This contribution discusses the principles and practice underlying allocation of resources for mental health services. No health and social care system has adequate resources to meet the demands placed upon it. Societies make choices about spending on healthcare, how healthcare is funded and, within the expenditure, the way this is divided up between conflicting priorities. Mental health problems are common (1-year period prevalence in Europe of 27.4% for working-age adults) and psychiatric conditions contribute greatly to the global burden of disease (approximately 20%). In England there is a strong emphasis on encouraging evidence-based practice through the elaboration of National Service Frameworks and guidance published by the National Institute for Health and Clinical Excellence, which explicitly uses health economic analysis in formulating its recommendations. Many core aspects of mental healthcare lack a robust evidence base. Spending on mental healthcare is dominated by secure services and other forms of hospital and residential care, whilst spending on psychological therapy services is relatively low and spending on mental health promotion almost non-existent. There has been a rapid expansion on spending on the ‘functional’ teams mandated by the NHS Plan in 2000. Despite resource constraints, local mental health services can improve their efficiency by being critical about how they undertake their tasks and there are possibilities for gaining additional resources by undertaking needs assessments against nationally agreed standards. Practitioners should also consider how they use the resources available to them, which requires delicate balancing between legal, practical and ethical priorities.