Steve Richards: So near, yet so far... how the Government has undermined its own NHS reforms

At times of intense pressure, Mr Blair has an Old Labour faith in generous financial provision

We live in fast-moving times. Most hours during each day of the year reforms are hailed as historic, disastrous or historically disastrous. The debate about the NHS moves faster still. I need urgent treatment in order to keep up. Thank goodness waiting lists are coming down. With a crusading zeal, ministers hail their latest reforms and acknowledge that short-term pain in some cases is possible. The Conservative leader, David Cameron, counters by arguing that there is nothing wrong with the crusade. He is a reformer, too. It is just that the Government mismanages the reforms.

This is all nonsense. The key reforms to the NHS have yet to take effect. They will start to make a more tangible impact next year at the earliest. Things move fast in British politics, but not that fast. The immediate problems whirling around parts of the NHS are because, with good cause, hospitals are clearing their deficits in preparation for the reforms. The new rigour has exposed financial crises in some areas, but has not caused it. As far as there is a crisis at the moment, the cause is the higher than expected pay rises to doctors and surgeons. This was agreed in the dark depths of the second term. The current problems are rooted in the past and are not directly related to reforms that have yet to bite.

We know this to be the case because the architect of the original generous financial package for the NHS has come forward to offer a fresh analysis. The former senior banker Derek Wanless has confirmed that he did not anticipate so much of the additional cash being spent on wages when he made his original study in the second term. Mr Wanless is not alone. No one in the Government worked on the assumption that wages would soar.

Tony Blair makes a robust defence of the wage increases. With head held high, he exudes an almost patriotic pride that doctors and surgeons in Britain are the highest paid in Europe. On one level, he strides proudly on to safe terrain. With ease, he brushes aside Mr Cameron's half-hearted and unconvincing attempts to make mischief.

The Conservative leader is not likely on the eve of some challenging local elections, and at a time when he is trying to make his party seem more cuddly, to campaign on the slogan: "Less pay for doctors and nurses". On this, the Conservatives are not a problem for the Government. The problem is the large amount of cash being swallowed up without an equivalent increase in productivity.

If Mr Blair had wanted so much of the additional cash to go on wages, he should have made even more money available to the NHS. Instead the Government reaches the European average on health spending, a significant achievement, and without a moment's pause the GPs became the richest in Europe. This was not planned.

There is a tragic dimension to the current situation. The Government is so nearly right and yet is undermined by its own familiar flaws. On the rarely heard positive side, it has increased investment in the NHS without damaging the economy and in a way that commanded the approval in opinion polls. This has resulted in significant improvements within the NHS. Who would vote for a return to the appalling health care offered in 1997 even if the return to the squalid past were accompanied by a tax cut?

The unions moan with a reckless ingratitude, and are deified in much of the media because they are attacking the Government. They should spend more of their energies assessing what better use could be made of the additional 85,000 nurses in the NHS. Blair is also right to expose and challenge complacent inefficiencies.

But the distorting pay bills highlight the darker, dysfunctional side of this Government. The origins lie in the epic internal battles during the second term, under-reported compared with the more innocent first term when a new book on the Government was published most days of the week.

Early in the second term, the Treasury's attention focused on the need to win popular support for a tax rise to pay for the NHS. Downing Street watched on nervously but eventually gave its support. After that, the Government was divided over the NHS almost with the same intensity as the last Conservative administration was split over Europe. The main row was over foundation hospitals and the degree to which they should be granted financial freedoms. The battle was long, arduous and at the end the field was strewn with casualties.

What is clear now is that they were all fighting the wrong battle. Gordon Brown showed much less interest in the negotiations over pay for GPs and consultants. Yet it was the outcome of those negotiations that were to swallow up much of his nimbly raised cash. Brown's forensic skills would have been better placed analysing the details of the GP contracts, but at the time the Department of Health, Downing Street and the Treasury were at war over the NHS and each of them decided selectively which battles to fight.

Meanwhile, Mr Blair was in an unnecessarily restive state about justifying the tax increase. A senior figure in Downing Street told me on the day it was announced that he feared the tax rise would lose Labour the next election. In the negotiations over pay, GPs and other NHS employees were given a relatively easy ride in the hope that they would then be allies for the wider reform programme.

At times of intense pressure, Mr Blair has an Old Labour-type faith in generous financial provision. Nearly £3bn was spent on farmers after the foot-and-mouth crisis in the hope that they would reform their methods. The farmers took the money and have since shown little interest in reform. Now the generously rewarded NHS employees are up in arms, threatening to strike, while it is as difficult as ever to see a GP if you work, fall ill at weekends or overnight.

Part of the tragedy is that the principles behind GP contracts were correct. Doctors are rewarded on the basis of a wider range of responsibilities. Over time, the deal will ease pressures elsewhere in the system and save money. But in the short term, the deal is swallowing up money.

So the Government has got it nearly right. Each day, there are thousands of good news stories about the NHS that will never be reported. There will be more bad stories than there should have been because warring ministers cannot act together. The worry is that the reforms to be implemented in the coming months were drawn up in a similar dysfunctional context.

As I write, the Health Secretary, Patricia Hewitt, tells Unison's annual conference that waiting lists will soon be a thing of the past. She is heard in a disapproving silence. Good news becomes bad. I am going for a lie down.

s.richards@independent.co.uk