clinical
services including acute patient care, which account for 22-26% of all direct service investment. The
second largest category in 2005/06 was secure and high dependency provision. Both these are
targeted at sufferers of more severe mental health problems.

Figure 4.2: Mental health spending by Government Office region per head of weighted
population (2005/06)

South West

South East

London

East

West Midlands

East Midlands

Yorkshire and the Humber

North West

North East

England

0 25 50 75 100 125 150 175 200 225

Source : Oxford Economics/NSIMHS £ per head of weighted population

Figure 4.2 shows areas of England ranked by the mental health investment they received per head of
weighted population. The results show that the highest investment per head is in London, with over
£180 being spent per weighted head of population. At the other end of the scale, the lowest is in the
North West, where the spending was £137 per head of weighted population in 2005/06. The average
investment across England was just over £150 per head of weighted population in 2005/06.

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4.2 Charities’ role in mental health spending

There are a number of mental health charities that provide key support to sufferers with mental health
problems. Table 4.3, although by no means comprehensive, provides data for some of the key
charities in the sector and their most recent expenditure as reported to the Charities Commission.

Table 4.3: Mental health charities’ Expenditure

Charity Year Expenditure

Rethink (National Schizophrenia Fellowship) 2005/06 £45 million

Together working for wellbeing (Mental After Care 2004/05 £19 million
Association)

Mind 2005/06 £15 million

The Sainsbury Centre For Mental Health 2004/05 £5 million

The Mental Health Foundation 2004/05 £4 million

Young Minds 2004/05 £2 million

Sane 2004/05 £2 million

Source: Charities Commission

As can be seen from Table 4.3, three of the UK’s larger mental health charities (Rethink, Together
Working for Wellbeing and Mind) have a combined expenditure of approx £80million, while the other
four charities on this list bring the combined total to roughly £90 million. Obviously, this list does not
include all of the mental health charities, but it does give some indication of the expenditure of mental
health charities.

To give some background on some of the larger charities in this list; Rethink (formerly known as the
national Schizophrenia Fellowship) is the largest voluntary sector provider of mental health services in
the UK. Rethink provides support to people with severe mental illness. Mind, meanwhile, provides an
information and legal service nationwide and is one of the UK’s leading mental health charities.
Finally, Together Working for Wellbeing (formerly known as the Mental After Care Association)
provides community support, employment schemes, advocacy and assertive outreach.

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5 Impact of government spending on mental health services

Key Points

• There is a small body of research that points to an improved labour market performance that
result from increases in spending to tackle mental health problems.

• Our statistical analysis indicates that on average spending £2,500 on treatment enables
someone with anxiety, depression or stress to feel well enough to start looking for and
successfully obtain a job.

• However, given the range of conditions that can be described as a mental health related illness,
ranging from anxiety to schizophrenia, the cost of supporting someone in work, or helping them
return to work, will vary enormously.

• But there are, in particular, people with more common mental health problems that, with
appropriate support, could make a valuable contribution to the economy and Exchequer.

5.1 Introduction

In this section we seek to assess the potential impact that additional government spending on mental
health might have on incapacity in the work place. We are not medical experts and we do not attempt
to medically assess individual programmes. Instead we review some of the existing evidence on the
costs and labour market benefits of mental health treatments. The majority of the studies on the
benefits from successful treatment focus on interventions to help those still in employment. Most focus
on company-based initiatives abroad. To support the literature review, and to further investigate the
impact of government spending on mental health on the numbers on Incapacity Benefit, we undertake
an econometric study based on UK data between 2003/4 and 2005/6.

5.2 Costs of mental health treatment

The Department of Health publishes information on the average costs of numerous types of medical
5
procedures undertaken by the National Health Service . For example, the national average unit cost
of inpatient adult rehabilitation is £240, and the equivalent unit cost for a psychologist’s domiciliary
visit is £256. In practice, these data on average costs are only of limited use as most suffers of mental
health problems are not treated in hospitals or secure units. It is only the most severe cases which
receive this type of treatment. Moreover, those with the most severe problems are least likely to be
assimilated back into the workforce.

