Authors: Tom Bower
Four days after the election, Frank Dobson was summoned to Downing Street.
‘How’s it going, Frank?’ Blair asked.
‘I’m implementing the manifesto,’ Dobson replied proudly.
Blair smiled. He had barely thought about New Labour’s health policy. On the Saturday morning after the election, in a telephone conversation with Alan Milburn, a former Trotskyite from a coal-mining village in County Durham, Blair had confessed his ignorance about the NHS. ‘You’ll be the junior health minister,’ he said. Milburn seemed a natural choice. He had made his reputation as a backbencher who asked awkward questions about the health service based on sensitive information leaked to him by a senior NHS manager.
‘What should I do?’ asked Milburn.
‘We need a health policy.’
The service, Blair believed, was in crisis. However, he was uncertain about the solution.
Dobson did not share those qualms, and had already ordered Graham Hart, the department’s permanent secretary, to restore the NHS to the purity of its founders’ vision in 1948. The Tories’ system of targets and league tables, along with the Patient’s Charter introduced in 1994, were rescinded. Simultaneously, Dobson abolished the Tories’ schemes to improve the quality of NHS care by empowering patients to choose their treatment and creating competition between hospitals.
‘I’ve ended the internal market and GP fund-holders,’ Dobson told Blair. ‘Now it’s co-operation, not competition and arguments.’
The NHS at that point employed a million people and absorbed about a tenth of Britain’s GDP. In the manifesto, Blair had promised that £100 million would be saved by terminating the internal market’s red tape. That money, he had written, would be used to reduce the waiting lists for admission to hospital, which were at their highest level since 1948. One hundred thousand people would immediately be helped, even though 1.1 million would remain on the lists.
That inheritance, Blair believed, was symbolic of the Tories’ disdain for the NHS. In comparison with other countries, Britons had a lower life expectancy and less chance of surviving cancer. With inadequate government funding, many hospital buildings were derelict, there were insufficient doctors and the use of new technology was limited. A plan introduced in 1988 to make the training of nurses more academic was producing ‘too posh to wash’ recruits who were reluctant to perform the traditional chores. The £100 million, predicted Dobson, would begin to solve these problems. ‘We hoped that all it would need was just a bit more money,’ recalled John Hutton, a junior health minister. Beyond that, on his own initiative Dobson had ignored the plans devised by Chris Smith over the previous year to refine the Tories’ introduction of market economics into the NHS. Any proposal to change Aneurin Bevan’s blessed legacy was heresy.
Back in 1991, Ken Clarke, the then health minister, had concluded that the NHS was weakened by the Luddite practices of the NHS’s own employees. To undermine their damaging self-interest, Clarke had created an internal market. His purpose was to provide faster and cheaper treatment for the public; to allow NHS hospitals to become more independent from Whitehall as so-called ‘trusts’; to give financial power to GPs as ‘fund-holders’ to select and ‘pay’ for the treatment and hospital care of their patients; and to use private hospitals to reduce NHS waiting times. Robin Cook, Labour’s spokesman at the time, had opposed all these ideas.
In 1996, in an unusual innovation, Chris Smith had been encouraged by Stephen Dorrell, the Conservative health minister, to speak to his departmental officials so that he might understand the incentives and competition that had been crafted to cure the NHS’s chronic inefficiency.
‘We need to rethink how to provide what did not exist in 1948,’ Dorrell told those civil servants in the department who still worshipped Nye Bevan’s ‘covenant of past ideas’. The famous quip, ‘The British have only one religion, the NHS, and Tories are seen as non-believers,’ still resonated. Dorrell’s White Paper, ‘A Service with Ambitions’, summarised the cures developed by trial and error to reduce management costs and end the paternalism of the staff running the NHS to suit their own rather than their patients’ interests. Over the previous six years, the NHS had gradually placed GPs rather than administrators in the central role as leaders of the service, responsible for directing the expenditure of money to improve primary care. By using incentives and competition, GPs were encouraged to focus on the quality of treatment rather than on the number of people passing through hospitals. The innovation had been rewarded by a continuous rise in productivity. Taxpayers were getting more for their money and a record number of people were being treated. The downside was that the increasing demand for treatment by a growing and ageing population was not being met by sufficient expansion of the service.
