Authors: Tom Bower
Research by yet another organisation, the Office for National Statistics (ONS), revealed that staff productivity had risen until 1997, then flattened, and between 2001 and 2005 declined. Some, including Derek Wanless, the former banker employed by Brown, would describe the ONS’s research as inaccurate because it failed to account for the quality and success of individual treatments. But even he acknowledged that unit costs in hospitals had increased.
A contagious malady handicapped NHS staff: from the most senior downwards, they seemed unable to embrace self-improvement. Too often, staff refused to read about medical innovations in other countries, and both hospital administrators and doctors stuck to outdated treatments. Many attempts to innovate failed. Under Frank Dobson, one NHS area was ordered to add 7,000 beds by 2000, but by 2005 4,518 of those beds had been withdrawn. The additional money and reorganisation was failing to treat proportionately more patients. Some blamed the culture of fear imposed by targets and inspection for undermining those managers who were minded to take risks and pioneer self-improvement. The Healthcare Commission reported that, if all hospitals were as productive as the best, the NHS could increase the amount of surgery performed by up to 49 per cent. None of these figures seemed to matter. Pressed on why productivity was falling by about 2.5 per cent a year – and by 4 per cent if the staff’s high sickness rate was included – Crisp replied, ‘The NHS is saving more lives.’
The traditionalists could always unearth ammunition to undermine
Blair’s advocacy of change. Whatever flaws were exposed, the staff protected their benefits. Forty per cent of them were receiving annual pay increases regardless of performance. Milburn’s rewards for employees who improved their expertise was proving as expensive as his concession of a 37.5-hour week. Half of the annual increase in the budget was spent on wages and ceaseless recruitment.
Reid’s 2003 agreements with the doctors had also become a burden. Within three years, GPs’ annual pay had doubled to £106,400, while consultants’ pay was up 27 per cent to £109,974, which in 2005 cost the NHS an additional £220 million. The consultants’ hospital car parks were like top-end car showrooms. In return for the extra money, GPs were working four hours less a week. ‘John Reid paid out to GPs more than was anticipated, and that was after a 32 per cent pay increase,’ admitted John Chisholm, the BMA’s delighted negotiator.
Consultants were also working fewer hours on clinical care. ‘The consultants’ contract’, said George Alberti, ‘was insulting. The BMA created clock-watching doctors.’ Weak hospital managers were failing to challenge the doctors to abide by the new contracts. The resulting higher pay, Wanless reported, failed ‘to demonstrate significant benefits [for patients] from the pay deals’. Blair loathed the BMA but was powerless.
In sum, by 2005 the NHS was costing £43 billion a year more than in 1997. The country’s health had improved (if not in proportion to the additional money spent) but, in terms of the number of doctors, the use of technical equipment, the number of patients being treated and the cure rates for cancer and heart disease, Britain still ranked near the bottom of the international league tables. Some argued that the improvement in the country’s health, despite the growth of MRSA and other infections caught in dirty hospitals, owed more to the reduction in smoking, better drugs (especially statins) and a healthier lifestyle than the NHS’s performance.
Despite his scepticism, Crisp was overseeing the applications for hospitals to become self-governing. Among the applicants seeking
to become a foundation hospital in 2005 was the Mid-Staffordshire Hospital Trust. There was no opposition from the new regulators, which included the Healthcare Commission and the Care Quality Commission led by Cynthia Bower. All were satisfied that Mid-Staffs had consistently met its targets. Not one of those health professionals sifting through the hospital’s data noticed the abnormally high death rates or that targets were being ‘falsified outright to avoid non-compliance’. None of the experts visiting the hospital spotted that managers and nursing staff were being systematically cruel towards hundreds of patients; corrupted by the ‘box-ticking culture’, as a later inquiry would describe it, the carers were causing hundreds of patients ‘unimaginable suffering’. Instead, the inspectors unanimously prided themselves on Labour having fulfilled its pledge to create ‘a new tough independent health care regulator’.