An alternative way of calculating an average treatment cost is to divide total expenditure by total
number of treatments. Unfortunately, while information is available on expenditure plans (for
example, Wanless (2002)), there is usually little publicly available information on what treatments this
delivers. Although we have explored this method of calculating an average treatment cost, it has
ultimately proved unsuccessful.
Additional evidence for the costs of treatments can be gathered by considering some of the factors
which are important for successful job retention or return to work for people with mental health
problems. A summary of findings from a literature review conducted by Thomas, Secker & Grove are

5
Department of Health (2006), ‘NHS Trust and PCT combined reference cost schedules’

20
 Mental Health and the UK Economy

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shown in table 5.1. Some of these solutions are not necessarily expensive and could provide
6
significant results, for example, providing vocational and mental health counselling . In addition, topics
such as symptom management, building self-esteem and the employees’ perspective on their illness
could also be addressed. Another important aspect of retention is communication; with
communication between the employer and employee paramount in issues such as time off work,
return to work plans, and in trying to keep all parties informed i.e. GP, employee, employer and line-
manager.
7
A case study undertaken in Avon & Wiltshire and published in The British Journal of General Practice
showed that out of the thirteen clients who agreed to take part in a work retention scheme, seven
retained employment with their original company and all seven cited the work retention team’s
involvement in keeping their job or getting back to their job more quickly. Four managed to get new
jobs that they felt were more appropriate and only two were still looking for work. Therefore, out of the
thirteen only two failed to secure a job. Obviously, this is a very small sample, but it does indicate how
vocational counselling, mental health interventions, and ongoing support at work can help people
retain jobs or find more appropriate ones.

Table 5.1: Summary of findings from Thomas, Secker & Grove literature review

Barriers to job retention for people with Factors which are important for successful
mental health problems job retention and return to work for people
with a mental health problem

Overcoming the stigma of mental illness in the Promoting positive and realistic perspectives on
workplace and in the community mental illness and employment amongst
individuals with mental health problems

Fear of disclosure Considering the job satisfaction and job

preferences of employees

Lack of awareness of one’s rights under the DDA Promoting healthy workplaces for all employees

Managing workplace adjustments without advice Facilitating natural supports in the workplace
or support

Managing one’s own stress and symptoms within Providing supportive and well-trained
the workplace management/supervision

Managing ongoing adverse reactions and events Promoting modified work programs and
within the workplace facilitating workplace adjustments

Overcoming negative and low expectations of Facilitating early intervention and minimal time off
mental health providers work
Source: Job Retention & Mental Health: A Review of the Literature (2002), Dr Tina Thomas
Dr Jenny Secker & Dr Bob Grove

In his paper presented at the No.10 Strategy Unit Seminar on Mental Health in January 2005, Layard
(2005) uses a figure of a £1000 per patient for either ongoing drug treatment or sixteen sessions of
cognitive behavioural therapy (including overheads). This figure is based on the National Institute for
Health and Clinical Excellence (NICE) Guidelines on the treatment of depression. Although this is a

6
Thomas T, Secker J and Grove B (2002). Job retention & Mental health: A review of the literature
7
Thomas T, Secker J and Grove B (2005). “Qualitative evaluation of a job retention pilot for people
with mental health problems” The British Journal of General Practice Vol 55(516) pp546-547

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 Mental Health and the UK Economy

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simplification, as treatment costs are likely to vary across type of mental health problems, severity of
the problem and treatment or services types, it does provide an indication of potential costs for some
services.

5.3 Labour market benefits of treatment of mental health problems

5.3.1 Sufferers still in employment

Van der Klink, Blonk, Schene and van Dijk (2001) review the available academic evidence on whether
treatment interventions have been effective in reducing work-related stress. They review forty eight
studies undertaken between 1977 and 1996. Table 5.2 summarises the results of five intervention-
types aimed at reducing stress on seven outcomes. The ticks indicate statistically significant
difference in the means between the group receiving the treatment and those who are not (at the
90%, 95% and 99% confidence intervals). The analysis suggests that treatments focused on the
individual are more successful than organizational-based ones (e.g. changes in working patterns or
loads). Of the three types of individual-focused treatments cognitive-behavioural approaches are
found to be more effective than relaxation techniques and tend to be more effective than multimodal
programs.

Across all intervention types, the effect sizes found for the outcome categories (quality of work,
psycho-logic responses and resources, physiology, complaints, and absenteeism) were all correctly
signed. All the effect sizes were statistically significant at the 95% confidence level, except
absenteeism.

