The UK’s National Health Service and Governance

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In the UK the National Health Service (NHS), once described as “the closest thing the English people have now to a national religion” is in the spotlight once again as the junior doctors are about to embark on a series of strikes. How can an organisation so popular with the public have developed such a bad relationship with a key group of employees? We look here at the failings in corporate governance which have led to this situation and suggest how applying our Five Golden Rules of Good Corporate Governance could help the situation.


Brief history of the NHS

The first steps

Central government’s first direct financial involvement in public health followed Lloyd George’s National Insurance Act of 1911, bringing together a contribution from employees and employers, topped up by an addition from the state, and requiring workers to register with a doctor in general practice, who would then provide them with free medical care. This didn’t cover anyone not paying national insurance contributions, that is, the non-employed population, which included wives and families.

Progressively, it became the consensus that dependents should also be covered, and the Second World War advanced this thinking as Voluntary hospitals and Local Authority hospitals were required to provide free treatment to injured members of the armed forces. Bringing together the different parts of the system and including the general practitioners (GPs), while supporting the whole system financially, became part of the 1942 Beveridge Report which previsioned the Welfare State.

Defining the NHS

When the White Paper was published in 1944, it laid out three guiding principles which have been at the heart of the NHS ever since:

  • services would be provided free at the point of use
  • services would be funded from central taxation
  • everyone was covered for free care while resident in the UK

At this early stage, the British Medical Association (BMA) representing doctors, who had supported the concept, changed its mind and opposed working for the state.

After the War, the Health Secretary of the new Labour government, Aneurin Bevan, devised a National Health Service Act in 1946, and by the time of its introduction in 1948, had overcome the BMA’s resistance and brought them on board.

The original “tripartite” structure of the NHS embraced hospitals (governed by regional boards), primary care (doctors’ surgeries) and community services (clinics, ambulance services etc), but this model came under challenge and in the 1960s plans were laid for the introduction of District General Hospitals for larger populated areas and a new contract for GPs which encouraged them to merge into group practices. During this time costs were rising inexorably. Bevan, famously, had predicted that costs would rise initially but then fall as the population grew healthier. But by the late 1950s the then Health Minister, Enoch Powell, remarked that whenever he talked to doctors the only thing they wanted to discuss was money.

Professionalising the NHS

In the 1970s a major reorganisation created Regional Health Authorities, gathering hospitals and some local authority services into the same structure and, with yet more restructuring, this endured until the 1980s when Margaret Thatcher changed the consensus on the role of government in the UK.

In 1983 the Griffiths Report recommended the appointment of general managers and that clinicians should become more involved in management. This led to the appointment of consultants as managers – regardless of their lack of experience in management and placing them in the position of poachers turned gamekeepers in relation to their colleagues.

Too big to manage?

In the late 1980s the Conservative government produced two White Papers addressing the growing problems in the NHS and proposing the creation of an “internal market” in the services provided. At the time, it was suggested that the NHS was so big and so complicated that the Civil Servants in the Department of Health had concluded that it was impossible to understand or to manage and the best thing to do was to break it into smaller elements in the hope that it might then become more manageable. At any rate, the result was the 1990 National Health Service and Community Care Act that created the internal market in which hospital “providers” offered services which primary care GP “fund holders” purchased. The providers became NHS Trusts and were expected to compete and to survive financially.

Interestingly, during this period, the author conducted a survey of the NHS District General Managers to coincide with the 40th Anniversary of the NHS, on the balance between cost, services and quality as they perceived them. The results are worth thinking about nearly thirty years later, as they indicate that some of the fundamental problems faced then are still causing difficulties today. We’ll return to this later in this article.

A re-think, or what?

The incoming Labour government in 1997 promised to abolish the Tory internal market and return the NHS to the pure principles of its founders. However, after not doing very much in their first term, in their second term they introduced measures to actually strengthen the internal market as they sought to rein in the inexorable rise in the cost of the “free at the point of use” service. Between 1997 and 2013 the annual cost of the public health service rose from c£80bn to c£128bn. Compare this with the 1948 cost of c£0.3bn.

In the past few years there have been regular attempts to make the NHS more efficient, to improve the career paths of doctors, to tighten controls over quality and to introduce modern information systems. Many of these initiatives have caused resentment and some, like the IT projects, have been expensive failures. In an attempt to set some overarching principles, in 2012 the government published The NHS Constitution for England, which set out the latest version of the objectives of the NHS, outlining the rights that patients and staff are entitled to and setting out the NHS system of accountability, transparency and responsibility.

With all this attention focused on it by so many people and with so much experience gathered over nearly seventy years, why is a key group, junior doctors, so upset that they have been promising a strike for nearly a year over the new contract that is now being imposed on them?

