The Conservatives' attitude towards the National Health Service (NHS) was ambiguous. While the political costs of attacking the service were too high to be seriously considered, the party was committed to tax cuts. In 1951, a committee on the economic situation identified the NHS as a key target for reductions in expenditure. The Chancellor, Richard ‘Rab’ Butler, recommended a one shilling prescription charge, a two pence increase in national insurance contributions, hospital 'amenity' charges and charges for dental treatment - or the suspension of the dental and ophthalmic services. Cabinet, however, was unwilling to sanction the suspension of services and subsequently dropped the proposed increase in contributions. The prescription charge and dental charges were incorporated into the National Health Service Act of 1952.
The Danckwerts award of 1952, which granted GPs an additional £27 million in back pay, increased concerns of Treasury officials about NHS expenditure. In February 1953, the Treasury requested an inquiry into the NHS and related expenditure, and the Guillebaud Committee was set up. The emphasis of the report was to be on preventing further increases in expenditure, rather than cuts. Meanwhile, the Committee on Civil Expenditure, the Swinton Committee, recommended a freeze on hospital capital projects and the extension of the one shilling charge to each item on a prescription.
The Guillebaud Report of 1955, however, found that in relative terms NHS spending had fallen between 1948 and 1954, from 3.75 per cent to 3.25 per cent of GNP, that capital spending was running at only 33 per cent of pre-war levels, and that additional costs implied by an aging population could be financed easily by economic growth. Nevertheless, the government continued to seek economies. In 1956, the Treasury forecasted increases in the cost of the NHS, and recommended the prescription charge increase be implemented.
Given that cuts in expenditure seemed impracticable in the light of the Guillebaud Report, the government turned to the question of increased funding. The Minister of Health, Dennis Vosper, argued for a national health contribution separate from general national insurance. This was broadly supported in Cabinet. The Conservative government's intention was to move to an 'opportunity' state rather than a 'welfare' state, and make the NHS fully funded via national insurance. However, the National Insurance Act of 1957 doubled the national insurance contribution, instead of providing for a separate national health contribution. The government promised that the additional funds would go to the NHS.
Harold Macmillan's government continued to debate cuts in expenditure and increases in funding. Enoch Powell, as Minister of Health in 1960, pushed through a variety of cuts and measures for increasing revenue. The government now concentrated, however, on the longer-term planning of expenditure and increasing the public contribution to fund the NHS, reflecting a wider embracing idea that expenditure on welfare could have economic benefits and, in creating a healthier workforce, make it more productive. Towards the end of 1960, the Cabinet debated and agreed on a further shilling increase in the national insurance contribution, producing a significant shift in how the NHS was funded. In 1962, Powell pushed through the £570 million hospital plan which, although substantial, was less than the extra revenue flowing from increased contributions.