Broken Vows

by Tom Bower

  Instead of questioning his own judgement, Blair once again blamed his misfortune on the ‘feral beast’ that was the poisonous media culture. On the first anniversary of his rise to power, he had been warned by Matthew Parris that while he could take comfort from the fact that most sleaze stories sink like rocks, apparently without trace, ‘slowly the whole foundation rises towards the surface … because [while] you can get away with a lot for quite a long time, while the love affair lasts … the old scandals never die’. Then comes the reckoning.

  Among the list of government-inspired ‘distortions’ were reports about the NHS. Blair was relying on the targets set by the new Delivery Unit. In the first months, Michael Barber’s ‘name and shame’ had produced improvements and good media headlines, and Barber gave himself a pat on the back since departments were turning the extra money into desired outcomes – ‘unlike 1998,’ he would write, ‘when money disappeared into black holes’. Yet, in 2002, the government’s auditors discovered the opposite, with some health authorities running huge deficits. To avoid censure and dismissal for missing targets, their senior managers had seriously overspent.

  Driving change from Downing Street by setting highly ambitious targets, Blair realised, had its limitations, but he could not think of an alternative. To clear his mind, he wrote a memorandum over a weekend at Chequers. Having finally persuaded Brown to announce increased NHS funding in the next Budget, he questioned why, despite the extra money already spent, waiting times were not falling and the number of patients being treated was not rising. It was the same disappointment he had suffered throughout his premiership. Would things never get better?

  Milburn replied that his own ideas had once again changed radically. The NHS Plan 2000, he said, was a revitalising shopping list. The government needed finally to cross the Rubicon and embrace choice as a cornerstone of the NHS. The heart of Milburn’s plan was to resurrect competition as the gospel, which meant reintroducing the Tories’ internal market. Blair agreed, and Milburn began drafting a new White Paper, ‘Delivering the NHS Plan: The Next Steps’. Ten years of policy in opposition and government was being jettisoned.

  In Blair’s new NHS, all hospitals would compete against each other to win contracts from private care trusts (PCTs). England’s best hospitals would be liberated from central control. Those so-called foundation hospitals would be run by local organisations and would have financial and managerial independence from Whitehall, although they were subject to targets. NHS managers who failed to perform would be dismissed. ‘It’s Groundhog Day for you, Andy,’ said Milburn to Andrew McKeon, the department’s director of policy and his internal ally. McKeon had helped Ken Clarke shape the reforms in 1991 and had contributed to Stephen Dorrell’s White Paper in 1996. Having watched Labour rip it all up, McKeon now witnessed Blair returning to the original philosophy. However, a decade later, one difference was critical: while the Tories had developed the reorganisation slowly, Milburn refused to commission pilot schemes to test his ideas. Blair wanted instant results – and numbers became important. ‘It will be heavy-duty and ruthless,’ observed McKeon.

  To seal the devolution of health care, Milburn started another round of reorganisation. The primary-care groups were transformed into 302 PCTs, funded by a new system of payment by results and supervised by twenty-eight strategic health authorities.

  Blair finally believed he had reached the beginning of the future. In that new dawn, the NHS would be equipped with a giant new IT infrastructure. One computer system would give instant access to the records of 50 million patients across the country, compiled by 30,000 GPs and 300 hospitals. Accurately described as ‘the world’s biggest civil information technology programme’, the unprecedented technical ambitions matched Blair’s search for a legacy. In February 2002, he hosted a seminar to approve the scheme. No critics were invited. To those querying the estimated cost of £2.3 billion, Milburn replied that the finances of the NHS were being monitored by an inspectorate reporting to Parliament. Blair praised Richard Granger, hired to supervise the project, as a man ‘with a demonstrable professional track record’ in Internet technology, something that was unavailable within the civil service. Recruiting Granger, John Birt told Blair, was a triumph over risk, establishing ‘a more strategic and innovative approach to policy’ than civil servants could achieve.

