The start of NHS privatisation: How Paul Foot shone a light on New Labour

By the mid-1990s the Tory government was in considerable disarray. Things were so bad within the Conservative Party that prime minister John Major stood down as party leader and then won the contest to be the new leader. His party was losing seats, through defections and by-elections. The Labour Party, under Tony Blair, was in the ascendancy and looked like it might win the next general election. 

This was the context in which Andersen Consulting began looking into the political future, wooing Labour. It provided its services free to Labour’s Commission on Social Justice, and in 1994 it employed Patricia Hewitt, the deputy chair of that Commission, as its own director of research. In the summer of 1996, it laid on a vast event at Green Templeton College, Oxford University, for the entire team of prospective Labour ministers – more than a hundred Labour MPs – to discuss their future as government ministers. The investigative journalist Paul Foot, who passed away 20 years ago this week, wondered what on earth they thought they were going to learn from a bunch of consultants.

The following year, Labour won the election and Foot began tracking Hewitt’s rise. She was now Labour MP for Leicester West, and within a year she would become economic secretary to the Treasury, within two years a Minister, and by 2001 was in the cabinet as secretary of state for trade and industry. Foot had always thought she was on the left but noted in his Guardian column that Bill Morris, the general secretary of the transport union, described the Department of Trade and Industry under Hewitt’s leadership as “the provisional wing of the CBI [the Confederation of British Industry, a trade group representing businesses]”.

In 1993, in his very last published column for the Daily Mirror before moving to news magazine Private Eye, Foot had written about the Wessex Regional Health Authority and the scandal of the millions of pounds it spent and lost on a new, failed, computer system. In the same year, David Willets, the Conservative MP for Havant, published a pamphlet called The Opportunities for Private Funding in the NHS. In it, Willetts argued for private enterprise to fund and build hospitals for the NHS, and then, at the end of the process, to inherit them too. Initially at least, both the Trades Union Congress (TUC) and the Labour Party were against the idea. 

Sam Galbraith, a member of Labour’s shadow frontbench and an internationally respected neurosurgeon, said PFI (the private finance initiative) was “a financial sleight of hand, a massaging of figures as a result of which the increase in the public sector borrowing requirements is not shown and is thus a matter of deceit”.

By 1997 such caution and criticism had been ditched, and the newly elected Labour government was ready and willing to go down the PFI route. The mastermind behind the change in Labour’s thinking was Geoffrey Robertson, MP for Coventry. Within six weeks of Labour’s accession he had a report on PFI ready, and legislation in the pipeline that would remove any hurdles to the signing of new contracts. 

The second reading of the National Health Service (Private Finance) Bill was introduced by Alan Milburn, who Foot remembered meeting in the Days of Hope bookshop in Newcastle, back when Milburn had been considered left-wing (and the bookshop was known locally as the Haze of Dope). 

The people who had been helping Geoffrey Robertson were at Andersen Consulting. They had worked on ways of making the rules on PFI contracts less onerous to the private sector, and by the end of 1997 PFI had soared into orbit. No one in government or the Labour Party seemed to care that the flow of new investment carried with it a heavy burden of new debt. By the time Foot was writing this story into The Vote, his book on the fight for the right to vote in Britain, Arthur Andersen, originally part of Andersen Consulting, had gone bust over its involvement in the Enron scandal. All that advice had come from an utterly corrupt enterprise.

The person who had helped Foot with the Royal Edinburgh Infirmary story was Allyson Pollock, a doctor and professor in public health policy. Her research achieved some fame when the British Medical Journal published an editorial entitled ‘PFI – Perfidious Financial Idiocy’. It concerned a series of articles the BMJ was publishing, based on research by Allyson and her team at University College London, that showed, contrary to the reassurances Foot had been given, that the number of beds across Lothian, which includes Edinburgh, had declined by almost a quarter.

The BMJ was loudly denounced by Labour MPs, but Foot cautioned them: remember what happened in Wyre Forest, a parliamentary constituency in Worcestershire where the Wessex Health Authority’s plans for a shiny new PFI hospital ran into difficulty. To finance the new hospital, the health authority planned to downgrade a smaller, local hospital in Kidderminster. 

