Health and Social Care Bill

Tuesday 6th March 2012 Lords Chamber

Report (5th Day)

Relevant documents: 18th and 22nd Reports from the Constitution Committee.

15:08

Amendment 163AA

Moved by

[Lord Warner]

163AA: Before Clause 60, insert the following new Clause—
“PART 2AStandards of adult social careSecretary of State duty as to the standards of adult social care
(1) The Secretary of State shall have a duty to secure the improvement in the quality of adult social care services through local social services authorities and qualified service providers registered with the Care Quality Commission.
(2) In discharging this duty, the Secretary of State must ensure—
(a) the establishment of a fair and resilient partnership between individuals and the state for funding adult social care that—(i) secures adequate funding to deliver safe and sustainable services,(ii) provides access to these services for those of limited means,(iii) caps the financial liability to pay for services for those with unusually high lifetime care costs,(iv) minimises the impact on the demand for health services,(b) that the assessment of the needs of individuals and their carers for services is undertaken on the basis of published criteria for eligibility to and charging for services that applies consistently throughout England,(c) that continuing efforts are made to reduce barriers to the delivery of integrated health and adult social care to individuals and through the conduct of commissioners and providers of both health and social care services.(3) The Secretary of State may, after appropriate consultations, make regulations governing the discharge of his duties under subsections (1) and (2), subject to affirmative resolutions in both Houses of Parliament.”

[Lord Warner]

My Lords, we return to the issue of adult social care, which is a good occasion for seeing a massive emptying of the Chamber. In very simple terms, the amendment is an attempt to get the Bill to live up to its title and become a genuine health and social care Bill.

Subsection (1) of the proposed new clause would place a clear duty on the Secretary of State to secure improvement in the quality of adult social care through the offices of local government and qualified service providers. It would make the Health Secretary pay proper attention to adult social care in a similar way to the way in which he is under a duty to ensure a comprehensive health service under other provisions in the legislation.

Subsection (2) of the proposed new clause identifies the key elements that the Secretary of State must pay attention to in discharging the duty in subsection (1). These are: adequate funding for safe and sustainable services; access to services for those of limited means; a cap on the financial liability of those with high lifetime care costs; and minimising the impact on the demand for health services. It also introduces national eligibility criteria for services across England and standard charging policies. That was argued for overwhelmingly in the evidence to the Dilnot commission, of which I was a member. In subsection (2)(c), a further push is given to the integration of health and social care in line with the recent report on social care by the Health Select Committee in the Commons.

What is to argue against in these provisions? Today, we see a lobby of Parliament by the Care and Support Alliance to secure action on delivering a more sustainable adult social care system instead of the underfunded and unsustainable system that we have now. This alliance is overwhelmingly in favour of implementing the framework in the Dilnot commission report in order to deliver a resilient and sustainable financial framework for adult social care. There is legitimate room for debate on the precise details of that framework, especially the level of the cap proposed by Dilnot. I for one would accept that we should start with a higher cap than the commission’s preferred option of £35,000, but there is nothing in this amendment that limits the Government’s freedom of manoeuvre on these details or on the speed of implementation. Nor does it frustrate the achievement of cross-party agreement in the cross-party talks now taking place. However, I see little evidence of those talks progressing very fast, with an isolated and politically wounded Health Secretary lacking any Whitehall-wide support, especially from the Chancellor, for doing a deal with the Opposition.

The amendment would get the Government out of a jam. They can implement Dilnot and anything else that they want to propose in their forthcoming White Paper without a new Bill next Session. Subsection (3) of the amendment would give broad powers to use affirmative regulations after appropriate consultation. I can see that after the failure of the Government to provide a convincing political narrative on this current Bill, the Prime Minister might not want to launch another Bill from Richmond House in the next Session. Therefore, ever sensitive to these political considerations, I offer him an exit strategy without neglecting the serious needs of adult social care and the people who need those services.

We all agree that the funding of adult social care is in a parlous state; there is broad stakeholder support for the Dilnot-proposed framework. We all recognise the dependence of the NHS on a robust adult social care system, without which the NHS will surely fail to deliver the efficiency gains required of it. We all want to see improved integration of health and social care, although the Government’s opposition to my amendment on integration last week was disappointing, especially the conduct of 17 Liberal Democrats who voted against it. However, I say to Lib Dem colleagues that today is your chance to make amends. If you want to go to your spring conference trumpeting your success in saving the NHS, you will support the amendment. You had the courage to insert in the coalition agreement the establishment of an independent commission. I pay great tribute to you for doing that. Now have the courage to put into this Health and Social Care Bill the means to implement the adult social care changes that are so badly needed.

I have low expectations of the Minister being willing to accept the amendment because I suspect that his hands are tied by those in a higher pay grade. However, if he is willing to take this amendment away and come back at Third Reading with something equivalent, I will not press matters today. If he is not, we owe it to the outside world, especially the stakeholders lobbying Parliament today, to show where people stand on tackling the crisis in adult social care and protecting the many vulnerable people affected by that crisis. I beg to move.

15:14

[Baroness Pitkeathley]

My Lords, I was delighted to add my name to this important amendment which builds on several amendments we have discussed in your Lordships’ House with regard to the integration of health and social care. The central point of the amendment is to place a duty on the Secretary of State to secure improvement in the quality of social care services provided by local authorities. It goes on to set out the means of doing so.

These proposals are based on those of the Dilnot commission, of which my noble friend Lord Warner was such a distinguished member and about which there is such consensus among all those who work in or are in receipt of social care. If only the coalition Government had managed to achieve such a consensus about all the proposals in this Bill, we would have saved a lot of time and be a lot more content. There is consensus around the proposals and everybody understands what the social care system is in need of. As we have heard from my noble friend, the system is starved of cash, failing to meet the volume of need, unfair—a lottery—and confusing and difficult to find your way around, especially if you are frail, elderly and confused.

The existing consensus is that the future funding of social care has to be based on a combination of individual and state responsibility and contribution, and that we must achieve a lasting settlement. We have mentioned many times before in your Lordships’ House that the Health and Social Care Bill fails to address the most pressing of all health problems: how to deliver affordable and effective social care for our growing elderly population—a view endorsed, I remind your Lordships, by the Health Select Committee in a recent report.

It is extremely worrying that rumours are circulating that the White Paper on social care, responding to both the Dilnot proposals and the Law Commission proposals about legislative reform in this area, is to be delayed. This would be a huge disappointment as well as a missed opportunity. Moreover, it would renege on the commitment given by the Minister for social care in another place when he said only four months ago that,

“social care has languished and rested in the ‘too-difficult-to-do’ box for far too long. We are the Government who are committed; we see the urgency and the need”.—[Official Report, Commons, 10/11/11; col. 181WH.]

I hope that the Minister will today repeat that commitment in response to this amendment.

We should remember, too, the advantages which would be delivered by accepting this approach. We would spend existing resources—which everybody agrees are short—better. It would improve integration of health and social care systems. When people’s need for social care is not met, they turn to the NHS—resulting in increased numbers of emergency admissions or delayed discharges. The inconsistency between fully funded NHS care and means-tested social care hampers delivery of an integrated care system. Recent statistics from the Department of Health show an 11 per cent rise already in the number of hospital bed days lost to so-called bed blocking, so that costs have risen extremely fast.

In addition, the rights and responsibilities of individuals and agencies would be clear to the public if the Government accepted this approach. If people were clear about their future personal liability, they could plan how they would meet care costs up to the level of the cap, wherever that were placed. We would also stimulate the care market to provide more choice for families and incentives for business. The Dilnot report and its proposals have been called a once-in-a-lifetime opportunity. We cannot and should not miss that opportunity. I support the amendment.

[Lord Skelmersdale]

My Lords, the House seems to have gone remarkably silent after those two introductory supporters of this particular amendment. As some of your Lordships will remember, when I returned from Northern Ireland as the ex-Minister responsible for health and social services, I came as a great fan of combined health and social services. Yet I discovered in my experience there that it would never, ever work unless you had one organisation in total and utter control. This may seem like a Second Reading speech, but it is not intended to be. The Secretary of State mentioned in the amendment means any Secretary of State, and currently we have two Secretaries of State. That is why the notable ambitions of this amendment—and they are notable—will always fail. Therefore, I encourage my noble friend, until a higher authority than himself, senior as he is, gives the imprimatur to take social services away from local government, to resist this amendment.

[Baroness Murphy]

My Lords, I think that the noble Lord, Lord Warner, is having us on. There is an urgent need to press the Government on bringing forward their White Paper on social care reform, which is the pressing economic and social care issue of our day—more important than this Bill. But we have to get it right. We are expecting a White Paper, and there are many arguments to be had about the recommendations from the Dilnot commission, although there is quite a consensus of opinion, and about the right and wrong and who will pay and when. I hope that we can have those debates in this House. But this issue requires a full Bill. This amendment gives a new Bill inside the Health and Social Care Bill on Report, and I do not really think that it will fly. I can imagine what the noble Lord, Lord Warner, would have done if it had been proposed when he was Health Minister. He would have given it very short shrift—and I urge the Government to do so again. We need a proper recommendation and discussion in the White Paper.

I also remind the House that last year the Law Commission came out with a report on adult care social services that said that we had had endless piecemeal bits of legislation over and over—and this amendment does it all over again. Let us not make the mistake of supporting this amendment. I am very sympathetic to what the noble Lord wants to do, and we all feel very impatient about it, but let us have a proper Bill and proper debates and get it right for the next generation. Frankly, it is our generation and the next one that will benefit from a proper social care reform Bill. Let us get it right and not do it this way.

[Baroness Barker]

The noble Lord, Lord Warner, asked what was to disagree with—what was not to like—and the answer is nothing at all. However, that is not to say that this amendment is not deficient and there are not an awful lot of questions that it begs.

The noble Lord is right that my party, along with others, has agreed with the Law Commission review and supported the efforts to see the Dilnot commission brought into law. However, he will know as well as I do that the history of social care law reform is littered with failed attempts to deal with one of the biggest issues that our society faces—the Royal Commission on long-term care. The Wanless report was largely about the NHS, but a significant chunk of it was about the need to reform social care to drive down future demands on the health service. Noble Lords have been critical of this Bill, and many of their criticisms are justified, but they overstate the extent to which the latter parts of the Bill, with the placing of public health into local government and the creation of health and well-being boards, attempt to deal with that agenda, decrease health inequalities and raise levels of preventive health promotion. I, too, think that this is an inadequate response, particularly to the Law Commission report, which was a good and detailed piece of work. It deserves extensive scrutiny and to be brought forward in law in a way that is far more comprehensive than this.