In crafting Labour’s health policy, Smith appeared to accept that Clarke’s innovations were improving productivity, but he intended to add refinements. At the same time, he could not resist mocking Dorrell and the Tories’ NHS as ‘a shambles’. Among the solutions he expected – by 10.30 a.m. on his first day in office – was the dismissal of Alan Langlands, the forceful and intelligent chief executive of the service.
Echoing that policy, Blair had told a meeting of the heads of the royal colleges and the BMA before the election that he intended to clear out all the top NHS officials, including Langlands. Unanimously, his audience had protested that the NHS’s chief was sound, not least
because he opposed both the introduction of market forces into the service and the use of private hospitals. Blair retreated, but he lost his trust in Smith. For the moment he did not grasp the consequences of the fundamentally conservative medical trade unions’ objections to any shift from the gospel that the NHS should be free of state controls. For them, introducing competitive pricing through the internal market offended Bevan’s idealistic purity. Blair accepted their protests, which in turn were endorsed by Dobson.
During his first substantial meeting in Downing Street about the NHS, at which Alan Langlands was present, Blair’s new health minister summed up his department’s officials as ‘dumbos appointed on a sleepy afternoon. They’re second-rate, basically incompetent.’
Dobson’s opinion was shared by Robert Hill, Blair’s special adviser on the NHS, who was also at the meeting. The civil servants, believed Hill, ‘had not got a clue as to how to get a grip on the service, which had been left completely fragmented by the internal-market reforms.’ Hill did not recognise that civil servants in Whitehall set policy; they didn’t manage services.
Neither Blair nor Dobson appeared to be embarrassed by the presence of Langlands. On the contrary, Blair shared Dobson’s dismay that Labour had inherited a public sector that, in their opinion, and despite the evidence, was largely unreformed. ‘The state was still as it had been in 1945,’ Blair later wrote, although he was unsure what to do about it. Nevertheless, the reforms introduced since 1991 were to be dumped.
Faced with Dobson’s caustic appraisal, Langlands trod carefully. Although sympathetic to Labour, he knew that Robert Hill, whom he marked down as ‘well-meaning but an ideologue who would not listen’, shared Dobson’s disdain. Yet voicing any disagreement, he understood, would be unhelpful. The prime minister, he suspected, was uncertain about Dobson. Hours before he was appointed health minister, Downing Street had alerted officials in the department to expect Peter Mandelson as their new boss. To switch from Smith to Mandelson and end up with Dobson suggested Blair had no clear vision for the NHS.
‘It’s clear from the manifesto’, Langlands now told Blair, ‘that your policy is to abolish GP fund-holders.’
‘Should we be getting rid of them?’ asked Blair uncertainly.
He had forgotten his approval of Smith’s plan for an amended GP fund-holding scheme. Although he instinctively accepted Thatcher’s idea that monopolies should be broken up, New Labour’s ideology provided no obvious alternative to central control of the NHS. ‘Save the NHS’ was only a slogan, behind which lay no new ideology, values or policy.
Any doubts were silenced by Dobson. ‘I’m taking control,’ said the new minister. Although the manifesto had pledged not to return to the top-down management of the 1970s, Blair did not object as Dobson went on to explain how the NHS would revert to the command-and-control system first developed in 1948. Over the following weeks, Dobson’s officials did not dare ask how one man in Whitehall could supervise 520 executives running the NHS’s 100 health authorities and 420 hospital trusts. With their jobs at stake, silence was advisable.
‘We’re not going to close St Bart’s, are we?’ Blair asked Langlands next. Closing the famous London hospital was part of Tory ‘rationalisation’ to improve community care. Concentrating medical expertise and new technology across a larger area provided better treatment than relying on an unplanned network of hospitals developed over the past century.
‘That’s in the plan,’ replied Langlands.
‘I don’t understand community care,’ said Blair. ‘I don’t want St Bart’s to close.’
Langlands made no comment. After a brief pause, Blair mentioned the huge discrepancies in treatment across the country. ‘How can they get it right in Newcastle and not Newquay?’ he asked.
‘There are some good ones and some tail-enders,’ Langlands replied, ‘just like in your Cabinet.’
Blair appeared to agree. ‘Good,’ he said, bringing the meeting to a close despite the unanswered questions.