Table 5.2: Summary of the results from van der Klink, Blonk, Schene and van Dijk (2001)

Organizational Cognitive Relaxation Multimodal Individual

Behavioural Focus

Quality of work
1
Psychologic responses
and resources

Physiology

Complaints

- o/w Anxiety -
symptoms

- o/w Depressive
symptoms

Absenteeism
1
, and indicate statistical ignorance at the 99%, 95% and 90% confidence interval.

The same authors found a stronger result for treatments’ impact on sick leave in a subsequent study.
Van der Klink, Blonk, Schene and van Dijk (2003) looked at staff absenteeism due to mental health
problems at Royal KPN (a firm employing 100,000 in the Netherlands which provides postal and
telecom services). They found treatment by a form of cognitive behavioural therapy was successful in
shortening sick leave duration. The size of the effects was a 25%-30% reduction in the duration of
absenteeism compared with that of care as usual.

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 Mental Health and the UK Economy

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Grime (2004) investigates the effectiveness of a computer-based cognitive behavioural therapy

course ‘Beating the Blues’ on NHS and local authority staff in London who were absent for ten or
more cumulative days due to stress, anxiety or depression in 1999 to 2000. Participants were
randomly treated by conventional methods or conventional methods plus the computer based course.
The patients undertaking the computer-based course were found to have significantly lower
depression and negative attributional style scores at the end of treatment and one month later relative
to those treated by conventional methods. The intervention group also had lower anxiety scores one
month after treatment. Differences were not statistically significant three and six months post
treatment.

Fleten and Johnsen (2006) investigate whether a minimal postal intervention (a letter and
questionnaire) had any effect on the length of sick leave of four hundred and ninety-five sick-listed
people in Norway in 1997 and 1998. They find it led to a statistically significant reduction in the length
of sick leave taken by those suffering from mental disorders.

Schoenbaum, Unützer, Sherbourne, Duan, Rubenstein, Miranda, Meredith, Carney, Wells (2001) look
at the cost-effectiveness of two quality improvement interventions to improve treatment of depression
in primary care and their effects on patient employment. The study focuses on 1,356 patients with
current depression attending primary care clinics in the US between June 1996 to July 1999. The first
enhanced treatment increased average health care costs by $419 but resulted in 17.9 days more
employment. The second improved technique cost $485 extra and 20.9 more days during the study
period.
8
Seymour and Grove in their review of evidence of the effectiveness of workplace interventions for
9
people with common mental health problems, find that a number of studies have strong evidence for
the effectiveness of cognitive behavioural therapy (CBT).

Layard (2005) calculates that over a two and a half year period, ongoing drug treatment or sixteen
sessions of CBT (including overheads) can be estimated as roughly eight additional months free of
depression (compared with no treatment). He assumes that the additional months free of depression
could lead to two months additional work although this link between CBT and increased working
months is assumption rather than evidence based.

In the UK, the government have been implementing strategies aimed at reducing stress for
employees in the public sector. The recent implementation of stress management standards have
already led to a 3% fall in days lost due to stress related illness. There is also a view across all
sectors of the economy that there is an important role for line managers to play in supporting staff, but
it was important they received suitable Training, advice and guidelines packages.
Box 5.1: Case study – Early intervention in the workplace
“The two-stage approach incorporates an employee risk assessment, together with the need, in a
smaller number of difficult cases, for psychosocial risk assessment and rehabilitation management,
carried out by a counselling, health or clinical psychologist. …early intervention studies show that this
two-phased approach has been successful in helping employees to remain in work and that there are
significant financial benefits to be achieved from such a systematic process. The Royal and Sun
Alliance introduced this approach to managing stress and other mental health absences in 2000.

8
‘Workplace Interventions for People with Common mental Health problems’ (2005), Linda Seymour,
Bob Grove
9
Grime (2004), Van der Klink (2003), Van der Klink (2001) and Barkham & Shapiro (1990)

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 Mental Health and the UK Economy

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The evaluation of the programme, which was presented at the Chartered Institute of Personnel and
Development, has highlighted significant financial and clinical success with benefits both for the
employer and their employees.
Early results have shown a 3:1 return on investment. Success was also reflected in the reduction of
long-term sickness absence levels, and the satisfaction levels of staff, managers and HR.
Psychosocial risk assessments were found to have facilitated the resolution of many of their complex
long-term absence cases, with 37% of participants successfully returned to work. Cases where
employees had not returned to work were resolved through resignation, redundancy, early retirement
or termination on the grounds of capability.
Clinically, these results demonstrate statistically significant reductions in levels of anxiety and
depression within the participant group of employees.”

