Policy Papers

The past and future of the NHS: New Labour and foundation hospitals

John Mohan |

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Executive Summary

  • The government's current policies on hospital provision rest on a partial critique of previous attempts at planning health care. New Labour alleges that the National Health Service's monolithic, top-down structures have failed to deliver an equitable service, and argues that the recuperation of what is claimed to be a neglected mutualist tradition in British socialism can rectify the democratic deficit in health care.
  • Developments under the NHS cannot be characterised simply as a top-down bureaucracy in the current fashion of government spokespersons. For this fails to acknowledge the real achievements of central planning in improving the distribution of resources. And it is arguable that the failures of top-down hospital policy were due as much to external circumstances as to technical weaknesses in the ability to plan services.
  • The inter-war period, characterised as a mixed economy of welfare, should not be celebrated as a positive example of localism, and its health-care system should not be celebrated as a positive example of mutualism. New Labour's proposals may indeed merely reproduce the shortcomings of the unrepresentative governing bodies of pre-NHS hospitals.
  • The establishment of foundation hospitals is being pursued for largely pragmatic and electoral reasons, with the attendant (but not publicly acknowledged) risk of fragmenting and dividing the service, and of reproducing features which the supervisory and regulatory state of the 1930s was unable to deal with satisfactorily.


New Labour has had to come to terms with the party's previous history. Nationalised and centralised institutions such as the National Health Service (NHS), once praised as crowning glories of previous Labour administrations are now seen as problematic for the party. Many of New Labour's policies are as much about distancing themselves from 'old' Labour as about distancing themselves from the Tories. Here I want to argue, with respect to the introduction of NHS 'foundation trusts', that Labour is selectively reinterpreting history to justify policy measures which are driven by pragmatic and ideological considerations, and which have the potential to fragment the NHS. This entails the construction of a mythical past which has two central elements. Firstly, it denigrates centralism and state planning, allowing the government to insist that only competition and choice can drive forward improvements in the NHS. Secondly, there are proposals to return hospitals to the autonomous status which they enjoyed prior to 1948. These arguments rely on invocation of a mutualist and localist past, in which hospitals were somehow more responsive to the wishes of the local community. These policies might have short-term electoral advantage but they have the potential to impact adversely on access to health care. This is because the establishment of autonomous foundation trusts will remove or weaken some important mechanisms for planning and cross-subsidy within the NHS.

Key to the proposals are the following elements. Trusts will be constituted as autonomous entities, accountable only to a board drawn from a membership comprising local residents, patients, and employees, and operating under a license issued by an independent regulator, rather than reporting to the Government through the Minister of Health. They will have enhanced borrowing powers subject only to the NHS's overall spending limit. Some of their assets will be 'protected' (those assets deemed essential, by the regulator, for the provision of health care) while others will not, and they will be able to engage in borrowing against income streams from the latter. Finally, there will be much greater scope for patients to choose the hospital in which they are treated and, although all trusts will eventually be awarded 'foundation' status, in an interim period of up to 5 years their new status will give the first-movers significant advantages in attracting patients.

This paper comments first on the validity of Labour's critique of the history of the NHS as a command bureaucracy. Second, it disputes the argument that the policy represents a reincarnation of an earlier mutualist tradition, points to the inadequacies of the pre-NHS system and questions the extent to which it permitted genuine community control. The final section considers some of the problems which may arise from the establishment of foundation trusts.

The NHS as a command bureaucracy?

Some might think that Labour are trespassing on ground staked out by right-wing think tanks and the Conservatives. For parallels were drawn in 1989 between the collapse of the state bureaucracies of Eastern Europe, and the urgent need for reform in the NHS. Malcolm Rifkind, for example, suggested that when the NHS was established it was believed that:

the best way to administer resources was through a form of rigid, centralised planning.... the assumption was that there should be nationalisation and ....that that would achieve the best use of resources. That view was shared in eastern and western Europe as well... a structure established 40 years ago does not necessarily make sense in dramatically changed circumstances...in this country and elsewhere we have seen a growing disillusionment with central planning and control...