I will not have a go at the noble Lord, Lord Warner, for keeping the issue on the agenda, but I say to him that the Care Services Minister, Paul Burstow, has made it clear throughout his tenure that he is doing all in his power to keep social care to the fore. I come back to the £2 billion that was invested in social care at the beginning of the Government’s term. The Government are mindful of the need to deal with this, not least because the noble Baroness, Lady Murphy, is right to say that, as she often reminds this House, no one has a social care need unless they have a healthcare need—the two things are indivisible—and if the Bill is about anything, it is about tackling the health needs of the population as a whole over time.

I do not disagree with the noble Lord, Lord Warner, but I do not think that this is quite the way to go forward. I hope that all Members of this House will continue to uphold the consensus that there has been over the past two years behind the work of the Law Commission and the Dilnot report to bring this issue forward in a way that means that it can be determined successfully once and for all.

[Lord Campbell of Alloway]

My Lords, I would like to raise the matter of the process of putting in statute what in the ordinary course of events should be put in subordinate legislation by regulations or whatever. If you read the amendment carefully, it is a very wide command involving four assessments of individuals’ needs. I am not at all criticising what is sought, but I ask for it to be considered that the amendment would open a large gateway of legal challenge to the Secretary of State that would not exist if this were not put into statute. This question is concerned with finance at a time when finance need not be referred to again.

[Lord Beecham]

My Lords, I congratulate my noble friend on bringing forward the amendment, to which there seem to be two limbs. The first involves finance and looks forward—indeed, arguably it paves the way—to the Dilnot report or some version of it being the basis for the complex issue of catering for the needs, present and future, of a significant proportion of the population.

The second limb is directed more towards the services that will be required, which we would all agree need to be better co-ordinated than they have been. In that respect, I have a certain sense of déjà vu. At the time of the 1973 reorganisation, I was chairman of my city council’s social services committee when various services that were directed to run adult social care were transferred to the health service—chiropody, bath attendant services and the like. At that time, the area health authority, as it then was, found itself in difficulties and unable to fund the continuation of the service, so my authority contributed significantly financially to preserve the very services that we had handed over. That illustrated clearly the need for a much better relationship between the two sides that, a generation later, has still to be achieved. My noble friend’s amendment would certainly direct us further along the road to integration.

The noble Lord, Lord Skelmersdale, refers to the impossibility of progress being achieved without a single body organising it. I do not think that that is right. In fairness to the Bill and the Government, the creation of the health and well-being boards, with the obligation to produce a joint strategic needs assessment and to collaborate in implementing the measures required to deal with those needs, provides a more coherent framework for that necessary degree of collaboration.

15:30

Nor is the noble Baroness, Lady Murphy, correct in saying that my noble friend’s amendment constitutes a new Bill. It constitutes at least a partial completion of the Bill, filling a lacuna in adult and social care, which is part of the Title of the Bill but thereafter becomes virtually invisible. In effect, his amendment paves the way for further reforms.

If I have any reservation about my noble friend’s amendment, it is one that perhaps applies to the Bill as a whole. We have talked repeatedly about adult social care as we have gone through the Bill, but there is very little about the social care of children in it. Perhaps that is something to which we ought to have devoted a little more time. There have been occasional references, and there are some amendments, but we will have to return to the subject if not during what little time remains for this Bill then in the not too distant future. Having said that, my noble friend’s amendment advances the argument and lays out a structure that could be most useful in ensuring a degree of collaboration, which is necessary to maximise the return on the social and financial investment in the care of a significant proportion of our population. I certainly commend it to the House.

[Lord Patel]

My Lords, I do not know whether the Bill is adequate for its intention. I did not think for one minute that the noble Lord, Lord Warner, was trying to insert a Bill into a Bill; he is trying merely to highlight the need for some commitment to social care in a Bill that has “health and social care” in its Title but not much about social care in it. Successive Governments have talked about integrated health and social care but have failed to achieve it. For the first time, we have a Bill with the Title “Health and Social Care”, but with no mention at all of social care. To indicate some commitment to its delivery, if not now then at a later stage, would have been adequate. Delivering integrated health and social care should have the same commitment to it as delivering improved waiting times for acute care.

We tried to get commissioning as a way of integrating health and social care. It would have been a better way forward, but unfortunately that amendment was narrowly defeated. This amendment asks only that the Government commit to making continuous efforts to reduce barriers to integrated health and social care. I do not think that it is inadequate or that it inserts a new Bill into the Bill.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, this has been a thoughtful debate. At the outset, it is appropriate for me to pay tribute to the noble Lord, Lord Warner, for his strong advocacy of the need to improve the quality and funding of social care services. The noble Lord played a critical role as part of the Dilnot commission and has made strong speeches both today and in Committee on this subject.

I am in complete agreement that high-quality social care services are crucial for the health and well-being of the population. As the Government and many others have said, major reform in adult social care is long overdue. We recognise the need for lasting reform to respond to the challenges facing social care. The recent engagement exercise, Caring for our Future: Shared Ambitions for Care and Support, conducted from September to December last year, highlighted again the scale of the challenges. We know that the quality of care is variable and can sometimes be poor, as recent high-profile failures have demonstrated. The current social care system does not support people to plan for their future care needs or maintain their well-being and independence. People often have a poor understanding of what social care is and of how to navigate the system and access the services they need.

All this is compounded by the well documented twin issues of an ageing society and financial constraint. This critical context explains why the Government have set the reform of adult social care as one their key priorities, but it also explains why social care reform merits it own focus and cannot be dealt with around the edges of discussions on another important topic. The Government are convinced that the time has come for social care reform. Given that, the question before us is not whether action should be taken to improve the quality of social care services but rather how we go about doing so.

I have given Amendment 163AA a good deal of consideration, and I am afraid that I have to say to the noble Lord, Lord Warner, that I do not feel it is the appropriate mechanism to achieve what he seeks. This is because, as well as reform being needed for social care quality and funding, there is broad consensus that social care law too needs extensive reform. The noble Baroness, Lady Murphy, helpfully mentioned the Law Commission report on law reform, which put forward this argument last year. I wish to quote a short passage of the report, which states that,

“adult social care law has been the subject of countless piecemeal reforms … It is of little surprise that not only does the law perplex service users and social workers, but also the judiciary”.

This is the problem with the noble Lord’s amendment; to accept it would be to perpetuate exactly the same confusing and piecemeal approach against which the Law Commission argues. The legal framework for care and support needs fundamental reform, not further additions to an already opaque statute.

I wish to set out briefly what I see as the appropriate course of action on social care reform. We will publish a White Paper on care and support in spring this year. I repeat that undertaking, particularly to the noble Baroness, Lady Pitkeathley. We will follow this by bringing forward legislation at the earliest opportunity. The White Paper will draw on multiple sources, including the excellent work of the Law Commission and the Commission on Funding of Care and Support, for which I again express my gratitude to the noble Lord, Lord Warner. The White Paper will respond formally to the reports of both those commissions and, of course, to the Health Select Committee report on social care.

The noble Lord has proposed that a duty be placed on the Secretary of State to secure continuous improvement in the quality of social care. The Government’s proposals for embedding and safeguarding quality throughout social care will be a central theme for the White Paper. We sought views on this as part of the engagement; it highlighted that progress on quality has already been made with the publication of Transparency in Outcomes last year, which set out the Government’s approach on quality, transparency and outcomes in social care. Our approach to quality improvement is aimed at responding to poor quality, enabling improvement and rewarding best-quality services to support choice.

The ideal for social care is a sector filled with great people doing great jobs who deliver high-quality care to people using social care services. As I said, we are committed to publishing the White Paper this spring and preparations are on course. The Government are taking the broadest possible approach to achieving consensus on the most crucial long-term issues. Therefore, in that context, I do not believe that the time is right for an amendment of this sort. It would pre-empt the White Paper and could leave stakeholders unclear on the broader picture of social care reform.

Moreover—I see this as the central point—we do not want to make further changes to the existing statute when more lasting legal reform is already planned in the near future. Social care is a vital public service and deserves its own focus in its own statute. Too often, debates on social care have taken place on the margins of those on another issue.

[Baroness Meacher]

My Lords—

[Earl Howe]

I will give way but we are on Report.

[Baroness Meacher]

I apologise for intervening but I wonder whether it might be relevant to change the Title of the Bill to the Health Bill, bearing in mind the noble Earl’s very valid comments that there will be a White Paper and a totally separate Bill. The Bill’s Title is a misnomer.

[Earl Howe]

The noble Baroness may not have been following all our debates as closely as some, given that we have extensively debated integrating health and social care and how the Bill will improve the prospects of that. I therefore do not agree that social care is such a poor relation in the Bill. She is quite right; of course its prime focus is health, but we have not completely neglected the subject that is so close to her heart.

Specific legislation on social care will be the most appropriate vehicle for debating these critical matters and achieving lasting reform. Of course I understand the desire of the noble Lord, Lord Warner, to keep social care at the top of the political agenda. That is greatly to his credit. I can assure him that the Government have not lost sight of this. We share the same aims for a high-quality service, but it would be wrong to legislate now in such a selective way. The noble Lord may suppose that this is just another instance of a Minister following the standard line that says “resist”, but I hope he will accept that that is not so. There are genuine reasons why the amendment is a bad idea, and I hope that he will feel able to withdraw it.

Having said that, I look forward to debating these issues with him further in due course, and to benefiting from the insight that he and others bring to this topic.

[Lord Warner]

My Lords, this is an interesting debate. Let me say to the noble Baroness, Lady Murphy, that I am not having the House on. I am deadly serious about this because when the Dilnot commission was set up we were asked to do a job extremely rapidly, and we did so well within the 12 months we were set. We were asked to do that so that the Government could crack on with change, which is absolutely vital. This service—adult social care—is in a parlous state that will also do enormous damage to the NHS. Unless you do something quickly about adult social care, you will cause the most terrible financial crisis in the NHS. That is what the demography tells us. That is the reality for urgent admissions to acute hospitals and people staying there much longer than they need to.

If you are interested in improving and safeguarding the NHS, you should be interested in rapidly moving on with the reform of adult social care. The Government are already behind time on this reform. I do not blame the noble Earl, but we were expecting faster action, as was the Dilnot commission. Spring could come quite late this year in terms of the White Paper appearing, and we have no guarantee that there will be legislation in the next Session. The noble Earl has stuck to the normal line, for which I do not criticise him, that one can give no assurances about the next Session’s legislation, but one has to be an extreme optimist to believe that a collective Government will want to have another go at this territory in the next parliamentary Session. I do not doubt his good will—I am grateful for the kind words he said about me—nor his real confidence that the Government will press on with that, but there are a lot of people out there, not just in front of Parliament today, who think that the Government need to go faster on this issue.

