IDEAS home Printed from
   My bibliography  Save this paper

Cost-Benefit Analysis of Psychological Therapy


  • David Clark
  • Martin Knapp
  • Richard Layard
  • Guy Mayraz


At present six million people are suffering from clinical depression or anxiety disorders, but only a quarter of them are in treatment. NICE Guidelines prescribe the offer of evidence-based psychological therapy, but they are not implemented, due to lack of therapists within the NHS. We therefore estimate the economic costs and benefits of providing psychological therapy to people not now in treatment. The cost to the government would be fully covered by the savings in incapacity benefits and extra taxes that result from more people being able to work. On our estimates the cost could be recovered within two years - and certainly within five. And the benefits to the whole economy are greater still. This is not because we expect the extra therapy to be targeted especially at people with problems about work. It is because the cost of the therapy is so small (£750 in total), the recovery rates are so high (50%) and the cost of a person on IB is so large (£750 per month). These findings strongly reinforce the humanitarian case for implementing the NICE Guidelines. Current proposals for doing this would require some 8,000 extra psychological therapists within the NHS over the next six years.

Suggested Citation

  • David Clark & Martin Knapp & Richard Layard & Guy Mayraz, 2007. "Cost-Benefit Analysis of Psychological Therapy," CEP Discussion Papers dp0829, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0829

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Faggio, Giulia, 2007. "Job destruction, job creation and unemployment in transition countries: what can we learn?," LSE Research Online Documents on Economics 19716, London School of Economics and Political Science, LSE Library.
    2. Alejandro Cuñat & Marc J. Melitz, 2012. "Volatility, Labor Market Flexibility, And The Pattern Of Comparative Advantage," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 225-254, April.
    3. Henry Overman & Patricia Rice & Anthony Venables, 2010. "Economic Linkages across Space," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 17-33.
    4. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
    5. Richard Layard & CEP Mental Health Policy Group, 2006. "The Depression Report: A New Deal for Depression and Anxiety Disorders," CEP Special Papers 15, Centre for Economic Performance, LSE.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Layard, Richard & Chisholm, Dan & Patel, Vikram & Saxena, Shekhar, 2013. "Mental Illness and Unhappiness," IZA Discussion Papers 7620, Institute for the Study of Labor (IZA).
    2. Patricio V. Marquez, 2016. "Mental Health Among Displaced People and Refugees," World Bank Other Operational Studies 25854, The World Bank.
    3. Richard Layard, 2010. "The Greatest Happiness Principle: Its Time Has Come," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(4), pages 26-31, 01.
    4. Clark, David M. & Layard, Richard & Smithies, Rachel, 2008. "Improving access to psychological therapy: initial evaluation of the two demonstration sites," LSE Research Online Documents on Economics 51591, London School of Economics and Political Science, LSE Library.
    5. Böckerman, Petri & Johansson, Edvard & Saarni, Samuli I., 2011. "Do established health-related quality-of-life measures adequately capture the impact of chronic conditions on subjective well-being?," Health Policy, Elsevier, vol. 100(1), pages 91-95, April.

    More about this item


    depression; anxiety; cost-benefit analysis; cognitive behavioural therapy; psychological therapists;

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I1 - Health, Education, and Welfare - - Health

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0829. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.