All health systems have a mix of financing mechanisms which are, in the terminology of Derek Wanless, social insurance, private insurance, out-of-pocket payments, and taxation. As is well known, Aneurin Bevan, Minister of Health in the Labour government, nationalized the hospital system in 1948 (Campbell, 1987). Since the local government was no longer to coordinate the NHS or to run its own hospitals or clinics, national rather than local taxes came to fund the service largely by default. Bevan also favored this in principle for three reasons. The first was that national taxation was more redistributive, and the second was that he regarded free access to health care to be a citizen’s right and not something conditional on the payment of contributions. Finally, there was the question of how, politically and administratively, the non-insured could be turned away from universal service. He favored a fully tax-financed system so strongly that he strove to disassociate the NHS from the other welfare services launched on 5 July 1948, ‘the appointed day’ and a conventional birthday of the welfare state (Bone 2008).
The welfare state in Britain, of which the NHS is a major and enduring part, is complex. It originates from the Beveridge Report, which was the major plank of post-World War II social reconstruction. The report provided a set of welfare principles for improved social justice for British citizens. It thus paved the way for a legislative framework to tackle five areas of serious need that the report had identified. These are wanted. disease. ignorance. squalor. and idleness. The market economy had failed the population in the inter-war years when much of it experienced unemployment, poverty, poor educational standards, poor health, and poor housing. Market forces had failed to supply these important social goods and to deliver essential services.