With the Christmas recess upon us, ministers are shattered but optimistic. The cabinet is proud of what it has achieved in just seven months. Difficult decisions have been made and painful cuts have started. Last week, councils, courts, schools and the local NHS were told their budgets for next year.
The spreadsheets make grim reading. Row after row of minuses. Each one represents thousands of workers starting a change process where their jobs could be lost. In January, the same thousands will compete for the remaining posts. The successful ones will be left to cope with increasing demand and fewer people to do the work. The unsuccessful will swell the ranks of the unemployed.
The NHS was supposed to be the bright hope amid the misery, a golden opportunity for the Conservatives to show they could be trusted to run the health service. Senior officials fear that the opportunity has already been squandered and the government must work fast on damage-limitation.
When Andrew Lansley took over as health secretary, the NHS was performing well, with satisfaction ratings that most companies would be proud of. The experts advised them to keep the NHS stable, maintain high standards and keep staff motivated to work harder with less money.
So Lansley published a plan to do the opposite.
He is forcing GPs to buy all the services and drugs for their patients and wants to strip out the backbone of the NHS: strategic health authorities (SHAs) and primary care trusts (PCTs). He wants to put patients in charge and trust people power and open competition to keep standards high. The plan relies on the SHAs and PCTs transferring their roles to GPs, and coping with less money by making massive efficiency savings.
Unfortunately, they are not doing either task very well. Lansley's first act was to tell them they were not very good and would be abolished. As a result, they are disintegrating as staff desert a fleet of sinking ships. Senior NHS managers are alarmed by the uncertainty spreading across the service. The resulting hysteria is leading to botched budget cuts as treatments are restricted and increasing numbers of frontline staff are told they are losing their jobs.
Lansley has been allowed to press on, mainly because few outside the NHS understand what he is talking about. In a belated attempt to get a grip on his plans, he has effectively been put on probation and asked to attend a review every fortnight with Oliver Letwin, Danny Alexander and Gus O'Donnell.
PMQs this week further raised the alarm. Ed Miliband tore into the Lansley plans and attacked the PM for reneging on the Conservative pledge to increase the NHS budget above inflation. Officials across government had been waiting for this grenade to explode ever since the Office for Budget Responsibility increased the inflation forecast and wiped out the real value of the extra NHS money. The PM insisted there would be an increase. Civil servants debated whether he hadn't read his brief or had just decided to keep repeating the pledge on the assumption that if he said it, it would happen.
And happen it did. Number 10 swung into action to guarantee that, if inflation increased, the NHS budget would rise above it. The Treasury agreed to find the extra money.
Lib Dem ministers are aggrieved. If billions could be found to preserve a Tory pledge, how was it that no serious money could be found for a Lib Dem pledge on tuition fees? Why was the PM saved from his embarrassment when the deputy was left to commit an agonising public U-turn?