The report, carried out by economist Christopher Smallwood, drew on available research, case studies of CAM treatment delivery on the ground, and interviews with academics, doctors and complementary health practitioners.
As well as the most popular herbal supplements, it also took into account osteopathy and chiropractic treatments, acupuncture and homeopathy.
It found that herbal medicine performed "quite well" in a number of areas, such as arthritis, the common cold, depression, heart and circulatory problems and some prostate problems.
In 2003, just 0.08 percent of the National Health Service (NHS) research budget was devoted to complementary medicines - a figure that the report said is indicative of a huge imbalance in the funds available for research into the cost-effectiveness of conventional and CAM treatments.
In other parts of Europe, CAM has a much higher role in primary health care. According to a study in the New England Journal of Medicine in March, Germany and France lead the way in herbal supplement use in Europe.
In 2003, German health insurance providers reimbursed US$283 million for prescriptions of ginko, St John's wort, mistletoe, saw palmetto, ivy, hawthorn, stinging nettle root, myrtol, phytosterols and curcurbita.
French insurers paid out $91 million in partial reimbursements for ginko, saw palmetto and pygeum, with a total value of $196 million.
Almost $5 billion (at manufacturers' prices to wholesalers) was spent on over-the-counter herbal medicines in all European countries in 2003.
"The weight of evidence we have examined suggests that complementary and alternative medicines could play a much larger role in the delivery of health care, and help to fill recognised effectiveness gaps in health care provision. Illnesses such as anxiety, stress and depression and a number of chronic complaints can often be more effectively dealt with by complementary therapies," said Smallwood.
He is calling for health ministers to invite the National Institute for Health and Clinical Excellence (NICE) to carry out a full clinical assessment of the cost-effectiveness of CAM therapies in the NHS.
However the report also recommends that safety and regulation of CAM therapies be tackled more systematically.
Dr Michael Dixon, chairman of the NHS alliance, said: "This is an important report. Given that 50 percent of GP practices are already providing access to complementary medicine, the question is no longer one of whether complementary medicines have a place within the NHS but which and how much."