International Journal of Arts & Sciences,

CD-ROM. ISSN: 1944-6934 :: 6(2):19–30 (2013)

Copyright c© 2013 by UniversityPublications.net

THERE AND BACK AGAIN: A SHORT HISTORY OF HEALTH

SERVICE REFORM IN ENGLAND FROM 1909-2012

David Sturgeon

Canterbury Christ Church University, England

The National Health Service (NHS) in England and the UK was established on the 5th July

1948 and marked the conclusion of a series of events and reforms that had been gathering

momentum for a number of decades. Prior to 1948, health service provision had been poorly

coordinated and standards of care were highly variable from region to region. From the point

of view of the patient, therefore, the quality of their hospital, and the standard of treatment

provided, was largely dependent on their geographical location and socio-economic status.

This paper considers the process of health service reform in England over the last 100 years

and explores some of the factors that contributed to the creation of the NHS. It examines the

transformation of the service since 1948, as it has evolved to meet the demands of a constantly

changing social, economic and political environment. Finally, it investigates to what extent the

service is beginning to unravel as service-providers face an increasingly uncertain financial

future in a progressively competitive marketplace.

Keywords: National Health Service, Reform, Market, Consumer, Competition

Introduction

The National Health Service (NHS) in England and the UK came into existence on the 5th July,

1948 and was founded on three core principles. It was to be a universal service, providing

standardised healthcare provision. It was to be a comprehensive service, covering all health

needs; and it was to be available to all citizens equally on the basis of medical need rather than

the ability to pay. Since the day of its inception, however, it has had to evolve to meet the

demands of a constantly changing social, economic and political environment. The architect of

the service, Aneurin Bevan, anticipated this to some extent and commented that the service must

always be ‘changing, growing and improving: it must always appear to be inadequate’ (cited in

Foot, 1973, p.212-3). In common with other countries of comparable economic status, England

has experienced a steady expansion in its health service. However, to a larger degree than

elsewhere, funding and policy issues have become conspicuously political in character (Webster,

2002). To this day, the NHS seems to be in a state of constant transition and organisational flux

as ‘the political tide sweeps backwards and forwards’ (Salter, 1998, p.4). The NHS is about to

undergo another major reorganisation following the ratification of the Health and Social Care

Act in March 2012 and it is widely anticipated that these changes will result in much greater

involvement from the independent sector. Some have gone so far as to suggest that the measures

introduced by the Act will facilitate the transition from a system of healthcare financed by tax to

the mixed financial model of the United States (Pollock et al, 2012ab). However, although the

Act contains much that is radical, it has not come about by chance and in many ways represents

19

20 David Sturgeon

the logical conclusion of decades of pro-market policy dating back to the 1980’s and before. This

paper considers the evolution of health service reform in England over the last 100 years or so,

and explores whether the NHS can be said to be unravelling as service-providers face an

increasingly uncertain financial future in a progressively competitive marketplace.

Lighting the Fuse

In 1968, Aneurin Bevan’s widow, Jennie Lee, remarked that the health service in the UK did not

begin in 1948 but had its foundations in the patchwork of services that existed between the First

and Second World War (Department of Health and Social Security, 1968). In terms of intention

at least, it almost certainly had its roots prior to that. As early as 1909, the Minority Report of

the Royal Commission on the Poor Laws and Relief of Distress recommended that Poor Law

health services be combined with sanitary authorities to create a unified state health service

(RCPLRD, 1909). The report also proposed that an individual’s need for medical care was to be

considered before assessment of financial means and that the poor were to be exempt from

payment altogether (Baggott, 2011). The Minority Report sought therefore, to establish the

principle of free healthcare for the poor as a right and - taken as a whole - anticipated much of

the modern welfare state in the UK (Fraser, 1984). That is not to suggest that it offered a ‘free

ride,’ and under the report's proposals, the work-shy could be sentenced to penal labour for a

matter of months or compelled to undertake compulsorily training (Brundage, 2002).