A report by Professor Brian Jarman would estimate that malpractice at Mid-Staffs had caused more than a thousand premature deaths. Searching through the statistical records of fourteen other hospitals starting in 2006, he calculated that there could have been an additional 19,000 premature fatalities, an extraordinarily high figure. Compared to other European countries, Britain’s premature death rates were higher and clinical outcomes worse.
A hint of the decay within the NHS had been highlighted in May 2005. Just after the election, Warner had sent Crisp and Hewitt a message about his ‘serious issues of concern about how the extra money we have pumped into the NHS is being managed’. Crisp admitted that the NHS’s accounts for the £76.4 billion budget were ‘not meaningful’, and he ignored the warning.
Four months later, Ken Anderson noticed that the accounts for the previous financial year had still not been produced. ‘What’s the deal with the finances?’ he asked Crisp. ‘Why haven’t the accounts been presented to the board? They’re six months late.’
‘It’s all very delicate,’ replied Crisp.
Anderson asked a secretary in Crisp’s office for the records. His
examination revealed that ‘Crisp had no control over costs and didn’t have a clue what to do.’
Under John Reid, Crisp had allowed an unquantified deficit to grow. His Transforming Community programme, which had seen some employees’ pay increase by as much as 50 per cent, was partly to blame. But the biggest culprits were the PCTs. Over half were serial overspenders, guilty of misusing the payment-by-results scheme, yet their profligacy had been excused repeatedly by Crisp’s officials. The NHS’s financial checks were so poor that neither Crisp nor Richard Douglas, the financial director, had realised the extent of the overspending.
Anderson told Blair’s adviser in Downing Street, ‘There’s a problem. We need to see the books.’
Blair was ‘puzzled’ after hearing the news. ‘How can they be running out of money when they’ve had so much?’ he wondered. He asked Hewitt to hold a meeting to scrutinise the finances.
She had limited expectations as twelve officials led by Crisp entered the conference room on 12 December 2005. Amid coughs and pauses, Crisp admitted that instead of the NHS enjoying a £1 billion surplus in 2004/5, there was a deficit of at least £700 million, and possibly £1.2 billion. The blood drained from Hewitt’s face. ‘Well, Sir Nigel, what do you suggest we do?’ Crisp’s reply was difficult to understand. ‘This is a shambles,’ she concluded.
‘So basically’, said Bill McCarthy, the director of policy, ‘we are where we are, and we have no plan to solve it?’
Crisp – who would later say, ‘I regarded myself as a problem-solver’ – did not reply. Considering the NHS’s budget, a deficit of 1 per cent was manageable, but more than money was at stake. Blair’s reform programme was being threatened by officials who not only assumed there was unlimited money, but also that targets were pointless. ‘We felt outraged by Crisp,’ recalled Matthew Swindells. ‘That’s why we made a big thing out of it.’
Hewitt and Anderson told Blair that Crisp had been working with ‘fairy-tale numbers which had been exposed as bullshit’. Some hospitals,
Hewitt explained, could not even accurately report how many staff they employed. She had also discovered that the department’s ‘indicative tariffs’ – the costings for the entire NHS – had been ‘wrongly calculated’. She ordered those responsible to her office. Three people arrived. All revealed they lacked the required expertise. ‘The department’s not fit for purpose,’ Hewitt concluded. A qualified team was hired – in Australia, Hewitt’s birthplace – to produce the first accurate tariffs.
The overspend, Blair heard, was only one difficulty. Another was that most of the additional £3.6 billion pledged to the NHS during that year would be spent on pay increases, drugs, buildings and negligence payments. Only £475 million would be directed towards improving treatment. Contrary to Richard Douglas’s optimistic forecast promising productivity improvements in return for what he had called ‘pay modernisation’, the opposite had occurred.