I have listened very carefully. The amendment does not prevent the Government from bringing forward new legislation in the next Session. If they want to do that, I shall be deeply delighted and they will have my support. I see nothing in the amendment that prevents the Government from making a start on making changes and protects them to go further if they want to include such provision in the next legislative programme.

I think we should make sure that adult social care is properly represented and recognised in the Bill. Therefore, I wish to test the opinion of the House.

15:45

Division 1

Ayes: 203

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Labour: 159
Crossbench: 36
Bishops: 1
Plaid Cymru: 1

Noes: 261

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Conservative: 140
Liberal Democrat: 64
Crossbench: 44
Ulster Unionist Party: 3
Independent: 2
Democratic Unionist Party: 1

16:00

Amendment 163BZZA

Moved by

[Baroness Thornton]

163BZZA:Before Clause 60, insert the following new Clause—
“CHAPTER A1Principles of regulations of health and adult social care servicesPrinciples of regulation of health and adult social care services
Any person undertaking any regulatory functions under this Part or any functions in relation to services provided under this Part shall exercise all such functions based on the principles of universality and social solidarity.”

[Baroness Thornton]

My Lords, at last we come to the heart of the Health and Social Care Bill—Part 3. On 3 March, David Cameron was again telling his party about the need for greater competition and for the private sector to be encouraged. He has since justified his remarks by saying that it would have been easier not to have addressed the “invisible crisis” in the National Health Service in England. So, the “invisible crisis” which no one but the coalition Government seem able to see is the justification for fragmenting our NHS and opening it up to the private sector.

Our fundamental disagreement with the two parties opposite is that we think that competition should be used only within a managed framework and when it adds value. There has to be freedom to use non-competitive means and to deliver co-operation, collaboration and integration. For a moment we thought that we had a new recruit to the argument, when the Secretary of State announced that he had lost faith in competition. He was all for it in his landmark 2005 speech to the NHS Confederation, and he was all for it when he and his coalition allies launched this Bill with price competition and an economic regulator to promote competition. Now, however, it is reported that he is not so sure.

We on these Benches have not changed our minds. We share the view expressed by the noble Baroness, Lady Williams, that Part 3 should be dropped—a view which is shared by almost all the professional bodies, as well as the staff in the NHS. Even the evangelical GP commissioners are very aware of competition, and we note that the drive to force through any qualified provider for the operating framework for 2011-12 has just been thwarted—a highly embarrassing defeat for government policy.

Making competition central to the reform of the NHS, as opposed to making it one component of a more rational and comprehensive reform with collaboration and co-operation at its heart, remains dangerous. Even with the amendments already agreed, Part 3 is a mess; and even at this late stage the Government should think again and try to build on the very wide consensus that accepts a role for competition only when it adds value for patients.

The three amendments in this group—and the late arrival of a manuscript amendment in the name of the noble Lord, Lord Clement-Jones, which I will return to in a moment—seek to address fears that have been widely expressed about the way that competition will intrude into the NHS in ways that we do not want, and that do not benefit patients. The fear is supported by the legal advice of many experts, who foresee how the Bill will open up opportunities for legal challenge in ways that are not currently acknowledged.

We also see that some clinical commissioning groups are asking awkward questions about how autonomous they will be, and how free to do the job that they are given. We know that they will have to obey the rules set out for them both by the NHS board and by Monitor, but is it worse than that? Will they have to employ legal and consultancy support on a grand scale to avoid being challenged by the courts or by whatever the co-operation and competition panel turns into? Will fear of challenge deter the innovation that the Bill claims will be unlocked?

Amendment 178A is the best effort of many legal minds collectively to solve the problem of ensuring, so far as is possible, that commissioners can do their job. When one looks at the old NHS, or even at Wales, one sees that there is a very high degree of confidence that arrangements made between different parts of the NHS will not be subject to legal challenge on competition grounds. There are no contracts on the arrangements of which the law may get traction. However, even in Wales, if there is a decision that some aspect of provision may require non-NHS providers to be engaged, the full force of competition law applies. We all know that. We are part of the EU so these rules apply.

We know that health services can, as Part B services, get some protection from the full force of EU competition law. We believe that that protection will be chipped away over the years. Although procurement is simpler under Part B, it is still open to challenge if the basics around transparency are not met. If there is an intention to enter into a contract that is enforceable in law, you quite rightly have to go through the correct procedure. This is no different from what is set out in the current principles and rules, which, if you read them, make a lot of sense—as they should, because my Government wrote them.

The doubt and the opportunities for challenge will remain unless you construct in the legislation a framework to protect commissioners of the kind that we set out. Such an approach might not be perfect but it is the best that major brains can come up with. Since the coalition Government’s stated intention is that commissioners should be free, we should be able to see either their version or their legal advice—but we have not. The purpose is not to give unfair preference to NHS providers, or, indeed, to prevent third sector providers; the purpose is to free commissioners to make decisions that would have to pass the test of reasonableness in any event. Neither the third sector nor private sector providers would be any worse off, because they would still have to go through procurement procedures under any circumstances if a service went out to tender.

We think that Amendment 163BZZA, at the head of this group, and the following amendment are the right place to recognise this important principle from the outset. Amendment 163D follows a line that our Liberal Democrat colleagues have also explored, which is to define our NHS in a way that makes it clear that it is not a market despite what the Bill states.

The principle of social solidarity is used in the courts to help differentiate national social policy from the EU internal market and competition law. Social solidarity is therefore not an invention of the Labour Party, it is a term used in EU law. Social solidarity means “provided for that purpose as a matter of social policy” and as such may be considered by the courts to restrict the application of EU internal market law. All this has the same objective—to limit the scope for EU law to be applied in ways that do not help.

The noble Lord, Lord Clement-Jones, has, as it were, come to the party somewhat late by tabling his manuscript amendment. My colleagues and I have been in discussion with him and his colleagues, including the noble Baroness, Lady Williams, for many months, and we have shared with them our thinking on this matter. Indeed only last week I wrote to the noble Baroness, the noble Lord and their colleagues about exactly what we thought we should do together on Part 3. In that letter, as point one, I said:

“Your amendment 177”—

the manuscript amendment—

“and our 163 cover the same kind of point and should be combined”.

I am very pleased that this burst of late enthusiasm from the noble Lord, Lord Clement-Jones, has led to his agreeing that we should combine our amendments, and I am absolutely delighted to say that I would want to accept his amendment as an amendment to our amendment. I hope that noble Lords will have time to work out what exactly is going on here as the discussion progresses. Essentially, however, the noble Lord, Lord Clement-Jones, wants to amend our manuscript amendment with his manuscript amendment—which I am sure he will explain. I apologise to the House that this has been done as a manuscript amendment, but I am happy to report that we seek the same end. When the time comes, I will be very happy to accept the noble Lord’s amendment.

Our amendment does not oppose the use of competition, in its place, and will enhance the Bill. I also like its use of the term social solidarity, as that appropriately describes what our NHS is, and why and how it exists. I beg to move.

Amendment 163BZZB (to Amendment 163BZZA)

Moved by

[Lord Clement-Jones]

163BZZB:Line 6, after “functions” insert “in accordance with the provisions of Article 106 of the Treaty of the Functioning of the European Union as set out in section (Service of general economic interest),”

[Lord Clement-Jones]

My Lords, I beg to move Amendment 163BZZB. I am delighted at the response of the noble Baroness, Lady Thornton. Clearly she recognises good drafting when she sees it. I hope she accepts the arguments, in substance, as I put them forward in my speech.

In common with many other Members of this House on all Benches, I expressed a number of concerns about the risk of market competition becoming greatly more prevalent within the health service as a result of the current provisions of the Bill, despite some concessions offered and partly because the Bill failed to fully reflect the intentions of the Future Forum. Our fear was that the Bill contained a number of measures that could increase competition within the NHS at the expense of collaboration and integration.

We were explicit that we are not against competition in the NHS but it must be applied where it is appropriate to do so in the interests of patients. It is not appropriate in all circumstances. Patient and public benefit can often be secured in other ways; for example, integration of services and co-operation between providers, or a mixture of these with competition, are often preferable alternatives.

EU and UK competition law has had some application within the health service for some years now, largely as a result of Labour’s reforms in the 2006 Act, and we should remember that. However, we do not want to see competition law applied universally across the health service so that our health service commissioners and providers are required to operate an entirely market-based NHS without being able to choose where the market and competition should apply and where they should not.

The objective of the Bill and Ministers during its passage must be to put beyond doubt the protection of the NHS from competition as an end in itself where this does not serve the interests of patients. The tests summarised from OFT guidance for whether EU competition law applies to the provision of healthcare for the purposes of the NHS falls into three stages. First, is the provider an “undertaking”? This depends on whether it carries out an “economic activity”. This status may fluctuate over time and apply to some activities and not others of the same provider. Offering or supplying goods or services in a given market is the characteristic feature of an economic activity.

Even if economic, is the activity wholly social in nature rather than commercial? Compulsory healthcare and insurance schemes have been held to be wholly social. The OFT emphasises that this depends on the facts of each case. Even if the provider is an undertaking and the economic activity is not wholly social, is this in relation to services of general economic interest? This is where both Amendment 177, which I am currently speaking to as well as Amendment 178, come in, in addition to Amendment 163BZZA.

SGEIs are protected from some aspects of competition law. Member states are free to designate services as SGEIs and the Commission will challenge such decisions only if it thinks that the member state is in error. In the view of these Benches, the risk of a number of elements of the Bill being taken together increases the likelihood of NHS services being found by English and EU courts to fall within the scope of UK and EU competition law. These include the fact that the Competition Commission is deployed in reviewing the development of competition in the NHS in the provision of healthcare, and the exercise by Monitor of its functions in relation to the provision of healthcare services.

Secondly, the potential deregulation of foundation trusts from 1 April 2016 under Clauses 111 to 114 means that Monitor will no longer from that date have the power to appoint and dismiss foundation trust directors unless the Secretary of State decides otherwise. On oversight of foundation trust mergers by the OFT, we were concerned that ordinary competition rules as a result of the application of Part 3 of the Enterprise Act by virtue of Clause 77 would be applied. Originally, the PPI cap for foundation hospitals was lifted under Clauses 163 and 164, opening the way for the majority of income for some foundation trusts to derive from private patients, which could have led to a loss of status as an organisation promoting social solidarity. This has now been restricted to a maximum of half the revenue of an FT, which helps to mitigate that risk. There are still issues surrounding transparency and authorisation by a foundation trust’s council of governors or Monitor which remain to be resolved with later amendments.

