Interview with Tony Blair three hours after consultants had objected the new contract, talking about the reform and why it should happen

In the stately hush of the Cabinet room, HSJ was given an exclusive interview with the man who has yoked the future of his government to reform of the NHS. Prime minister Tony Blair set out his views on pay modernisation, foundation trusts, primary care trusts and the rejected consultants contract. And there was a note of contrition for managers, too.

Three hours after the announcement that consultants had rejected a new contract, Tony Blair says: The reform process has got to go on.

Leaning across the table of the Cabinet room, the prime minister declares: The principle of saying: 'If were putting more into the service, we need more performance out of it' has got to be maintained.

Though ruling out the imposition or re-negotiation of the contract, he says: We've got a very significant pot of money that could have gone to the consultants. They've rejected the contract, so therefore we will have to look at how else we use that money to incentivise performance. It is important that consultants do improve their productivity.

And he adds that the money set aside to fund the consultant contract - estimated to be over£300m per year - would be used to provide very considerable leverage in the system one way or the other, for managers to manage more effectively.

Praising the commitment and dedication of health service professionals, Mr Blair says NHS productivity is suffering from old-fashioned practices and demarcations [and] the ineffective use of new technology.

He adds: We are in a position where we are under immense pressure from the public, who say: 'Look, you're raising our taxes to put more money into the health service. Show us what the product at the end of that is.' It is not really good enough for us to turn round and say: 'Well just leave that up to the system.'

To have a consultant contract that is effectively unchanged from 50 years ago is not compatible [with health service reform]÷ In every other walk of life, people are having to make changes.

He continues: We are putting record investment into [the NHS]. And that's not a piece of so-called spin, we are the only major country anywhere in the western world increasing our health and education spending [in real terms] as a proportion of our national income.Many countries are cutting back.

We are embarked on a very big and radical programme here.

It is the only chance for the NHS to be back on its feet again in a decent way.

He then pauses to give what he describes as a crucial warning.

There is a large part of the political world and a significant part of the media desperate to portray the NHS as a hopeless case. They will seize on any problem, any example of malpractice, any incident, in order to say this is not the exception in the health service, this is the rule.

Were fighting against [that], were trying to work with the professionals within the health service to change it; were trying to put extra money in and get the publics consent for that extra money.

At the same time, were doing it in the context that anyone who goes onto the news and says the NHS is failing will get top slot [and] anyone who goes on and says there's progress being made here might not bother.

One of the reasons I wanted to do this interview is to say to people it is really important that we have a dialogue between us, where we understand each others point of view,. he adds.

Sometimes people see reform of a system as somehow aimed at those that work in it. Its not like that all. Its just that whenever youre working in a particular situation sometimes youve got to take a step back and ask: 'Is the system within which I'm working the most effective system that there could be?'

Instead of flogging the existing system harder and harder, [we must ask] is the system, in fact, sensible?

Mr Blair says that one reason why it was so important to make the upfront financial commitment to the NHS was to allow those working absolutely flat out in immensely difficult situations to take a step back and take stock.

Insisting he understands the difficulties over bureaucracy, over targets and waiting lists and all the rest of it, he is determined to reach an understanding with health service staff in which you understand why were under such intense pressure to produce and we understand why sometimes in obeying that intensity we can end up providing hassle for you that you find either difficult or counter-productive.

Part of this understanding extends to the salary expectations of NHS staff other than NHS consultants.

On Agenda for Change pay restructuring, Mr Blair says: There's a constant process of making sure it reaches wide enough and deep enough. I think most people would consider that it is taking us in the right direction.

But he adds: There has to be a sense of orderly process. If you leap too far ahead and try to solve all the problems at once - deal with all the pay inequities and give everyone a huge pay rise - the economic consequences for the whole of the economy, and for investment in the service, would be dire.

I'm well aware if you're a nurse or doctor in the front line - or a manager, managing a vast budget - [you might be] thinking: 'Well, I deserve more than that.' But I'm afraid theres just a limit to how far you can go. Its not that ambitions [about salaries] should never be satisfied - they have to be satisfied in an orderly way, he explains. The pay review board awards are being met. Those awards are all above the rate of inflation. For the first time in many years, public sector pay is rising faster than private sector pay.

I met a prime minister from another European country recently who said he was facing a strike within his public service 'because they're making a wholly unreasonable wage demand'. I said: 'What is it?' and he said: 'Its 3.8 per cent when inflation is just over 2 per cent.' And the fact is that we have been giving those type of awards.

But that's still not enough for many. How long will NHS staff have to wait to have their pay ambitions fully satisfied?

By the end of the 10-year plan, we should see people in a significantly better position. Will that mean they're all going round putting out the flags and saying that everything's hunky dory?