Dobson returned to his department. Under the orders of his deputy Alan Milburn, everything inherited from the Tories would be reversed, echoing his wishes. ‘I’ll come down like a ton of bricks’, Milburn threatened a group of NHS managers, ‘if anyone uses the private sector.’ He further told Langlands, ‘We’ll abolish the NHS trusts.’
‘That’s the one thing that is working,’ replied Langlands.
‘Right, we’ll keep them,’ said Milburn, ‘but GP fund-holding, the internal market and the idea of independent hospitals must go.’ In his understanding, Labour had settled on a policy of ending any independence of hospitals from Whitehall’s total control and restoring what he called his ministry’s ‘care and maintenance’ of the NHS.
Dobson and Milburn’s demand for a complete reversal of previous government policy exposed their misunderstanding of the internal market. Among the NHS’s weaknesses was its inability to price good-quality treatment. Since the 1980s, the Tories had accused the medical profession of obstructing improvements to the NHS. Doctors were interested in more cash – when it became their income – but caring for money that was to help the taxpayer caused discord. Like all NHS staff, GPs and consultants were unwilling to be constrained by budgets. ‘My job’, the doctors incanted to ministers, ‘is to treat my patients. Your job is to provide the money.’ The Tory answer was to set up an internal market between providers – the hospitals – and purchasers – the GPs. Being empowered to choose between different services provided by different hospitals would force NHS staff to consider costs and pricing, a normal procedure in the private market. By introducing a tariff, the NHS would get value for money and at the same time challenge vested interests.
The plan’s introduction in 1991, forcing GPs to make choices when treating their patients, had caused grief for the NHS’s ideological purists. The only solution, agreed Labour’s supporters, was more money. Blair joined the chorus trumpeting that the internal market was a curse and should be abolished.
Graham Hart, the permanent secretary in the health department,
was dismayed. Over half Britain’s GPs had signed up to the fund-holders scheme. Research showed that the patients of those GPs incentivised by payments and preferential access were being treated faster and better in hospitals. And that was precisely Dobson’s complaint: patients served by GPs opposed to fund-holding were noticeably worse off. Dobson and Milburn were adamant: ‘We’re not having a two-tier service.’ The alternative scenario seems not to have occurred to them: namely, if all patients were served by GP fund-holders, all would benefit. Hart resisted explaining that to Dobson, reasoning, ‘He would suspect that I was a Tory.’
Persuaded by the medical professionals that competition undermined the public-service ethos, Dobson and Milburn believed that Britain should rely upon the altruism of the NHS staff, who, to their mind, were wholly motivated by their social conscience to help patients. Blair agreed. Choice, he believed, entrenched inequality because only the middle class possessed the ability to make effective use of it. ‘Cream-skimming’ was unacceptable because choice led to unequal life expectancy and, owing to duplication, waste. With his blessing, the system of fund-holders was abolished, but Dobson agreed to keep a watered-down scheme that still incorporated the internal market’s ‘providers and purchasers’. No one was quite sure whether Dobson understood the resulting confusion, and Blair was not told about the muddle in the NHS, nor did he seem aware of it in government policy.
At 10 a.m. on the Wednesday after the election, Blair bounced into the regular weekly meeting of Whitehall’s permanent secretaries. Radiating idealism and energy, and dressed in his shirtsleeves, he conveyed missionary zeal. ‘My motives’, he said, ‘are the same as yours. Public service. You all have a huge wealth of experience, and we will rely on you.’ Some officials would depart enthused, but Graham Hart was disappointed by the answers he received to particular questions. Labour’s plan, Blair had said, was to ‘reintegrate the NHS without reorganisation’. Hart was ready to implement the new government’s policies by abolishing trust hospitals and GP fund-holders, but Blair’s refusal to set up a Cabinet
committee for the NHS was puzzling. He appeared unaware of the fiendish complications of running the world’s second-largest business. ‘He doesn’t have the faintest idea about the NHS,’ Hart concluded.
Blair left the meeting with misgivings of his own. The top civil servants, he complained on his return to his office, were not as impressive as generally assumed by politicians. They were only good for supplying raw data, and their advice was best ignored. He would rely on his confidants to change Britain.