16:09

We are also concerned that even after the changes made following the Future Forum report, Monitor’s powers were not properly balanced so that they could ensure integration as well as prevent anti-competitive behaviour. The Government have now tabled Amendment 193 to Monitor’s powers under Clause 97 so that it can set and enforce licence conditions for the purposes of enabling integration and co-operation in line with the principles and rules for co-operation and competition, which we will debate later. In putting down amendments, we have no hostility to competition as such, merely a desire to make use of the opportunities that the TFEU and European competition law offer member states to avoid the NHS being treated like a utility, such as gas and electricity.

Under the EU treaties, Article 106 of the Treaty on the Functioning of the European Union states:

“Undertakings entrusted with the operation of services of general economic interest … shall be subject to the rules contained in this Treaty, in particular to the rules on competition, insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them”.

Member states have certain discretion as to which services are services of general economic interest. By ensuring healthcare services for the purposes of the NHS are services of general economic interest and that the “task” of co-operation between services is “assigned” to the healthcare providers, it should be possible to provide some protection from less desirable aspects of competition law.

An EU summary of legislation on this issue states:

“Services of general economic interest (SGEIs) are different from ordinary services in that public authorities consider that they need to be provided even where the market is not sufficiently profitable for the supply of such services. The concept of services of general interest is based on the concern to ensure that a quality service is provided at an affordable price everywhere for everyone. Services of general interest contribute to achieving the objectives of solidarity and equality of treatment underlying the European model of society”.

The objective must therefore be to ensure that providers for the purposes of the NHS that fall into the category of economic activity from time to time will have the necessary protection. By categorising health services as a whole as SGEIs, where services fall into the economic activity category the protections available against the application of competition law can be brought into play. Our amendments would designate healthcare provided for the purposes of the NHS as a service of general economic interest.

It must be right to clarify the treatment of health services when it is available and recognised explicitly in EU guidance. To benefit from the SGEI exclusion it will be necessary to show that performance of the tasks assigned to the undertakings entrusted with the operation of SGEI is being obstructed by the rules of competition. The best example to illustrate why it is important to recognise healthcare for the purposes of the NHS as a market that merits this status is obesity, which affects deprived communities disproportionately. A pure market approach would lead to providers, for instance, offering gastric band surgery, which would be more profitable than undertaking health campaigns to tackle prevention.

Co-operation between healthcare providers, however, may be the best way to achieve good patient outcomes. For example, PACE, the post-acute care and enablement programme, involves collaboration between providers proactively to seek out medically stable in-patients and to treat them at home with interventions which would normally require them to remain in hospital, such as intravenous wound care. This type of service involves integration and a co-operative culture to innovative integration in the first place. Beneficial co-operation must not be prevented by competition law and must be actively encouraged.

When a court approaches the question of whether an activity carried out by one of the new bodies under the proposed health regime falls within the scope of the competition regime, purchasing activity is characterised by the services for which the purchased products are used, and the court will then examine whether the offering of relevant services should be regarded as economic. However, the court will also have regard to the objectives that the relevant body is required to pursue; and the greater extent to which the domestic regime makes it clear that the activities should be carried out by reference to public policy objectives rather than in line with free market incentives, the less likely it is that the court will find the activity to be economic activity governed by the competition rules. So the way we have proposed to do this both in our amendment and in Amendment 178 is to expand upon existing duties on co-operation within the NHS in the 2006 Act and make use of the licensing regime which Monitor will operate under the Bill to impose co-operation for the purposes of integration of services.

Other approaches may of course be valid—for instance, under the general competition rules in Article 101 of the TFEU and in the UK’s Competition Act 1998. An agreement that restricts competition may be capable of being exempted. Clear statements in the Bill or during the passage of the Bill need to be made of the Government’s view that improvements to patient care fall to be taken into account within the context of Section 9. Lawyers would then be able to refer to the Bill or to Hansard when arguing for such an interpretation as and when the issue crops up in later cases, especially if the burden of proof falls on the party trying to demonstrate that the agreement is necessary to produce the countervailing benefits. In addition, under Section 6 of the Competition Act, the OFT or Monitor may recommend that the Secretary of State makes a block exemption order specifying that a certain category of agreements falls outside the scope of Section 2 of the Competition Act.

There are many ways of resolving the competition issues under this Bill and I am sure that there is much common ground on this legal analysis. This means that much of the difference between us relates not so much to the law but to the degree of risk prevailing in its application. It is also true that the impact of competition law is likely to be determined to a considerable extent not necessarily by decisions by the competition authorities in individual cases, but in the advice provided by lawyers to their clients operating in the health sector. There is clearly a risk that lawyers and the companies involved will take a conservative approach and avoid potentially beneficial co-operation because of the perceived risk that it might be contrary to the competition rules. So another way to minimise this is for Monitor to issue sector-specific guidance on the likely impact of the competition rules on specific types of health sector agreements.

I believe that these are constructive suggestions so that the unwanted application of competition law can be avoided. It is now up to the Government to recognise the risk and act accordingly. I beg to move.

[Earl Howe]

My Lords, competition in the health service is a complex topic and very often, in my experience, misunderstood. It is important that we start with a misconception which several noble Lords have raised with me outside the Chamber and, indeed, in Committee. We need to be clear that competition already exists in the NHS and that the Bill does not herald its introduction. The last Government fully recognised that and encouraged it. The last operating framework which they put in place for the NHS stated:

“We shall enable this by … re-affirming our commitment to the ‘any willing provider’ approach for free choice of elective care, reducing the barriers to the entry of new providers”.

The previous Prime Minister, Gordon Brown, giving evidence to the Liaison Committee in December 2007, said that,

“the private sector … is expanding, will continue to expand and will be a lot bigger in the next few years than it is now”.

The Labour Party manifesto of 2010 said:

“Patients requiring elective care will have the right, in law, to choose from any provider who meets NHS standards of quality at NHS costs”.

The previous Government’s policy of increasing the use of competition is already benefiting patients. The recent report from the Office of Health Economics Commission on Competition in the NHS concluded that,

“evidence both from the UK and internationally suggests that quality based competition with prices fixed by a regulator can be beneficial, producing higher quality care at the same cost on average and, importantly, not leading to increased inequity in access to health care”.

[Baroness Thornton]

I thank the noble Earl for allowing me briefly to intervene. He has given some useful and selective quotes. Do not those quotes go on to warn very seriously about cherry picking?

[Earl Howe]

I think that the noble Baroness and I agree that cherry picking is highly undesirable, which is why this Bill outlaws it.

I do not see, as some do, competition and integration as polar opposites, nor are they mutually exclusive. I agreed entirely with the Future Forum when it said in its report last year:

“We have also heard many people saying that competition and integration are opposing forces. We believe this is a false dichotomy. Integrated care is vital, and competition can and should be used by commissioners as a powerful tool to drive this for patients”.

That is worth keeping in our minds.

In response to my noble friend Lord Clement-Jones, let me turn to competition law. I understand that some noble Lords want to prevent competition law ever applying to NHS services. That is to wish for the impossible. The question is not whether competition law should apply to the health service but how. That is why I agree with my noble friend that we must make sure that the NHS is insulated from the inappropriate application of competition law. In particular, we must ensure that clinicians are free to commission NHS services in the way that best serves patients’ interests and that there are no impediments to beneficial co-operation to increase integration, improve quality or reduce inequalities. Under our proposals, a series of protections will provide the sort of insulation against inappropriate application of competition law that my noble friend and others require. I hope that the House will allow me to set this out in a little detail.

Co-operation for the benefit of patients should not breach competition law. Article 101(3) of the Treaty on the Functioning of the European Union and Section 9 of the Competition Act lay down exemptions which apply if the wider benefits of an agreement outweigh its anti-competitive effects. On an individual basis, we would expect collaborative arrangements whose overall effect was beneficial to patients to meet the criteria in Article 101(3) and Section 9.

Competition law would be unlikely to apply to a wide range of NHS services. Some obvious examples are accident and emergency, trauma, critical care, maternity, specialist surgery and many others, particularly in remote or rural areas.

Monitor would support the NHS to understand where competition law does and does not apply. A key benefit of establishing Monitor as a sector regulator, with concurrent responsibilities under the Competition Act, is that it will be able to provide authoritative guidance to the NHS on where that law would and would not apply. The Government’s firm expectation is that Monitor would produce sector-specific guidance and address this question in terms of relevant examples, including models of integrated care and clinical networks, which would be updated in line with developments in healthcare practice. This guidance would help reduce unnecessary fear of legal challenge and uncertainty for both commissioners and providers.

Monitor could also provide informal advice in individual cases, building on what the Co-operation and Competition Panel does now. For example, that might include commenting on what types of collaborative arrangements and specific provisions within such arrangements are and are not likely to comply with the competition rules. Any such advice would be without prejudice to any future decision that Monitor might have to take to enforce the provisions of the Competition Act. However, like the guidance, such advice would provide reassurance to providers and could help them to avoid unnecessary legal costs.

If and when it became appropriate, Monitor could make the case for block exemptions. That would mean that the Competition Act would not apply to specified arrangements for the provision of NHS services. At this stage, it is not clear whether or where block exemptions might be appropriate, but an example of the sort of arrangement that could potentially be covered is clinical networks. In any event, this protection would remain available and there is no doubt in my mind that Monitor would be better placed than the OFT to determine when and where it might be needed.

In these and other areas, competition is unlikely to be effective in providing services on the scale or in the way that best promotes patient's interests. The NHS often acts to promote social objectives to ensure that patients receive the level of service that they could not afford or which private companies might not find it profitable to provide. Applying competition law in such contexts makes little sense and such activities are likely to fall outside its scope.

Next, commissioners would not have to create markets against the interests of patients. Clinicians will be free to commission services in the way they consider best. We intend to make it clear that commissioners will have a full range of options and that they will be under no legal obligation to create new markets, particularly where competition would not be effective in driving high standards and value for patients. As I have already explained, this will be made absolutely clear through secondary legislation and supporting guidance as a result of the Bill.

The Bill already creates duties on commissioners to secure continuous improvement in the quality of services, reduce inequalities and promote integrated services. The Government intend to complement these by making it explicit through regulations under Clause 73 of the Bill that commissioning decisions must be in the best interests of patients, those decisions must be transparent and commissioners will be accountable for them. We would expect the NHS Commissioning Board to maintain guidance to support commissioners in these decisions, based on the available evidence and drawing on academic research.

