Andreas Whittam Smith: Tackling mental health problems helps us all

Buried in the dross of the Treasury's comprehensive spending review was a nugget of pure gold. It concerned mental health. Until the Chancellor of the Exchequer, Alistair Darling, published his plans, I had believed that the NHS was unlikely to provide an effective treatment of common disorders such as depression, anxiety and stress. It couldn't be afforded. For the best way to tackle many forms of mental illness – talking to a trained therapist about one's problems – is expensive.

A typical treatment involves 16 weekly one-on-one sessions. Compare the intensity of this with the length of a consultation with one's doctor or the time that surgeons are able to give to individual patients on their hospital rounds. But I am pleasantly surprised. As a result of the Spending Review, the Department of Health has announced that by 2010, the NHS will be spending nearly six times more than it does at present on psychological therapies. Some 3,600 new practitioners will be trained.

How this enlightened decision was reached is an unusual tale. The story starts not at a centre for medical research but at the London School of Economics. The department concerned is called The Centre for Economic Performance. One of its sections is a Mental Health Policy Group. What we see here, then, is economics and medicine and the state working together.

The link is the fact that depression and anxiety are widespread and make it difficult or impossible to work. One in six of us are affected. Indeed, one million people claim state benefits for incapacity on account of mental illness. In theory, therefore, what is spent on improving mental health would be paid for by people coming off benefits and returning to work.

Usually, however, when experts convincingly argue or demonstrate something like this, the government of the day takes not the least bit of notice. The Treasury is notoriously impervious to ideas that it hasn't thought up itself. This time it has shown an openness to novel thinking. Particularly influential has been "The Depression Report, a new deal for depression and anxiety disorders", published last year under the leadership of Professor Lord Layard by the LSE.

What was needed was good evidence that talking therapies work, an accurate cost per patient, and proof that there would be a saving in incapacity benefit. In behavioural therapy, which is one of the main methods, people are encouraged to learn new ways of behaving through gradual changes and exposure to feared situations. They are often asked to keep diaries to record their activities and to monitor their progress. Cognitive behavioural therapy, another well used approach, is based on the fact that the way we feel is partly dependent on the way we think about events (cognition). It stresses the importance of behaving in ways which challenge negative thoughts.

Talking therapies like these have been thoroughly tested against drugs. The difference is that whereas therapy is as effective as drugs during the short term, therapy has more long lasting benefits. The short term success rate is about 50 per cent. The treatment costs £750. And one month on, incapacity benefit, taking into account loss of tax receipts on earnings as well as benefit payments, costs about the same. Thus the pay-off is speedy.

This is no doubt why the National Institute for Health and Clinical Excellence (Nice) recommends that, except for mild or recent cases, patients with anxiety disorders or depression should have an option of therapy. Nice has a sophisticated measurement system that relates cost to what it calls "quality-adjusted-life-years". It approves treatments where the cost of securing an additional year is less than £30,000. In the case of talking therapies, the cost of the extra year is £4,000.

This is the way to govern well – identify a big problem, listen to outside advice, carry out trials, cost carefully, make a bold decision. The question then arises why the same statement that contained the excellent mental health initiative should also put forward completely muddled proposals for the reform of taxation on capital gains. In 40 years of covering budgets, I have never seen a worse proposal.

The promoters of the mental health plans had the advantage that spending on the NHS is due to rise by 4 per cent above inflation over the next three years. This is a more encouraging scenario than a squeeze. It may also be that the new Secretary of State for Health, Alan Johnson, recognises a good idea when he sees one, can take a prompt decision, and has the political skills to get his plans through the Treasury.

What haunted the taxation decisions in the Chancellor's statement were those terrible enemies of good government, panic and rush. These proposals were the bits Mr Darling did himself in close consultation, no doubt, with the Prime Minister. The problem that had been identified, the relatively modest amounts of tax paid by private equity entrepreneurs, wasn't a big issue like mental health but a technical matter that needed sorting.

Such advice as had been given on handling the difficulty wasn't followed. The costing is problematic because levying a lower tax rate on capital gains than on income opens the door to massive tax avoidance. The decisions were bold only in the sense of their astonishing stupidity. They should be withdrawn. The nugget of mental health reform shines all the brighter by comparison.