Friday 27 July 2018

The UK NHS – 70 years but why was it necessary?

The UK NHS at 70 years  – but why was it necessary?

The UK is celebrating the introduction of the National Health Service, 70 years ago. It is however a time for reflection rather than celebration. The "celebrations" usually describe advances in medical practice that have occurred in many nations, advances that are far from specific to the UK NHS.

Why is it that in 1948 the UK introduced a nationalised health care system (known as the NHS) whereas this had not happened in other countries and has not happened subsequently outside the UK?

The NHS was not introduced out of ideology but out of necessity. The many independent hospitals were effectively bankrupt, and rescue by central government was the only acceptable option at the time. It proved to be very successful.

Blackburn Royal Infirmary, opened 1862

The voluntary hospitals of the UK, the infirmaries, had developed widely during the 19th century in response to an increasing number of industrial accidents. They were primarily centres of surgery, but staffed mainly by physicians; surgeons had a technical function without day-to-day patient care. 

The local authorities, the town councils, also developed hospitals, but they were more orientated to chronic diseases, and also tuberculosis, acute fevers, care of children, and maternity care. There was generally rivalry rather than co-ordination between the hospitals and the infirmaries.

The local authority hospitals were funded by the town council, but there was no formal or regular funding of the infirmaries. They had been set up by large donations from local industrialists, and funding continued to be on the basis of philanthropy. Donations from citizens were constantly required.


During the late 19th century hospital activity was increasing substantially but philanthropy was diminishing. The infirmaries were drawing on their financial reserves. A new and regular source of funding was necessary and the answer lay in Germany, administered by Chancellor Otto von Bismark.

Bismark had introduced social insurance, an insurance system in which each week working people paid  a compulsory income-related tax into a fund, so that at times of need (illness, unemployment, major injury, old age) they would receive payment from the fund. This was an important social advance, very relevant to the new industrial nations.

Lloyd George

Social insurance was introduced in the UK in 1911, by the Liberal party Chancellor of the Exchequer David Lloyd George. It included general practice family medicine, but not hospital care. This had long-term ramifications that we experience in the 21st century.

General practice family medicine adapted well to social insurance, but the doctors were paid on the basis of an annual capitation fee, rather than payment by item of service which had developed in other European countries. 

The infirmaries were desperate for the introduction of social insurance. It would mean that, as in the German model, an episode of  hospital care would generate a bill, which would be passed from the patient to the insurance organisation that collected the social insurance fund. The vital part of the process was that an increase  activity would generate increasing income to the infirmary.

This is the model that proved to be very successful in other European countries. It was not introduced in the USA due to failure to pass legislation for a health tax that would be compulsory – the Statue of Liberty represents liberty from government laws.

But  in the UK hospital funding from the 1911 Social Insurance was not to be. The proposal proved to be unacceptable to the hospital consultant body of the British Medical Association (BMA). The consultants felt that a cash payment from patient to doctor was right and proper, and they appear to have given no consideration to the plight of the infirmaries.

Clement Attlee
And so the infirmaries continued after World Ward One with serious underfunding that was not sustainable. The crisis of the 1930s was postponed by the greater challenge of World War Two. However within government, rescue of the nation's infirmaries (including the major teaching hospitals) was being planned. The proposals were accepted by the new Labour government in 1945 (Prime Minister Clement Attlee) and the NHS was introduced on July 5th 1948. The key politician was the charismatic Welsh Minister of Health, Aneurin Bevan.

Aneurin Bevan

The option of local government taking over the infirmaries was against the wishes of the BMA and it would not have helped as a nation funding system was essential, along the lines of the German Social Insurance. But in the UK there was no insurance organisation that could deliver the enormous task ahead. A solution was urgent. The government stepped in to fund hospital and indeed all health care from central taxation. The expenditure of hospitals in 1947 was  provided as income for the hospitals in 1948 and beyond.

The opportunity was taken to integrate all hospitals within a community under a Hospital Management Board. Hospital care was free at the point of access.

The immediate crisis was solved, but activity increased at a greater rate, no doubt because it was now free to all, and this continued continually during the subsequent 70 years. The financial pressures were effectively transferred to central government, which had taken responsibility for funding health care through the new NHS.

If an insurance system of funding had been adopted, hospital income would have increased with activity. However funding as a block grant by central government has meant that activity and staffing (70% of expenditure) have been constrained to keep within the cash allocation.

The tension has continued for 70 years. We end up with the UK NHS being very cost-effective (one measure of efficiency) with a large activity being delivered within a certain defined budget. On the other hand other European countries have higher expenditure, more hospital beds, more doctors and other staff than the UK. They also generally have better overall health outcome measures.

The NHS seems to be inadequately funded, but there is also a serious recruitment problem, of doctors and nurses in particular. This restricts the opportunities of spending any additional funding.

Will the UK NHS change to having an insurance base? The answer is "No". Although as in 1911 it would be popular with health care providers, it would be an enormous change and it would be strongly resisted by government and the Treasury in particular. 

The NHS is extremely popular with the public. No doubt it will continue despite its faults and permanent underfunding.