Part of the blame, Crisp later said, was the use, despite his opposition, of independent sector treatment centres, which caused NHS facilities to be wasted. He ignored a report produced by his own department that admitted that the ISTCs had forced the NHS to become more productive. Crisp would only later concede, ‘We lost clear direction.’ Hewitt’s conclusions were more explicit: Crisp and his team had lost control.
The truth was dismal. Under Crisp, the funding formula for the NHS had been changed four times since 2001, and each change had triggered costs and no benefits. The plans to incentivise quicker treatment – through choice, private providers, foundation hospitals and payment by results – had not been properly implemented.
Crisp’s answer to all the complaints was that the NHS was the victim of its own success in treating more people. Bradford Royal Infirmary, a foundation hospital, was an example. In 2004, the hospital had treated 11 per cent more patients, but the improvement was cancelled out by the hospital’s failure to get the cash from the PCTs to pay the staff for the additional work. Similar mismanagement had plunged a quarter of all hospitals into debt. The NHS executives had also failed to anticipate
that the bureaucrats managing the 350 PCTs would increase their annual administration costs by £1.5 billion.
A study by Sir Tony Atkinson of the ONS provided the final judgement. Examining the NHS in 2004, he discovered that only £35 out of every additional £100 spent since the Wanless report had produced real improvements. Of the remainder, £56 had fuelled inflation within the service and £9 was lost through falling productivity, which had declined between 3 and 8 per cent each year since 1995.
The chaos built up over the previous five years was finally exposed. Talking with Hewitt, Blair was ‘acutely aware how much had gone wrong’. As usual, he did not ask for a detailed explanation or the names of those who were to blame. ‘We went backwards under Frank,’ he lamented to Hewitt. ‘It [reform] only started when Alan came in.’ To Swindells, he looked demoralised. ‘Probably I only found my voice on domestic reform in the last term,’ Blair would write of his first eight years in power, but he was more candid when he also confessed, ‘We shied away from deep systemic reform.’ All the mantras – ‘investment and reform’, ‘rights and responsibilities’, ‘hand up but not hand out’ – had cut waiting times and improved some standards but had failed to prevent over a thousand deaths in the Mid-Staffs hospital, encouraged financial waste and stymied proper modernisation.
Blair was persuaded by Anderson that John Bacon, who was portrayed as a Soviet ideologue announcing the ‘record production of tractors’, was one obstacle. ‘He’s a wallpaper merchant,’ said Anderson, ‘putting up wallpaper over huge cracks.’ Crisp was told that, unless Bacon resigned, there would be repercussions. Bacon agreed to depart, but denied any such shortcomings.
‘You should under-promise and over-deliver,’ Crisp suggested to his masters, ‘but that’s not the political way.’
‘Is Crisp up to it?’ Hewitt was asked by a Downing Street adviser. Blair did not ask the same question. Removing a permanent secretary was difficult, even for a prime minister.
The solution, Hewitt decided, was to hire McKinsey, the consultants.
‘We don’t want a report on the department,’ the team was told. ‘Just talk to people and tell us what you hear.’ The result was ugly. A culture of bullying and innumeracy infected Richmond House.
‘We need to get rid of Crisp,’ Blair was told by his domestic adviser. He looked surprised but agreed: he was dispassionate about a man who had defied his quest for reform.
‘You’ve lost the confidence of the health minister,’ O’Donnell told Crisp. ‘I think it’s best if you retire.’
Crisp was surprised but understood the system. ‘I had lost power and leverage,’ he admitted later. ‘The environment had moved against me.’
‘Nigel will go,’ O’Donnell reported. ‘It will be quiet and dignified. You may need to get him a seat in the Lords.’
‘If that’s the way to get rid of him, do it,’ Blair replied.
The prime minister summoned Crisp to bid farewell. ‘I am particularly saddened’, Crisp admitted, ‘by the financial problems we are grappling with.’ On 7 March 2006, he duly resigned – at the age of fifty-four – and was created a peer. No other permanent secretary had been rewarded in similar circumstances. Blair praised him as ‘a superb public servant’. He had not, Crisp said, been pressured to resign.