In startlingly similar terms, Alan Milburn asserted over a decade later that the 1945 settlement was the 'social equivalent of mass production'. The NHS had been founded in a 'world where everyone was given the same rations', so that a minimal form of equity for the population was produced at the expense of choice for the individual.

If one is searching for examples of the command-and-control systems in the history of the NHS, the Hospital Plan of 1962 would appear to fit the bill. The aim was to create regional hierarchies, centred around District General Hospitals (typically containing 600-800 beds) to provide a range of general acute medical and surgical services to communities with populations of 100,000-150,000. More-specialised services would be available in the teaching hospitals at the apex of the hierarchy. The assumption was that a considerable increase in capital investment would greatly enhance hospital efficiency and also effect revenue savings.

Perhaps for the first time there was an attempt to identify and prioritise hospital investment programmes. Communities which lacked provision knew what they were going to get and roughly when they were going to get it (albeit decades away, in some cases). But on closer examination the extent to which this was a hierarchical, bureaucratic and rational exercise is debatable. The Plan was not a top-down blueprint, but the result of the aggregation of proposals of varying quality from various Regional Hospital Boards. Despite the efforts of the Ministry to achieve consistency, in many cases comments on regional strategies show that they were making the best of a bad job. Enoch Powell's comment, as the Minister responsible for launching the Plan, that the government was now planning the hospital service on a 'scale not possible this side of the Iron Curtain', must therefore be taken with a large pinch of salt (though no-one should doubt Powell's commitment: he minuted that he would even be prepared to 'close hospitals symbolically' to demonstrate Ministerial commitment to the project!). Nor was a uniform template simply imposed across the country. Instead, there were extensive discussions on hospital design with management committees and doctors. Some might argue that this meant that professional aspirations were given too much deference, but the consequence was that there remained scope for local variability and flexibility.

Of course, planning also assumes a capacity for execution, but severe implementation problems ensued. The Plan had raised hopes that the decrepit hospital stock would be upgraded, but the economy was faltering and the construction industry proved inadequate. The former restricted the resources available for hospital construction while the latter prevented their effective use, but this does not make a case for 'state failure'. We need, perhaps, to separate failures of policies from changes in the circumstances affecting their implementation. For all the complaints about the Plan and the attendant frustrations, it did guarantee some new hospital construction in locations where it had previously been almost non-existent. But the problems of implementing it led politicians swiftly to disavow it, and insiders contend the Plan was dead within three years of being launched. Symbolically, a published revision in 1966 was titled 'the Hospital Building Programme'- the word 'Plan' being quietly dropped. The oil crisis of 1973 brutally terminated the programme's expansion, expenditure not recovering to its 1972 level until the mid-1980s. The response was a more localist emphasis on policy with a greater retention of physical assets rather than new building, a softer line on hospital closures, a scaling-back of the official view of appropriate hospital size, and efforts to promote standardisation of hospital design and construction. This certainly cannot be regarded as a blueprint or coherent policy, and there were further variations on this theme during the 1980s as the Conservatives placed greater emphasis on estate rationalisation and reinvestment of proceeds of land sales as a way of funding capital developments.

All this suggests that a period of hierarchical, top-down planning in hospital provision was at most short-lived. It is worth recalling that there were good reasons why such a planning exercise was launched and specifically why it took the form it did, namely, District General Hospitals serving a defined catchment. This made possible the integrated planning of services for a defined population, not just in terms of making hospital beds available, but also in terms of developing parallel community-based services (even though provision of the latter was variable). But elements of localism, markets, and partnerships with local communities never really went away. Caricatures of the NHS as a command bureaucracy are surely vitiated if we recall that the key decisions about committing resources are made - and, by and large, have always been made - by individual doctors. Moreover the distribution of hospital medical staff has always been shaped, at least in part, by market forces, in the form of opportunities for private practice. Commentators on the post-1991 era in the NHS have, moreover, emphasised the extent to which the 'market' era was in fact characterised by management of the market or even what Donald Light called 'dictated competition, which was perhaps a contradiction in theory, but not in politics'. It is in fact the New Labour government that has adopted highly centralist policies, exemplified by its rigid specification of targets.