Issues over the years

What they thought in 1988

The main findings of the detailed survey carried out by the author in 1988 were as follows:

  • managers wanted to have the freedom to manage like private sector managers; unfortunately, professional managers were mistrusted by the doctors and, to a lesser extent, by the nurses
  • quality was seen as of overwhelming importance, but invariably suffered due to cost constraints
  • the internal market was seen as no more than a partial answer to the operating and financing challenges facing the NHS
  • more money was regarded as essential to delivering the necessary quality and range of desired services
  • the provision of common financial and information services was seen as useful but many managers wanted more autonomy and felt they were inhibited from making improvements by centralised controls
  • it was generally felt there was great potential for improvement in the effective use of most groups of staff, particularly through improved training and development and improved motivation and reduced turnover.

It almost seems as if this could have been written yesterday.

What they think today

The dialogue is probably more sophisticated now and the technology in patient treatment certainly is. But the fundamental problems are much the same, namely:

  • the NHS provides a service that is universally seen as essential – the provision of health care – and provides it free at the point of use
  • in any other field, the laws of supply and demand would use the pricing formula to bring about a balance, but in their absence, demand for a popular service which is apparently free becomes potentially infinite
  • hence the inexorable rise in costs, notwithstanding Bevan’s expectation that demand would fall in a healthier population
  • moreover, following the evolutionary development of the NHS, the doctors, and the BMA, have always been semi-detached, as, to a lesser extent, have the nurses, owing primary allegiance to their professional body, the Royal College of Nursing
  • hence the clinical staff, particularly, regard themselves as professionals in the same category as top lawyers and have little respect for the professional managers who are not doctors and who have to implement policies created at the centre (eg Junior Doctors Contract) and cannot interpret them to meet local conditions
  • and the general public, as the consumer (or customer), doesn’t relate the amount it pays in taxes to the use it makes of the NHS, but takes the provision of a top quality service for granted and complains when it falls short of the highest standards through shortage of funds
  • and to cap it all, the politicians find it easier to play politics with the NHS than to tackle the fundamental issues at the heart of the new English religion.

Tackling the problems through a new approach to governance

Flaws in the concept

Over the years the three fundamental principles of the founding days of the NHS have been sacrosanct, leading to the insoluble cost problem. Moreover, the initial centralising efforts, while understandable in the context of the day, have been adhered to by successive governments even while paying lip-service to decentralisation in setting up the internal market. The most recent move towards giving the NHS a degree of independence from government control still leaves a giant centralised organisation – some say the biggest employer in the world apart from the Chinese Peoples’ Liberation Army!

What do the key stakeholder groups think?

The staff, in the shape of the junior doctors (and after them, perhaps their senior colleagues when their contract next comes up for renewal) are clearly most unhappy with the current arrangements. Whether there is a degree of politicking in the planned strike, the imposition of a country-wide contract clearly gives little room to deal with local requirements in particular specialisms.

The general public, as consumers, are happy, and indeed expect, to receive free healthcare at the point of use (who wouldn’t) but are much less happy about the quality of the service provided (waiting times to see doctors, overcrowded Accident & Emergency departments, infections in hospitals etc).

The general public as “owners”, that is taxpayers, are most reluctant to put their hands in their pockets for the sort of tax increase required to fund the big quality improvement that they regard as necessary. Comparisons of the UK’s position in international leagues showing England’s spending as a percentage of GDP falling back in comparison with some of our peer countries are going to get little support outside the ranks of health professionals.

And the government, supposedly representing the “owners” is having a rotten time managing the NHS through the Department of Health.

Necessary changes

So the key policy steps would appear to be:

  • in the short term, impose modest but significant charges at the point of use to bring an element of control into the demand for services
  • in the longer term, invest in technology to bring artificial intelligence and the latest development in technology to bear to greatly increase capacity
  • progressively break down the centralised management and policy-making  structure to permit much more flexibility and local autonomy and responsiveness to local conditions

Corporate governance surveys to lead the way forward and lead opinions to acceptable change

A template for success

To gain acceptance for such a radical programme demands a different approach to governance. Turning round deeply established political positions requires a staged approach and would logically start with a pilot, supported by public opinion.

Hence one would first select one of the successful Foundation hospital trusts and analyse why it was able to sustain itself in the very challenging current environment, dependent on central funding, and look to produce a template for replication.

Looking to our Five Golden Rules of Good Governance, we would survey the key stakeholder groups to ascertain how well that hospital meets their expectations and aspirations. This holistic survey would bring out the perceived deficiencies in the current arrangements and suggest potential solutions for consideration by respondents to the survey. The strengths and weaknesses of present policies would thereby be fed into the board meetings of the governors of the trust and, within the restrictions of their current constitution, could lead to improvements.

Achieving a transition

By conducting regular holistic surveys and thus engaging the key stakeholder groups in considerations of governance, not only could the hospital’s current performance be progressively improved but a template could be created for application in other, similar hospitals. Furthermore, attitudes could be progressively changed to prepare the ground for the more radical changes necessary to transform the NHS itself, starting with progressively more autonomy for local health services, embracing primary and secondary care.

In this way the political climate can be progressively changed so that politicians can finally feel able to formulate the necessary policy changes to bring the NHS on to a sustainable path.


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