The London bombings of 7 July 2005 permanently transformed the immigration debate. All four bombers were born in Britain, an unexpected phenomenon that challenged the virtues of multiculturalism. Overnight, Blair questioned his previous views. ‘The rules of the game have changed,’ he said in a declaration of war. He wanted more legislation to criminalise the extremists, an extension of imprisonment without bail of terrorist suspects and more money for the intelligence services.
Around the water cooler in the Home Office, officials and ministers discussed the pedigree of ‘home-grown terrorists who sound like us’. Just why did people who found refuge and comfort in Britain turn against the country that was providing them with generous welfare benefits?
Blair offered no answer to those complaining that Abu Qatada and Abu Hamza, two Muslim preachers, were urging violence on the streets of north London. ‘Multiculturalism is preventing their arrest,’ said a security official who had formerly worked in the immigration directorate. ‘We need to get inside the Muslim community to influence their opinions.’
General Jonathan Shaw, the director of Britain’s special forces, watched Blair at the first Cobra meeting after the bombings. ‘He didn’t understand the machine of which he was the master,’ he observed, ‘so he got in the way of getting what he needed.’
Instead of demanding the two preachers’ arrest, Blair listened to Jack Straw arguing that the Muslim community must not be alienated. ‘Jack wants the Muslims to be uncritically indulged,’ noted Tony McNulty, the new immigration minister.
Straw was supported by Robert Hill, by then a special assistant in the Home Office. ‘It’s incumbent on the host community’, Hill told McNulty, ‘to allow other communities to do what they want.’
Hazel Blears, the Home Office minister responsible for counter-terrorism, disagreed. ‘We need to know why the Muslims have become radicalised.’
She was supported by Ruth Kelly. ‘The Muslim Council’, said the education minister, ‘must adhere to Britain’s common values and condemn Islamic violence.’ There was a chasm between Muslims who refused to ostracise the so-called infidels and those advocating integration into British society.
‘What does Tony think about the split?’ McNulty asked Matt Cavanagh, Downing Street’s new adviser on immigration.
‘Tony refuses to take sides,’ replied Cavanagh.
Since the election, Blair had sat on the fence about immigration, wrestling with a political minefield. The terrorist threat, he asserted, justified the invasion of Iraq. His critics said the opposite: the invasion had incited the outrage.
Just as he had relied on the army and intelligence services, in the aftermath of the explosions Blair trusted the police. His faith was misplaced. Their deliberate shooting of Jean Charles de Menezes, an innocent Brazilian, at Stockwell tube station proved that the Metropolitan force was flawed, and Scotland Yard had concealed their officers’ mistake by lying. Combined with the violent corralling or ‘kettling’ of peaceful demonstrators in London, some police acted as if unfettered by the law. But by then the public’s trust in all the state’s institutions had become strained. Blair’s answer to the scepticism was a speech focused on the continuing dangers of terrorism. Within days, the headlines were forgotten.
Before the London bombs, Blair had given Charles Clarke and Tony McNulty the impression that, with the election over, his concerns about immigration had evaporated. Only the extreme left and right, he believed, were ‘peddling an emotionally attractive but practically
foolish or even dangerous debate around immigration’. Discussion of the topic was to be shut down. McNulty was told in advance of a meeting in Downing Street that Blair did not want to discuss numbers, not even about the unexpected influx of European migrants. That was surprising. Rather than 13,000 A8 nationals coming to Britain, as predicted by Christian Dustmann, a London academic, the preliminary estimate was that 630,000 had arrived.
‘I’ve just had forty-five minutes with Gerry Adams,’ Blair said, as he walked into the room for the scheduled one-hour meeting, ‘and I’ve got the Queen at five-thirty. So let’s get on.’ Clarke described his new immigration bill, the fifth since 1997. After thirty minutes, Blair stood up and ended the meeting. The latest wave of immigrants was not mentioned.