It is worth reflecting that without Part 3, the main legal provision on commissioning NHS services would continue to be the general procurement regulations for public bodies introduced by the previous Administration in 2006. The application of that law to the NHS is unclear. Without the provision that we intend to include in regulations under Clause 73, commissioners would continue to face risk of legal challenge when they decided not to open services up to competition, even where the decision was in the best interests of patients. That uncertainty is unacceptable.

Finally, the Bill would prevent private companies taking over NHS trusts or foundation trusts. There has been a lot of misconception about that. I assure the House today, unequivocally, that that could not happen.

I now turn to the opposition amendments. Amendment 163D raises the application of competition law to the provision of NHS services. Its intention is to ensure that competition law does not apply to the provision of NHS services. However, as I have said, there is a basic point to make here: it is not within the gift of this Bill to secure that. It is like saying that if you pass a law saying that black is white, that is what will happen. However, what I agree on absolutely is that we need to protect the NHS from inappropriate application of competition law and its undesirable effects. Equally, as I said earlier, we do not want to leave patients unprotected from potential abuses by providers. That would be the effect of the amendment and I hope that the noble Baroness will reconsider her wish to move it.

I also referred to the fact that this Bill would provide for clinical commissioners to decide how to secure NHS services to best serve the interests of their patients. Hence, I do not agree with Amendment 178A.

The NHS has always been a comprehensive service, free to patients, with treatment and care based on clinical need and delivered through a wide range of diverse providers. That includes GPs, dentists, independent sector providers, NHS trusts, foundation trusts and a range of charities and social enterprises. Taken together, these providers operate across the various sectors of healthcare, including the community and mental health. They provide a range of services, including vital specialist services to people in lower socioeconomic and minority groups, and people with rare medical conditions.

Amendment 178A does not acknowledge that reality at all. Instead, it seeks to create an arbitrary and unnecessary presumption in favour of NHS and foundation trusts which would likely act against patients’ best interests. For example, the amendment would make it more difficult for a clinical commissioner seeking to manage long-term conditions such as diabetes or COPD in primary care and in the community—involving GP practices or social enterprises—instead of sending those patients to hospital. That could prevent choice for patients in a very crucial area. It could also prevent choice in end-of-life care by restricting the extent to which organisations such as Macmillan and Marie Curie were able to extend the services that they delivered for the NHS. It could prevent charities such as Turning Point transforming—

[Baroness Thornton]

My Lords, has the noble Earl actually read the amendment? Paragraph 6(c) says,

“the need to commission health services in a way that promotes the integration of health and social care services”.

Will the noble Earl accept that he just said that it does not say that? It says that; it is there.

[Earl Howe]

My Lords, we are talking about Amendment 178A. I disagree with the noble Baroness’s reading of it. It is quite clear what it says. It is geared towards making the NHS the preferred provider. The noble Baroness shakes her head. If I have misunderstood and that is not her intention, I will obviously retract that.

Yet the amendment would increase the risk of commissioners facing legal challenge under procurement law. As the noble Baroness pointed out in 2010,

“procurement must be transparent and non-discriminatory”.—[Official Report, 9/3/10; col. 137.]

Amendment 178A would be a retrograde step. I ask the noble Baroness to withdraw it, as well as the other amendment in this group.

[Lord Clement-Jones]

My Lords, is the Minister aware that many of us will welcome the statement he made? It was very comprehensive—indeed, more comprehensive than would be possible in many respects under an amendment to the Bill. He has covered so many different areas, both in terms of the provision-commissioning duties of Monitor and also the duties of co-operation.

[Earl Howe]

I am grateful to my noble friend. He very well encapsulated in his speech the issues that we are looking at. I hope that what I said will in turn serve to reassure him on those crucial points.

[Lord Clement-Jones]

My Lords, clearly I have the Floor. I thought that I had it after the noble Baroness, Lady Thornton, as I was guided. I am very pleased to have the Floor before her.

What my noble friend Lord Howe said was extremely constructive, not only about the state of competition within the health service and some of the patching that had to be done to make up for deficiencies of the 2006 Act, but also to do with competition, the block exemptions available, co-operation and the general duties of Monitor. A law court would probably find it much more useful to have my noble friend’s fuller statement than simply some rather narrow amendment to the Bill. I recognise the deficiencies in my own Amendments 177 and 178. I much prefer the Pepper v Hart solution that has been found and proposed in these circumstances. The dangers of putting matters in the Bill are entirely illustrated by Amendment 178A. The Minister’s criticism of that amendment, which was made to me by expert competition lawyers, of trying to put commissioning in a straitjacket as is proposed—it may give the wrong impression, but it is ineffective in terms of EU procurement law—shows exactly the dangers of trying to put too much into the Bill. The Minister, entirely appropriately, has picked up many of the points made during the course of the Committee and in debate today and put forward a statement that will be used by those looking at provision and commissioning in the NHS in future. On that basis, I wholly welcome it. I may not be able to withdraw my amendment to the amendment, but I shall certainly not be moving my Amendments 177 and 178. I beg leave to withdraw the amendment.

Some Lords objected to the request for leave to withdraw the amendment, so it was not granted.

16:41

Division 2

Ayes: 188

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Labour: 162
Crossbench: 19
Independent: 2
Plaid Cymru: 1

Noes: 278

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Conservative: 152
Liberal Democrat: 64
Crossbench: 44
Bishops: 2
Ulster Unionist Party: 2
Independent: 2
Democratic Unionist Party: 1

16:58

[Baroness Thornton]

My Lords, I apologise to the House for the confusion that has just reigned. I blame the Liberal Democrats for that, but then I would, wouldn’t I? The noble Lord, Lord Clement-Jones, decided to seek to amend my amendment. Then, when I said that I would like to accept his amendment, he refused to allow me to do so. What can a girl do when she has been rejected in this way? My Amendment 163BZZA is the lead amendment in the relevant group. It is very disappointing that the Liberal Democrats did not feel confident enough to vote for their own amendment, again. They seem to be making a habit of that.

[Lord Clement-Jones]

My Lords, perhaps I may intervene. Has the noble Baroness received legal advice on the benefits of a Pepper and Hart-type statement versus the kind of amendment that her party has tabled, its effectiveness and the width of the statement made by the Minister?

[Baroness Thornton]

The noble Lord, Lord Clement-Jones, has a very legalistic manner of addressing the House. Of course I understand exactly what was happening there, and I understand exactly what the deal was between his Benches and the Minister, which was that the noble Lord would get a strong statement in response to his amendment. Is he satisfied with it? If so, he is wrong. That strong statement means that the protection comes when legal action starts to take place. I would prefer the protection to be in the Bill. That is what these amendments are about—protecting the NHS. We disagree about that and the noble Lord knows it. If I may address the Liberal Democrat Benches, it seems likely that the noble Lord’s spring conference will agree more with me than with him. However, that is his party’s problem for this weekend—not ours, for now, on the Bill.

I should like to make two further remarks on the substantive amendment and what the noble Earl said. He suggested that we were making the procurement rules more complex. We were not; we were making them simpler. The NHS deserves protection in the Bill. The Liberal Democrats have made a deal that sells the NHS short, as happened on the issue debated last week on conflict of interest. That is a great shame.

[Lord Clement-Jones]

I apologise for interrupting the noble Baroness, but does she realise that the more she attacks us, the more chances we have of a very positive outcome at our Gateshead conference?

[Baroness Thornton]

I was not actually attacking the noble Lord; I was just speculating about what might happen. I feel for Liberal Democrat Peers when they go to their conference this weekend, because they may be in for an uncomfortable time. However, that is absolutely not my business. I will just witness it with interest. It is time that we moved on and I beg leave to withdraw the amendment.

Amendment 163BZZA withdrawn.

Amendment 163BZA not moved.

Clause 60 : Monitor

Amendment 163BA

Moved by

[Baroness Thornton]

163BA:Clause 60, page 87, line 31, at end insert—
“(c) is to continue as regulator of NHS Foundation Trusts as set out in Chapter 5 of Part 2 of the National Health Service Act 2006.”

[Baroness Thornton]

My Lords, this is a large group of amendments led by our amendment. In fact, we have only two amendments in the group, but they address issues regarding Monitor. The amendment suggests that Monitor should continue to be the independent regulator of NHS foundation trusts.

Our Amendment 167B would remove Clause 63. It might be easier if I were to explain why that amendment is there. It is not that we are necessarily opposed to Monitor’s functions as a regulator of social care, but something as important as this matter should be done not through regulations but in a proper manner through primary legislation. That is the only reason why that amendment is there and we seek the Minister’s views on it.

Returning to the amendment, Monitor must remain as the independent regulator of foundation trusts. We do not believe that now is the time to relax oversight of foundation trusts. We can be confident that the Francis inquiry will have views on this. We support trusts becoming foundation trusts, but only half of trusts have achieved foundation status, and the issues facing those unable to achieve the required standard remain. There is yet another drop-dead date; my Government had a drop-dead date and that did not work; we do not think that another drop-dead date will change that situation.

We must also be cautious in overclaiming the merits of the foundation trust model, because time will tell. Monitor has an important role in that, which should continue, although we do not support the need for an economic regulator for our NHS, because we do not see healthcare as a market. I do not intend to rehearse those arguments, but patients are not consumers, and choice for patients is not shopping. Economic regulation and privatisation are certainly linked in the view of those who want to break up our NHS—many of those who want the Bill in the private sector.

The Bill is radical, not evolutionary. We believe that the Government should have taken a different approach, but it is important that Monitor continues to carry out its role. It should not be asked to do two roles: those of the foundation trust regulator and the economic regulator for the NHS. We think that that presents Monitor with an insurmountable conflict of interests and that it lacks the capacity and capability to carry out the enhanced role. I hope that the Minister will accept our sequencing idea—I freely confess that it was stolen from the noble Baroness, Lady Williams, who first used the word sequencing— which is to allow Monitor to become an economic regulator only after it completes the job of authorising all those bodies which will get foundation trust status after a few years’ oversight. We believe that Monitor should take on those new duties and roles only at that point, May 2016, which is in the Bill.

Even for supporters, there is a realisation that Part 3 is a direct challenge to the idea that local commissioners will be free to shape local services as they see fit. The more we have patient choice, the more we have any qualified provider, the more regulatory enforcement around competition, the less need for commissioners. That is the central irony of the Bill. Any commissioner needs to read Clauses 19 and 73.

