From Budgets to Well-Being: How Smarter Funding Can Transform Europe’s Health

A new WHO report argues that Europe’s health crisis is driven by chronic underinvestment in well-being, prevention and equity, not just by rising medical costs. It calls for smarter use of taxes, budgets and private finance to treat health as a long-term economic investment rather than a short-term expense.

Across Europe, governments are under growing pressure. Populations are ageing, the cost of living is rising, climate change is affecting health, and public debt is at its highest level in decades. At the same time, health systems are struggling to cope with rising demand, widening inequalities and worsening mental health, especially among young people. A new World Health Organization primer argues that this is not just a health crisis, but a funding crisis driven by outdated economic thinking.

Produced by the WHO European Well-being Economy Initiative and led by the WHO European Office for Investment for Health and Development, with research contributions from institutions including Bocconi University, the University of Oxford, the University of Barcelona and El Colegio de México, the report makes a clear case: countries are underinvesting in the very things that keep societies healthy, stable and productive.

Health Is Not a Cost – It’s an Investment

One of the report’s central messages is simple but powerful. Health should not be treated as a drain on public budgets, but as an investment that pays off over time. Evidence shows that healthier populations are more productive, rely less on emergency care and contribute more to the economy. Yet many governments continue to focus spending on short-term fixes, while neglecting prevention and the social factors that shape health.

The COVID-19 pandemic exposed the consequences of this approach. Countries with weaker health systems and lower investment in social protection experienced higher death rates and deeper economic shocks. The lesson, the report argues, is clear: cutting back on health and well-being makes societies more vulnerable, not more efficient.

The Real Drivers of Health Lie Outside Hospitals

The report stresses that medical care alone explains only part of what makes people healthy. Much larger influences come from everyday conditions such as safe housing, decent work, education, income security and a clean environment. Poor air quality, insecure jobs and inadequate housing all increase the risk of illness and shorten lives.

Investing in prevention and early support, especially for children and vulnerable groups, has been shown to deliver strong returns. Programmes that improve social protection or reduce inequality can lower future health costs while boosting economic growth. Despite this evidence, these investments are often sidelined because their benefits appear slowly and fall across multiple government departments.

Rethinking Budgets Through a Well-Being Lens

To address this gap, the WHO report promotes a “well-being economy” approach. Instead of judging success mainly by economic growth, this model asks whether people are healthy, secure and able to participate fully in society, now and in the future. It looks at four areas together: human well-being, social cohesion, economic stability and environmental sustainability.

Several countries are already moving in this direction. New Zealand, Canada, Iceland, France and parts of the United Kingdom have introduced well-being or quality-of-life indicators into their budgeting processes. These approaches aim to direct public spending toward mental health, child development, gender equality and community well-being. While they are not easy to implement, they help governments make spending choices that reflect real social needs, not just short-term financial targets.

Taxes Can Improve Health – If Designed Fairly

Tax policy plays a key role in funding healthier societies. The report highlights health taxes on tobacco, alcohol, sugar-sweetened drinks and polluting fuels as effective tools that both raise revenue and reduce harmful behaviour. Evidence from countries such as Mexico and Viet Nam shows that these taxes can lower rates of obesity and diabetes while generating funds for health and social programmes.

However, the report also warns that taxes must be designed carefully. Poorly structured taxes can hit low-income households hardest. To avoid this, governments should use progressive tax systems and reinvest revenues in services that benefit those most affected, such as health care, social protection or healthy food options.

New Money, New Partnerships

Public budgets alone will not be enough to meet today’s health challenges. The report therefore explores new sources of finance, including social bonds, impact investment and partnerships with philanthropic and private investors. Across Europe, these tools are already being used to fund hospitals, affordable housing and community services. Iceland’s recent issuance of the world’s first sovereign gender bond is highlighted as a striking example of aligning finance with social goals.

More innovative approaches, such as social outcomes contracts, pay investors only when agreed health or social results are achieved. While these tools cannot replace public funding, they can support prevention, innovation and better measurement of results.