Broken Vows (24 page)

‘We need to see how we can break the monochrome,' Blair told Alan Milburn, his health minister, soon after the 2001 election.

The campaign slogans about closing the health gap between rich and poor, the pledges about building ‘a world-class public service', recruiting 80,000 extra nurses, reducing waiting times from eighteen to six months and cutting waiting lists by 100,000 were meaningless when some health authorities, it was revealed, were massaging lists by removing names. The NHS Plan 2000 had produced headlines but still no profound solution, not least because Gordon Brown still refused to fund the expansion. The promise to build new hospitals and appoint thousands of new staff, Neil McKay, a senior official in Richmond House, the NHS's headquarters in Whitehall, told Milburn, was not enough: ‘You need to change the way NHS people think.' Milburn's answer was to give Nigel Crisp, his new NHS chief, whom he barely knew, additional power.

In an unusual breach of precedent, Blair and Milburn had decided not only to remove Christopher Kelly, the permanent secretary at the Department of Health, but also to scrap his job. Crisp would be simultaneously the permanent secretary and the NHS's chief executive. Crisp arrived convinced there was ‘a real doubt whether the NHS could survive'. His melodramatic assumption reflected his professional bias. ‘I was always interested in NHS staff and not politicians,' he said. The suspicion was mutual. Milburn blamed NHS executives like Crisp for blocking Blair's modernisation ambitions. NHS managers, he told
Blair, were culpable for the long delays and dirty wards. Now, the two politicians were dependent on another civil servant similar to all the others they disdained.

The politicians' distrust of the bureaucrats was mirrored by the public's shock over medical negligence. A report had confirmed that, during the late 1990s, doctors at the Bristol Royal Infirmary had caused the deaths of twenty-nine babies; another report disclosed that Dr Harold Shipman, a GP in Manchester, had probably murdered over 200 of his patients. ‘This year must be the turning point for the NHS,' Blair impatiently told NHS executives. He resented the experts' warning that, despite the billions of pounds spent since 1997, they would need ten years to effect an overhaul. Ten months rather than ten years was his timetable, and his guests' protests were unwelcome. The experts' reaction, he wrote, was ‘a betrayal of public service ethos. I began to look for ways of getting business ideas into public service practice.'

In reality, he was stumped. Other than spending money on new buildings and employing more people, he had no new ideas. Yapping at his ankles, Roy Hattersley, an old Labour stalwart, was deriding his ‘free-for-all philosophy' for shifting the party to the right with ‘vacuous platitudes'. And Brown was still refusing to allocate the extra money.

‘We have to cut the waiting times for operations,' Blair was told by Simon Stevens, his trusted adviser. ‘That's the key to improving public satisfaction.'

Blair agreed. He despairingly compared civil servants to the army and its successful response to the outbreak of foot-and-mouth disease. ‘Why did the army succeed?' he asked rhetorically. ‘Because they didn't take “no” for an answer. They used rules as a means to an end.' If only civil servants became social entrepreneurs taking risks to ‘achieve change', many problems would be solved.

Once again, he trusted one of Britain's self-publicising businessmen to deliver salvation, although like Richard Branson and Richard Desmond, his latest hero, Stelios Haji-Ioannou, the founder of easyJet, had orchestrated several unsuccessful ventures. Unaware of his failings,
Blair invited the Greek to map out the path for reform. The honest answer was disappointing. ‘You can't have an entrepreneurial civil service', Haji-Ioannou explained, ‘because you don't have any competition.' Milburn's snap advice, after returning from his constituency with a litany of complaints about the NHS, was, ‘We must get back to choices.'

Blair liked ‘choice' as a slogan and had embraced it for education, but was resistant to adopting it for the NHS – as Julian Le Grand discovered when, during a conversation, the professor revealed a statistic. Productivity in the NHS, he told Blair, had peaked in 1997 and ever since had been flat. In 2001, it was beginning to slide back. Although the measurements were controversial, the trend as monitored by the reputable King's Fund was embarrassing. The crunch statistic was ‘activities'. Despite all the extra money – £5 billion more in 2001 – spent on additional staff, higher wages and drugs, the number of patients being treated had risen by less than 1 per cent since 1997. Targets were intended to place NHS professionals under pressure to deliver, but they were failing in their efforts.