Three months later, Blair bowed to the public’s anger over large immigrant families living on benefits in comfortable homes. Justin Russell, his special adviser, warned that media reports about the unending stream of ‘foreign scroungers’ unwilling to adopt British values was undermining support among Labour voters. The focus was no longer on asylum-seekers. By opening access through work permits, only 23,000 people would apply for asylum in 2006, the same as in 1996.
‘We will meet the tipping point at the end of the year,’ McNulty told Blair, meaning that the same number of bogus asylum-seekers would be deported as applied. ‘You can hold me to that.’
‘I will,’ replied Blair.
The target would not quite be reached: 25,712 would apply for asylum and 22,654 applications were refused. McNulty could not remedy Blair’s irritation that judges were still using Labour’s human rights laws to prevent the deportation of foreign nationals, or offer any solution to the 520,000 migrants arriving that year. At least 200,000 people were leaving, which reduced the headline figures.
The articles generated before the election about ‘crackdowns’ had buried the research showing that a third of all new homes built in south-east England were inhabited by non-British people. The cosmetic treatment of statistics was discussed between Lin Homer, the new
head of the IND, and Blair in September. ‘There’s a handling problem,’ John McTernan, Blair’s new policy adviser, was told. To improve the government’s image, Blair announced the reversal of multiculturalism and the closure of the borders under the new slogan ‘Prevent, Protect, Pursue and Prepare’. But the revival of his interest in immigration was short-lived, while Homer was soon regarded as being as hapless as her predecessor.
Blair was looking at the big picture. Finally, he believed that he understood the mystery of ruling. ‘I really did feel absolutely at the height of my ability and at the top of my game,’ he wrote. ‘I was pushing hard on all fronts.’ He would not be fighting another general election, he had already declared. The Queen’s Speech would promise forty-five bills to create his legacy. Attitudes ingrained in 1997 about the NHS, education, pensions, welfare and immigration were jettisoned. In the best practice of the Third Way, he plundered the Tory manifesto. Nothing, he told his new team, would undermine his idealism. ‘Every time I’ve ever introduced a reform in government,’ he said shortly afterwards, ‘I wish in retrospect I’d gone further.’
*
‘I stand before you as the first leader of the Labour Party to win three full consecutive terms in office,’ Blair told the party’s annual conference in Brighton in 2005.
His emphasis on ‘full’ infuriated Gordon Brown, who had announced an immediate national tour to prepare for his premiership. ‘You completely shafted me last year by ratting on our deal,’ he shouted after they returned to Downing Street. ‘You have to set a date.’
To fan the flames, Cherie told a BBC journalist that the corporation should dampen its speculation about her husband’s departure: ‘Darling, that is a long way in the future. It is too far ahead for me even to think about.’
In retaliation, Brown unleashed Damian McBride, a shrewd Rottweiler, to feed the media with anecdotes portraying Blair as a lame duck. Newspapers published accurate stories about Brown demanding
Blair’s departure. Blair retaliated by asking Alan Milburn and Charles Clarke to question Brown’s fitness to be prime minister, and even contemplated a leadership election. As increasing numbers of supporters asked about his intentions, Blair realised his error of pre-announcing his departure. ‘We began to lose control of the party,’ admitted Powell.
The proof of disarray was Blair’s latest plan to protect Britain’s security. Fearful of international terrorism, he decided that the police should be allowed to detain suspected terrorists for ninety days without charge. Not even Michael Howard supported such provisions. Rather than compromise, Blair staked his authority on success in the Commons. It was a miscalculation: forty-nine Labour MPs voted with the opposition, defeating the government by 323 votes to 290. Blair grimaced when told the result moments before the formal announcement. His luck had finally run out. ‘Sometimes it’s better to lose and do the right thing than to win and do the wrong thing,’ was his rationale. No longer invincible, he immediately agreed to a compromise of twenty-eight days.
