Blog post

The NHS can help cure the UK’s economic malaise

Siren calls about the scale of health service funding ignore its role in the push to grow the economy.
Matthew Taylor

19 October 2022

Regrettably, economic and political debate often portrays the NHS as a drain on public resources. With a budget of just over £150bn, health now consumes 40 per cent of day-to-day spending on public services, so perhaps this preoccupation with costs is not surprising. But this is to look through the wrong end of the telescope.

Far from health spending being seen as a drag on growth, it should be part of a balanced strategy for economic prosperity. Our new research demonstrates what an investable proposition the NHS is. As the proportion of funding has risen — along with more evidence that the NHS faces a significant capacity gap — discussion about how the health service is funded has intensified.

Experts and celebrities have joined siren calls to abandon the “bottomless pit”. But what if we were to look at the NHS in a different light? With a prime minister stating that her three priorities are “growth, growth and growth”, investment in heath and care could help lift Britain’s economic malaise. The NHS is the fifth biggest employer globally and by far the biggest in the UK. In most towns and cities, it is the single biggest employer and makes a vital contribution to the local economy through job creation, purchasing of local services and keeping people healthy for work.

1 per cent decrease in the proportion of workers off due to long-term sickness is associated with an additional 180,000 workers joining the workforce

My organisation has commissioned independent analysis to determine the impact of investment in healthcare on not just health outcomes but labour productivity and broader economic activity. The results should be taken as seriously in the Treasury and Downing Street as well as the health and social care department.

The economic activity of a local area, and how productive it is, is heavily influenced by its inhabitants’ health. Unmet health and care needs are among the key reasons for people of working age being out of the labour market. Relatively small reductions in the number of those off for long-term sickness could have a huge impact on labour productivity and economic activity. A 1 per cent decrease in the proportion of workers off due to long-term sickness is associated with an additional 180,000 workers joining the workforce. This would be a significant boost to the economy at a time of ongoing challenges in labour market participation, widespread labour and skills shortages and the rising cost of living.

Every pound invested in the NHS results in around £4 back to the economy

In addition, NHS staff are a major contributor to their local economies and productivity. However, the NHS itself has a record number of vacancies — over 130,000. In places with labour shortages, it is the health and care sector that often finds it the hardest to recruit, leading to a vicious cycle of overstretched services meaning more people are without the help they need and unable to work. This makes recruitment even harder. One local NHS leader told me about watching staff cross the road from their workplace to “better pay and conditions” in a distribution warehouse.

Investing in health reduces A&E use and long-term sickness, and both are associated with an increase in the employment rate. When it comes to quantifying the return on investment, our analysis reveals that every pound invested in the NHS results in around £4 back to the economy through increased productivity and workforce participation. With the UK facing major labour market and economic growth challenges, it is time for our political leaders to start considering the vital contribution the NHS makes to the wider economy. It directly and indirectly supports our population, our local economies and our productivity and should be considered an essential building block of any national — and local — plan for growth.

The NHS is both an engine room for the economy and a security net for communities. We should stop seeing it as a drain on public resources — investment in health must be at the heart of the government’s plan for growth.

Matthew Taylor is chief executive of the NHS Confederation. Follow Matthew on Twitter @FRSAMatthew

This blog first appeared in the Financial Times.