Initially supportive of local campaigners against the cuts in their services, the Labour MP for Wyre Forest, David Lock, soon changed sides, as he climbed the political ladder in the New Labour government. At the next general election, Wyre Forest elected retired hospital consultant and campaign leader Richard Taylor as its MP. David Lock was out – providing a cautionary tale for his fellow Labour MPs.

Despite the campaigns and objections, the number of new hospitals being built under PFI contracts continued to grow. Building costs were spiralling, bed numbers were shrinking, and running costs growing. What was the difference, asked Frank Dobson, New Labour’s health secretary, as he opened the new PFI hospital at South Tees? Hospitals were previously being built by the same profit-making companies who were now involved in building PFI hospitals. Nothing had changed. 

As Private Eye explained, everything had changed:“Dobson cannot see the difference between hiring a plumber to put in your new bathroom and letting the plumber take over your whole house on condition he rents it back to you for the next 30 years – and paying him extra to do your cooking and cleaning.”

The hospital stories continued to roll into the Eye. At the 2003 Labour Party conference, the schools minister, David Miliband, announced that all future school building would be under PFI, too – even though an Audit Commission report had shown that the first 17 contracts for schools were neither cheaper nor quicker.

What intrigued Foot about the whole PFI story, besides the mounting public debt and the enrichment of some building companies, was the critical transfer in power from public to private. Why was New Labour so in love with business and projects like PFI? 

Foot had a theory. When the Social Democratic Party (SDP) was formed in 1981 through the defection from Labour of four right-wing MPs, the new party was intent on ditching everything associated with traditional Labour. 

As far as Foot was concerned, they were, in truth, Liberals. For evidence, Foot produced his uncle Dingle. Dingle Foot had been a Liberal MP during the war, and had been defeated as a Liberal candidate in three successive post-war elections. In 1957 he joined the Labour Party. How else was he to sustain a political career? He was instantly selected to fight a by-election in Ipswich, which he won – and then held the seat until 1970.

The SDP was extremely successful for quite a long time, even though it would eventually vanish into oblivion, and its leaders into the Liberal Party, renamed the Liberal Democrats. But the young, aspiring Tony Blair never joined. Why not, Foot asked. Blair’s politics had proved to be far more in tune with theirs than the Labour Party’s traditional politics of socialism and trade unionism. 

Foot speculated that Blair must have decided it would be better to stay and change Labour from within. In his early days, Blair sported a Campaign for Nuclear Disarmament badge; but as soon as he became leader, and then prime minister, he built around himself a powerful group of people who would reject the socialist tradition of the Labour Party.

Just days before the contest for the leadership was over, Blair had made clear the intended direction of travel: “The trade unions will have no special and privileged place in the next Labour government. They will have the same access to it as the other side of industry.” 

It was as if, Foot reflected, the two sides of industry were like two football teams, and the government an even-handed referee. These were echoes of the past, he thought, as Blair and his team prepared the ground for “an assault on Labour voters more outrageous and contemptible than even Ramsay MacDonald ever imagined.”

“Labour came into existence to represent trade unionists and socialists in Parliament”, Foot wrote in the introduction to Labour Party PLC, journalist David Osler’s book on the Labour Party’s growing connections with business.

“In the various periods before 1997 when they have achieved office with a parliamentary majority, the influence of those socialists and trade unionists, though waning, has at least been detectable enough to worry big business and their media. Systematically and with tremendous application and dedication, New Labour has striven to tear up the roots left by Old Labour and to turn itself into a business party every bit as credible and friendly to big business as the Tories had been.”

The cost of tearing up the roots would be high: “Where there is no difference between two big political machines paid for by big business, ordinary peoples’ interests in and involvement in politics collapses. Less people vote and less people care. All politics becomes contemptible, and the way is open for the racialist and the dictator.”

*This is an edited excerpt from Margaret Renn’s new biography of Paul Foot.

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