The more important point of principle concerning New Labour's policies is where it places them on the ideological spectrum of contemporary health care policy debate. For their references to the pre-reform NHS as a command bureaucracy are being used to justify pro-market policies which in certain respects go even further than those of the Conservative successors to Enoch Powell. Ironically, the Hospital Plan endorsed by Powell accepted restrictions on patient choice in a way that New Labour's proposals do not. For they are proposing that hospital services should be driven by the expressed preferences of patients and at the same time removing controls on hospital borrowing powers. Thus they risk losing their grip on the key levers by which the government can steer the development of hospital services.

Mutualism before 1948?

Labour have claimed that they are merely drawing on neglected traditions in socialist thought which are consistent with their aspirations. There is a recognition of the achievements of the post-war settlement, but this is combined with an insistence that governments must not become prisoners of it. With characteristic 'third way' rhetorical antithesis, it is asserted that changed socio-economic circumstances require alternatives to 'monolithic health care provision' (i.e. the public sector) on the one hand and shareholder-led-for-profit providers on the other. Thus Ian McCartney and Peter Hain describe the proposals for foundation hospitals as emanating from a cooperative and mutualist tradition. There are also proposals from think tanks, which climb on board the same bandwagon. For example Mutuo state that 3118 independent hospitals, many of which were 'steeped in the not-for-profit traditions of mutuality', were nationalised in 1948.

In fact the actual number of voluntary hospitals nationalised was nearer 1100, the majority of the rest having been provided by local authorities or by central government via the wartime Emergency Medical Service. It is also questionable whether many of the pre-NHS voluntary hospitals could be regarded as cooperative and mutualist enterprises. With a few exceptions democracy and consumer control were not strong features of these hospitals. In historical terms, Labour is suggesting that community control can work, much as it did in the pre-NHS era. But if we look back at that period we find large-scale community participation in raising funds for hospitals (via mass contribution schemes) accompanied by tokenistic representation on governing bodies. Moreover, any serious assessment of the pre-NHS era would have to acknowledge the enormous variations in provision and finance, such that there were five-fold variations in patients' chances of obtaining treatment in a voluntary hospital, depending on where they lived! Assertions, by Arthur Seldon for instance that the NHS 'simply mounted the already-galloping horse of voluntarism' are simply not credible: that horse lacked steering mechanisms and had not found its way into all parts of the country.

Designing representative and democratic structures for organisations operating in the British NHS is complicated because there is no obvious way of delimiting the territory served by a hospital, nor is it easy to determine who the electorate should be. A succession of administrative reforms have failed to solve this problem. Had health care remained the responsibility of local government, and had local government been reorganised around relatively large spatial units, incorporating both urban areas and their hinterlands, there might have been grounds for a direct integration of health care and local government. But there are very large counterfactuals here and a key reason for nationalisation in the health service related to professional antipathy to local government control. For their part, the new proposals may only serve to stimulate loyalty to individual health care institutions, such as hospitals. A persistent problem in the pre-NHS era was that of persuading hospitals to sink their differences and work together rather than developing in an autarkic manner. Strengthening loyalties to individual institutions does not seem sensible at a time when the aim of intelligent policy ought to be about integration of services. Establishing trusts covering integrated hospital and community services might have been one way forward, but probably looked too much like the discredited health authorities which existed until 1991. Alternatively, democratisation could be extended to Primary Care Trusts, the bodies responsible for commissioning NHS care, which serve relatively coherent geographical areas, albeit ones which are not coterminous with local authorities.