I think we need a discussion about Monitor’s roles and functions. I will wait until I sum up to comment on other noble Lords’ amendments in the group. I beg to move.

[Lord Warner]

I speak to Amendment 164 in my name, which is in this group. It returns to the issue I raised in Committee: the need for Monitor to produce an early report on the barriers to entry for new providers of services to the NHS. Although he had sympathy with what I was trying to do, the Minister did not like my previous amendment, which would have required Monitor to produce a report within 12 months of Royal Assent on barriers to NHS entry to new providers. I think that he accepts that there are barriers to entry for new providers which we need to tackle. In this amendment, I have added the words “identifying and” to the requirement in Clause 61(3) for Monitor to prevent anti-competitive behaviour.

I recognise that many people in this House and in the Commons do not share my view on the virtues of competition when used selectively for patient benefit. I will not go over all the ground again, but I think there is good evidence—the noble Earl cited some of it in an earlier discussion—that that has proved beneficial to patients. Moreover, the UK is almost unique in large advanced healthcare systems in enshrining monopoly public providers of hospital services, with little challenge to their efficiency or effectiveness. These NHS monopolies have been very good at erecting barriers to entry for newcomers and ensuring—if I may put it as unkindly as this—a quiet life for monopoly incumbents.

We should be concerned about this. Only last week there were some startling statistics in the Health Service Journal about non-foundation trusts’ poor performance in achieving savings requirements in line with the Government’s targets. I have no problems with the Government setting those targets for non-foundation trusts to improve their efficiency. None the less, however we frame the competition provisions in this legislation, we have to face the fact that it is extremely difficult for new entrants to dislodge incumbents in many of these services where the performance is poor. That is why in my view Monitor should, after the Bill receives Royal Assent, quickly identify clearly existing barriers to entry so that they can be dismantled in the public interest. The Co-operation and Competition Panel has already identified some of the barriers for new entrants to the NHS market—and, again, I make no apology for talking about an NHS market. It is important that we see healthcare, in part, as a market where new providers can provide better services and different types of services more effectively.

I hope that the Government will look sympathetically at this modest amendment to try to get Monitor on the case of identifying barriers to entry.

[Baroness Williams of Crosby]

My Lords, I have two amendments in this group, Amendments 163C and 166B, which also stand in the name of my noble friend Lord Marks. However, before I address those relatively short amendments, I should like to say a word or two about the broader issues that we have been discussing. I begin by perhaps giving a little comfort to the noble Baroness, Lady Thornton, by saying that my understanding is that we will be discussing the whole issue of the relationship of Monitor to foundation trusts later in the proceedings. Our amendment on this matter, which is not far removed from hers, addresses an amendment to the government amendment on this issue, which itself comprises a considerable advance in the position that we have had up till now. I shall not try to get into that debate because it is complicated and I think that it would be better conducted a little later in the light of the various proposals.

I want to say a word about competition, and it is appropriate to do so given that the noble Lord, Lord Warner, has just been speaking. He has always spoken with some courage on this issue, which I recognise is not exactly popular with his party. However, I say quite directly that I feel very strongly that we have allowed the issue of competition to become quite different from the reality that we have encountered in the Bill, in this House and from the argument that is going on outside. That is because we have tried to treat competition as an absolute—either we have a competitive market for the National Health Service or we have no competition at all—and we all know that to be false.

We all know that there is a role for competition but the argument is about how limited it should be, what it should be addressed to and whether it is then balanced by, for example, equally strong duties in relation to co-operation, integration and the bringing together of services. I think we all recognise that competition can make a significant contribution in innovation and bringing in new ideas. For example, we have only to look at the recent developments in the treatment of stroke victims and victims of heart conditions to see that there has often been an innovatory role for the private sector. However, many of us also believe, as I certainly do, that the National Health Service should continue to be primarily a public service, that it should be available free of charge and that it should be accessible to all. Therefore, competition must exist but essentially it must be balanced by other considerations which, in the case of what we have been discussing recently, are clearly of great significance—particularly the role of the integration of services and the role of co-operation, which in terms of our main priorities, including the care of the elderly, are absolutely central and crucial.

17:15

If we can get the debate on to those issues, what will the outcomes be and what will the practical effects be? We may then be able to contribute to a National Health Service which remains a public service but which is also capable of advancing and moving in innovatory and new directions. Frankly, that is what many of us on our Benches and, to be fair, many on other Benches—the Labour Benches, the Cross Benches and the Conservative Benches—want to see as well. I am thoroughly fed up with reading pieces on social network sites, such as Twitter, which have presented this debate in terms of how we voted on the last amendment and if we did not vote for it then we must be in favour of the marketisation of the NHS. That is simply absurd and it makes me very angry. It adds to what has become a silly debate, a fictional debate which has led a great many people to believe that what is being discussed here is not at all what is being discussed, but some other strange, nightmare battle between marketisers and publicisers and no possible compromise can properly be reached between the two. I feel very strongly about that. I am fed up with reading about how I am actually a secret marketiser, when I know perfectly well that I am not. Many others may feel the same way. Let us turn back to the rather limited procedure in my own amendments, as I do not wish to waste the time of House.

Our amendments are quite simple and appropriate. On the basis of what is in the Health Act 2006, they say that it should be possible to insist that Monitor says, in statements, precisely what it has done in terms of two of the 2006 Act’s main objectives. The first of those is a comprehensive health service—here we go—and I am delighted to see the noble Baroness, Lady Jay, in her place. She built the commitment to a comprehensive health service right back in the initial constitutional structures of the NHS and, in my view, for that we are all greatly in her debt. The second addresses the issue of the quality of health services across the board. A statement should be made by Monitor on both those points. That is the first of our amendments.

The second of our amendments states that, those statements having been made, guidance should be issued by Monitor to ensure that they are implemented and become the case. Again, I think that it is an unexceptional amendment. It takes very seriously the mandate that many of us in this House have attempted: to enrich and embolden an essential weapon or tool for setting out the objectives of the NHS from the Secretary of State in each year. Effectively, these amendments say that Monitor shall make the statements; that Monitor shall ensure that those statements are carried out; and that it will do that within the structure and on a mandate, with the Secretary of State’s overall objectives, that will be reflected and clear. That is exactly what we want. We want clear objectives, agreed by all; we want a commitment by the House and by many beyond it, including the professional bodies, to do exactly those things. We want a comprehensive health service, directed towards increasing and improving quality; directed towards accepting innovation that will not threaten the health service but enrich it; directed, not least, to dealing with the inequalities that still exist; and directed to ensuring that we address them in a wholehearted and determined spirit. I beg to move.

[Baroness Finlay of Llandaff]

My Lords, I have Amendment 165 in this group. It is designed to prevent anti-collaborative behaviour in the provision of healthcare services for the purposes of the NHS. Promoting collaboration and integration must be at least as powerful, if not more so, than preventing anti-competitive behaviour. We are well aware that no two patients are the same and, to date, all too often professional boundaries—whoever is the person providing the care—have created barriers. Those are very evident between primary and secondary care and can prevent a seamless patient experience.

This is not an amendment to prevent different providers coming together. Its aim is to ensure that whoever those providers are, whether they are NHS, whether they are from the voluntary sector or whether they are from social care, they must collaborate for the benefit of each individual patient. Therefore, the ways in which they will need to be able to collaborate will vary depending on the patients they are dealing with. Good care should treat the patient and their experience in the context of their life, social support relationships, cultural experience, gender and a range of other factors, and the services should support people to live productive, independent lives in their own homes for as long as possible. Patients, including older patients, must have access to specialist services, including in-patient, acute care when appropriate. Again, that will require collaboration between homecare services, in-patient services and step-down services to rehabilitate people in their homes. There will be a wide range of providers of all those services.

Population health needs and inequalities must be considered at the planning stage. Even doing that will require close collaboration between those doing the assessments. The tariff should reflect the complexity of clinical care and should encourage integration and collaboration between providers. The danger exists at the moment of a tariff structure that does not reflect clinical complexity but overcompensates for simple conditions and for those where there is a discrete episode of care, and does not recognise ongoing complexity. The tariff must work toward commissioning across the whole patient pathway. Information and data gathered around patients and clinical services should also reflect that. I hope that the amendment will make sure that the need for collaboration occurs at every level across providers, because at the end of the day Monitor will have the responsibility for licensing all providers.

The other reason for the amendment is that there will be times when competition and collaboration might appear not to be one and the same, and may indeed look to be in conflict. My concern is that unless there is a requirement for collaborative behaviour, it will be all too easy for the justification for commissioning to be based more on competition than on collaboration. In the balance of doubt, patients need to know that there is collaboration between their providers. There have been examples in social care and in the delivery of healthcare in care homes where integration could certainly have improved, for example, the unacceptable level of medication errors. Collaboration is going on among a variety of agents and stakeholders to develop practical solutions and an integrated approach to medication safety in care homes. Public health, too, requires the three arms of health improvement, health protection and healthcare delivery to work together, and will be very dependent on collaboration with other aspects of the NHS.

Perhaps I might take this opportunity briefly to correct a piece of information that I gave to the House in our previous debate and which turned out to be a little out of date—for which I apologise. It related to troops coming back from our theatres of war, where the provision of prosthetics has improved. This is an example of good collaboration between all agencies, which has been underpinned by the military covenant that the Government supported and instigated in legislation. The result has been an improvement in the care of those who are extremely vulnerable.

I hope that the House, and the Minister in particular, will see that there is a need to make sure that collaboration is driven forward between all providers, wherever they are and wherever they come from, so that the NHS and its principles can be underpinned for the benefit of patient outcomes.

[Baroness Cumberlege]

My Lords, I, too, tabled an amendment in this group. Before I speak to it, I will say that I very much support what the noble Baroness, Lady Finlay, said. I was interested in an article in the BMJ that she, too, may have seen. It was a report by Nigel Hawkes on how competition works in healthcare and how it can stimulate the provision of better services. He went on to say:

“The report dismisses claims that competition makes integrated care impossible or that the opening of tendering a service to ‘any qualified provider’ amounts to privatisation of the NHS”,

and that,

“evidence suggests that competition with regulated prices”—

which is what we are proposing—

“can produce higher quality care at the same cost—and without leading to increasing inequity in access to care. Our message is that competition can help the NHS, but proceed with care”.

It is “proceed with care” that many of us want. Although I support the idea of competition, the National Health Service is not a free-for-all but a regulated market.

I think we need competition. Looking at the summary scores of the seven nations surveyed on health system performance, which have often been mentioned in earlier debates in this House, we do very well compared with other developed countries, but when it comes to patient-centred care, we come last—seventh. That is really why competition is necessary: to make the health service much more sensitive to the needs of patients.