Source: http://www.personneltoday.com/Articles/2005/07/01/29772/getting-back-on-track.html

5.3.2 Suffers on Incapacity Benefit

There is very little, if any, academic evidence on the impact of spending on mental health on the
numbers of people claiming Incapacity Benefit due to mental and behavioural disorders. However,
according to the DWP 90% of people moving onto Incapacity Benefit (IB) aspire to return to work, and
of people with long term mental health problems who are economically inactive, 35% would like to get
back to work, as compared to 28% for other health problems. Further, a Healthcare Commission
survey of mental health service users found that 79% of respondents were not in work and that half of
those that said they wanted help to get back to work did not receive that help.
10
The results from a study , that analysed empirical evidence of the effectiveness of a scheme working
to help hard to reach groups of people suffering with multiple deprivation return to the labour market,
show that the scheme cost, on average, £1,289 per person with a success rate of 15% finding work.
The actual figure may be far higher, but 25% of participants could not be traced, reflecting the
difficulties of monitoring a large number of people.

A condition management programme run in NHS Argyll and Clyde and its five council areas, where
79% of participants had mental health problems, helped 1,600 people into employment and brought
about a 4.4% reduction in Incapacity Benefit recipients. Whilst no details were available to us on the
cost of this programme it does demonstrate a significant labour market affect can be achieved.
Box 5.2: Case study – Workplace programmes in Australia

“In Australia, a steady increase in rehabilitation and return to work programmes led to the number of
people returning to work increasing to 86% in 2003-04 from 83% in 2002-03 while the proportion of
injured workers with employment as their main source of income has risen to 74% in 2003-04 from
69% in 2001-02. A cost-benefit analysis of Australia’s rehabilitation services in 2003 found substantial
savings.”

Source: Improving Health in the Workplace – December 2005, Association of British Insurers

In order to supplement the existing research on the link between mental health spending and labour
market affects we have undertaken some regression analyses. Specifically, we have looked at the
impact of spending on mental health on outflows from Incapacity Benefit (where the recipients have
mental or behavioural disorders). To undertake this task we collected data on the number of

10
The price of Exclusion, European Social Fund: a potential response for those furthest from the
labour market

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 Mental Health and the UK Economy

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Incapacity Benefit recipients due to mental and behavioural disorders, numbers employed, and
numbers unemployed (claiming Job Seekers Allowance) in each local area in England between 2003
and 2006. Data are available from the Department of Health on expenditure on mental health by each
primary care trust (PCT). We have mapped PCTs into local areas using the Office of National
Statistics mapping data. Where a PCT spanned more than one local area’s boundaries and vice-a-
versa we have dropped this observation. This leaves us with data on 113 local areas over three years
(or 339 observations in total).

Figure 5.1 plots the relationship between spending on mental health services and outflows from
Incapacity Benefit (due to mental and behavioural disorders). Each point on the chart represents a
different geographical location in each of the three years for which we have data. The chart indicates
a (weak) positive correlation between the variables. The available expenditure data is not ideal as
most goes on services for severe mental health problems whereas those people with the higher
likelihood of returning to work are those with less severe conditions who may need different
interventions. However, despite the absence of an ideal data set, we have proceeded to explore the
relationship between the spending data and off flows from incapacity benefit econometrically. This is
discussed in greater detail below.

Figure 5.1: Spending and outflows from Incapacity Benefit across all geographies

Spending on mental health (£ million)

180

160

140

120

100

80

60

40

20

0
-400 -300 -200 -100 0 100 200 300 400 500 600 700
Outflows from Incapacity Benefit by mental health
claimants
11
We estimate Equation 1 using a linear fixed effects model . This seeks to explain the outflow from
Incapacity Benefit of people with mental health problems in each local area, by spending on mental
health, a measure for the growth of economic activity, and the fixed effects dummies. The coefficient
2 is expected to be positive, suggesting the greater the spending on mental health treatment in a
county the more people will recover sufficiently to leave Incapacity Benefit and gain employment. The
coefficient 3 is expected to be positive, as stronger economic growth in a locality should lead to
greater employment opportunities increasing the potential outflow from Incapacity Benefit.

