From safety net to springboard: putting health at the heart of economic growth
17 October 2022
Investing in healthcare has an impact on more than healthcare outcomes. It also boosts labour productivity and economic activity.
Cross-sector partnerships
Finance
Key points
- The NHS is the fifth biggest employer globally and by far the biggest employer in the UK, with more than double the employees of the second largest employer. In many local towns and cities, the NHS is the single biggest employer and makes a vital contribution to the local economy through job creation, purchasing of services, driving demand for innovation and in keeping people healthy and well to remain in work.
- Much of the political debate surrounding the NHS tends to focus on how much it costs to run the health service, with the current annual budget at just over £150 billion and health consuming 40 per cent of spending on public services. However, very little attention is paid to part of what that investment buys: the wider economic benefits that result from investing in healthcare.
- In the run up to the Chancellor’s 2023 Budget and the next Comprehensive Spending Review, and with the government making economic growth the central plank of its reform agenda, the NHS Confederation has commissioned independent analysis to determine the link between investing in healthcare and the impact it has on a range of factors, including labour productivity, economic activity and healthcare outcomes.
- The analysis reveals:
- The economic activity of a local area, and how productive our local towns and cities are, is heavily influenced by the area’s health status. Reducing the proportion of workers off for long-term sickness increases the working population and provides a significant boost to the UK economy at a time of ongoing challenges in labour market participation, widespread labour and skills shortages and the increasing cost of living.
- The proportion of workers off due to long-term sickness is a recognised proxy measure for general morbidity, which research shows could lead to an increase of 180,000 workers among the working population; equivalent to the working-age population of Bolton.
- Further, staff employed by the NHS significantly contribute to the productivity and economic activity of local areas. However, the NHS is experiencing a record number of vacancies – currently over 130,000. An NHS that is appropriately staffed will directly increase local productivity through more people being employed in good work, enabling the NHS to collectively widen access to healthcare and reduce waiting lists. This in turn ensures that more people can return to the labour market and contribute to the economy, especially in areas of high deprivation, which have higher unemployment rates.
- Investing in health results in reduced A&E attendances and reduced long-term sickness, which are both associated with an increase in the employment rate and therefore growth in the economic activity of a local area.
- When it comes to quantifying the return on investment of spending on healthcare, the analysis reveals that every pound invested in the NHS results in around £4 back to the economy through increased gross valued added, (GVA), including through gains in productivity and workforce participation. This economic value is above and beyond the range of physical services and the intrinsic personal, societal and moral value that people receive from being able to access healthcare.
- With the UK facing major labour market and economic growth challenges, the analysis reveals the mutual and cyclical benefits of investing in the NHS and demonstrates the power of health as an investible proposition. It directly and indirectly supports our people, our places and our productivity and should be considered an essential building block of any national and local plan for growth. Given the scale of the NHS’s annual budget, this is a significant, tangible economic benefit that can be felt right across the UK. Uniquely positioned as a sector, the NHS is both an engine room for UK PLC and a security net for our local communities.
- On the back of this independent analysis, NHS leaders encourage the government to place investment in health at the heart of the reform agenda for economic growth. At minimum, this will require the government to protect the NHS budget, which will mean making up the shortfall in funding that has been lost due to the impact of soaring inflation (the NHS is facing a minimum real-terms cut in funding of £4 billion this year). In the medium-to-long term, this will require governments of all persuasions to commit to maintaining NHS investment at the long-term historical average and avoid lengthy periods of underfunding, such as occurred during the decade of austerity in the 2010s, which have left the NHS with 130,000 vacancies and a crumbling estate.