National Health Service Act 1946
Last Updated: March, 2019

After the Second World War, the Poor Laws were abolished. In their place came the 1946 National Health Service Act and the  National Assistance Act 1948  created by Aneurin (Nye) Bevan.

These two Acts created two parallel systems of care:

National Health Service Act 1946

The NHS Act 1946 nationalised the hospitals and established a universal system of health care organised along collective principles (redistribution, risk sharing and equity) and free at the point of delivery. No other Western country could match the low costs of the NHS because no other country had so radically eliminated market mechanisms within their health services.

However, unavoidable compromises were needed to bring the NHS into existence because; money was needed to rebuild the country following the Second World War, there was strong opposition to the NHS from well-to-do consultants and Tories, and the cost of nationalising the hospitals was very high. Referring to the consultants opposing the creation of the NHS, Nye Bevan said: I stuffed their mouths with gold.

The architects of the NHS were well aware of its inherited weaknesses and design flaws, but they always hoped that political leadership responding to popular opinion would allow these problems to be designed out at a later stage.

The following health care providers were allowed to remain as self-employed - independent from the NHS:

  • GPs
  • Dentists
  • Opticians
  • Pharmacies

The following services were funded from the NHS budget, but not incorporated into the NHS planning framework, instead they were made the responsibility of local authorities (See section 2 below):

  • Community health services
  • Preventative services
  • Child health
  • Public health
  • Ambulance services

Regional Health Authorities had responsibility for planning services for populations of 1 to 5 million people.

District Health Authorities had responsibility for planning services for populations of about 250-thousand people. Their responsibilities included providing district general hospital services and community-services.

Local authority services were means-tested, but NHS services were free at the point of delivery. Those services integrated into the NHS including; consultations, investigations and treatments, were so seamlessly and efficiently integrated that treatments had no price tag as there was no internal pricing system. Excluding external suppliers (particularly the pharmaceutical industry) and private patients, their was no invoicing and no payment of bills. The idea of reducing health care to a series of transactions on a balance sheet was seen as ludicrous and one of the mistakes of history.

The absence of a pricing system didn't mean that there were not strong financial controls. Expenditure was accounted for in meticulous detail - details that are absent from the accounts that hospital Trusts now publish. The cost of bureaucracy was kept to a minimum, and the relative simplicity supported complete financial transparency.

NHS consultants were allowed to undertake private work outside of the NHS, which meant that there was still a choice for those people who had lots of money to opt-out of the NHS if they preferred to be treated privately. Unfortunately this established a limited two-tier system, meaning a consultant might offer a patient the option of a private clinic appointment in order to be bumped-ahead of a queue for treatment in the NHS.

The fact that the above health care providers and services were not fully incorporated into the NHS, made it easier for successive governments (starting in earnest with the Thatcher government of the 1980s) to begin privatising services.

The 'internal market' introduced by the  NHS and Community Care Act  at the start of the 1990s, created a complex pricing system for individual treatments; taking into account all the costs associated with that treatment including such things as rental income, repairs, maintenance, water, energy, staff time, goods, services bought in, and the share of the administration costs needed to manage the pricing system.

National Assistance Act 1948

The National Assistance Act 1948 put local authorities in charge of a subsidiary system for those in need of other care and attention. This care was primarily concerned with frail older people, but unlike the NHS care it was means-tested and subject to a statutory charges.

Aneurin Bevan who introduced these Acts intended the National Assistance Act to provide care for the type of old person who is still able to look after themselves but who is unable to do the housework, the laundry, cook meals, and things of that sort.

This parallel system was exploited by Thatcher and later governments to assist the fragmentation and privatisation of services, and build the private care home sector. The sort of elderly people now in care homes often have far greater needs, receive inadequate care and can be bankrupted paying for it. These same people would once have received the higher levels of care they need free as part of the NHS. (See  long-term care ).

The hotel style care homes envisioned by Bevan took time to build, so from 1948 onwards, charities played a role in providing residential homes and community-based services. In 1972 charities were still providing 18 percent of residential care for older people.

While local authorities developed their own care homes, they were at first not allowed to provide domiciliary services themselves, and instead encouraged to seek voluntary sector provision. Eventually the voluntary sector could not cope, so in the 1960s local authorities were given permission to develop their own domiciliary services, and these services remained dominant until the end of the 1990s.

As mentioned above Bevan's plan was that sick and infirm elderly people should be treated for free by the NHS, and local authority residential care homes would be like hotels for frail elderly people. But by 1965 local authorities were told that they were expected to take on responsibilities for residents who fall ill, whether for short or long periods, [but] whose needs are no greater than could be met in their own homes by relatives with the aid of the local health services.

In addition to this, successive governments were unwilling to invest in the upgrading and construction of high-quality long-term care facilities and domiciliary care for the elderly; this is one of the main reasons why the private residential and nursing home industry was able to grow rapidly in the 1980s and 1990s.