Broken Vows

by Tom Bower

  An example of his distraction came at an NHS stock-take. ‘What’s on your mind, Tony?’ asked Milburn as Blair entered the Cabinet room.

  ‘What is on my mind, Alan?’ Blair replied, looking absent-mindedly over his glasses.

  ‘NHS workforce?’ prompted Milburn.

  ‘Ah, yes,’ said Blair, and uttered hardly another word.

  ‘There’s finally progress,’ Michael Barber told the meeting. Emergency waiting times had fallen and access to health care was easier and faster.

  Blair later sent his congratulations. Rigidly enforcing targets, he was sure, had worked. But he had one reservation. ‘Do we have to crack down on hospitals like this every year?’ he asked Julian Le Grand. ‘Is there no other way to keep this going?’

  The professor sympathised. Targets were draconian and caused ill feeling. Over the course of a year, he replied, they did shake up the system, but in the long term could be toxic and would fail. ‘It’s like a macho culture that demands instant delivery.’

  Many NHS executives were being bullied after failing to meet a target. To avoid dismissal for breaching the four-hour wait in accident and emergency units, ambulances were parked outside hospitals until the staff were ready to treat the patients. Bureaucrats were ‘gaming, cheating and misreporting’ their results. In Scotland, administrators changed their system of measurement to prevent embarrassing comparisons. No one mentioned that similar practices in the private sector would be a criminal offence. ‘Hit the target and miss the point’ had become the shorthand for the flaws in the Delivery Unit’s operation and the NHS’s performance. Yet Blair was not persuaded by these negative reports. Despite the unpleasant culture, he believed there was no other way. Nevertheless, to resolve the doubts over targets and markets, command and control, choice and competition, he asked Le Grand to join his Downing Street team of advisers.

  New arrivals in Downing Street noticed an omission in Blair’s lexicon. Unlike Margaret Thatcher, he never said, ‘I want the money well spent.’ Relying on Barber’s targets had replaced any interest in seeking value for money. In contrast to executives in the private sector, Blair never asked whether Nigel Crisp could cost a patient’s cancer treatment. Nor did Barber. Both aides were focused on numbers and waiting times, not finances. Blair failed to realise that Crisp’s passion for ‘shovelling in the money’ made him disregard the complexities of incentives, improvements and prices.

  To satisfy Blair’s fixation with modernisation, Crisp had created a unit actually called the Modernisation Agency, at an annual cost of £230 million. Some 760 staff spoke about ‘change’ produced by ‘inclusivity’ and ‘collaboration’, but not about ‘productivity’. ‘They’re tinkering at the edges’, complained a senior adviser, ‘because Nigel wants to hold on to the NHS’s traditions.’

  ‘It’s flabby,’ agreed Neil McKay, the senior NHS executive.

  Le Grand’s outsider’s view offered an explanation. His book Knights and Knaves challenged the civil servants’ mantra that they were serving the public interest. Many officials, he suggested, were knaves working in their own self-interest. The monster derided as the Blob – the one-third of civil servants at the Department of Health who were former NHS managers – resisted reforms. Those officials, disdainful of Downing Street, ploughed their traditional furrow, rarely recommending changes. Even Simon Stevens, Blair’s special adviser, acknowledged that the NHS had ‘gone from the trust to the mistrust model’. For those NHS employees, like Crisp, who had been praised for their altruism by Brown, Le Grand’s book was the satanic outpourings of a heretic.

  Crisp regarded the NHS as stately. He loathed those who described it as a real-time business – one that generated about 10 per cent of the British economy. At the end of 2002, his anger was directed particularly at Ken Anderson, the experienced hospital manager recruited from Texas to introduce cost controls. The American had asked an irritating question after he arrived in Richmond House: if 90 per cent of the economy is based on choice and competition that works, why not the NHS? Anderson represented what Crisp disliked: an independent disrespectful of the Establishment.

  The health department, Anderson announced, was ‘obsessed’ by buildings. NHS Estates was a huge organisation that focused on the size of rooms, car parks and the construction of new hospitals as the way to improve patient care. ‘Abolish it,’ he told Stevens. ‘To get change, you can’t nickel-and-dime. The NHS is filled with folk trying to block change. You need to offload billions of pounds of work.’