A Patchwork Service

A recurring theme in the history of healthcare reform in England is the failure to coordinate

services and to standardise provision. For example, the relationship between voluntary and

municipal hospitals was to remain a source of tension right up until the creation of the NHS in

1948. Voluntary hospitals enjoyed greater status than municipal institutions. They relied upon,

and frequently competed for, charitable donations, endowments and public subscriptions. The

more successful institutions, such as the teaching hospitals, could also derive income from

investment. As a result, the distribution and quality of voluntary hospitals varied considerably

throughout the country. Wealthier cities, such as London, possessed many hospitals which were

good by the standards of the day. Smaller industrial towns, with less access to fee paying patrons

or charitable donation, were less well provided for and institutions were typically small (Abel-

Smith, 1978). At the time of the RCPLRD, the only hospitals which made no charge for

treatment were the infirmaries attached to workhouses or the network of isolation hospitals for

infectious diseases (Hardy, 2001). Like the voluntary hospitals, the quality of service provision

provided by these municipal institutions varied greatly. By the early twentieth century some had

x-ray machines and performed an increasing number of surgical procedures (Powell, 1997).

However, in many rural areas, service provision was less comprehensive and patients often

continued to be treated in unsanitary conditions (Crowther, 1983). From the point of view of the

patient, therefore, the quality of their hospital, and the standard of treatment provided, was

something of a lottery (Crowther, 1988).

There and Back Again: A Short History of Health... 21

Between the Wars

In 1918, the Labour Party’s advisory committee on public health prepared a report entitled The

Organisation of the Preventative and Curative Medical Services and Hospital and Laboratory

Systems under a Minister of Health. The report proposed the integration of curative and

preventative services and the creation of a free National Health Service staffed principally by

full-time salaried doctors (Labour Party, 1918). Although the Liberal government of the day did

not act upon many of its recommendations, it did create a Ministry of Health (MH) the following

year. One of the first acts of the new Minister of Health the following year was the creation of

the Consultative Council on Medical and Allied Services under the chairmanship of Sir Bertrand

Dawson. His report of 1920 was ambitious and reflected the optimism that followed the end of

the First World War (MH, 1920; Webster, 1990). He proposed the integration of preventative

and curative medicine under a single health authority which would coordinate a network of local

hospitals and health centres (Baggott, 2004). The report also maintained that provision of the

best medical care should be made ‘available to all citizens’ (MH, 1920, para.3, 7). In the event,

lack of funding and professional consensus meant that the influence of the report on healthcare

policy of the day was negligible (Crowther, 1988). In the long term, however, it proved much

more influential and Sir Arthur MacNalty described it as ‘the parent of all regional schemes of

health services’ (cited in Watkin, 1975, p.111). 1929 saw the publication of the Nation Local

Government Act which sought to simplify the complex system of local healthcare administration

that existed at the time. The founder of the Socialist Medical Association (SMA), Dr Somerville

Hastings, commented that the Act was the key to a ‘complete and unified municipal hospital

system’ (cited in Stewart, 1995, p.344). However, despite the fact that it empowered local

authorities to establish and run general hospitals, by 1939 only about half of them had made use

of these powers (Levene et al, 2004). Hastings remained a vocal exponent of universal healthcare

and, at the 1932 Labour Party conference, called for the abolition of private medicine and the

creation of a State Medical Service (Marwick, 1967; Stewart, 2002). He proposed that this

service would not be for the working class alone but would be ‘a service that the millionaire may

take advantage of…[and]…be glad to do so’ (Labour Party, 1932, p.269). In 1938, the British

Medical Association revised and reissued an earlier pamphlet entitled A General Medical Service

for the Nation but no action was taken due to the crisis unfolding in Europe (Sheard and

Donaldson, 2006).

World War Two

The outbreak of World War Two in 1939 is widely regarded to be the major catalyst for the

creation of the NHS nine years later (Baggott, 2004). The hostilities allowed the Ministry of

Health to take indirect control of health services and in 1939 it established the Emergency

Medical Service (EMS) in anticipation of likely air-raid causalities (Rivett, 1986). The EMS

allowed central government to collectively coordinate both voluntary and municipal hospitals

under the civil defence regional administration (Webster, 2002). Moreover, doctors were

recruited into the EMS on a salaried basis and were expected to work wherever need was

greatest. According to Webster (2002) the Luftwaffe achieved in months what had defeated

politicians and planners for at least two decades. The EMS demonstrated that it was possible to

organise a coordinated system of care that involved partnership and cooperation between the

voluntary and municipal sectors (Ham, 2004). Whiteside (2009) proposed that by increasing and

22 David Sturgeon

standardising pay for medical staff, widened access to services and reducing regional differences

the EMS provided the blueprint for the NHS of 1948.

