More NHS charges? Lessons from history

Providing a high-quality, accessible service from a tightly-held public purse is not a new dilemma for the NHS, says Geoffrey Rivett.

Blog post

Published: 08/08/2014

The Health Secretary has quite a difficult job. He is charged with encouraging quality improvements in the NHS while it is, as the Nuffield Trust’s report Into the Red? shows, under considerable – perhaps unsustainable – financial pressure.

As the new two-part edition of my book on the history of the health service From Cradle to Grave, or the Nuffield Trust’s interactive timeline show; providing a high-quality, accessible service from a tightly-held public purse is not a new dilemma for the NHS.

Even prior to the NHS’ formation The King’s Fund remarked, in The Hospitals in the Last Five Years (1938), on the increased expenditure necessary due to the growing volume of treatment and demands for better quality.

So what is to be done? Controlling the cost of supply is difficult for two main reasons

A recurring issue in the NHS has been the financial pressure produced by its very success: as the UK’s population found that it enjoyed having access to tax-funded health care, the NHS sought to extend this by offering the latest and best treatments.

This has generally led to a real-terms growth in NHS funding, so the periods of slow (even negative) real-terms growth during the 1950s, 1970s, 1980s, and now the current decade, inevitably cause problems.

So what is to be done? Controlling the cost of supply is difficult for two main reasons: unlike other public services which can be (and have been) simply cut in response to demands from the Treasury, the public expect to receive free comprehensive NHS care, and will resist anything seen as reducing this right, for example closing their local hospital or downgrading its A&E department.

Second, a significant proportion of the NHS’ costs are attributable to staffing: while pay caps and freezes are another feature of the NHS’ history, they are notoriously hard to maintain over the long term.

So it’s hardly surprising that policy-makers trying to save money have looked at curtailing demand instead; hence the recurring thought that patient charges might be at least in part the solution. The evidence suggests otherwise, however.

Guillebaud, in his classic 1956 report, carried out the first examination of NHS finance. Quite apart from finding that costs were not a major issue, he concluded that ‘no convincing case has been made out for the imposition of new charges’. This was the first, but not the last, examination of patient charges that rejected the idea.

Each time the NHS’ growth rate slowed experts, not least the medical profession, would declare that the end was nigh and Presidents of Royal Colleges would write a warning letter to The Times. Health service gurus would, in response, point out that most developed countries relied on various forms of insurance that imposed a less effective cap on expenditure.

Others would lobby for patient charges to reduce demand and balance the books. Those with an economic perspective would answer that a system of charges was in itself costly and by the time one had exempted the old, the young, the poor and the chronically ill, comparatively few people were left and the sums raised were therefore small. Or that if one believed in reducing health inequalities, imposing patient charges was both counterproductive and ethically wrong.

During the Thatcher years, the NHS at times significantly outspent its budget and in 1988, a review of the health service was announced. A British Medical Journal leader article of the time suggested that either health insurance or higher taxes were needed.

Think tanks urged this or that solution. After a period of some chaos in Whitehall, it was accepted that there was no mandate for change and a tax-funded system persisted. It was hoped that an internal market might generate efficiencies – but no new patient charges were introduced.

Once more we have a looming financial black hole, possibly as big as £2 billion a year. Once more there are letters to The Times. The Nuffield Trust polled the views of 100 health and social care leaders: nearly half the respondents felt that a future increase in the scope and/or scale of patient charges is likely.

But just take a quick trip to the Republic of Ireland, post-Celtic Tiger, to see the effect patient charges have. While the poorest may get free care, patients are asked if they have private insurance, to bring cash or a credit card to their consultation; and GPs are loath to accept a scheme to give all children a health card entitling them to free care.

Specialists prefer cash to cheques. Aneurin Bevan – and my own mentor Sir George Godber (who also helped found and plan the NHS) – would turn in their graves. A recent Commonwealth Fund Report shows how cost-free access to health care helps to place the UK at the top of the quality league table, and also the effect on health that poor access to care has within the US.

So the NHS has a looming financial black hole, as it has had in the past. Supply costs are hard to control, though the quest for more efficient care models goes on. In an era of expensive but potentially life-saving treatments and an ageing population, demand is only likely to increase. But as others’ experience and the NHS’ own history shows, increasing charges is unlikely to be an effective way of balancing the books.

Geoffrey Rivett is a contemporary health historian and author of the website: Please note that the views expressed in guest blogs on the Nuffield Trust website are the authors' own.

Suggested citation

Rivett G (2014) ‘More NHS charges? Lessons from history’. Nuffield Trust comment, 8 August 2014.