How the Coalition carved up the NHS

Twelve days after the general election in May 2010 two men, neither of whom would claim to be experts on the workings of the National Health Service, held a meeting in the Cabinet Office.

Oliver Letwin, the Conservative minister for government policy, and Danny Alexander, a Scot who at the time was chief adviser to Nick Clegg, had both been involved in negotiating the Coalition Agreement. They were now meeting to draw up the Coalition's much more detailed "programme for government".

The NHS, Britain's biggest public service by a mile, had barely got a mention in the Coalition Agreement – merely the promise of real-terms increases in spending. What the two men were trying to do was marry two competing philosophies over the how the NHS should be run.

On one side was the Liberal Democrats' long-standing desire to hand over the commissioning of NHS care to local government. The party's manifesto had not gone quite that far.

But it had advocated elected health boards to replace primary care trusts. On the other was the Conservative belief that choice, competition and a greater willingness to make use of the private sector were the essential tools needed to drive up NHS performance.

The exercise was a purely political one. Civil Service help in drafting the detailed proposals was offered, but rejected. Andrew Lansley, the new Health Secretary, was largely excluded. He saw a draft. He objected. But according to officials and special advisers, he was ignored.

Pretty much the same applied to Paul Burstow, the Liberal Democrat who had just been made a minister in the health department. He now describes himself as a "consultee" but certainly not a "co-producer" of what emerged.

What Letwin and Alexander produced was, in the words of one Tory special adviser, "a cut-and-shut job" between the two competing views of how to run the NHS. In the words of a Liberal Democrat, what emerged was "a half-horse/half-donkey" of a policy. And it was to cause the newly formed Coalition Government no end of trouble.

It is two years since Mr Lansley published his White Paper that set out his mighty plan for NHS reform. The reaction over the next 20 months was to immolate the gains made in a five-year long drive by David Cameron as the Conservative Party leader to "detoxify" the NHS as an issue for the Tories.

A government that just two months before – in the "programme for government" that Letwin and Alexander were drawing up – had promised the electorate that it would "stop the top-down reorganisations of the NHS that have got in the way of patient care" launched instead what was arguably the biggest structural reform in the service's 62-year history and certainly the biggest single shift of power and accountability it had ever seen.

GPs were to be required, like it or not, to take over the commissioning of NHS care. The entire existing superstructure of the NHS – 10 regional health authorities, 152 PCTs and the existing NHS executive – was to be abolished.

In its place would be a new national commissioning board and a new economic regulator, charged with promoting competition across the service. "Any willing provider" was to be allowed to supply NHS care at NHS prices.

Local government was to be given a new role in public health and a new role in trying to tie health and social care together, while gaining a bigger say over NHS commissioning.

The reaction on the day was less one of immediate hostility than one of shock at the scale and pace of a set of changes that seemed to most people – politicians, the public and to most of the NHS itself – to have come out of the blue.

Old, unhealed, wounds about the use of choice and competition to drive up standards in the NHS were reopened. By the end of the legislative process, commentators from both the left and the right were predicting that the reforms could prove the Government's "poll tax" – the change in the way local government was financed that proved a key part in Margaret Thatcher's downfall.

By March this year, David Cameron had seen his party go from being almost level in the polls with Labour for having the best policies for health to a position where Labour had a lead, with the Liberal Democrats, on that measure, nowhere in sight.

Over the past few months, the Institute for Government and the King's Fund have supported a study into just how and why what is widely seen as one of the biggest-ever "car crashes" of politics and policy making occurred. A key cause of the later problems was the "programme for government" and Letwin and Alexander's private Cabinet Office meetings.

Without any experience of how the NHS actually worked, they proposed that PCTs, the existing commissioners of NHS care, should be turned into a bizarre mix of directly elected individuals (in order to give patients a stronger voice), with the remainder of the board being appointed by local authorities. The chief executive and other officers, however, were to be appointed directly by the secretary of state – a power Lansley did not at the time have.

Quite how this structure was meant to work is unclear. A body with at least some democratic legitimacy would be operating beneath an administrative body that had none – the strategic health authorities – while being answerable to the new, and entirely appointed, national commissioning board that Lansley was planning.

It would not be responsible for hiring and firing its own chief officers. And on top of that, the department rapidly calculated, the elections would cost £200m to £300m at a time when the NHS was trying to make £20bn of efficiency savings.

