More than 16 million people use herbal and other treatments and six million choose therapies such as acupuncture and chiropractic but, despite good evidence of their effectiveness, there is no policy covering their use by the NHS, it says.
The failure of modern medicine to find treatments for chronic conditions such as back pain and stress has opened up "effectiveness gaps" in the NHS that complementary therapies are poised to fill.
But doctors lack guidelines on which therapies to use and which patients to offer them to. Half of all GP practices refer some patients for treatment by complementary practitioners paid for by the NHS.
The inquiry was commissioned by the Prince of Wales whose long-held objective is to extend the use of complementary therapies in combination with orthodox treatments in the NHS.
However, its chief author, Christopher Smallwood, formerly chief economic adviser to Barclays Bank, denied yesterday that he had approached the inquiry with pre-conceived ideas.
"This is a completely independent report. The Prince had nothing to do with it beyond commissioning it. We have taken absolutely as fair-minded a view as we can of all the therapies," he said.
The inquiry focused on the four principal disciplines of acupuncture, homoeopathy, manipulative therapy (osteopathy and chiropractic) and herbal medicine. The authors reviewed research, interviewed practitioners, and conducted case studies of centres in which the therapies were used.
The best results were with manipulative therapies where the potential savings were huge, it said. There is good evidence osteopathy and chiropractic are more effective than conventional treatments for lower-back pain which accounts for more than 200 million days lost from work every year at a cost to the economy of £11bn. "It is not difficult to envisage benefits to the wider economy running into hundreds of millions of pounds as a result of improved treatment in this area," the report says.
Acupuncture is also effective as a treatment for pain and nausea following surgery, and reduces the hospital appointments and drugs needed by patients with musculoskeletal disorders. When used in addition to conventional medicine it generates extra health benefits which could be worth the additional cost, it says.
The inquiry is less enamoured of homoeopathy, for which it says the evidence is "fragmentary", and herbal medicines, where it says comparing costs with conventional medicines was "difficult" because of variations in dosages, potencies and the number of medications available.
Studies of health centres in Newcastle, London and Glastonbury suggested that the use of the therapies helped psychological problems such as stress and anxiety as well as chronic pain and musculoskeletal problems.
Overall, they reduced GP consultations by one third and they made savings on the drugs bill by up to 50 per cent, the report said.
"Our main conclusion is that there appears to be sufficient evidence to suggest that some complementary therapies may be more effective than conventional approaches in treating certain chronic and psychological conditions and that specific treatments offer the possibility of cost savings, particularly where they can be provided in place of rather than in addition to orthodox treatments."
As a first step, the main complementary therapies should be assessed by the National Institute for Clinical Excellence (Nice) to check whether they are cost effective, the inquiry says.
Nice responded yesterday by saying it could not initiate reviews but would welcome a request from the Secretary of State for Health, Patricia Hewitt, if she was "minded to refer this topic to us" for further investigation.
For and against
Relieves pain and nausea in patients who have had surgery.
Helps in the treatment of musculo-skeletal conditions, such as painful joints.
Reduces the need for consultations and prescription drugs.
Time consuming; consultations last an hour.
Expensive: costs about £40 a session
Small risk of infection from used or improperly sterilised needles.
Many studies suggest homoeopathic remedies are better than placebos.
Most effective in childhood chest and ear infections and asthma. Harmless: never causes side-effects because the dilution of the tinctures is so great.
Lacks scientific credibility because dilution levels are so great some remedies cannot contain a single molecule of the original preparation.
Evidence of benefit is "fragmentary" .Reuse content