The Beveridge Report

The Beveridge Report on Social Insurance and Allied Services was published in 1942 and set out

a broad framework for the post-war welfare state (Timmins, 1996). Beveridge called for the

creation of a comprehensive health and rehabilitation service based upon three complementary

components: a policy of full employment, a scheme of family allowances and a National Health

Service. The report also proposed that all people of working age should pay a weekly

contribution and, in return, benefits would be paid to those who were sick, unemployed, retired

or widowed. Beveridge (1942) argued that this system would provide a minimum standard of

living ‘below which no one should be allowed to fall’. The report received and enthusiastic

reception from the media, and opinion polls at the time reported that the majority of the British

public were in favour of the report's findings and wished to see them implemented as quickly as

possible (Addison, 1994). Beveridge understood the benefits of planning for peace whilst still at

war and the publication of his report added impetus to the process of healthcare reform that had

been gathering pace for a number of decades. According to Webster (1990, p.150) policy

development after 1918 involved ‘a gradual erosion of market-related mechanisms’ and a

transition to forms of health care that were more universal in their provision and more

redistributive in their effects.

Born from Adversity

Aneurin Bevan is rightly considered to be the father of the NHS but he also had ‘the good

fortune’ to spearhead a movement that had already gathered momentum (Honigsbaum, 1989,

p.217). That is not to belittle his contribution and without his vision, skill and strategy, the

political settlement that allowed the NHS to emerge and endure would almost certainly not have

been possible (Baggott, 2004). The administrative structure of the NHS in July 1948 was the

product of complex negotiation and represented a compromise situation. It was defended by its

planners as the ‘best that was possible in the context’ and, at the time, satisfied the immediate

requirements of the service (Pater, 1981, p.186). However, it was not a viable permanent basis

for the organisation of a modern health service and Bevan (and others) soon recognised that

reorganisation was both necessary and desirable (Webster, 1995). The most pressing concern for

the NHS in 1948 was spiralling expenditure in relation to demand for services. It had been

widely perceived that the service would pay for itself as people became healthier and national

productivity increased. The Beveridge Report, like the Minority Report before it, had predicted

that the creation of an NHS would increase overall levels of health and fitness which would lead

to an increase in national prosperity as levels of sickness declined (Timmins, 1995). In actual

fact, health service expenditure was much greater than parliamentary estimates had anticipated

and supplementary funding was necessary almost immediately (Ham, 2004). From 1949 to 1950

the Chancellor of the Exchequer, Stafford Cripps, sought to persuade Bevan to accept the need

for prescription and other service charges (Hill, 1993). Bevan refused to budge and stated that he

would prefer to ‘seek economies by prohibiting doctors from prescribing proprietary medicines’

(Public Records Office, 1950, p.100). In the end, however, the new Chancellor, Hugh Gaitskell,

introduced charges for spectacles and dentures from May 1951 and Bevan resigned his position

There and Back Again: A Short History of Health... 23

in protest at what he saw as an attack on the principles of free and comprehensive healthcare

(Morgan, 1985).

Consumer Choice

In 1961, the Institute of Economic Affairs published Health Through Choice which argued that

there was fundamentally no difference between medical care and any other consumer goods

(Lees, 1961). Lees argued that, provided those at need were helped generously, there was no

reason why people ‘should not be free to buy health services from competing suppliers by paying

for them directly or with the aid of private insurance’ (cited in Anonymous, 1961, p.1272). He

believed that ‘consumer choice’ would help to make the NHS more efficient and rid it of its

fundamental weaknesses: ‘the dominance of political decisions, the absence of built-in forces

making for improvement and the removal of the test of the market’ (cited in George and Miller,

1994, p.8). Lees’ vision of a system that actively encouraged competition and consumer choice

was not popular at the time, but it was not without support. Geoffrey Howe, a future

Conservative Deputy Prime Minister, argued that the Conservative Party must limit the role of

state and ‘strive for a large reduction...[in]…public services’ (Howe, 1961, p.61). He also

proposed that people should be allowed to ‘contract out’ of the health service and advocated the

creation of a ‘self-help’ state, in which the individual was increasingly encouraged to provide for

himself and his family (Ibid).

