Workers (Economic Affairs Committee Report)

Lord Layard Excerpts

Thursday 8th February 2024 Lords Chamber

[Lord Layard (Lab)]

My Lords, I am delighted to follow our chairman, who does such a wonderful job in leading our work.

This report is timely because everybody wants to see more economic growth. The most obvious way to achieve that is to increase employment. The central issue is how we can raise employment in the most cost-effective way. As our chairman hinted at, the most obvious way is to help the long-term sick back into work. I want to take in particular about those who have mental health problems.

Mental illness is by far the biggest illness among working-age people. People with mental health problems comprise at least half of all those on disability benefits who are unable to work. Yet mental health is treated by the NHS quite differently from physical health. Most people with physical health problems are in treatment while most people with mental health problems are not; only 40% of them get any form of help from the NHS. What is even more shocking is that, although NICE recommends that all mentally ill people should receive psychological therapy based on evidence-based methods, only 13% actually receive it.

Yet there is overwhelming evidence that these therapies more than pay for themselves in terms of the public finances. They are exceptionally cost effective; of course, this is because people with depression or anxiety disorders are often unable to work so relieving their problems helps them back into work, off benefits and into paying taxes. The evidence is clear: psychological therapy is the cheapest policy that we have for economic growth in this country. That is my central point.

For anxiety disorders or depression, a typical course of treatment costs around £1,000. If such a programme is offered to a clientele, some of whom work and some of whom do not, it needs only 5% of all those treated to move into work from not working to pay for the whole programme for the 100%, through the reduced benefits that they claim and the increased taxes that they pay. The evidence is clear: the existing programme produces at least that effect. It has now been copied in five other countries. Extraordinary evidence from Norway about a randomised trial shows that people who are treated earn four times more than the extra cost of treating them.

I want to talk about a programme that we have, NHS Talking Therapies, with which I have been associated. It now treats 700,000 people a year; half of them recover within a course of treatment, which averages eight sessions. The Chancellor has wisely given the programme another £600 million to expand over the next Parliament but this programme covers only people suffering from depression and anxiety disorders. There is another large group of people who are unable to work because they suffer from addiction to alcohol, drugs or gambling, as well as people who suffer from personality disorders that either make them anti-social or make them self-harm. Hardly any of these people receive any form of psychological therapy from the NHS yet they have very low employment rates—lower than for people with depression or anxiety disorders. They suffer and cause others to suffer, and they cost the country a lot of money. We need a programme parallel to NHS Talking Therapies to provide psychological therapy to this group too; I would like to see this as a commitment in every party’s election manifesto.

How does the programme for addiction compare with the case for other types of expenditure? Our group at the London School of Economics is analysing the relationship between benefits and costs across a whole range of public expenditures. For example, in road building, the average ratio of benefit to cost is about three to one; it is less than that for many rail projects. However, as I said, the benefits obtained by psychological therapy for anxiety and depression are zero costs, so surely the case for expansion there is absolutely overwhelming. Our calculations also suggest a cost-benefit ratio that could go up to 25 to 1 with psychological therapy for addiction and personality disorders.

Our policies for economic growth are too centred on things and not centred enough on people; that is the fundamental point I want to make. For example, we shamefully neglect the skills of people who do not go to university, although even the Department for Education estimates a cost-benefit ratio of seven to one for apprenticeship—double that in road building—because of, again, the effects on employment and earnings. We should, within five years, be guaranteeing an apprenticeship to every qualified person who wants one; in my view, this is another election pledge that every party should be considering.

When one looks at the pattern of public expenditure, the tragedy is this: the small sums needed to transform people’s lives are so difficult to raise while we splash out on physical infrastructure, which makes much less of a difference to people’s lives. Going back to mental illness, according to the OECD, it reduced GDP by at least 4%. It is mainly a disease among people of working age whereas, as we know, physical illness is mainly a disease among retired people. Yet, despite all the rhetoric over the past 20 years, the share of mental health spending in the NHS budget has not increased at all. It is time for that to change. The economics are clear: mental health should be the number one component of a strategy for growth.