When the "programme for government" was published on 19 May – Cameron and Clegg hailing it as "a united vision for the NHS that is truly radical" – it was regarded in the Department of Health quite simply as "a disaster". It is, one official says, "almost impossible to conceive of a worse piece of policy making, really".

Lansley's own reaction was to ignore it. He told officials, "Let's find a way round it. Let's show how it is unworkable and [then] we can deal with it." Or, as Lansley himself now puts it, "it became increasingly obvious to all of us" – ministers and officials – that this thing "was never going to fly".

The question was how to unpick it. Lansley was determined to have all GPs involved in commissioning. Paul Burstow was determined to have a bigger role for local government.

The solution, as one official puts it, "was to recognise that local authorities had always had a role in public health".

Indeed, between 1948 when the NHS was founded and the 1974 reorganisation, local government had run public health. So the answer was to hand it back.

But with public health gone and GPs taking over the bulk of NHS commissioning, there was suddenly nothing much left for primary care trusts to do. "They were a shell," as one health department insider puts it. So they were abolished.

That removed a big part of the job of the strategic health authorities (SHAs) that sat above them – overseeing PCTs – while another huge part of their role, the oversight of ordinary NHS trusts, was also set to go because all hospitals were intended to become NHS foundation trusts.

So there was nothing much left for SHAs to do either. With their numbers set to be heavily truncated anyway to meet huge cuts in management costs, and with the Liberal Democrats having a manifesto commitment to abolish them, the SHAs too were scrapped

"In one stroke we were free" [of the programme for government proposals], as one official puts it. On paper, the solution had an elegant purity. In practice, it produced a spectacular reorganisation.

What unpicking the "programme for government" did was turn a big shift of power and accountability – Lansley's determination to make GPs responsible for commissioning – into a huge structural upheaval. One that allowed critics and the media to write this up as the biggest NHS reorganisation ever.

The "programme for government", however, had huge impacts on the events of the next 20 months. First it revived the promise that had gone missing in the Tory manifesto of "no more top-down reorganisations". And, second, once the Bill was published, it became crystal clear that what it contained was not what the programme for government had promised.

That allowed Liberal Democrat activists who objected to many other elements of the Coalition's plans – more choice and competition, greater use of the private sector – to argue that "we signed up to this [the programme for government], not to that [the Bill]".

That produced the revolt at the party's spring conference in 2011 that in turn led to "the pause" in the legislation and the bitter battles over it that followed in the Lords. It allowed the argument to be run that there was in fact no mandate for these reforms.

But if the programme for government was a key cause of the Coalition's travails, there were other reasons why the publication of the White Paper came as such a shock.

Timeline

Tortuous route from backroom deal to legislation

2010

11 May: Coalition Agreement does not refer to health service reform.

18 May: Oliver Letwin and Danny Alexander meet to draw up the wording of the Coalition's Programme for Government.

20 May: It promises to "stop the top-down reorganisations of the NHS that have got in the way of patient care".

12 July: Health Secretary Andrew Lansley dismantles Letwin's plan and sets out plans for the biggest NHS shake-up in 60 years in a White Paper.

2011

19 January: The Health and Social Care Bill is introduced in the Commons.

28 February: Lib Dem peer Baroness Williams criticises an "untried and disruptive reorganisation".

28 February: Ex-Labour Health Secretary Alan Milburn chairs NHS commissioning board.

13 March: Lib Dem activists denounce plans.

6 April: Bill is put "on pause".

13 April: More than 95 per cent of delegates at Royal College of Nursing pass vote of no confidence in Lansley.

13 June: NHS Future Forum recommends alterations.

21 June: Bill in Commons.

7 September: Bill receives its third reading.

12 October: Bill approved at second reading in the Lords by 354-220.

3 November: Bill paused amid Lords opposition.

2012

19 January: The Royal College of Nursing, Royal College of Midwives and British Medical Association join in "outright opposition" to the Bill.

19 March: Third reading in Lords.

20 March: Approved in Commons.

27 March: Bill gets Royal Assent.

Extracted from 'Never Again?' by Nicholas Timmins, published on Thursday by the Institute for Government and The King's Fund. Tomorrow: How Lansley was silenced ahead of the election.