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National Health Service and Community Care Act 1990

Purchaser/provider split

The National Health Service and Community Care Act 1990 received royal assent on 29 June 1990. The Act made provisions to split the provision and commissioning (ie purchasing) of healthcare.

It marked the start of an internal market within the NHS, with the creation of NHS trusts and changes to the way in which local authorities carried out their social care functions. These proposals had been outlined in the Department of Health white paper Working for patients in January 1989.

The 1990 Act gave the secretary of state powers to establish NHS trusts by order. These trusts were to assume responsibility for the ownership and management of hospitals or other facilities previously managed or provided by regional, district or special health authorities. These 'self-governing' trusts had greater freedoms to borrow money, generate income and raise revenue directly from providing services.

The Act also gave authorised GP practices the opportunity to manage their own budget for practice expenses, drugs and some hospital services, giving GPs the freedom to choose where to purchase services. Fundholding was voluntary, but many GPs who were competitive, independent contractors took to it with enthusiasm.

Fundholding was originally restricted to practices with a list size greater than 11,000. The restrictions on list sizes were later relaxed, to allow practices with a registered population of over 5,000 to become standard fundholders. Those with a list size of under 3,000 were able to purchase community services and outpatient care (community fundholding).

Family health services authorities were established, replacing the role of family practitioner committees (FPCs) in the planning and delivery of primary care. Family health services authorities were themselves replaced in 1995 by health authorities.

Changes to local authorities' social care functions

In parallel, the Act made changes to the way in which local authorities carried out their social care functions by:

  • giving them an obligation to carry out a needs assessment of older people and people with disabilities for community care services
  • allocating funding for places in residential homes as well as domiciliary care services.

Such services were mainly covered by existing legislation, such as the National Assistance Act 1948, and included:

  • home assistance
  • respite services
  • day care
  • provision of adaptations
  • rehabilitation and prevention services
  • home delivered meals.

Section 47 obliged local authorities to carry out a needs assessment if someone appeared to need community care services, or if they had disabilities. However, in urgent situations, local authorities had the discretion to provide services before undertaking an assessment. Assessments were to include other services a person might need, such as housing and healthcare.

The responsibility for funding, planning and means testing community care services was transferred to local authorities from the Department of Social Security. Local authorities became responsible for allocating funding for places in residential homes, as well as domiciliary care services (eg home assistance and care).

The community care reforms were originally intended to be implemented in 1991, in parallel with NHS reforms, but implementation was delayed until 1993. The National Assistance Act 1948 (choice of accommodation) Directions 1992 were intended to formalise the rights of individuals to choose where they received residential care under the new community care arrangements.

The Act also extended the functions of the Audit Commission to cover health authorities and other bodies established under the 1990 Act. The Audit Commission's name was changed to the Audit Commission for Local Authorities and the NHS in England and Wales.

The Audit Commission's role was to appoint auditors to secure high quality audits of public sector spending. Before 1990, the commission's role focused on local government. Increasingly, the commission looked at value for money and carried out national thematic studies into cross-cutting issues such as spending on young people and crime.


House of Commons.
National Health Service and Community Care Act 1990.
leglisation.gov.uk; 1990.

Leese B, Drummond M, Hawkes R.
Medical technology in general practice in the UK: Will fundholding make a difference?
University of York: Centre for Health Economics; 1994.

Dixon J, Glennerster H.
What do we know about fundholding in general practice?
1995; 311:727.