11
Outflows from Incapacity Benefit (due to mental health problems) are proxied by the change in
stock of recipients (due in to mental health problems), since no outflow data has been forthcoming
from the Department of Work and Pensions (DWP). We tried two proxies for economic activity (the
annual change in the employment and unemployment). The change in employment was preferred as
it appeared a cleaner measure of economic activity. The difference in those receiving Job Seekers’
Allowance may be contaminated by people switching between benefits to avoid screening. The local
authority fixed effects may control difference in the health of the population (due for example to higher
income or education levels, or a preponderance of former mining or heavy industry jobs).

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 Mental Health and the UK Economy

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Equation 1

Outflows from IB due to mental healthit = β 1i + β 2 Spending on mental healthit − n +

β 3∆ Economic conditionsit −n + error
The results suggest spending an extra £1 million pounds on mental health would reduce the number
of people claiming Incapacity Benefit due to mental and behavioural problems by 404 people. Or put
another way, on average spending £2,500 on treatment enables someone with anxiety, depression or
stress to feel well enough to start looking for and successfully obtain a job. The analysis does not
indicate how long any individual stays in employment.

The results should not be interpreted as a rule on the relationship between mental health spending
and Incapacity Benefit recipients as how the money is spent and the severity of the mental health
illness will be the determining factors. However, the results do provide some support to the anecdotal
evidence discussed above that increased spending can help improve the employment prospects of
people claiming Incapacity Benefit due to mental health reasons. This is likely to be particularly true
for those individuals with less severe conditions.

5.4 Conclusion

This chapter presents evidence of the effectiveness of mental health treatments on helping people
return to work, stay in work, or reduce the number of working days lost due to sickness. Clearly, given
the range of illnesses that can be described as a mental health related illness, from anxiety to
schizophrenia, the cost of supporting someone in work or helping them return to work will vary
enormously. However, there are people with more common mental health problems who, with
appropriate support, could make a valuable contribution to the economy. The potential value of this
contribution is explored further in the next section.

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 Mental Health and the UK Economy

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6 Economic Benefit Analysis

Key Points

• The benefit from a single person working for a full year, rather than claiming Incapacity Benefit is,
in total, around £20,000 for the Exchequer and over £33,000 for the economy.

• The benefit, from someone of average age, working the rest of their life is over £530,000 for the
Exchequer and nearly £900,000 for the economy.

• The economic benefits from an individual of average age reducing the number of days that they
are absent from work due to stress, anxiety or depression could amount to nearly £100,000 over
their life time.

• It total, we estimate that mental health costs the economy over £10 billion and exerts a negative
drag on government finances of over £6 billion.

• There are a lack of controlled, well designed studies evaluating the costs and benefits of
programmes designed to improve the labour market prospects of those individuals with a mental
health illness.

• However, the evidence that is available suggests that it is likely that there are ways in which
carefully targeted increases in government spending could bring net benefits to both the
economy and Exchequer.

6.1 Introduction

This section of the report discusses the benefits associated with helping people with mental health
problems retain or gain paid employment. The approach adopted is similar to that previously used by
both Oxford Economics and the National Audit Office (NAO) in assessing the benefit to the economy
and Exchequer from a number of schemes aimed at assisting disabled people back into
12
employment .

When considering the benefits for the Exchequer from helping someone gain or retain paid
employment included in the analysis are the reduction in the payment of welfare benefits, the tax
revenue (income and National Insurance) earned from participants’ employment, the additional
indirect tax (including VAT) from participants’ spending out of the extra income they receive in
employment, and the additional tax paid by companies (including corporation tax and NI). For the
economy as a whole, the NAO count the economic benefits as the increased income of those gaining
jobs and the profits firms receive from the sale of their production. Clearly, the value of the benefits
will depend on the length of time the person works; we present the results for one year, and also for
the rest of an individual’s life.

