As the UK's health-related economic inactivity crisis deepens, John Lourenze Poquiz argues that it should be treated as a productivity problem to be solved, rather than simply as a fiscal cost. If this approach succeeds, investment in human capital could generate returns greater than the initial cost to government.
The UK government has long treated the NHS primarily as a cost to be managed, in the face of its expanding cost and frequent short-term funding top-ups.
One of the reasons for the pressure of demand on NHS services is that millions of working-age people are out of the workforce due to long-term illness. This is costing an estimated £127 to £188 billion a year in lost output and forgone tax revenue.[1]
Yet at the same time, qualified doctors are leaving for other countries or leaving the medical profession altogether. This is not because there are no patients who need them, but because there are no funded positions to employ them – one of the grievances in the repeated strikes by NHS resident doctors.
In 2024, there were nearly 60,000 applications for just 12,743 specialty training posts. In other words, for every training post available, roughly four qualified doctors are left without one. According to a House of Lords Library briefing, the government’s own NHS 10 Year Health Plan attributed this directly to medical school expansion outpacing growth in postgraduate training posts. Those who were not able to enter training often end up working expensive agency or locum shifts.[2] This tends to cost the NHS far more per shift than a salaried post would.
Meanwhile, data from the Office for National Statistics show that 2.81 million working-age people are out of the labour market because they cannot access the care that would allow them to return to work. The ONS data shows that depression, anxiety and musculoskeletal disorders account for the majority of health-related inactivity. In most cases, these conditions respond to treatment. They are also the conditions most effectively addressed by the disciplines facing the sharpest workforce shortages, including general practice, psychiatry and occupational medicine.[3]
Not a health problem but a productivity problem
To put in perspective the estimated costs of labour market inactivity, even on the most conservative estimate, it amounts to nearly two thirds of what the government spends running the entire health and social care system. In other words, the country is losing an amount approaching its entire health budget every year to the very problem that budget is under-resourced to treat.
Moreover, health and disability-related benefit payments provided to people being too ill to work currently stand at around £64.7 billion a year. The Office for Budget Responsibility anticipates that this will reach £100.7 billion by 2029/30. Meanwhile, every person who moves from employment into long-term health-related inactivity costs the public finances an additional £2 billion in cumulative NHS demand, according to DWP analysis.
Of course, creating additional training posts for doctors costs money too. Opening a specialty training post costs roughly £114,000 per year in total.[4] So 10,000 to 30,000 new posts would require an investment of between £1 and £3 billion annually. This is less than two pence invested for every pound of output currently being lost.
The binding constraint is not a shortage of trained doctors but a shortage of funded posts. From their very first year, NHS doctors in training positions are working on wards, seeing patients, and delivering care, not sitting in lecture theatres.
The return is not uniform though. A new cardiothoracic surgeon does not help the 1.35 million people out of work because of depression and anxiety. A new GP, psychiatrist, or occupational medicine specialist might. Put simply, hiring more of the right doctors produces labour market returns that simply hiring more doctors generally does not.
Clinical posts also need to sit within integrated employment and health pathways, the model the government is currently piloting through its Health and Growth Accelerators in South Yorkshire, West Yorkshire and the North East. And pathways off welfare into work that do not involve high effective marginal tax rates must accompany health investment so that clinical recovery will translates into labour market re-entry, and the resulting fiscal returns.
It is impossible to be sure how many of the 2.81 million long-term sick would return to work if treated, , or at what wage. It will depend on the severity of individual conditions, the quality of care delivered, and labour market conditions. Addressing the long term health crisis at scale requires capital investment too, in infrastructure and equipment.
Still, even under conservative assumptions, if only a fraction of those currently inactive return to the work force, the tax revenues, combined with benefits no longer paid, would more than cover the cost of treating them. And even for those who cannot return to work, reducing suffering and preventing further deterioration has value that the public and economic accounts do not fully capture.
A first step would be for the government to fund posts targeted explicitly at the conditions driving inactivity, and embedding them within the integrated employment and health pathways already being piloted through the Health and Growth Accelerators. As evidence accumulates on what works, that model can be scaled. In parallel, the benefits system needs improvements to ensure that recovering patients are not financially penalised for returning to work. Without this, even well-designed clinical investment will fail to translate into labour market re-entry. This approach requires persuading the Treasury that investment in doctors’ posts now is a secure investment, as it has long been reluctant to support ‘invest to save’ pitches from spending departments.
But the broader point is that health spending is not necessarily a drain on the public finances. When health outcomes are thought of as part of human capital investment – and as things stand health is omitted from economists’ human capital calculations – health spending to treat conditions that are keeping people out of work will generate a positive economic and fiscal return.
[1]The DWP notes these figures represent the difference between current economic output and potential output if ill-health were no longer a barrier to work. These figures are not a prediction of what any intervention could recover. They are used here as a measure of the scale of the problem against which the cost of investment can be benchmarked.
[2]Hired on a day-by-day basis to plug staffing gaps, often paid at a higher rate.
[3]Also see: https://www.gov.uk/government/publications/keep-britain-working-review-final-report/keep-britain-working-final-report
[4] Authors’ calculation. Average FTE doctor basic pay of £87,701 (NHS Digital, via House of Commons Library, June 2025), uplifted by a paybill multiplier of approximately 1.3 to account for employer pension and National Insurance contributions, as set out in DHSC Supplementary Evidence to Pay Review Bodies 2025/26.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