‘Is this true?' asked Blair, clearly surprised.

‘Yes,' Le Grand replied. ‘Productivity increased with choice and the internal market.'

‘Well, if that's what the data shows …' said Blair, unsure about his next step. He knew the Labour Party's limits. Unlike the Tories, his supporters were not suspicious of the state. He had ostentatiously jettisoned Thatcherism and old Labour's socialism, but the Third Way had not provided an answer. Nor had discussions with the trade unions. He never mentioned productivity to Nita Clarke, his special adviser liaising with the unions. Aggressive incentives were one solution, but Brown prevented their introduction. Milburn's answer was five well-funded regulators and the Modernisation Agency, another quango that armed the regulators with ‘targets and terror' to improve the NHS through rewards and warnings.

Blair was still searching for a speedier cure. The NHS was absorbing money like a sponge, yet failing to treat the anticipated numbers of
additional patients. He invited Le Grand to return to Downing Street. In successive conversations, the professor explained that a better alternative to targets was the market. ‘Markets don't distort like targets,' he said. ‘Patients' pressure through patients' choice, or patients' screams, will improve the NHS. Hospitals will have to be nice to patients.' Blair was not wholly convinced but agreed that Le Grand could stage a PowerPoint presentation in Downing Street.

Among the seven in attendance, Ed Balls and Ed Miliband challenged the academic scathingly. ‘What are the ideological foundations of choice?' they asked.

‘They tried to intimidate me,' Le Grand said later, ‘but I could not understand their ideological reasons.' He did not give up, describing to Blair the solution based on payment by results, which effectively restored GPs as fund-holders.

‘How do we know it will work?' asked Blair. Le Grand resisted the obvious answer: because the scheme had succeeded under the Tories.

Milburn, however, was a convert. Money and targets alone, he conceded, could not improve the NHS. ‘The simple truth is that the NHS cannot be run from Whitehall.' The absurdity of such command and control had struck him after he was called upon to dismiss a hospital executive in Bedford for mismanaging a mortuary. In his search for solutions, during a brainstorming session with Loraine Hawkins, an expert on health systems, he was told: ‘Do you realise that in Australia they got 20 per cent more activity in hospitals by using payments by results?' Milburn liked that idea and another proposal put forward at the same time by Simon Stevens, who was advocating the advantages of the Swedish health-care system, which allowed patients to choose the hospital where they would be treated, using the state's money. ‘Right, let's do that,' Milburn said, without mentioning the resemblance to the Tories' derided ‘patient voucher' scheme. ‘Don't even go there,' he warned a smiling civil servant who was clearly tempted to make the point.

In a moment of epiphany, he next told Blair that the answer was to decentralise decision-making to local communities and ‘empower'
individual patients. Choice and a market culture, he said, would cleanse the NHS of the 1948 relics so entrenched within the party, especially the dogmatism of both the trade unions and the NHS staff. Blair liked the sentiment but, as always, disliked the word ‘market'. Labour voters would assume a lurch towards the American system of payment for health treatment, and that would be bad politics. As usual, no one fully understood Blair's intentions, not least because, despite his enthusiasm, he obviously remained undecided on which direction was best.

Undeterred, Milburn urged Blair to revive the internal market, but in a more radical manner than the Tories. Blair asked Chris Ham to recruit fifteen people for a new strategy unit, using the code name ‘rainbow project', to pave the way for another White Paper. To protect the project's secrecy, civil servants in the Department of Health were excluded. Hostile officials, Blair feared, would tip off Brown and Balls about the plan. The results were delivered in early summer 2001. The project recommended moving the NHS towards the market and choice. ‘A fundamental wake-up moment,' said John Hutton, the junior health minister.

