Introduction

The third distinctive organisational feature of the NHS comes from the choice policy makers made at the time of its founding in terms of the way it would be financed. The general taxation method of funding health services means that those on higher incomes make a greater financial contribution to the cost of their treatment than those on lower incomes, but with no guarantee of better access or superior treatment. The principle of funding health services from general taxation is therefore redistributionary – the richer in society are helping to subsidise those who might not otherwise be able to afford healthcare (Webster, 1988).

At the same time as this, those in government have become increasingly aware that they gain a great deal from funding health services through general taxation (Klein, 1986). This is because it creates an effective brake on healthcare expenditure that is not available in health systems based on insurance principles. Because funding healthcare through general taxation means that the government effectively decides the overall budget for it (as long as it is able to subsequently control actual expenditure against that budget), funding is effectively supply-rather than demand-led. Insurance systems, in contrast, are demand-led, with expenditure being incurred on the basis of the health services treated in a particular year. In the NHS, care is budget-limited – it has to be provided within a set sum of available funds. When the money has run out, wards have often been closed and operations postponed. This should not happen in an insurance-funded system, which is, theoretically at least, driven by the capacity of health organisations to provide care rather than the budget of the overall system.

This implies that the NHS is not giving care on the basis of need, which seems to directly contradict one of the key principles for setting up the NHS. This apparent contradiction has been overcome through the NHS offering to treat the public, but often making them wait for that treatment. Thus, the NHS does treat people according to need, but only within the resources that are available. This has inevitably meant that services have had to introduce waiting lists.

So central policy makers decide the overall budget available for healthcare, and for much of the NHS's history, this has meant waiting lists.