Well, I don't think that ever happens.

Building a system that works The prime minister says he was struck, while involved in the development of the NHS plan, over how the hospital problem - whether it was bed blocking, long waits in accident and emergency or for outpatient appointments - had its root cause in something that has happened outside the hospital.

What is needed is the introduction of flexibilities and incentives into a primary care-led system designed to tackle the underlying causes of the hospital problem, rather than simply treating the symptoms.

He acknowledges that not all these flexibilities and incentives are there yet, but believes that through a constant process of dialogue, ideas can be refined and solutions found.

And we shouldn't be worrying about that. Its precisely the same in the school system where were amending the whole time the concept of how, in the post-comprehensive age, specialist schools are going to work.

The important thing is that the basic principle is clear.

Values old and new Ifthe leading role of primary care is one of the cornerstones of the new NHS, so surely is the declaration that the NHS is now defined by values rather than organisational structures.

Mr Blair agrees and is quick to add: The core value of the NHS is healthcare on the basis of need, not the ability to pay. That was the value that gave birth to the NHS and still is its core value.

Does the NHS have any new values? Choice, for example?

Choice is a concept that relates to the core values. If the core value is treatment on the basis of need, not the ability to pay, that core value is breached if somebody who is in need has to wait so long that the only choice available to them is to pay to go private - or not get the treatment at all.

Mr Blair says that many NHS reforms - the choice agenda, structural re-organisation, national service frameworks etc - are designed so that a patient is able to get some purchase within the system.

If a patient can't get the treatment they need, they can go elsewhere - or theyve got some [other] recourse. Increasingly you'll find in all public services that those are basic issues.

In the end what people want from the NHS today is to be treated as an individual.

Role play: managers are vital

Better treatment is what many NHS managers would ask from the government.

In the past, the contribution of health service managers to the NHS has received very little recognition in comparison with their clinical colleagues.

Prime minister Tony Blair is contrite, admitting: To be absolutely honest, we bear some responsibility for that.

But he is keen to set the record straight.

Earlier this year he backed HSJ s Health Management Awards, with the overall winner set to receive the prime ministers award for excellence in health service management on 18 November.

Now he declares: We do need high-quality and high-performance managers in the health service. If you're managing a PCT [for example], you're managing the budget of a reasonably sized limited company.

We forget that sometimes these managers are handling huge budgets.

Managers are absolutely vital in the health service, because they are the people who are meant to take a step back and look at the design of the system.

One of the reasons why I wanted to be associated with the award is in order to make clear that we really do value managers.

Earned autonomy: power to the front line

One carrot waved in the direction of NHS managers is the promise of greater freedom through earned autonomy.

Prime minister Tony Blair believes it is important to understand that the principle is one the government is trying to apply across the public sector - including local government, education and even the police, who may receive more freedom in the way they organise themselves to fight crime.

The challenge facing all public services - literally all the industrialised world over - is: 'How do you keep the principle of public service whilst creating a dynamic and entrepreneurial public service sector?' Foundation trust hospitals are part of meeting that challenge, says the prime minister. As such, he does not see any prescribed limit on the number of foundation trusts.

You should step it forward as fast as it will go, consistent with principles of earned autonomy on the basis of high performance. There should be no arbitrary cap on [the number of foundation trusts] - it is meeting the criteria that is important.

However, he does not think that the concept is one that primary care trusts should aspire to.

Mr Blair constantly refers to primary care trusts bedding down and how the government must be very, very carefulabout the way in which the trusts, while in their infancy, handle their very large budgets.

Foundation trust status for primary care would be a development too far, he implies.

Yet Mr Blair clearly believes PCTs must be allowed to become more influential players.

I'm very sympathetic, particularly to the go-ahead PCT managers who say: 'Come on, we need greater power to innovate, there are a massive number of things we could do locally if you gave us the power to go ahead and do them. 'That's a discussion were very willing to have.

We've got to be careful that there is not a gap between the rhetoric of 75 per cent devolved to the front line and the reality of the freedom [PCTs] have.

One freedom desired by many PCT chief executives is the ability to use their three-year funding allocations more flexibly. Mr Blair grins as he hears the question and exchanges knowing glances with health policy adviser Simon Stevens, suggesting this is a common topic when the PCT lobby arrives at Number 10.

I've no doubt that this issue of PCTs developing more flexibly will be an increasing part of the dialogue were having with them.

We will be wanting to engage in very close discussion with PCTs as to how we develop greater freedom for them, how they develop creativity and innovation in the services they provide.

Mr Blair says he wants PCTs to have greater control within the system so that the budget they are allocated is a budget they're making work for their patients on the ground.