By then, Blair was admitting that his appointment of Frank Dobson had shown ‘how little I understood' about the modern world. He was ready to think about a health ‘market', but the appropriate cosmetics were vital. He had come to accept that patients' treatment could only improve if the NHS embraced the private sector. The money should follow a patient to a hospital. He liked the artificial distinction made by Stevens between the ‘patient's passport' or ‘voucher', a Tory idea, and the unlabelled ‘patient's right to choose'. Similarly, he nodded through Milburn's proposed foundation hospitals, which would be independent and free from Whitehall control, even though they were a development of the Tories' hospital trusts, which Labour had opposed.

The battle lines were drawn, only Blair was hazy about the implications. ‘He wasn't an economist,' noted Le Grand, ‘so he didn't understand markets. He didn't know where he was heading.' His plight was not helped by the lack of a senior economist as an adviser at No. 10. Unlike Ken Clarke, who had delighted in challenging vested interests,
Blair sidestepped conflict. He ignored one of Peter Mandelson's rules: ‘If a government policy cannot be presented in a simple and attractive way, it is more likely than not to contain fundamental flaws and prove to be the wrong policy.' A new plan was only workable if it could be sold.

To test the Labour Party, in July 2001 Blair spoke at the Royal Free Hospital in north London, advocating the privatisation of some services. The NHS, he said, should employ the private sector to perform non-emergency surgery, hire foreign surgeons and allow NHS patients to be treated in France. Sixteen months earlier, he had made the same suggestions but had been ignored. This time, he was attacked instantly by the trade unions and Labour MPs. ‘If the unions want a fight,' he countered, ‘they can have one.' One moment he recoiled from confrontation, and the next he threatened battle. The inconsistency reflected his vacillation, unlike Milburn: ‘I welcomed a fight,' the minister recalled, ‘but I wanted to win. I didn't want to do fifteen rounds in one round. I needed to stretch the elastic to move on.'

One principal adversary was Nigel Crisp. In an unexpected blast of criticism, the NHS's chief executive opposed the private sector receiving public money. Blair knew that too many NHS executives were institutionalised, but he had not expected fossilisation to encroach at the very summit. Crisp, he discovered, typified the conviction within the profession that the NHS Plan 2000 was the Bible and, beyond spending additional billions, nothing should undermine the sanctity of the national monopoly. The problem, as Neil McKay, the Richmond House official, observed, was that Crisp was not managing the disbursement of the money. ‘There was a sense that Crisp had no grip on the finances,' thought McKay, but nothing was said to Milburn – or to Blair.

With the prime minister's blessing, Milburn presented a White Paper entitled ‘Shifting the Balance of Power in the NHS'. Ostensibly, he was replacing the top-down command system with local groups. In reality, a flurry of contradictory changes reflected his indecision about who should manage the NHS. First, the eight regional health
authorities were cut to four. Soon after, these four were demolished and resurrected as twenty-eight strategic health authorities and a hundred health authorities. The differences were imperceptible. To remove dud managers, Milburn started a carousel of executives being dismissed from one post only to be re-employed by another health authority, and that continued when those authorities delegated their power to 481 primary-care groups, heralded as ‘the front line', under new directors. In the process, over 30,000 administrators were shunted around, reflecting the disagreement between Crisp, Milburn and Blair about the ideal size and structure of the NHS's management. Should it be big or small? Dictated from Whitehall or devolved?

Over the summer, Blair's talk about the market continued to inflame the opponents. Milburn fed the dispute by speaking about ‘a self-improving culture' at local levels, but no ministers or civil servants understood his plans. The dilemma was not surprising: other than advocating ‘choice', Blair was no more certain about the principles on which the NHS should be reconstructed than he had been when he first took office. Resolving the conundrum required a leap of political conviction – that competition could reduce waiting times – and he was reluctant to make that jump.

To help resolve matters, a few Blairite ministers were invited to Chequers on the eve of the summer holidays. In unusually nonchalant mood, Blair urged his supporters to praise choice for both parents and patients. Their response was not enthusiastic. Educating his party to somersault and embrace choice as ‘progressive' required proof of his sincerity. ‘It's going to be hell for a large part of the time,' he told Michael Barber. ‘But I don't see any point in being prime minister unless we take risks.'