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NHS investment boosts economic growth

Geoff Riley

17th October 2022

A new report from health consultancy Carnall Farrar claims that every £1 invested in the NHS translates into an overall economic return of £4 in the local area. This is a good example to add to your notes about the potential supply-side economic benefits from investment spending in the National Health Service.

You can read the research here

More than 200,000 people have left the labour market since the onset of the Covid pandemic because of ill health, with a record 2.5 million people now inactive due to long-term sickness, almost 500,000 more than just five years ago. This rise in economic inactivity hurts long run aggregate supply and hits trend economic growth. And there are deeper social costs associated with a sharp rise in the number of people no longer active in the labour market.

I feel that this is an important report not least with the treat of real-terms cuts to investment spending in the NHS and across the public sector. We often talk about the multiplier effect from a rise in government spending. This new research looks at the longer-term impact of investment in preventative treatments and other support to help people re-enter the labour market. Lifting the employment rate can boost gross value added (GDP) in local areas, which in turn supports higher consumer spending. The rise in economic inactivity since the start of the covid pandemic in 2020 is a barrier to economic growth.

Health investment can pay for itself many times over.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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