6.2 Approach

12
National Audit Office VFM Report (2005), “Gaining and retaining a job: the Department for Work
and Pensions’ support for disabled people Cost Benefit Analysis – detail” and “Gaining and retaining a
job: the Department for Work and Pensions’ support for disabled people Cost Benefit Analysis –
background”.

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 Mental Health and the UK Economy

March 2007

Figure 6.1: Flow diagram summarising our approach

Exchequer Economy
benefits benefits

Increase in employment
Increase in employment /decrease in working days
lost

Increase tax – VAT, corporation, NI &

income Increase GDP

Decrease benefits – Incapacity Economic multiplier and

Benefit and housing/council tax displacement

In our analysis, for illustrative purposes, we have tracked the benefits that would accrue to the
economy and Exchequer from one individual retaining work and another individual having a lower
absence rate. We have assumed that both our individuals are of average age, thirty nine years old,
and earn an average salary for someone of their age - £26,739, according to the Annual Survey of
Hours and Earnings (ASHE).

In order to calculate the welfare benefits our individual, let us call him Mr Smith, would receive from
the government if he were to lose his job, we have based our analysis on DWP research. They show,
approximately 33% of those receiving Incapacity Benefit also receive Housing Benefit and Council
Tax Benefit.

In order to calculate income tax and National Insurance (NI) receipts we have used current
thresholds. To calculate the additional amount of indirect tax revenue flowing to the Exchequer we
have assumed that Mr Smith saves 10% of his salary and spends the rest. To calculate the profits
firms earn on participants’ production we have assumed, in line with the NAO, that 26.1% of the value
of each employee’s salary accrues to the firm. The percentage comes from the DWP’s model.

We have not only calculated the value to the Exchequer and economy today, but also over the rest of
Mr Smith’s life. We have assumed no changes in taxation policy. Furthermore, we have assumed that
any growth in earnings is offset by discounting of future benefits. We have assumed that whilst Mr
Smith is working he is contributing to a private pension, and during retirement his private pension will
mean he is not eligible for pension credit, although he will still receive his state pension.

When considering our other representative person, let us call her Mrs Jones, missing fewer days work
due to stress we calculate the value of her economic output per extra day in work. On average people
with stress, anxiety or depression at work miss twenty-five days work a year.

6.3 Results

6.3.1 Impact of gaining or retaining a job – Mr Smith case study

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 Mental Health and the UK Economy

March 2007

If Mr Smith works for a full year rather than claiming Incapacity Benefit he will contribute an extra
£19,600 to the Exchequer through paying tax and not claiming benefit. If Mr Smith stays in
employment for the rest of his life, recall we assume he is of average age – thirty nine years old, then
he will contribute an extra £530,000 to the Exchequer. Over this same period he will contribute
£880,000 to the economy.

Although the costs of supporting an individual with a mental health illness into work will vary
enormously, those with more common mental health problems, who may be more easily supported,
could generate considerable net benefits for both the Exchequer and the economy. Individuals with a
more severe illness, who may be more costly to support, could also generate net economic benefits,
in particular, once the benefits outlined in section 6.3.3 are included.

Table 6.1: Summary of results: benefits

Mr Smith

Economic benefits from 1 years work £33,700

Exchequer benefits from 1 years work £19,600

Economic benefits from working for the rest of his life £880,000

Exchequer benefits from working for the rest of his life £530,000

6.3.2 Impact of missing fewer days of work – Mrs Jones Case Study

If Mrs Jones is treated effectively for her stress and no longer misses any days work then she will
contribute an additional £3,500 per year to the economy and an extra £90,000 over the rest of her
working life (recall we have assumed Mrs Jones is thirty nine years old). These benefits do not take
into account some of the more subtle effects such as; higher staff turnover, family medical leave, and
lower on the job productivity. Equally, they assume that the economic output is ‘lost’ when she is not
at work. These figures demonstrate the large potential benefit to the UK economy from supporting
sufferers of stress, anxiety and depression in being able to work throughout the year.

Table 6.2: Summary of results: benefits

Mrs Jones

Economic benefits from fewer sick days in 1 year £3,500

Economic benefits from fewer sick days every year for the rest of her life £90,000

6.3.3 Other Impacts

There are a number of benefits that have not been quantified as part of this study. These additional
benefits accrue to both the individuals concerned and society as a whole, and can be substantial.
They include:

Additional benefits to the Exchequer if either of our representative individuals has children or
carers.

