Magazine article Public Finance

Picture of Health

Magazine article Public Finance

Picture of Health

Article excerpt

As the NHS celebrates its sixtieth birthday this week, what might its first minister, Aneurin Bevan, make of the service he helped create? A new ten-year-plan, launched this week by health minister Lord Darzi, promises a patient-centred shift in focus, and fresh debates are emerging about the direction of travel. But then, the health service has never been a stranger to controversy, particularly when it comes to its everexpanding funding needs.

Politically and financially the early years of the NHS were turbulent, to say the least - overspending, wrangles about patient charges, worries that demand could not be met and arguments about what it should provide and where.

Today, the NHS might have won the battle against overspending, although to the public the size of last year's surplus - £2bn - looks less like prudence for the future and more like care forgone now. Prescription charges are again on the agenda, with abolition in Wales and Scotland, but not (yet?) in England and Northern Ireland. And, despite the huge funding increases of the past few years, there are still headlines about patients being denied care and renewed calls for alternative ways to fund the service.

Yet over the next few years UK health care spending, both public and private, is set to break new records as it edges nearer to consuming one pound in every ten of the entire measured economic activity of the country.

This year, public spending on the NHS will account for almost 8% of gross domestic product and around 20% of all government spending. And with more than 1.5 million employees, around one in 20 of all working age people are on the NHS payroll. As for the future, all indications are that it's going to get a lot bigger.

The financial origins of the service were, by today's standards, small. For the first full financial year, spending was around £370m, representing about one and a quarter days' expenditure today in cash terms. Allowing for inflation, it would be around £10.5bn, which is still just one-tenth of the total NHS budget in 2008/09.

Demand in the health services first few years was huge, fuelled by millions of people who needed hospital treatment, or a decent set of teeth and spectacles. The resulting overspending fuelled Treasury fears about the financial sustainability of the NHS and the control of public spending. All parts of the service were facing problems. Hospital spending was considerably over budget; spending on dentistry was three times higher than estimated and on ophthalmic services almost five times higher. Overall, the NHS pay bill rose by more than a fifth in one year.

If all this sounds familiar, it's worth remembering that at the time total NHS spending was just 3% or so of GDP. For ministers and the Treasury of the time, however, action was needed. Charging patients was always an option as far as the Treasury was concerned, and in 1951 fees for prescriptions and co-payments for some dental and ophthalmic services were introduced.

The NHS historian Charles Webster reports that in a parliamentary debate on the Bill to introduce charges, Bevan, never short of an ability to deliver a whiteknuckled verbal jab to the throat when required, attacked his own front bench as those 'who appeared as grinding the faces of the poor with all the malice of the Tories but without their excuse for believing in it'.

Bevan would smile now as Wales has abolished prescription charges and Scotland is shortly to follow. The tension between a system funded collectively on the basis of ability to pay (through a mildly progressive tax system) with free access based on need, and one that meets all needs and wants at an individual patient/ citizen level remain unresolved.

Arguments about 'topping up' NHS care, for example, echo similar wrangles in the late 1950s for private patients to have access to prescription drugs on the same basis as NHS patients.

Five years after the inception of the NHS, money worries still troubled the government - now Conservative. …

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