  On ‘Devolution Day’ (but also April Fool’s Day) 2002, Milburn’s White Paper was published. Politicians spoke about ‘building capacity’, ‘transformational change’ and the ‘big bang’ of health reforms. Blair mentioned that NHS employees should feel part of the ‘culture of the community’. NHS pressure groups dismissed such jargon as gibberish intended to conceal the ultimate betrayal of the service’s ideals. Others scoffed that Blair was not devolving authority because Whitehall retained control. Unsure about his final destination, Blair could not spell out a complete vision. In a display of ideological contradiction, he spoke about ‘empowering the individual’, but also said that ‘the weaknesses of free markets are clear’.

  A key adviser in Downing Street realised that Blair ‘was muddle-headed. He could not describe a coherent and complete model of what he wanted to achieve. So he could not explicitly tell Nigel Crisp what to do.’ But for the moment his team – Barber, Milburn, Stevens and Paul Corrigan, a special adviser on the NHS – were all agreed on the same ‘line of travel’. They would push through the first changes from Whitehall, then decide on the next step.

  Two weeks later, Gordon Brown delivered his Budget. Conscious that the image of Blair was fixed behind him in the TV camera’s frame, Brown’s publicists presented the occasion as the coronation of the king-in-waiting. To Labour’s cheers, the chancellor flourished a record 8.6 per cent increase on that year’s NHS spending. The Tories’ glum faces helped cast Brown as the hero.

  Blair did not question the chancellor’s claim that, despite the extra spending, he would stick to his ‘golden rule’ of balancing the budget over the economic cycle; nor did he query his pledge to keep government debt below 40 per cent of GDP. He seemed unaware that the Budget broke both assurances. Knowing that there was no prospect of financing the additional spending by private wealth creation or by increasing productivity in the private sector, Brown borrowed money from China and other countries, without any prospect of immediate repayment. To protect himself from criticism, he redefined his ‘golden rule’ for balancing his budgets.

  The technical terms fooled Blair. But, unlike Barber, who praised Brown’s ‘new discipline established over public expenditure’, he suspected chicanery. Although he could not master economic detail and thus prevent Brown’s overspending, he did understand that the electorate would damn the chancellor’s latest stealth taxes on savings, pensions, petrol, stamp duty and allowances as ‘broken promises’. To avoid an argument, he retreated. ‘I have a floppy PM on NHS costs,’ Simon Stevens told Julian Le Grand.

  Nor had Blair understood Milburn’s reorganisation. In the nature of his government, well-meaning but fearful civil servants did not dare mention their foreboding. Suspicious ministers, they knew, disliked being told to ‘read the game’. Within months, however, Milburn came to recognise his errors. He should have approved ten strategic health authorities instead of twenty-eight, fifty PCTs instead of 302 and eleven ambulance authorities instead of forty. He started another wasteful bout of restructuring, propelling 30,000 administrators into a merry-go-round of expensive redundancies.

  During his regular meetings with Barber about the NHS, Blair never asked about these costly mistakes. Targets focused on crude numbers, not fundamental policies. The sessions gave Blair the opportunity to pose questions prepared by his staff that reassured those summoned about his being in full command. Although Jonathan Powell liked to boast that Blair possessed the ‘barrister’s ability to soak up vast amounts of paper while at the same time remaining focused on the big picture’, the experts could see through the performance.

  Improving the NHS depended largely on Nig
el Crisp, but by then he and Milburn were arguing regularly. Milburn disliked Crisp’s attitudes and upper-crust style, while Crisp resented Milburn’s persistent questioning, which he regarded as interference. Others had become disillusioned with the NHS chief, not least George Alberti, who had originally nominated him. ‘He was affable and smooth,’ recalled Alberti, ‘but I realised after two weeks that nothing was going on.’ The health chief, he suspected, was ‘anti-clinical’.

  To Crisp and his departmental team, the NHS Plan 2000 was sacrosanct. Billions of additional pounds to erect new hospitals, hire additional staff and improve regulation were a nirvana, but to revolutionise the service according to the plan devised by Stevens and Milburn was, Crisp believed, unacceptable. The chief executive resented Blair’s reintroduction of the internal market, but he did not oppose the 2002 White Paper outright. Instead, he cherry-picked from the new plan by approving ‘limited choice’.

