The National Health Service in England is currently halfway through the most austere decade in its history. Finding ways to improve health care efficiency is crucial to ensure the sustainability of the health system. While evidence of supply-induced demand(SID) has often been used as an economic argument to restrict labour supply, in the UK the risks of SID may be much less than in health care systems with more deregulated entry into the market post-qualification and with fee-for-service payment systems. This article focuses on the problem of staff shortages in nursing. We argue that, although an oversupply of some types of labour can add to cost pressures by increasing demand for health care services and that the cost of training staff is high, undersupply and poor labour planning lead to unintended consequences such as poor labour productivity. As a result there is a case for public policy to target an oversupply of nurses in the future. If government reforms to nurse funding help, they are to be welcomed.