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Last Updated: Sunday, 12 March 2006, 22:06 GMT
Tony Blair's quest for a 'Big Idea'
By Mukul Devichand
BBC Panorama

Prime Minister Tony Blair
Mr Blair wants public service reform to be his legacy

Since the start of the year, Panorama has spoken to several of Tony Blair's former key advisors - some of whom agreed to go on the record.

They have helped us piece together a history of the prime minister's attempts to achieve a public service reform legacy. Reforming Britain's schools and hospitals has long been Mr Blair's ambition.

Those who have worked closely with him in Downing Street believe this is about more than creating a Blair legacy - it is about saving the welfare state itself.

"If Tony Blair's reforms stall, or if they're rolled back, worse still, I think we're in for a pretty disastrous situation," says Professor Julian Le Grand. He was the prime minister's public services advisor from 2003 to 2005, and designed many of the most recent changes himself.

Prof Le Grand says it's no good pouring money into health and education unless that money is spent efficiently. Unless the system is redesigned, he says, "the pressure will be on to privatise, to cut back, to cut taxes".

Britain would "essentially move to a privatised world and it would be the end of the welfare state as we know it," he says.

So what exactly are the prime minister's ideas for saving the welfare state - and how did they develop?


Insiders describe how Mr Blair's reforms began with Labour's election victory in 1997. Britain's new prime minister had won his mandate by promising to drastically improve the health service and to prioritise "education, education, education".

But what exactly was his plan?

Panorama has been told that New Labour government wanted to prove that they could make a break with old Labour's image of reckless hikes in public spending. So they stuck to Conservative spending plans - a massive increase in funding for schools and hospitals was not yet seen as an option.

Professor Julian Le Grand

However the Labour government did stick to old habits in the way they ran and managed public services, according to Prof Le Grand. Many still "believed in the old style of socialist government by which where you pulled the levers at the top and things changed at the bottom," he says.

But the prime minister himself was thinking differently. He had already turned his mind to a legacy of public service reform, says another former Number 10 insider.

"Every Sunday night the fax machine would whirr and a fax would come through, generally from Chequers, from the prime minister giving his thoughts [and] what he'd been thinking about over the weekend," says Lance Price, who worked in the Downing Street press office.

"I've never heard him use the word 'legacy' but people around him would talk about how we could make sure that his legacy was clear," says Mr Price

The problem for the prime minister, he says, was that even by the year 2000 the government's approach was not bringing improvement fast enough.

2000-2001: TONY'S TARGETS

Prof Le Grand says that by the dawn of the new century, it was clear that the old-style methods weren't working.

"The were lots of commands but actually there was precious little control," he says.

Derek Scott

Insiders say the government now embarked on a new strategy: the creation of "targets". Schools and hospitals were told they must deliver specific results.

"Basically you set your targets and you gave operators [and] providers considerable freedom in how they met those targets," says Prof Le Grand

This was thought to be a successful strategy in the short run - as the government managed to deliver measurable improvements in some public services.

But there were problems. Insiders say it wasn't always clear what the results actually meant, and driving towards targets could sap the motivation of public service workers.

Something else had changed since 1997 - the government now felt comfortable with spending more public money on public services.

But another key Downing Street advisor says that the increases in public spending that came along with targets didn't always deliver.

"We drifted into turning on the taps of public spending, trying to reform with targets and so on and so forth with mixed success," says Derek Scott, former economic advisor to Mr Blair.

By 2001, it was felt the Labour government - now in its second term - needed to go far beyond targets and funding increases. The prime minister needed a new "Big Idea".


In 2002, the prime minister hired new advisors with new ideas.

Prof Le Grand was one of them. He had long advocated a "quasi-market" in public services, which is at the heart of the current reforms of schools and the health service.

What does this mean? Another of Mr Blair's advisors describes the system as a "search engine" in which the public and private sectors compete to deliver the best public services - all funded by the tax payer.

Dr Arnab Banerji

"The hope is that those who provide these public goods, education health care in a better way than others will thrive," explains Dr Arnab Banerji, the prime minister's economic affairs advisor from 2002 to 2005.

These are the ideas behind reforms like trust schools - which can be run in partnership with private companies - and new GP surgeries that can be run by health care corporations. MPs are due to vote on schools reforms this week.

Some critics say that it all sounds very similar to Conservative policies - like grant-maintained schools and the internal market in the NHS - which New Labour scrapped when it first came to power

Prof Le Grand denies this. "The key insight that I think Tony Blair had was that you could actually have... a left wing way of funding services and you could have some of the advantage of the market," he says.

Some Downing Street insiders have also told Panorama that they fear reforms have been left too late.

The prime minister's former economics advisor Derek Scott thinks much of the delay is to do with the prime minister's relationship with his own Labour party.

"Many in the Labour Party don't want to go where the prime minister wants to take the country," he says.

Tony Blair's Long Goodbye
10 Mar 06 |  Panorama


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