Managerial Efficiency

In 1972 the Conservative Secretary of State, Keith Joseph, argued that significant financial

savings could be made by increasing managerial efficiency and he proposed comprehensive

reorganisation of the NHS (DHSS, 1972). The National Health Service Reorganisation Act

received Royal Assent in July 1973, the 25th anniversary of the NHS, and came into operation

the following year. However, on the very date the New NHS came into being, changes to its

structure were already being considered (Levitt and Wall, 1994). The Conservative government

of Edward Heath had been defeated in a snap election and it was a Labour administration that

proceeded with the reorganisation of the health service. In the event, they introduced only minor

alterations to the plan in order to avoid compromising patient care (DHSS, 1974). The following

year, however, they agreed to establish a Royal Commission on the NHS (RCNHS) to ‘consider

the best use and management of the financial and manpower resources of the National Health

Service’ (RCNHS, 1979, p.1). When the RCNHS eventually reported in July 1979 it was to the

newly elected Conservative government of Margaret Thatcher. In total, it made 117

recommendations which provided strong, but not uncritical, support for the health service. It

recognised that the organisation was overly bureaucratic and that spending rose each year simply

to maintain the existing standard of service (RCNHS, 1979).

The Patient Consumer

The newly elected Conservative government’s plans for the NHS were first outlined in the

consultative paper Patients First which sought to position patients at the centre of the new

service (DHSS, 1979). However, it was the publication of the Griffith Report in October 1983

24 David Sturgeon

that marked the beginning of the managerial transformation of the NHS. The central theme of

report was the need for the introduction of general management at all levels in the NHS. Griffith

argued that the NHS compared poorly with private industry and that the main problem was lack

of accountability as a result of consensus management (West, 1997). In June 1984, the Secretary

of State, Norman Fowler, announced to Parliament that he accepted the recommendations of the

Griffiths Report and a phased program of implementation was planned (Ham, 2004). Klein

(2010, p.121) commented that the publication of the Griffith Report marked a shift ‘from

producer to consumer values’ and one of the key issues highlighted by Griffith was the

relationship between effective management and customer satisfaction. By the autumn of 1987,

however, financial problems in the NHS were leading to cuts in services on an unprecedented

scale. When the offer of additional funding failed to curb public and professional criticism, the

Prime Minister reluctantly announced a full scale review of the NHS (Klein, 2010). A variety of

proposals were submitted, including increasing and extending patient charges, encouraging the

further growth of private health insurance and moving from taxation to social insurance as the

main source of NHS funding (Ham, 2004). In the event, alternative systems of finance were

discounted as it became clear that they were both unpopular with the public and offered little

advantage to the current tax-funded system.

Towards the Internal Market

As the debate on finance stalled, the review focused upon the allocation of resources within the

NHS. Mrs Thatcher wanted funding to follow the patient and it became increasingly clear that

the review was gravitating towards a model of reform based upon the internal market (Timmins,

1995). The idea that hospitals should compete for resources in an internal market had originally

been advocated by the US economist Alain Enthoven in 1985 (Ham, 2004). The White Paper,

Working for Patients was published in January 1989 and provided a framework for much greater

competition and consumer power within the service (DH, 1987). One of the key proposals was

that hospitals and community services could apply for self-governing status as NHS Trusts.

Trusts would be able to employ staff, own and dispose of assets, retain surpluses, and borrow

money from both the government and the independent sector (Rivett, 1998). General

Practitioners (GPs) were also encouraged to act as purchasers of health care services on behalf of

their patients. On the 1st April 1991, the first wave of 57 NHS Trusts and 306 GP fund-holding

practices came into existence as the Conservatives began to implement the economic and

structural reforms outlined in Working for Patients. Although the White Paper confirmed the

government's commitment to the principle of a comprehensive system of healthcare, financed

mainly through general taxation, it also favoured expanding the role of the independent sector

and increased competition.

