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Publication abstract

The Financial Health of Voluntary Hospitals in Interwar Britain

An enduring assumption in the history of the pre-NHS health system in Britain is that the voluntary hospitals were approaching a financial crisis in the interwar period which was exacerbated by the Second World War. Thus the arrival of state funding rescued a system on the verge of disaster. However, recent revisionist work has questioned the depth of the crisis of traditional philanthropy and noted the development of new funding sources. Was the financing of the interwar voluntary hospital therefore more innovative and robust than has previously been thought? This article uses findings from the Voluntary Hospitals Database coupled with research into the accounts of fourteen major hospitals to answer this question.

Evidence for the extent of current account deficits in the 1930s reveals that while these were not universal, some hospitals were experiencing recurrent problems. Income shortfalls were most prevalent in large institutions, especially teaching hospitals, and in certain regions, such as London, the North West and Wales. Turning from current accounts to capital assets, the experience of individual hospitals shows that in the 1930s a notable proportion faced a diminishing wealth base and a rising burden of debt, which curtailed expansion. Analysis of the pattern of expenditure at both national and individual level suggests that this pressure on funds was driven significantly by the rising cost of staffing. In particular nursing costs rose due to labour market conditions and the demand for skilled care. Consideration of the changing composition of income confirms the rising importance of user fees and mass contributory schemes, while examination of funding trends at current prices in 63 large hospitals shows unambiguously that hierarchical charity was in decline from the mid-1930s. A correlation exercise suggests that while the establishment of a contributory scheme could protect a hospital from deficit, it was those institutions that tapped user fees and local government contracts which were best able to expand provision.

Thus evidence from the Database broadly supports the ‘pessimist’ reading of the financial health of pre-NHS hospitals, in that it shows rising expenditure demands led to deficits and a dwindling asset base, while traditional philanthropy was diminishing. However, the picture is modified by evidence of variation by place and type of hospital. More generally, the supersession of charitable giving by user fees (signalling the entry of middle class patients) and the quasi insurance model of contributory payments created a context in which hospital administrators and policy makers began to consider favourably the benefits of state funding.

GeoData Institute