Additional savings to the Exchequer if anyone supported into employment would otherwise
have required government funded day care.

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 Mental Health and the UK Economy

March 2007

Although not quantified as part of standard economic accounts, there may be considerable
benefits even if people did not gain or retain paid employment, but instead undertook unpaid
work (e.g. housekeeping).

Additional benefits would accrue if the support given to people with mental health problems
reduced premature mortality.

Increases in an individuals well-being, happiness and quality of life.

Increases in an individuals financial independence.

6.4 Comparisons with other studies

In this section of the report we have scaled up our results from our individual to consider the total
benefits to the UK economy and Exchequer from reducing Incapacity Benefit recipients due to mental
and behavioural disorders and eliminating working days lost due to stress, depression and anxiety.
We have assessed the total benefits by assuming that recipients of Incapacity Benefit due to mental
and behavioural disorders that have been receiving benefit for less than two years become employed
at the same rate as the rest of the population, and those who have been in receipt for longer than two
years become employed at a far lower rate. Further, in line with the other studies, we have calculated
the benefit for a single year. Drawing comparisons with other recent studies of the economic and
social costs of mental illness in the UK provides a useful cross-check on our estimates. There are two
studies which have been carried out recently, which provide a good base for comparisons. The first is
a report carried out by the Sainsbury Centre for Mental Health in 2003, called “The economic and
social costs of mental illness.” The second, a report by Richard Layard called “Mental health: Britain’s
Biggest Social Problem.”

These two studies differ in exactly what they are attempting to measure, although both make some
attempt at quantifying the costs of sickness and non-employment. As can be seen from the table
below our estimates for non-employment and Exchequer benefits are approximately in line with these
other studies.

Table 6.3: Costs of mental health

£ billion Sainsbury Layard Oxford Economics

Economy - sickness 3.9 4 1.4

Economy - non-employment 9.4 9.4 10.8

Exchequer N/A 7 6.3

We believe that the reason that our ‘sickness’ estimate is much lower than the other studies is that the
Sainsbury’s and Layard study use the lost days estimate from the CBI study which includes all types
of illness scaled down to mental health whereas we use the work related illness figures which directly
relate to mental health, and the numbers are much lower.

6.5 Conclusion
There are substantial benefits to both the economy and the Exchequer from helping people either
gain or retain a job or miss fewer working days due to sickness. Evaluating whether these benefits out

30
 Mental Health and the UK Economy

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-weigh the costs will clearly depend on the details of the proposed medical intervention and the
individuals concerned. And there are a lack of controlled, well designed studies evaluating the costs
and benefits of programmes designed to improve the labour market prospects of those individuals
with a mental health illness. We do not attempt such an evaluation as part of the study. However, our
econometric analysis, and results from the research that does exist, indicates that it is likely that many
schemes have been, or could be, of net value to both the economy and Exchequer. This will not be
the case for all people on Incapacity Benefit due to mental health reasons. But, given the large
numbers claiming - currently just under one million, of whom over 150,000 have been claiming for less
than a year, along with the large number of people missing days at work due to stress, depression
and anxiety - those with less severe illnesses, who are likely to cost less to support, are most likely to
be beneficial to the economy and Exchequer. By spending in a targeted way the evidence suggests
that small increases in spending could generate positive returns for the economy and Exchequer.

Whilst the focus of this section of the report has been on the monetary benefits to the economy and
Exchequer we also recognise the strong arguments for providing employment opportunities to
everyone. The quote below, from Dr Bob Grove, Director of the Employment Programme, at the
Sainsbury Centre for Mental Health, points out the crucial role the benefits system plays in this
process.
“In the right circumstances and with the right support almost anyone who wants to work is
employable. The keys are hope and self-belief. For those who are deemed to be unemployable this
will in effect say to them that they can abandon all hope of a normal life. It is vital that everyone is
aware of and has access to employment support and the hope that this represents. Many severely
disabled people, including those with severe mental health problems, have excellent employment
13
records. It is vital that the benefits system offers hope, support and belief to everyone.”

13
http://www.scmh.org.uk/80256FBD004F6342/vWeb/pcKHAL6NYK8N

31
 Mental Health and the UK Economy

March 2007

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