Putting the Genie Back in the Bottle

By 1994, more than 400 service-providers, accounting for approximately 95% of the NHS’s

activities, had become NHS Trusts (Klein, 2010). By 1997, the majority of patients had enrolled

in the GP fund-holding scheme (Lister, 2005). Throughout this period, Labour continued to

oppose the government’s reforms and promised to abolish the internal market once they returned

to power. The election of a New Labour government in May 1997 brought to an end 18 years of

Conservative rule and appeared to offer the prospect of a new direction for the NHS. However,

There and Back Again: A Short History of Health... 25

although they continued to publicly oppose the marketization of the NHS they also recognised

that it represented the most effective means of service-delivery without recourse to higher

taxation (Webster, 2002). As Ham (2004, p.51) remarked: ‘with the competitive genie out of the

bottle, politicians experienced difficulty squeezing it back in.’ Consequently, despite the fact that

there were clear differences between the ideological orientation of the Conservative and Labour

governments, there was also a high degree of continuity in both the style and substance of their

health care reforms (Baggott, 2004). Perhaps the most notable volte-face by New Labour at this

time was their adoption of the Private Finance Initiative (PFI) whereby NHS Trusts could borrow

money from the private sector to fund growth and development. In October 1996, New Labour

Member of Parliament, Chris Smith, criticised increasing commercialisation within the NHS and

cited the decision to build a PFI hospital in Dartford and Gravesham as evidence of the

Conservative government’s privatisation agenda (Labour Party, 1996). In February 1997,

however, he declared that the only way reverse Conservative underfunding of the service was to

work with the private sector (cited in Webster, 2002, p.211).

Return to the Market

In April 2002, New Labour published the White Paper Delivering the NHS Plan (DH, 2002).

Like Patients First, it advocated shifting the balance of power towards the patient and

confidently asserted that they would henceforth be ‘in the driving seat’ (DH, 2002, p.24). By

ensuring that money followed the choices made by patients, service-providers were required to

compete on grounds of quality rather than price (fixed by regional tariff). The expectation was

that since competition between providers would centre on the standard of care offered, it would

empower consumers to drive improvements in quality (Willcocks, 2008). In an interview with

The Times, Alain Enthoven described New Labour’s plan as a ‘bold wide-open market’, more

radical than the previous government’s version of an internal market system (Charter, 2002). In

July 2005, Creating a Patient-led NHS reiterated the case for practice based commissioning and

stated that Primary Care Trusts needed to consider how to ensure all GP practices were actively

engaged in this scheme by 2008 (DH, 2005). Ham (2009) remarked that the interest shown by

New Labour in practice based commissioning, and the strong parallels with GP fundholding in

the 1990’s, reinforced the view that New Labour was returning to the internal market of its

predecessors.

Anniversary and Economic Downturn

To mark the occasion of the 60th anniversary of the NHS in 2008 the British Medical Journal

and the King’s Fund hosted a debate to consider whether a health service funded by taxation and

available to all, was still relevant in 21st century Britain (Coombes, 2008). Although 65% of the

audience eventually opposed the motion there was a 9.3% swing in favour from the pre-debate

poll (Ibid). The debate served to highlight many of the benefits of a tax funded system but it also

raked over familiar concerns such as inefficiency, value for money and sustainability. The global

financial crisis that followed the collapse of the US sub-prime mortgage industry in 2008

plunged economies around the world into recession (Taylor, 2009). After more than a decade of

unprecedented capital investment, the NHS entered a period of profound financial uncertainty

(Appleby et al, 2009). The NHS Chief Executive’s annual report for 2008/09 advised that the

26 David Sturgeon

service should plan on the assumption that it would need to release between £15 and £20 billion

of efficiency savings between 2011 and 2014 (Nicholson, 2009).

Coalition

In May 2010, New Labour was replaced by a Coalition government led by David Cameron.

Within sixty days of its formation it had launched what was arguably the biggest reorganisation

the NHS had ever seen. The White Paper, Equity and Excellence, announced that responsibility

for commissioning services would be devolved to GP practices and that they would be free to

buy services from ‘any willing provider’ (DH, 2010, p.17, 27-30). The Paper also proposed that

all NHS Trusts should become Foundation Trusts within three years and that the cap imposed on

private work should be removed (DH, 2010). Despite strong opposition to the proposals, the

Health and Social Care Bill was published in January 2011 and, at 550 pages, was three times

longer than the original NHS Act of 1946 (House of Commons, 2011). The length of the

document did nothing to reassure public or professional confidence and more-and-more

commentators expressed concern regarding the increased role of competition and the perceived

threat of creeping privatisation (Timmins, 2012). The government was undeterred and the Prime

Minister declared that he was prepared to ‘take a hit’ in terms of popularity over NHS reforms

that he considered ‘right’ (cited in Timmins, 2012, p.174). In the event, over 2000 amendments

were made before the Bill finally became an Act of Parliament in March 2012. It had been 14

months since the legislation had first been introduced to Parliament but, ultimately, the

government achieved much of what it set out to do (Hawkes, 2012).