  Inevitably, his tactics created contradictions. On the one hand, he criticised the lack of incentives for hospitals to treat more patients, which caused ‘a sense of drift’, but then he scorned incentives because ‘there are limits to markets’. Not that he was blind to his Janus-like pronouncements. Rather, in his heart Crisp resented the politicians for generating the problems. Blair and Milburn, he observed, failed to understand ‘the difference between wanting to change things and making things happen’. He went further: ‘The NHS Plan was a plan of action which I could implement, while the 2002 White Paper was just more political developments.’ To stymie any return to the Tories’ blueprint, he created an unbridgeable chasm between the two plans. With the help of John Bacon, his deputy and the director for performance, he gathered the traditionalists in Richmond House to entrench top-down controls, prevent the devolution of powers and sabotage the loathsome internal market.

  Crisp’s rejection of profound change incensed Milburn, a volatile politician. The official was accused of being ‘too laid-back, wishy-washy and not on top of his brief’. ‘I had a simple and rather unsophisticated management model in my head,’ Crisp would later explain. Blair, he believed, had ‘a naive notion that you can change things from the centre. The problem with politicians is they’re restless and push things on.’ He spoke with pride about remaining remote from the political battles, biding his time, watching Blair and Milburn steel themselves to outwit Brown. He could count on the chancellor to stymie Blair.

  In Crisp’s portrayal, Milburn was not a true moderniser but was ‘still very wedded’ to the model of a centrally controlled NHS and ‘very nervous’ of going beyond old Labour’s orthodoxy. ‘There’s already enough political blood on the floor,’ Crisp recorded Milburn saying in an argument about change. Milburn denied that recollection but admitted being caught in the middle between Blair and Brown. In frustration, he appealed to the public by writing in The Times that Labour needed to seize diversity and choice from the Tories, just as it had taken over traditional Tory territory on the economy and crime.

  As Crisp anticipated, Brown opposed the NHS contracting any privatised services or there being any dilution of Whitehall’s control. He picked on foundation hospitals as his battleground, refusing to allow them to borrow money. These hospitals, he said, would fragment and eventually destroy the NHS. By contrast, an inflexible, monopoly NHS with no competition, no devolved powers and no patients’ choice would preserve the values established in 1948. He rejected the evidence that competition was producing positive results in other countries.

  By the beginning of June, Blair’s self-confidence was being pummelled. Two days before a Cabinet meeting, he asked his close advisers whether he should announce that he would not contest the next election. ‘Tony has to face up to the fact that Brown is killing him,’ said Milburn. Blair was persuaded to fight. The showdown at an unusually dramatic Cabinet meeting on 13 June exposed the fractures. ‘Our mettle is being tested,’ Blair told his ministers during a discussion described by Richard Wilson as ‘a big bad moment’. Brown brooded silently, stoking the division he had created.

  Over a weekend at Chequers, with the help of officials Blair wrote a twenty-page note explaining the advantages of foundation hospitals. For once, his endorsement of Milburn’s disdain for Whitehall’s micro-management showed a better grasp of the detail than that shown by officials in the Department of Health. Brown ignored the note. He never engaged with Blair over ideas on how to improve NHS treatment. In retaliation, an eyewitness observed, Blair ‘egged Milburn on to fight Brown’. ‘Don’t hold back,’ he told the minister. Foundation hospitals, he stipulated, would be independent of the Treasury’s control. ‘If independence is good enough for the Bank of England,’ Milburn had said brazenly to Brown in Cabinet, ‘then it’s OK for schools and hospitals.’ His audacity, other ministers rightly assumed, had been blessed by Blair.

  Unknown to Milburn, at that delicate moment Blair was preparing for war in Iraq. Over the following three months, his appetite for a power struggle over foundation hospitals disappeared. His weakness was revealed at the confrontation on 9 October with Brown, Milburn and Prescott. Brushing Milburn contemptuously aside, Brown refused to surrender the Treasury’s control over every hospital’s budget. His hatred for Milburn, sitting right next to him, was undisguised.