I appreciate that noble Lords must label me the greatest bore on earth, but I am going to continue to bore because I am going to relate Monitor to the duties for patient and public involvement. This amendment introduces the same definition and scope of involvement for Monitor as Amendment 142, which I moved earlier on Report, on duties for NHS commissioners, including public and private providers.

On 16 February, I received a letter from my noble friend Lord Howe on patient and public involvement, and since then I have had some useful meetings with him. The context of this amendment is that patient and public involvement must be robust as we are moving towards a stronger, more plural market, which I support. Patient and public involvement is an even more indispensable component in a market where the consumer role is split between commissioners, who hold the money, and patients who consume the service. PPI must bridge this gap for the market to work well, as patient choice will never apply to some NHS services.

Given its pivotal role in the reformed NHS, it is vital that Monitor has a PPI duty that is consistent with that of the providers it is regulating. The Bristol Royal Infirmary public inquiry 11 years ago led to the statutory PPI duty and its report specifically mentioned regulators in the list of bodies that should have this duty, so Clause 61(7) is very welcome. However I do not feel that the wording of Clause 61 goes far enough to achieve the Bristol recommendation that regulators,

“must involve the public in their decision-making processes, as they affect the provision of healthcare by the NHS”.

On the broader PPI duty, my noble friend helpfully clarified at our meeting that statutory guidance will be used to describe what is reasonable in terms of PPI and that there will be consultation on its content. The intention, as I understand it, is that the guidance will require PPI in monitoring the impact of planning decisions or proposals to require the views of patient representatives and their carers. Perhaps my noble friend will confirm this. We also discussed the role of the NHS Commissioning Board in making sure that clinical commissioning groups enforce the model contract clauses on PPI against private providers. This is important as they do not have the statutory PPI duty that NHS providers have.

I think it is the Government’s intention to create a level playing field for patients and the public to influence private providers who are under contract to the NHS in the same way that they can influence NHS providers. Can my noble friend assure me that that is the case? That would be very helpful, particularly as providers may challenge statutory guidance as burdensome under the duty of autonomy in Clause 4 as amended.

17:30

In contrast to this clearer PPI framework for providers and commissioners, currently Monitor may decide unilaterally what type and level of involvement, if any, is needed in its decision-making against unspecified criteria. If it decides that no involvement is needed, there are no criteria on which this can be challenged, even by the Secretary of State.

Monitor’s primary duty in Clause 61 is,

“to protect and promote the interests of people who use health care services”,

having regard to the 11 matters listed in the clause, including quality of and access to services. Government Amendments 193 and 194 are very welcome in bringing Monitor’s role closer to the patient’s interest, including health inequalities and quality of service. However, it seems illogical to recognise that providers and commissioners of services need enforceable statutory guidance on how to involve patients in deciding what is best for them, when they have been trying to do it for 11 years with mixed success, whereas Monitor is expected to become immediately expert and have total discretion without any criteria against which that discretion is to be exercised. Perhaps my noble friend could give me the assurances I seek.

[Lord Walton of Detchant]

My Lords, I will briefly speak to Amendment 167 in this group, which has been tabled in the name of the noble Lord, Lord Hunt of Kings Heath. I understand entirely why he has tabled this amendment but, with respect, I do not believe that it is necessary.

All medical bodies, including the BMA and the General Medical Council and others, now agree that the days of doctor’s orders are long past. The practice of medicine is a partnership in which it is up to the doctor to recommend to the patient what course of action is most appropriate in the patient’s best interests; what it is appropriate to do in order to reach a diagnosis; what tests are appropriate in order to achieve that diagnosis; and what course of treatment would then be necessary. However, it is up to the patient to decide whether or not to accept that advice and it is not possible for a doctor to carry out a test without the informed consent of the patient.

It is also well agreed by these medical bodies that if a doctor has given full and detailed information to a patient about the course of action that is appropriate, and if the doctor recommends a particular course of treatment that he regards as being necessary in the patient’s best interests, the patient may nevertheless have the right to refuse that advice even if refusal of that advice ends in the patient’s death. For that reason, as all of these issues have been dealt with repeatedly in the advice given by the GMC, the BMA and other bodies, I do not believe that this amendment is necessary.

[Baroness Barker]

My Lords, the noble Lord, Lord Walton, will be aware of many occasions in this house—when the noble Lord, Lord Hunt, was Minister and some of us were in opposition—when we listened to Lord Weatherill speaking on behalf of Christian Scientists, who often wish to refuse treatment. I understand that this amendment originated from the Christian Scientists, who merely wish to draw again to the attention of the medical authorities the fact that they have a belief system that deserves the same amount of dignity and respect as any other. Perhaps he might view the amendment in that light.

[Lord Hunt of Kings Heath]

My Lords, I do indeed recall the debates that we had during one of the many health and social care Bills that have gone through your Lordships’ House in the past few years. It was indeed Lord Weatherill who raised the issue with me. Essentially, it was about standards in nursing homes where there was some concern that an insensitive regulator would take action against a home that was actually respecting the wishes of a member of the Christian Science religion. We were able to reach a satisfactory solution. An appropriate amendment was put forward and I think the noble Earl, Lord Howe, was also part of what I like to think of as the “second Weatherill agreement”. We may need another one in a couple of years’ time—who knows? I ask the Government for an assurance that the position that we then agreed will continue under the new Bill.

[Lord Marks of Henley-on-Thames]

My Lords, I will speak briefly, in addition to what my noble friend Lady Williams of Crosby said, to the amendments in our names concerning the Secretary of State giving guidance to Monitor: Amendments 163C, 166B, 173A, 173B and 173C.

These are further amendments concerning the role of the Secretary of State and are intended to ensure that the Secretary of State has a practical and effective influence over Monitor’s overall approach to the work it does. The Secretary of State would exercise that influence by issuing statutory guidance to Monitor that will have to be published and laid before Parliament. The guidance in each case could be revised but the revised guidance would also have to be published and laid before Parliament.

The heart of the scheme is Amendment 166B. The duty referred to in that amendment under Clause 61(9) is the duty on Monitor to exercise its functions consistently with the Secretary of State’s duty to promote a comprehensive health service. The amendment allows the Secretary of State to publish guidance to Monitor on the objectives specified in his mandate to the board and to set out guidance on how those objectives are relevant to the separate work carried out by Monitor. Monitor is, of course, required to have regard to such guidance.

Amendments 173A to 173C empower the Secretary of State to give guidance to Monitor in line with any guidance that he has published under new Section 13E of the 2006 Act. That is the so-called outcomes document issued by the Secretary of State to the board in connection with securing continuing improvement in the quality of services and outcomes achieved by the health service. These amendments make it incumbent on Monitor to have regard to that guidance, which must also be published and laid before Parliament. Amendment 163C concerns reporting by Monitor so that in its annual report Monitor would be required to state what it did to comply with the guidance, envisaged by these amendments, given by the Secretary of State in relation to the exercise of its functions.

These are modest but important amendments. They seek to weave into the fabric of the Bill a clear role for the Secretary of State to give strategic guidance to Monitor in line with the Secretary of State’s overarching duties, in particular with the objectives set out by the Secretary of State in his annual mandate to the board, and in line with the outcomes document that he publishes that is designed to ensure the board’s performance of its duty to secure improvement in the quality of services.

These amendments are part of creating a coherent and consistent framework within the new structures established by the Bill, to ensure a single and purposive approach by all the bodies within the NHS, with the Secretary of State remaining in charge of setting the strategic objectives for the service. In those circumstances I suggest that they are very welcome.

[Baroness Meacher]

My Lords, I rise with some trepidation, not having been involved in Committee on this Bill but having been upstairs in Grand Committee on another Bill. I therefore have not done the learning that I know noble Lords around the House have done during that process.

Many noble Lords have referred to the term “competition” without distinguishing between competition within the NHS between public sector organisations and competition between public sector and private sector organisations. It is perhaps relevant for me to quote recent research by Zack Cooper and colleagues at the London School of Economics. It came out in February, since Committee, which is my justification for introducing research at this late stage of the Bill. That research looked at competition between public service NHS organisations on the one hand, starting in 2006, and between the different forms of organisation, the private and the public, on the other hand, starting in 2008.

This considerable research looked at 1.8 million patients, 161 public sector hospitals and 162 private sector hospitals and should be taken seriously. It showed that the result of public sector competition was a reduction in lengths of stay both pre-surgery and post-surgery. Those results were significant. As the Minister knows, I support strongly competition in the public sector. I really believe that human beings thrive on competition. Therefore, if the research showed that public and private sector competition worked, I would support it because I believe in the best possible service for patients.

This research also shows that when you look at the competition between the private and public sector organisations, you will find an increase in the length of stay in the public services, albeit that there perhaps is a marginal improvement financially. If you look at the whole policing and monitoring apparatus that you need in far greater proportions once you have all this competition, I am not sure that you would even achieve a financial benefit. However, you find a reduction in quality, most particularly for people with long-term conditions. That is why I needed to speak in this debate.

I hope that whatever happens on these amendments, great care will be taken to protect public service provision. If we do not prevent the cherry picking, which happened in the provisions studied by this research and has occurred in other settings examined by research, without any question we will achieve a two-tier service with the private sector cherry picking the easier and healthier patients and the public sector having the complex care. I know that this issue will have been rehearsed at length in Committee. I do not want to go on further but it is important that we do not just use the word “competition” without clearly differentiating the competition that we are talking about.

[Lord Ribeiro]

For clarification, perhaps the noble Baroness would say whether we are dealing with apples and pears here. She made reference to the private sector and chronic care whereas she said specifically that the earlier 2006 report related to surgery. My understanding is that quite a lot of the competitive work done in the NHS involved ISTCs. These contracts were held by private practitioners and private companies. I have not read this report but we need clarification as to whether we are dealing with a level playing field of NHS provision or whether this is NHS provision against private provision.

[Baroness Meacher]

I am grateful to the noble Lord for his intervention. I was trying to conflate a number of points. The research that came out in February has to do with surgery but the point is that those findings support earlier studies which looked at a mixed public-private market by Allen and Gertler in 1991 and Ellis and McGuire in 1986 and others. Their research also showed that if you have private and public services competing with each other, you will see the cherry picking and the detriment to the long-term conditions to which I have referred. I am sorry that I slightly skipped a few things and compounded them into one. The findings are absolutely consistent whether they are concerned with surgery or other settings.

