Mental health issues are costing Britain £70bn a year, the west's leading economic thinktank said on Monday, as it urged the government to help those with depression, stress and anxiety into work. The Paris-based Organisation for Economic Co-operation and Development said mental health was the cause of 40% of the 370,000 new claims for disability benefit each year – the highest recorded among the 34 nations that belong to the so-called "rich man's club". An OECD study found that the bill to the UK from a failure to cope adequately with mental health issues was 4.5% of GDP each year, caused by productivity losses, higher benefit payments and the increased cost to the NHS. It added that around one million claimants on employment and support allowance (ESA), and as many on jobseeker's allowance (JSA) and other working-age benefits, had a mental disorder such as anxiety and depression that was hurting their prospects of finding work.

And it warned that those with mental health problems could be further disadvantaged by the welfare cuts unless the Government did more to help their work prospects.

"Some of the recent UK welfare reforms designed to tackle stubbornly high disability benefit caseloads go in the right direction. However, further improvements are needed to ensure that reforms live up to their promise to bring people into work. If welfare cuts are to be made, they need to be matched by increased efforts to address the barriers to finding and remaining in work," said the report. "The new Work Programme is struggling to place ESA and JSA claimants with mental health problems into work", the OECD said. "People with a mental illness continue to fare badly compared to their counterparts without such illness: their unemployment rate is more than double the overall rate; and the risk of falling below the poverty threshold is almost double the overall risk. Indeed, the risk of poverty among people with mental health problems is the highest in a comparison of 10 OECD countries including seven other European countries, Australia and the US."

Noting that prevention was better than cure, the OECD listed a series of recommendations for the UK, including a stronger focus of mental health in the workplace; an increase in resources for employment service providers to ensure more people with mental issues found jobs; better integrations of health and employment services: and increased access to psychological therapies for those with a common mental disorder. Norman Lamb, Care and Support Minister said: "People with mental health conditions can and do work and the vast majority want to. That's why last summer, working with the Department for Work and Pensions, we jointly commissioned a report to look at how we can better support people with mental health problems to get back to and stay in work. This could not only help them, but helps to build a stronger economy and reduce the strain on the benefits system.

"Progress has already been made — the expanding Improving Access to Psychological Therapies programme has already helped over 80,000 people to move off sick pay and benefits. We are vigorously pursuing solutions and are working across Government to drive improvements. The OECD has recognised the successes we have had, but we want to go further."