  Anderson was introduced to Blair, who was sympathetic to his lament that the NHS was being run in the interests of its employees and not the patients. ‘They believe 200 per cent that the NHS belongs to them,’ said Anderson. ‘They don’t want to change it.’ Crisp, he added, ‘hates talking about money. He loves talking cerebrally about “change”. He oversees forty-two NHS quangos employing ten times more staff than the department’s headquarters in Whitehall. And nothing happens. He ignores that he’s running the biggest business in the world.’ (Anderson did not count the Chinese army as a business.)

  ‘How do we change it?’ asked Blair.

  ‘You’ve got to use the private sector.’

  Anderson assumed that ‘Getting Tony to land on a decision will be difficult. The problem for him will be a political bridge too far.’

  For four years Blair had relied on Milburn and Stevens as agents of change, but they were not guided by either an ideology or a master plan. Everything was hit or miss; even the anticipated showdown with Brown about foundation hospitals was undirected. ‘Progress is always heavy lifting,’ a Downing Street adviser told Blair, ‘but your problem is that you’ve no clear sight of your destination.’

  Blair had no answer. So much was piecemeal, even haphazard, with disappointment the inevitable outcome. The latest disillusionment came in the form of Wendy Thompson, the new head of public-service reform tasked with ensuring Barber’s NHS targets were met. Blair’s choice was not a success. Thompson complained about excessive expectations and was accused of impolitely asserting her authority. Matthew Swindells, a respected health adviser in Whitehall, was among several who resigned rather than experience her conduct. David Omand called her ‘a complete disaster because she didn’t understand government’. Resolving the problem was Jonathan Powell’s job, but he could neither manage people like Thompson nor co-ordinate policies with Brown, who steadfastly ignored him. Once again, everything depended on Blair.

  After another argument with Brown about the NHS, he resolved, once again, never to retreat. His Alamo was a breakfast in Downing Street for Britain’s top forty private health executives.

  ‘I know you’ve been duped in the past,’ he told them, ‘but now we do want to co-operate with the private sector.’ He then declared: ‘I no longer care who provides the service so long as patients receive the right treatment at the right price.’ No one at the end of the seductive speech doubted his commitment to the NHS contracting treatment from the private sector.

  First, Milburn needed to seek Crisp’s agreement. ‘We must give these poor buggers a choice,’ he said.

  ‘Patients don’t want choice,’ replied Crisp, convinced that Milburn, to avoid alienating Brown, ‘wasn’t yet ready to come out in favour of the private sector’. In his distrust of politicians, he dismissed the minister for ‘playing both ends’.

  ‘Well, let’s test that hypothesis,’ Milburn retorted.

  Some 200,000 patients were treated for cataracts every year. All waited about eighteen months, and Milburn blamed the doctors and bureaucrats for the delay. ‘They’re taking the NHS for a ride,’ he told Blair. The elite consultants were especially to blame. Their work practices were riddled with abuses, in particular keeping their NHS patients waiting for treatment until they switched to pay the same consultant for private care. Targets could not cure the exploitation. ‘We must shift from “NHS delivery” to “NHS reform”,’ agreed Blair. The removal of cataracts was offered to the private sector. Confr
onting the forces of conservatism would be a question of carrots and sticks, agreed Stevens’s team.

  The first stick with which to beat the doctors came in the form of privately owned clinics, known as independent sector treatment centres (ISTCs), which were created to provide a free alternative service. Competition would shame the NHS into change. The next step was to sign new contracts with the BMA. Milburn reported to Blair that his negotiations had been completed. To end their abuse of the system, the consultants’ annual starting pay would be increased from £52,000 to a maximum of £110,000.

  ‘Alan, I like what I hear,’ said Blair, ‘but is it truly radical?’

  ‘Yes,’ replied Milburn, knowing that Blair was interested only in the headline, not the details.

  The doctors needed to vote their approval. Milburn’s offer was rejected. The consultants resented risking their private income and allowing NHS managers to fix their working hours. But Milburn refused to compromise. The dispute was black and white: the government against greedy doctors. Negotiations resumed.