A Universal Service?

Prior to the creation of the NHS in 1948, health service provision had been poorly coordinated

and highly variable in terms of quality and efficiency. Voluntary hospitals competed with one

another for income and were able to derive revenue from investment. Today, NHS Foundation

Trusts are expected to compete for business based upon quality of service provision. They are

also encouraged to undertake private work for profit and to take advantage, where appropriate, of

foreign markets by establishing NHS franchises abroad (Vize, 2012). In any marketplace,

however, where there are winners there are also losers and the Department of Health recently

identified 21 trusts (about a tenth of the hospital network) considered not to be clinically or

financially viable in their current form (Triggle, 2012a). The Public Accounts Committee (PAC)

also expressed concern that the government could not offer adequate assurances that financial

problems would not damage the quality of care or equality of access to all citizens, wherever

they lived (PAC, 2012). A report by the Audit Commission confirmed ‘stark geographical

differences’ in health finances around the country with a disproportionately high number of

struggling Trusts situated in outer London and the South East (Audit Commission, 2012, p.2, 5-

6). The prospect of NHS Trusts failing to provide acceptable standards of care sets a worrying

precedent and provides a reminder of the lack of standardisation that existed before 1948.

The Independent Sector

An increasing number of non-emergency NHS procedures are being undertaken by independent

sector providers. The Health and Social Care Information Centre (2012) revealed that private

There and Back Again: A Short History of Health... 27

providers treated 345,200 non-emergency NHS patients in 2011-12, a 32,900 rise on the previous

year. Although these services are provided on behalf of the NHS it raises questions regarding

efficiency and equity of service provision from region-to-region. It was also announced in

January 2012, that a private firm would, for the first time, take over the running of an NHS

hospital (Triggle, 2012b). By October the same year, however, the hospital's board revealed that

it had lost £4.1 million, double what it had expected over the six-month period (National Health

Executive, 2012). Many commentators have expressed concern at the ad hoc way in which the

government seems to be dealing with the issue of financial failure in the NHS and the of

chairman of the PAC commented that the government seemed to be ‘inventing the rules and

processes on the hoof rather than anticipating problems and establishing risk protocols’ (Hodge,

2012).

Conclusion

In order to address the financial difficulties that have beleaguered the NHS since its inception,

consecutive governments (from the 1980’s) have implemented an increasingly competitive and

pro-market model of healthcare service provision. This has resulted in a system in which service-

users have been encouraged to become more-and-more assertive regarding their expectations of

how the NHS should operate and the standard of care they receive. In order to address this,

service-providers have had to borrow money from a variety of sources in order to improve

infrastructure and service provision. However, the need to make large scale efficiency savings

has left many NHS Trusts in severe financial difficulty and unable to repay their debts. John

Appleby, chief economist at the King's Fund, recently reported that 40% of NHS finance

directors said that they expected ‘patient care to worsen over the next few years as savings and

productivity gains become harder to deliver’ (Appleby, 2012, p.3). A recent report by the

Institute for Fiscal Studies (2012) also advised that more charging for services and rationing of

care may be required as the NHS faces its toughest test since the early 1950s. It is interesting to

contrast the current situation with the steps taken to move away from market-related mechanisms

after the First World War. Many of the benefits of increased state intervention which occurred

following the creation of the NHS have subsequently been eroded by the on-going drive to

impose the laws of the marketplace onto the NHS (Webster, 1990). Consequently, despite

assurances from successive governments that the NHS continues to offer an equitable and

universal service in keeping with the principles outlined by Bevan in 1948, service-users today

find themselves in a paradoxical situation where, to paraphrase Orwell: everybody is equal but

some are more equal than others.

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