Financial crisis

Surge in demand for NHS

Within a year, the newly created National Health Service (NHS) was already facing financial crisis. The Minister of Health, Aneurin Bevan, argued that the initial surge in demand was due to a backlog built up in previous years. Given the large numbers of staff employed in hospitals, salaries were a major expense and these could only be reduced through negotiation with the Whitley Council, which regulated National Health Service (NHS) employment. Accordingly, the government planned to stabilise salaries in the NHS. Although some savings were made by cuts to hospital capital projects, the Treasury, under Stafford Cripps, believed that the NHS should charge for some items, such as spectacles. Cabinet resisted this, believing that the introduction would be unpopular in the country and would cause political damage.

The financial situation became more acute in 1949, as NHS spending continued to outstrip forecasts. These circumstances produced exchanges between Cripps, determined to obtain additional finance through charges, and Bevan, who was determined that savings should only be made through organisational change. Subsequently, Bevan instigated an inquiry under Sir Cyril Jones to examine NHS expenditure. Jones found that NHS spending was good value for money, and that increases were largely due to inflation. The Cabinet, however, set up a Committee on the National Health Service to monitor expenditure. By 1951, Bevan had been moved to the Ministry of Labour and the Ministry of Health no longer had its own representative in Cabinet. The new Chancellor, Hugh Gaitskell, capped NHS expenditure and introduced charges for dentistry and ophthalmology through the National Health Service Amendment Act of 1951.