  Other negotiations were equally complicated. Under the Agenda for Change, Milburn’s detailed plan for all the NHS’s staff with the exception of doctors, the government agreed to give a million NHS employees big pay increases in exchange for their learning new skills. Better-educated staff appealed to Blair in his quest for an improved society. Focused on daily performance statistics, he welcomed the headline that, to ‘modernise the NHS’, nurses’ pay would increase by 5 per cent. He did not ask whether their productivity would improve, nor whether pay increases could be equated with modernisation.

  Blair also failed to question Milburn’s agreement with the GPs. In 2001, they had threatened to resign if their demands for more money, more autonomy and less work were not met. Instead of rejecting their demands outright, Milburn delegated the negotiations to the NHS Confederation. Two years later, there was a stalemate. The BMA was demanding that GPs be able to opt out of working unsocial hours, including weekends, in exchange for reducing their annual salaries by £7,000. The government demanded a reduction of £12,000. ‘I’ve got to make a decision,’ John Hutton, the junior minister, told an official. ‘I know it’s the wrong decision but I’ve got to take it for political reasons.’ The GPs won. They received a 26 per cent annual pay increase plus a large rise in their pension in exchange for giving up well-known, lucrative abuses of their contracts, and at the same time their working hours were dramatically reduced.

  Blair was happy to buy them off. Ever since he had been ambushed during a TV interview in 2001 by angry patients complaining about the failure of the policy of giving a £5,000 reward to every GP practice that guaranteed to see a patient on the same day they rang for an appointment, he believed in buying peace. ‘We pointed out the risks to Milburn and Hutton of giving the GPs too much money,’ said Rob Webster of the NHS Confederation, ‘but it was ignored.’ In 2005, the concession would cost an extra £392 million, 22 per cent more than anticipated, and create a crisis of access by patients to GPs. ‘We made a mistake,’ admitted Hutton. Blair, he noted, was untroubled by the excessive costs.

  At the monthly stock-takes, Blair never asked Crisp whether he was monitoring expenditure. Neither he nor Milburn realised that Crisp shared their fondness for good headlines. At the regular NHS board meeting, Crisp beamed about newspaper reports describing ‘panic’ among the private health insurance companies because their business plans were ‘going up in smoke’ as NHS waiting lists fell. During those meetings, he did not question the NHS’s accounts, which revealed that some hospital operating theatres remained unused for 43 per cent of the week, or that staff in some A&E wards were grossly inefficient. Andrew Foster, responsible for human resources, noticed that Crisp usually listed pay negotiations at the end of the board’s monthly agenda – and the meetings ended before personnel contracts were discussed. Such managerial habits were, naturally, unknown to Blair. To secure a headline about saving a small sum of money, Blair would approve reducing staffing levels at Richmond House by 38 per cent in order, he explained, to have less ‘unproductive interference in the day-to-day management’ and to direct civil servants to be ‘focused on strategic leadership rather than micro-management’, but he did not engage in forensic discussions about NHS finances.

  During his regular meetings with Barber and Milburn, Blair rarely discussed the changing skills required from doctors and nurses. New drugs, keyhole surgery and revolutionary diagnostic equipment ought to have prompted Crisp to revise the job descriptions in the new contracts awarded to NHS employees, but the technical revolution was ignored. Crisp’s mistake, he would later admit, cost hundreds of millions of pounds every year.

  Blair also never questioned whether the new medical gospel of dispatching patients as fast as possible from hospitals might not contradict Brown’s £12 billion PFI scheme for 107 new hospitals. ‘We created overcapacity,’ Crisp would later acknowledge, ‘so we had waste.’ He blamed the politicians for lacking the ‘political appetite’ to close unnecessary buildings.

  By then, the Princess Royal in Bromley, one of the first PFI hospitals to be completed, was crippled by debt. Undeterred as ever, in 2003 Blair opened the new Hexham General Hospital to display his commitment to PFI. His publicists mentioned that the rebuilding had cost £51 million. They omitted to disclose that the hospital trust would need to repay a debt of £249 million over the following thirty-two years, including £114 million to the private financiers. The total PFI debt was heading towards £100 billion, yet the burden was not recorded in the national accounts.

