The unions reacted with outrage, claiming that Mr Blunkett's plans would prove divisive and damage team-working in schools.
But ultimately it is their members who have emerged as the big winners from performance pay.
Ministers realised early on that to win acceptance for their scheme they would have to allow most experienced teachers to benefit.
As a result, 97 per cent of those who applied to cross the threshold in 2000 were successful in gaining a pound;2,000 rise.
This solution may have been politically astute but it means that pay "by performance" remains more rhetoric than reality. If ministers really want merit rather than automatic pay rises, they will have to restrict the numbers getting a bonus. One way of doing this would be to let only a proportion move up the upper pay spine.
In March, Education Secretary Estelle Morris attempted to draw a line in the sand when she wrote to the School Teachers' Review Body saying: "I do not think that progression up the upper pay spine should be virtually automatic." She explicitly stated extra pay points should only go to "the most effective teachers".
Once again though, the Government's intentions have been thwarted, this time by heads. As The TES revealed last week eight out of 10 teachers (110,000 out of 138,000) who have crossed the threshold are expected to get a further rise this year.
In his speech to the National Association of Head Teachers' annual conference, general secretary David Hart will pledge to keep up the pressure over performance pay.
He and teachers' leaders will be hoping that they can continue to force the Government to provide enough funding to give experienced teachers near-automatic progress up the pay spine.
Things may change though. One of the Government's problems has been meeting a pent-up demand among older teachers for pay rises who had been stuck at the top of the old pay spine. Once these teachers have worked their way through the performance pay system, ministers may find it easier to restrict the numbers being given merit rises - especially if the recruitment crisis eases.