The NHS: a 70-year-old Mistake?

In 1967, an incredulous US Secretary of State, Dean Rusk, told his British counterpart that he “could not believe that free aspirin and false teeth were more important than Britain’s role in the world”. Secretary Rusk’s outburst had been prompted by the Wilson government’s unexpected announcement that it would withdraw from all its military and naval bases ‘east of Suez’, and focus on welfare, not warfare.

It’s no surprise Rusk was shocked. The time when Britain was the number one military and economic power in the world was still within living memory. The country had emerged victorious from both World Wars and now had a seat at the top table of postwar global affairs as a permanent member of the UN Security Council and as one of the founding members of NATO. Why, indeed, was the country that was once ‘the global policeman’ voluntarily giving up its predominant position to dish out free prosthetic legs and bandages to a nation of people who could surely afford these things for themselves?

It was a question that had baffled many foreign observers for nearly twenty years. People outside the United Kingdom were mystified as to why so much time and money had been spent setting up a universal healthcare system – the cost of which had already proven to be a massive underestimation – when the end of the Second World War had surely presented Britain with the chance to become the industrial, military and financial heavyweight of Europe?

The reality, of course, was a little more complex.

There is a narrative that has sprung up in some quarters about why Britain fell behind countries such as Germany after the war. The argument goes, at the end of World War II, German manufacturing lay in ruins and instead of taking advantage of this fact, the Atlee government decided not to invest the money it received from overseas aid to modernize the UK’s industry and infrastructure. Instead, the Labour government used the money to implement the recommendations of the 1942 Beveridge Report which called for the setting up of a universal healthcare system, as well as a wider welfare state that would look after the people of Britain ‘from cradle to grave’.

The story continues that Germany, on the other hand, used the aid it received to build state-of-the-art new factories. These factories soon outshone the dilapidated, Victorian-era, small-fry operations commonly found throughout Britain’s industrial heartlands and thus, by the end of the 1970s, UK manufacturing’s number was up, and Germany became the industrial powerhouse of Europe.

If only Britain had focused on industry instead of those aforementioned false teeth and aspirins. If Britain had, it would have emerged as not only as Western Europe’s leading financial centre but also as the continent’s beating industrial heart.

But is this narrative really true? Did Germany use Britain’s focus on health and social security to leapfrog its way to European manufacturing dominance? Should the UK have focused on manufacturing and innovation to capitalise on its postwar advantage and then introduced an insurance-based healthcare system that its wealthy workforce could easily afford?

To answer this question, we have to go back to 1945. While it is indeed true that Germany was on its knees at the end of the Second World War, it is also true that, from a financial perspective, so was Britain.

Despite emerging as one of the winners of the war, anyone looking at the UK’s books in 1945 could have been mistaken for thinking that the country had in fact just lost it. Britain was, for all intents and purposes, bankrupt.

Lend-Lease – the system set up by the Roosevelt administration in 1941 to supply the United States’ allies with vital resources such as warships, planes, ammunition, food, oil and weaponry - was keeping Britain's vast global military operation and sprawling empire just about afloat. When the US promptly cancelled Lend-Lease after the defeat of Japan in 1945, this vital source of supplies and material suddenly disappeared, meaning the UK had to come up with money it didn’t have to maintain the status quo.

After the cancellation of Lend-Lease, Britain had to go begging for a $4 billion loan from its American allies just to keep all its plates spinning. With all main political parties promising to radically modernise the country’s healthcare system after the war, how long could this situation go on for? What would have to be sacrificed if everyone was to receive universal healthcare ‘free at the point of need’?

At first, the new Labour government headed by Clement Attlee tried to keep the country’s position in the world intact by implementing cost-cutting measures. Unfortunately, this led to a military that was not fit for purpose. Deputy Prime Minister Herbert Morrison observed in 1949 that the country was paying “more than we can afford for defences that are nevertheless inadequate, or even illusory”.

The cost of Empire was equally crippling. By 1947, the $4 billion loan was all but spent keeping all this afloat, and the United Kingdom was also gearing up to introduce a system that every major party had promised in their 1945 election manifestos – a National Health Service, due to be introduced on the 5th July 1948. How on earth could the country afford this?

Well luckily, in 1947, the country received a timely cash injection when American Secretary of State, George Marshall, proposed the ‘European Recovery Plan’. The plan proposed lending huge sums of money to war-ravaged European nations so that they could rebuild their shattered nations. The French and the Germans proposed to use their so-called ‘Marshall Plan’ money to invest in modernizing their industries and infrastructure. Britain, on the other hand, used the $2.7 billion it received to shore up its military commitments, the Empire's day-to-day running costs and for funding the establishment of the NHS.

The die was cast. The narrative of Britain ‘squandering’ its Marshall Plan money on aspirins and false teeth was born. In reality, Britain did indeed use some of this huge cash injection to implement the recommendations of the Beveridge Report, but it also wasted enormous sums of money trying to maintain a position in the world it simply could no longer afford.

By the time of the Suez crisis in 1956, the bubble had truly burst on the idea that Britain was still one of the big boys. The main body of its empire was already deep into the process of being dismantled, and it shouldn’t have come as a surprise to Secretary Dean Rusk when Harold Wilson finally threw in the towel in 1967.

So, it was a little more complex than the 1945 Labour government ‘wasting’ money on setting up the NHS. A combination of trying to save face, trying to better the health of the nation and underinvestment in the UK’s industry and infrastructure in favour of spending on day-to-day expenses allowed countries such as Germany and Japan to overtake an already outdated UK manufacturing sector.

Should Britain have invested in industry and infrastructure instead? The answer, looking at it from a bean-counting perspective, is probably yes. But a country is more than just a balance sheet.

In this, the seventieth anniversary year of the founding of the NHS, the question can indeed be asked, was it worth it?

Ask a finance-focused pragmatist and the answer will more than likely be no. But ask someone who’s never had to worry about finding the money to pay for their loved one’s cancer treatment or someone who wasn’t presented with a bill after the birth of their first child, and the answer will be a resounding yes.

Should a country be defined by its military standing in the world and how strong it is in global markets, or should it be defined by how it looks after the health and well-being of its citizens? To the majority of Britons who have grown up wrapped in the comfort blanket the NHS has provided for seven decades, there’s only one possible answer to that question. But is it the right answer?

Tell us what you think @HistoryUK. Was the founding of the NHS, Britain's greatest mistake or the country's finest moment?