That sacred cow the NHS


This week on Facebook I posted some links on the National Health Service (NHS). By the 1980s if society was divided by notions of a welfare state all strata of society were united in giving the NHS the status of a sacred cow. Yet from the moment of its inception in 1948 by the newly elected post World War II Labour Government, the NHS was unaffordable as a free service. Aneurin Bevan who, as the minister of health, was responsible for establishing an NHS that included free diagnosis and treatment for all, resigned from the government in 1951 as a protest against the introduction of prescription charges for dental care and spectacles.

The concept of the NHS was key to the Social Insurance and Allied Services report¹ written in 1942 by Sir William Beveridge and commonly known as The Beveridge Report. In it he proposed a real insurance contract of pooled insured risks, in which the premium payments reflected the value of potential benefits. Beveridge’s report included the following three basic assumptions about post-war society: Firstly — that government policies promoted full employment; secondly, family allowances payable to all households with children (regardless of whether the parents were in or out of work) and thirdly a free, universal, National Health Service (NHS).

Beveridge wrote in his report, ‘Benefit in return for contributions, rather than free allowances from the State, is what the people desire,’ preferring the term social service state with an emphasis on duties rather than rights. By the late 1950s Beveridge believed that the original ideas included in his report had been subject to political manipulations that effectively reversed his intentions. He eschewed both the caption Welfare State and the title Beveridge Plan, regarding them both as being political advertising slogans leading to a gross misrepresentation his intended social service state.

The pillar that underpinned Beveridge’s planned social service state was a government policy that promoted full employment, as only a fully employed work force could sustain the expenditure implicit in his report, especially the envisaged National Health Service. As Beveridge had written, it was necessary for the employed to not only make contributions to a fund that would cover their own demands placed on a social service state, but would also cover the demands made by the indigent who — through no fault of their own making — were not able to contribute. This assumption of full employment gave rise to the National Insurance Fund which was intended to give people an incentive to take extra steps, such as saving, thus providing themselves with more than the minimum benefit entitlement advocated in the Beveridge Social Insurance and Allied Services report¹.

The funding of the NHS as proposed by Beveridge was rejected in favour of it being funded out of general taxation and since its inception the NHS demand for expenditure out of general taxation has grown larger each year. Apart from a small element of patient charges (1.2%) monies are taken from the National Insurance Fund to add to a publicly funded NHS, which continues to be regarded as sacred cow. In its current form the NHS has a ravenous maw and yet is that can of worms that places an ever increasing demand for expenditure on the finite revenue inherent in government fiscal policy.


Monday —King’s Fund forecasts £2.3bn NHS deficit. Published in February this report can only guess at the deficit in an organisation that is pressurised to increase ‘productivity’ while at the same time introduce measures that must negate any such increases.

Tuesday — Why £8bn is a zombie figure that won’t save the NHSTrue £8bn won’t save the NHS but politicians will continue adding to this figure in their political gamesmanship. It’s impossible to control expenditure in an organisation deemed too big to fail and which inevitably leading to increased public sector borrowing.

Wednesday — The Health of the Nation: Averting the demise of universal healthcareThe Institute for the Study of Civil Society (Civitas) have just published a collection of essays by a cross-section of leading commentators exploring the background to the present crisis and, more importantly, some of the ideas that need to be considered for a reform of the NHS.²

Thursday —   Buying out PFI hospital could save £217m. In 2011 I called PFI politically financed insanity and it would seem that I was right. PFI costs are rarely discussed in the NHS debate and never conflated with the cost of NHS patient care. Yet PFI costs are an integral part of NHS costs, funded (in theory at least) out of the overall costs of the NHS. Buying out of a PFI scheme requires current expenditure to be increased in addition to the ongoing running costs of the NHS with the inevitable consequence of either increased taxation or borrowing — or both. The alternative is a reduction in patient care or the demise of free, universal, health care.

Friday — NHS reforms should be included in deficit debateStatements claiming that by 2020 the NHS will be billions of pounds in the red make its future look unaffordable and I would opine that in its current form we are already beyond that point. The article looks at those costs included in the running of the NHS (including PFI), which are largely a source of ever changing government intervention. So far the imponderable costs relating to a definition of purpose for the NHS are simply figures thrown up that bear little relationship to the needs and the means of a properly funded NHS.


It’s now over 70 years since the Beveridge  Social Insurance and Allied Services report¹ was written, during which time successive post war government administrations have constantly changed their fiscal policy with regard to its implementation. Beveridge’s plan for a social service state was based on the structure of a society that prevailed at the time it was written and which was expected to continue after the war. A society in which (mainly) the men worked as the breadwinner and women stayed at home to bring up children. There was little realisation of how much the war would change the structure of society bringing about inexorable changes, which are still occurring and which are always a source of contention.

The tenets of a social service state were underpinned by the notion of full employment and a sense of duty rather than rights. Given the way that the structure of society has dramatically changed post WWII, the political failure to introduce the social service state envisaged by Beveridge may have exacerbated the social problems some of those changes have introduced. Beveridge was prescient in thinking that the term Welfare State implied a Santa Claus State and nowhere has the growth of this Santa Claus State been encouraged more than by the political use of the NHS³. Sickness and in particular disability benefits, have been used to disguise successive government failures in achieving the full employment that Beveridge envisaged necessary.

¹ Beveridge Social Insurance and Allied Services report  (pdf)
² The Health of the Nation: Averting the demise of universal healthcare (pdf)
³ The Evolution of Disability Benefits in the UK: Re-weighting the basket (pdf)

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Hello, I’m Ed Conway, Economics Editor of Sky News, and this is my website. Blogposts, stuff about my books and a little bit of music

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