The company once known as, run by T Blair, CEO, should close down its Department of Health

The strategy is confused. Difficult decisions are being ducked. The directors are at each other's throats. Such is my end-of-year assessment of NewWorldOrder plc, the company briefly branded as, led by T Blair.

It is worrying for shareholders that the constructive tension between the chief executive officer, Blair, and the finance director, G Brown, is a distant memory. Once they were the darlings of the market, the dream team of a slick frontman with marketing moonshine (TB) and a number-cruncher/strategist (GB). Now they rarely seem to be playing for the same team.

It is desperately inefficient and wasteful to have two competing centres of government, in the form of an ever-expanding Downing Street and the Treasury octopus. It is also terribly confusing for the directors of assorted subsidiaries, such as Milburn at Health and Morris at Education. To whom do they report? Who is in charge?

Poor Milburn has signed up for a ten-year plan of renewal, plus a "public service agreement" linked to the three-year budget set by the Treasury, and a new 47-page "contract" with TB's pristine "delivery unit". Which of these contracts takes precedence? Which one will determine whether Milburn gets his bonus or is ignominiously sacked? If I were him, I would be contacting the headhunters and looking for a transfer, pronto.

Health illustrates another great weakness of the company, its inability to make bold, long-term strategic decisions. In the NHS, we have a business characterised by sharply declining customer confidence, shattered employee morale and questionable performance (to put it kindly). Yet the CEO appears to believe that its problems are of a similar nature to, say, Marks & Spencer's. In other words, he is going for a few "quick wins", delivered by a handful of gurus (the equivalent of what George Davies has been called in to provide at M&S), to turn the business around.

Well, it ain't going to work. The days when incremental improvements could fix the NHS are long past. It can only be viable for the long term if completely relaunched, rebranded, remade. This should not be confused with the recent furore over how it is financed. The question of whether it is funded out of general taxation, with a hypothecated tax or through compulsory private insurance is relatively unimportant.

Far more germane is the structure of the business, the nature of its relationship with "customers", and the working practices of its employees. It needs to be broken up and decentralised. Doctors should be bought out of contracts that allow them to freelance in private healthcare, to the detriment of service to the NHS (which other business would institutionalise moonlighting?). And patients need greater control over what treatment they have and where they get it.

Of all NewWorldOrder's hidden liabilities, the NHS, still working on a model settled in 1948, is probably the most potentially damaging. It could bring down the company. So, if the CEO has any sense, he will move the NHS off the balance sheet as quickly as possible. Day-to-day ministerial involvement in it should be ended and the Department of Health should be closed down. The model for this is the Bank of England, which was given independence to set interest rates. An autonomous NHS would be subject to a three-year or five-year plan set by the company board. But Blair or Brown, or any other director, would not be allowed to get involved in day-to-day NHS management. And as for corporate governance, the NHS would be accountable to the non-executives (as convened in the House of Commons).

The company has also got into a pickle over its policy on corporate and social responsibility. I am not a proponent of political correctness, but should Blunkett, the executive in charge of internal security, really be going around saying that clients should conform to "norms of acceptability"? Seems a sure-fire way to lose market share. And the less said about the reconstruction of the railway division, the better. It was hardly best practice to ride roughshod over stakeholders, even if taking Railtrack off the stock exchange seemed guaranteed to find favour with the mass market.

However, although the company's overall performance may be lamentable, that of its main rival, IDS Inc, is worse. Is it mass market or niche, traditional or brand spanking new? The way things are going, I would not be surprised if it were forced to break up into a touchy-feely people business, controlled by the cuddly duo of Archie Norman and Francis Maude (whoever they saw for grief counselling is clearly a genius), and an operation run by Iain Duncan Smith based on long-term care for the elderly.

Finally, what about the outlook for the coming year? Well, the CEO will endeavour to convert all the company's assets into euros, in spite of the finance director's residual fears that an unhedged position could bankrupt the business. Although this refinancing of the company requires the approval of shareholders, who are divided on it, I suspect Blair will win the vote.

As for the power struggle between CEO and finance director, I would still put my money on transition within a couple of years. This would involve Blair quitting to become president of Euroland SA, with Brown taking the helm of the domestic company (subject to shareholder approval, naturally). But the short-term problems faced by NewWorld-Order are pretty intractable. The rumours of a boardroom battle are bound to get nastier. I'm shorting the shares.

Robert Peston is editorial director of Quest(TM);; e-mail

This article first appeared in the 17 December 2001 issue of the New Statesman, The ignorance of the Islamophobes