Moreover, the proposals for foundation trusts do not, in fact, resolve the democratic deficit. They allow for a self-nominating membership, which may be unrepresentative of the population served by a trust, to elect its governing body. One is reminded of the early days of the voluntary hospitals, the governing bodies of which comprised individuals who were wealthy enough to pay to see doctors privately, rather than attending hospital as a patient. Indeed, the precise arrangements for democratic involvement under the new scheme have been left to the discretion of individual foundation hospitals. For example, their trusts will be free to decide how they attract members and conduct elections to their board. This can only be designed to introduce further diversity of accountability and governance into the nation's health services and raises the question of what sort of national health service is intended by New Labour. Of course, one answer to that might be that the service never has been 'national', but if one is providing broadly the same type and level of services across the board, it would seem reasonable to expect some consistency in their governance.

Independence, incentives and regulation

If we think about the potential future development of the hospital system and what it might look like under these new decentralised proposals, are there any further lessons from history? In terms of planning the disposition of hospital services there is an argument that the combination of the borrowing powers available to foundation trusts, plus the expanded scope for patients to choose their hospital, creates dilemmas which are novel for the NHS but which do have parallels with the inter-war years. The future of the NHS will be as a mixed economy; the government clearly being indifferent as to whether provision of services is by the public or private sectors, as long as the services are provided. A crucial difference is that hospital finance will be underwritten in a way which was inconceivable in the pre-NHS period. However, relaxing restrictions on the borrowing powers of foundation trusts would seem to lead inexorably in the direction of a more commercialized service, because trusts will be thinking primarily in terms of how they resource repayment of loans. This will lead to competition between trusts to capture market share. The parallel with the inter-war years concerns how one articulates a collective interest.

In the 1930s, many of what we would now regard as deficiencies were regarded as strengths. It was acknowledged that no hospital 'system', as such, existed, but this resulted from 'local patriotism' which was 'not without its advantages' according to Ministry of Health officials. There was a degree of Ministerial agnosticism about variations in the quantity and quality of hospital services. The Ministry had next to no dealings with the voluntary hospitals (and had no way of influencing their development) while surveys of local-authority activity in health care had revealed 'variations in the standards achieved'. However, according to the Ministry of Health's annual report, the Minister had no desire to limit the activities of local authorities to 'the maintenance of a mechanical efficiency'. Of course, this was a rather self-serving argument which could be used to justify the hands-off stance of the Ministry. Thus, no attempt was to be made to impose a national blueprint. Attempts to improve access to services largely took the form of exhortations to greater collaboration. These failed to overcome deep-seated problems of articulating a collective interest; even in locations experiencing severe economic depression, where necessity might have been the mother of invention, voluntary hospitals refused to collaborate. And there were no powers available to the Ministry which enabled it to guarantee the provision of services in communities lacking them. Nevertheless, voluntarism was celebrated as being deeply-rooted in the national character, and part of the reluctance to countenance greater intervention (during wartime discussions, for example) had to do with the desire to preserve the positive aspects of voluntarism. Even here, however, informed opinion within the voluntary sector recognised that, in rebutting the advance of state intervention, 'more was needed than this negative argument.... that uniformity does not give the best service'.

Under the new proposals such problems could recur in a modified form. The trajectory of health-systems development is going to be determined by the pattern of investment in buildings until society reaches a utopian condition of prevention or self-management of illness. As that still seems a long way off, a national service needs control over the pattern of service provision. The top-down planning initiatives criticised by Milburn at least had the advantage of spelling out priorities. Under these new proposals, instead, individual trusts will strike their own bargains with banks for the financing of capital development, and the only constraint will be that borrowing must be contained with the NHS's spending limit. Capital development in the NHS will therefore be skewed towards foundation trusts and, even though the intention is that all NHS trusts will ultimately attain this status, in an interim period this must give an advantage to those at the front of the queue.