  Blair retreated. In what one eyewitness called ‘split the baby’, he ruled, ‘Your hospital plan and Gordon’s financial plan.’ Contrary to Milburn’s blueprint, hospitals would not have their own budgets or benefit from financial incentives for good performance. Of course, in his remarks to the media Campbell would present ‘new-style foundation hospitals’, but they would not be financially independent nor would they embrace choice and competition. ‘They’ll be free to innovate,’ was the best the Downing Street spokesman could say. Simon Stevens wrote out the agreement, with Andrew Turnbull looking over his shoulder. In a prearranged move, as soon as Brown left the room Campbell issued a press statement praising the plan but omitting any hint that Brown had won. The chancellor was furious. Blair was consoled that, although the policy was lost, he had at least scored a victory with the press release.

  Half a victory did not thrill Milburn: ‘Once again Tony had said he would get rid of Gordon and endlessly, as usual, he didn’t.’

  TWENTY-FIVE

  Targets and Dismay

  * * *

  At the end of Michael Barber’s first year as head of the Delivery Unit, Blair was still excited by the regular stock-takes about the ‘performativity’ of the five priorities – crime, health, transport, immigration and education. Barber was basking in the glow of a Progress in International Reading Literacy Study about the reading standards of ten-year-olds in 2001. English primary schools had been ranked third out of forty countries. Part of the credit, eulogised Barber, was owed to Labour’s ‘excellent’ reforms of Britain’s teacher-training programme. His own credibility, Barber hoped, would be further enhanced by the 2002 results. But there was a hiccup. In June, on the morning of a critical World Cup match, he walked into Estelle Morris’s office. ‘It’s a disaster,’ he cried. ‘England are playing a crucial match tonight and they’ll go to bed too late.’ The following day, eleven-year-olds were due to sit their SAT examinations, and Labour’s political reputation would suffer if the targets were not met. Barber’s fears were justified. ‘Panic in the Department of Education,’ was the eyewitness observation of Margaret Brown, a professor of mathematics education at King’s College, London. That one day’s results showed there had been no improvement in maths or English. The government’s target of 80 per cent of eleven-year-olds achieving level 4 in maths was missed.

  In his subsequent post-mortem with Blair, Barber fluently recited the disappointing statistics supplied by the schools and test boards. He heaped the blame on teacher training and on teachers failing to understand Whitehall’s strategies. In searching for other culprits, he even blamed Chris Woodhead’s resignation and Whitehall for ‘losing its edge at every level’.

  ‘The results will improve
next year,’ said Blair with conviction.

  ‘I’m more worried that the media will rubbish the process,’ said David Blunkett.

  ‘Should we change our strategy?’ Morris asked.

  ‘No,’ replied Barber. ‘It worked with the previous children, so we’ll do more of the same.’

  Barber was in denial about the research presented by the statisticians. The dramatic improvement in level 4 maths had started in 1996. The best results were in 1998 and 1999 – before Labour’s £80 million programme began – and the results would remain static after 2002 for another six years. ‘We could not understand why the results plateaued,’ said David Normington, the education department’s permanent secretary. ‘We never got an answer.’ The standards among the poorest children, who did not benefit from the government’s strategy, actually declined.

  Margaret Brown knew the reason. She criticised cheating teachers and Labour’s introduction of ‘whole-class teaching’. Maths teachers trained under the Tories had divided classes into sets by ability. In those schools where numeracy skills had jumped between 1999 and 2002 from 33 per cent to 45 per cent of children meeting the high grade, many children had been specially coached for the tests. In 1998, Blunkett had ordered a dramatic change. Maths was now taught to mixed-ability classes by teachers who pitched their lessons at the middle, dragging down the results for those at the top. Innumeracy among children, Brown discovered, was growing. Even the best students no longer showed a deep understanding of maths.