  Borrowing, Blair and Brown agreed, should increase to create a positive legacy for the 2005 election. Brown now posed as the protector of NHS spending. While Treasury officials devoted inordinate time to scrutinising the cost of widening a single road or ordering the sale of an embassy’s wine cellar, they never challenged Crisp’s accountants about reducing the cost of hospital care, and the additional £8.7 billion allocated by Brown in 2002/3 was soon spent.

  Blair’s tool for changing the NHS’s culture remained foundation hospitals. The legislation had been delayed by the Iraq war and compounded by media storms about gun crime, the A-levels fiasco and a strike by firemen seeking a 40 per cent pay increase without any change to their work practices. To keep the flag flying during these storms, Blair continued to speak about the modernisation of the NHS. Brown, he knew, would lead the opposition, despite the facts.

  Anderson’s plan for some cataract operations to be treated privately had proven the value of the private sector. Phaco, the ISTC contractor, used a much faster American procedure that NHS doctors had resisted, one that took twelve minutes rather than nearly two hours. Fearful of losing their jobs, NHS doctors quickly adopted the new method and immediately increased their workloads. Although barely 4 per cent of the operations in Britain were conducted by Phaco, the NHS’s waiting time for cataract removal contracted from eighteen months to near zero within the first year. ‘75 per cent of patients with the opportunity did make a choice,’ Milburn pointedly told Crisp.

  ‘The NHS got a huge jolt from the private sector,’ noted John Hutton. ‘It was a fundamental wake-up moment, because the private hospitals’ treatment was so much better than the NHS’s.’

  Not everyone was pleased. Among the critics was Crisp, who accused private contractors of being overpaid and of ‘draining the NHS of funds’. He was supported by Brown and the chancellor’s media sympathiser, Polly Toynbee of the Guardian. To prick that bubble, Milburn took Toynbee to a hospital in Peterborough to meet an NHS doctor who specialised in cataracts. ‘I’m absolutely against these ISTCs and choice,’ the doctor told her. The journalist glowed sympathetically before the doctor continued: ‘It’s absolutely ruined my private practice.’ Milburn watched Toynbee’s astonishment with pleasure. However, experience had taught him not to expect the facts to influence her journalism, and she continued to support Brown’s opposition to foundation hospitals.

  Brown had reopened hostilitie
s on 3 February 2003. In a speech in London, he condemned talk about choice, markets and foundation hospitals. ‘The consumer can’t be sovereign,’ he said. He wanted collectivism and co-operation in the NHS rather than competition. The state and its servants, especially doctors and administrators, knew better than patients. Milburn, he complained, had not delivered any real improvements. The following day, Ed Balls, Brown’s consigliere, described foundation hospitals as deliberately divisive. Blair was the party leader despite the party, implied Balls.

  ‘Tony felt cornered,’ noted Mandelson. To counter that impression, Downing Street leaked to The Times that Blair intended to revive the argument in favour of foundation hospitals by organising a Commons vote in May. The following day, 1 March, Brown’s spokesman retaliated by briefing the media against Milburn. An investigation was launched over whether the existing foundation hospitals were disobeying the Treasury’s financial rules. Then the Iraq war forced a stand-off between the two ministers.

  In Blair’s interpretation, Brown was pitching old Labour against New Labour in a Commons revolt organised by his lieutenants. As many as two-thirds of Labour MPs threatened to vote against foundation hospitals in a debate arranged for 7 May. Here was another example of Blair’s folly. Political success depends upon bartering, exploiting the weaknesses and strengths of both opponents and supporters to tilt the balance and win a vote, but Blair never fully understood pork-barrel politics. He engaged in confrontation without preparing the ground to guarantee victory, or else participated in an argument without the certainty of a safe exit before defeat.

  To Milburn’s dismay, despite the victory in Iraq Blair still appeared hesitant about taking on the Labour rebels. ‘It’s fucking not on,’ Milburn told him after a fractious Cabinet meeting on 30 April, when the government appeared destined for defeat in the Commons. ‘Tony, you can’t just stand there and take it. You have to do something.’