In the absence of close ministerial supervision of capital development Labour places faith in the role of a new independent 'regulator'. Rather than imposing a top-down blueprint for the pattern of service provision the object will be to ensure that 'reasonable demand' for NHS services is met. The regulator will issue licenses which will specify the services which are to be offered to the NHS by providers (whether in the public or private sectors). In issuing the licenses the regulator will have to take account of existing provision in the locality: this could be regarded as a sensible way of avoiding duplication (there was no way of doing this in the 1930s), or as a way of guaranteeing local monopoly not without its parallels from the maligned era of planning. Either way, what is not specified is how and where 'reasonable demand' is to be met. At least the 1962 Hospital Plan specified the range of services which were to be available for communities of a specified size, but there are no such specifications in the bill introducing foundation trusts and presumably the implication is that demand could be judged to have been met even though it involves much longer travel for patients. Nor is it clear what powers there are to guarantee the provision of services in communities which lack them. Presumably the government hopes that the welcome additional resources being pumped into the service will call forth a response in terms of extra capacity, but one can foresee circumstances in which surplus capacity in distant parts of the country is used to meet 'reasonable demand'. This might be regarded as a sensible use of resources but - like the patients crossing the Channel for treatment - it is only possible if one accepts much greater travel on the part of patients.


The government's justification for its proposals rests on the apparent failure of the NHS, over many years, to tackle health inequalities, but is the way to do this really to enhance the scope for the articulate and well-off to exercise choice, and simultaneously to reduce integration between hospitals and other elements of the health service? Historically, after all, health standards have improved most as a result of public health and economic policies, rather than as a result of health services. A serious attack on health inequalities would involve macro-economic policies which prioritised relatively secure and well-paid employment and a more redistributive welfare state than is currently on offer. Within the health service the foundation trust proposals run counter to a long history of attempts to integrate hospital and community services and this is why commentators view the proposals as a pragmatic attempt to bind the middle classes into the public sector by offering them scope to exercise choice and, in a worst-case scenario, as a Trojan Horse for the creeping privatisation of the service, rather than elements of a coherent policy for improving health standards.

In defending his proposals for nationalisation, Aneurin Bevan, Minister of Health in the post-war Labour government, insisted that 'the self-contained, independent local hospital is nowadays a complete anachronism'. The implication was that the development of health services required a modern, integrated organisation with appropriate links between hospitals and primary and community services. New Labour is rejecting part of this - the belief that such integration is to be established through a centralised administrative structure - and instead creating autonomous trusts in the belief that incentive structures can be designed which will ensure that they pursue collective interests. Inter-war criticisms of hospitals 'pursuing the prosperity of the infirmary rather than the service of the city' stand as warnings of the difficulties of ensuring that such collaboration takes place. If, like the Minister of Health in the 1930s, the government is sanguine about 'variations in the standards achieved', then they should say honestly how much variability they are prepared to tolerate.

Further Reading

Gorsky, M., Powell, M., and Mohan, J. (2002), 'British hospitals and the public sphere: contribution and participation before the NHS', in Sturdy, S. ed., Medicine and the public sphere in Britain, 1600-2000, London, Routledge, pp123-145.

Hunt, P. (2002), 'Governance in health care', in Making healthcare mutual: a publicly-funded, locally-accountable NHS, London, Mutuo, p5.

Lawlor, S. (2001), Second opinion? Moving the NHS monopoly to a mixed system London, Politeia.

Light, D. (1997), 'From managed competition to managed cooperation: theory and lessons from the British experience', The Milbank Quarterly, 75, pp297-341.

Mohan, J. (2002), Planning, markets and hospitals, London, Routledge.

Mohan, J. (2003), 'Voluntarism, municipalism and welfare: the geography of hospital utilisation in England in 1938', Transactions, Institute of British Geographers, 28, pp57-74.

Paton, C. (1997), 'The politics and economics of health care reform: Britain in comparative context', in Altenstetter, C. and Bjorkman, J. eds. (1997), Health policy reform, national variations and globalisation, London, Macmillan, pp203-235.

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