Government Funding of the UK National Health Service: What does the Historical Record Reveal?

Abstract

Objectives: To examine the historic funding record of the UK National Health Service (NHS) by year (1948–1997), political administration and political party. Methods: Construction of a deflated expenditure series between 1948 and 1997 from published sources of cash spending for each UK country and by four main NHS budget heads using extrapolated NHS-specific inflation measures for each budget head. Analysis of the resultant real funding record for the UK NHS by year, political administration, political party and pre-general election years. Results: A historical funding record constructed from a number of official sources appears to show noticeable differences in volume levels of government spending on the NHS in the UK between political administrations and between political parties. All administrations (apart from the 1951–1955 Churchill/Eden government) have increased funds to the NHS over and above the level of NHS-specific inflation during their periods of office. Labour administrations have increased average annual real percentage funding by around 3.75% compared with an average increase of 2.33% for Conservative administrations. It does not appear that incumbent governments spend more than the long-run trend in pre-election (or, indeed, election) years. The economic difficulties of the mid 1970s (primarily the oil price shocks) appear to have realigned NHS spending at a lower level compared with spending rates in the 1950s, 1960s and early 1970s. Between 1950 and 1997, NHS cash spending as a percentage of gross domestic product increased by around 0.06% per year, with decreases in this proportion in 25 out of the 48 years examined. A comparatively crude analysis of changes in productive efficiency in the hospital and community health services sector between 1951 and 1991 suggests that there is no significant relationship between financial inputs (adjusted for NHS-specific inflation) and outputs (discharges and deaths). One explanation is that the NHS copes (at unknown cost) in times of financial stringency, but, conversely, does not systematically respond (at least, not in terms of increased output) in times of financial plenty. In policy terms, a very tentative interpretation of these findings would be that improvements in productivity can be brought about by restricting financial inputs and at the same time applying managerial pressure to the NHS to at least maintain (or improve) output levels (through, for example, improvements in medical practice). Conclusions: As a guide to voting, this analysis may confirm some prejudices. However, judging the performance of political administrations in relation to the NHS is rather more complex than a macro analysis of financial inputs alone suggests. The apparently weak relationship between inputs and outputs and the possible ability of governments to increase productivity by restricting inputs (and hence partially to deflect criticism of their funding policy) perhaps confirms other prejudices about the productive slack of large organisations. Again, however, care should be taken in the interpretation of the macro analysis, since the potential costs (e.g. reduced quality) arising from parsimonious funding are not captured by the global output measure used in this analysis.