The Teflon was further scratched by the publication on the same day, 9 November, of an acerbic account by Christopher Meyer, the former British ambassador in Washington, describing Blair’s subservient relationship with President Bush. Blair’s sense of isolation may possibly have influenced his ungenerous farewell speech for departing Tory leader Michael Howard at the end of the month. Bitterness was capturing his spirit.
The seventh of December saw Blair make his debut against David Cameron, the thirty-nine-year-old new Tory leader. The Old Etonian’s political bibles included
The Unfinished Revolution
by Philip Gould, a flattering accolade to Blair. Cameron had prepared a perfect soundbite for his first exchange at Prime Minister’s Questions: Blair was ‘stuck in the past and I want to talk about the future. He was the future once.’ Blair’s thin smile acknowledged the arrow had struck home.
Blair had also been persuaded that Brown was no longer a safe pair of hands: he had raised taxes too high, was spending ‘massively’ on
welfare credits to redistribute wealth and was failing to limit the deficit. Britons, Blair learned, were saving too little, and the government was wasting untold amounts of money. He insisted on a Fundamental Savings Review. Brown refused to co-operate until a formal letter arrived at the Treasury. ‘You asked for a fucking document, so there it is,’ shouted Brown, throwing the review papers on Blair’s desk.
Both knew the exercise was pointless. Blair had long ago lost control of spending, while Brown assumed that the economy would grow ceaselessly and refused to cut the budget. Instead, he would increase borrowing, taxation and spending to win the next election.
Blair chose to concentrate on pensions. Ever since he had ridiculed Peter Lilley’s sensible reforms in 1997, he had ignored the consequences of allowing Brown to wreck the balance between the social classes’ contributions to the welfare state, not least by levying an extra annual £5 billion tax on private pensions. The chancellor had discouraged saving. Increasingly, only foreigners could afford to buy British corporations and expensive homes. Instead of praising his countrymen who accumulated wealth, millions of Britons were encouraged to ‘play the system’ by receiving welfare benefits rather than working and providing for themselves. Belatedly, Blair recognised that Brown was ignoring the abuses of the system and refusing even to protect the basic state pension. The report by Adair Turner, commissioned in 2003, warned that people were not saving for their retirement and intended to rely on the state. The remedy, Turner advised, was to link state pensions to incomes. To overcome Brown’s opposition, Blair mastered the intricacies.
‘We can’t afford it,’ Brown told him.
‘Yes, we can,’ insisted Blair, showing Brown the statistics.
‘No,’ said Brown, and stomped off.
Brown’s first Budget had accelerated the end of Britain’s private pension schemes. Employees rapidly lost their traditional final-salary-related pensions, but at the same time Blair surrendered to the trade unions by allowing public-sector workers to retain their right to retire at sixty rather than sixty-five with inflation-proof pensions.
Blair knew that the private sector paying for public-sector employees’ advantages was unsustainable. Inevitably, Brown disagreed. Ignoring the Treasury’s advice, he refused to abandon means-tested benefits and, as outlined by Turner, restore the link between earnings and pensions. Their argument became intense.
David Blunkett, the new pensions minister, understood the truth: ‘Gordon wanted pension reform to be his achievement, his legacy, just like Beveridge. So he refused to arrive at our meetings.’ Soon after, Blunkett resigned from the Cabinet for the second time after failing to declare payments and a share purchase from a private company.
In February 2006, John Hutton, the next pensions minister, gave a slide presentation in Downing Street. He did not get past the second transparency. ‘Blair and Brown started screaming at each other,’ he recalled. ‘The row was terrible.’ The argument lasted for what appeared to be ‘a lifetime’, but it had in fact gone on for about forty-five minutes when both men walked out. For the chancellor, pensions reform was just another weapon to destabilise Blair. He would not agree to any changes. He could not overthrow Blair, but he would make his life intolerable.