17:45

[Lord Adebowale]

My Lords, I had not planned to speak in this debate but, having heard the contributions of many noble Lords, it is important perhaps to indulge in reminding the House that competition does not revolve around just what one might call private and public. I am the chief executive of a social enterprise organisation, which some might consider to be a new entrant into the health and social care market. However, in substance misuse and learning disabilities, it is a significant, historical provider of services to members of the community and the provision of long-term condition management.

The debate around competition becomes polarised very quickly, as has been pointed out in earlier contributions to this debate. I am in favour of competition. It seems to be currently the case in the NHS that we have competition. I am concerned about the way in which the market is managed. Let me illustrate this with an example: it is possible for a new entrant into a care market—say, delivery of community health services —with very little experience in that market to win a substantial contract against an incumbent provider with vast experience and an excellent track record simply because the interpretation of the way in which procurement rules need to be managed means that that a not-for-profit provider gets ruled out. That happened recently in reference to the provision of community health services in Surrey and the Surrey nurses.

The safeguards that I want to see in regard to competition are those that protect public taxpayers’ money in the procurement of health and social care services. Again, we tend to concentrate on hospitals, surgery and related issues. These days, the health service is as much about what happens in the community. I am concerned that we have safeguards in place to protect health and social care services from new incumbents with a poor track record, or no track record, which can bid at or below cost and win simply because the procurement rules rule out not-for-profit providers who may not be able to access capital. I refer to the intention of this Government to bring in laws that would encourage social value and social enterprise.

It would be helpful for the House to be reminded that the players in the health and social care market are no longer just public and private. The market has to be managed in favour of a mixed economy and in favour of retaining resources in the public realm that could be pulled out in a simple battle between private capital and public service. I hope that my contribution has made sense and I apologise for keeping the House.

[Lord Turnberg]

I shall speak in support of Amendment 165 in the name of the noble Baroness, Lady Finlay of Llandaff. This amendment is designed to ensure that Monitor encourages integration and collaboration. In all that, it is important that Monitor ensures that the operation of the system of payment by tariffs does not interfere with that integration and, at worse, adds to the costs of the health service.

I shall give two examples of where the tariff system might be counterproductive. The first is in relation to the hospital admission of a patient who goes home, is readmitted and may be readmitted several times. It is in the hospital’s financial interest to have these episodes of care because it gets paid by the tariff each time the patient comes in. There is no inducement in the hospital to try to enlist social services. I am sure that it does, but the system works against that and tends to promote readmission as a way of earning money.

The second concerns patients who are in the hospital for one condition and develop a condition relevant to another consultant. For example, a patient may come in with an orthopaedic problem such as a broken hip, and then develop an acute episode of diabetes, so there is a need to call for a diabetologist to look after the patient’s diabetes. That requires a rather tortuous consultation process which involves a second episode and a further payment by the tariff system. Those are two obvious and common examples of where integration is interfered with by the system we are operating.

I know that the Government are not keen to change that sort of system, but there must be ways for Monitor to look at it critically and see whether the current tariff system can be made to work better than it does at the moment. I hope that the noble Earl will be able to comment on that.

[Baroness Wall of New Barnet]

Perhaps I may contribute to the debate solely on the comments that have just been made by my noble friend. As regards the first instance he mentioned, that is no longer the case. If someone is brought back into hospital with the same disease or illness, no tariff is paid. As far as I am concerned, that is certainly the guidance we have had from the Department of Health and it is being applied. It is still the case with regard to the second example— I guess quite rightly. But from my experience as the chair of a foundation trust—my noble friend Lord Hunt is nodding in agreement—if someone is admitted again with the same illness there is a presumption that they were not dealt with properly in the first place. As a result, the treatment has to be carried out under the first tariff and no additional tariff is granted.

[Lord Turnberg]

My Lords, I wonder whether I could comment on that. It depends on the timescale between admissions. If it is longer than two months, I think that you get a second shot.

[Baroness Murphy]

My Lords, this is a disparate group of amendments. I support the principles that underline Amendments 164, 165 and 166. The Bill has been amended since the Committee stage and may address some issues, and that is one of the difficulties when we discuss competition, collaboration, integration and co-operation. We will have yet another amendment later today or on Thursday from the Government on the duty of co-operation that will further strengthen the role of Monitor in regard to these issues. That, I think, will meet some of the arguments.

My feelings are consonant with those of the noble Baroness, Lady Williams. I am furious at some of the debates in the press about whether we are marketeers or pro-NHS. In fact, the vast majority of people in this House steer a course in order to do what is in the best interests of patients in terms of competition, collaboration and integration. I acknowledge that many of us must feel the same as the noble Baroness in her frustration about that.

The intervention of my noble friend Lord Adebowale was helpful in that it reminded us of how competition has worked in mental health services and substance misuse services. For many years collaboration between organisations to deliver services in both acute care and for long-term conditions has been helpful. I have no difficulty thinking of dozens of situations where commissioners have decided to commission services in areas where there has been collaboration between a group of service providers. They may involve social care services, residential care homes being run independently and so on. Commissioners might seek to put together an improved ortho-geriatric service especially for people with multiple disabilities in later life. There are examples of successful collaborative services which have been competitively tendered for. However, I do not want to take up the time of the House at this stage by mentioning too many examples.

I have a question to ask of the Opposition in relation to Amendment 163BA. This is the first amendment in the group, and perhaps the noble Baroness, Lady Thornton, could help me in one respect. I am not quite clear whether this amendment would return Monitor to the position it is in now—where we would continue with the two-tier system of foundation trusts and other trusts with a simple economic regulator for foundation trusts—and would rule out the rest of the new economic regulation functions. If it has that effect, it would seriously wreck the main purpose of the Bill. However, I may well be reading it incorrectly, so before I decide which way to go, I wonder whether the noble Baroness, Lady Thornton, could reassure me that that is not the purpose of the amendment.

[Earl Howe]

My Lords, there is a clear purpose to Part 3. It is to strengthen sector regulation of healthcare in England by building and improving on Monitor’s existing role as the regulator of foundation trusts. It does that in three main ways. First, it makes clear that Monitor’s overriding duty would be to protect and promote patients’ interests. Secondly, it makes sector regulation more comprehensive by extending Monitor’s remit to all providers of NHS services. Thirdly, it makes sector regulation more effective in realising benefits for patients; for example, by monitoring the NHS Commissioning Board setting fairer prices for NHS services. Fair pricing is important for a whole host of reasons: to strengthen incentives for improvement, to enable better integration and to reduce the risk of cherry picking.

I shall deal with a simple point. Monitor will continue as the regulator of NHS foundation trusts. The Bill makes that crystal clear in Chapter 1. However, I am most grateful to my noble friend Lord Clement-Jones for highlighting the need for greater clarity on what intervention powers Monitor would have over foundation trusts on an enduring basis as against what would be transitional. I shall say more about that when we come to debate his amendments in a later group.

Before going on, let me address Amendment 167 from the noble Lord, Lord Hunt, on the specific issue of patients’ rights to refuse consent for treatment in the NHS. I can absolutely assure the noble Lord that these rights must be protected and nothing in the Bill would change that.

Returning to Part 3 and the role of Monitor, its overarching duty will be to promote economy, efficiency and effectiveness in the provision of healthcare while maintaining or improving quality for the benefit of patients. I underline those last words. This is the single overarching purpose for which Monitor would carry out all its functions, including its continuing functions under the NHS Act 2006 as the regulator of foundation trusts. Monitor’s overarching duty is clear, unequivocal and focused on improving outcomes for patients. I stress that point since as this is its guiding principle for resolving potential conflicts, there is no need to separate Monitor into two organisations, as the noble Baroness, Lady Thornton, proposes in her amendment. I suggest that she has raised an issue that in reality is not a substantive one.

Let me briefly address Monitor’s role in ensuring that where there is competition in the provision of healthcare it operates in the interests of patients. We will have an opportunity to consider this issue in more detail later. Decisions on whether and when to use competition will be a matter for clinical commissioners. As I have already said, there have always been private and voluntary providers in the NHS. Anyone who reads Part 3 will see that it does not create markets for NHS services, despite what some others have said. This is not the same Bill as that which was debated in the Committee of the House of Commons in March 2011. It has changed significantly as a result of amendments tabled by the coalition in response to the NHS Future Forum.

18:00

Of course, as I made clear earlier, we already have some competition in the NHS. Indeed, this was increased under previous Labour Governments; for example, with the independent sector treatment centre programme in 2004 and the introduction of “any willing provider” in 2008. This was followed up with guidance published in March 2010 which made it clear that there should not be preferential treatment of public bodies over independent providers of NHS services. I have placed a copy of that guidance in the Library for noble Lords who are interested.

Where commissioners decide to use competition to increase choice and improve NHS services, this Bill seeks to strengthen how that is regulated so as to protect patients’ interests. Nothing in this Bill would extend competition to particular services or privatise NHS institutions. Nor would the Bill force commissioners to tender services or enable Monitor to impose that, as the earlier amendments to which I referred make clear. On the contrary, regulations under Part 3 would provide for commissioners, not Monitor, to decide when, how or if to use competition as a tool for improving services. That is the right thing to do because these decisions should be made locally, driven by patients’ needs and priorities for improving quality.

We have, however, listened to the concerns that people raised about the emphasis on competition in the Bill, as it was originally drafted, and we responded to them by making changes to make it clear that Monitor will not have a duty to promote competition. This reflects recommendations of the NHS Future Forum that competition in the NHS should be used only as a means to an end in improving services, never as an end in itself.

Monitor’s role in regulating competition in the NHS would be limited to addressing anti-competitive behaviour that harmed patients’ interests. It would also have a duty to enable integration where this would improve quality or reduce inequalities. Again, that reflects the recommendations of the Future Forum and the amendments made in another place. The noble Baroness, Lady Finlay, made points in her amendment with which I completely agree. The Bill, as she knows, is already clear that commissioners will have a duty to secure that services are provided in an integrated way where that would improve quality and outcomes or reduce inequalities. Monitor’s role is to support commissioners in this by enabling integration and encouraging co-operation. In a later group of amendments, we will come to government Amendments 193, 194 and 195, which would establish express power for Monitor to set and enforce licence conditions for the purpose of enabling integration and co-operation. I hope that the noble Baroness will take comfort from that and feel able to support those amendments when we get to them.

It is important to remember that Monitor will work with the Commissioning Board to design tariffs which best incentivise high-quality patient care, including through integration. That brings me to the point made by the noble Baroness, Lady Meacher. The Bill addresses the situation where a private provider could cherrypick the most profitable services to deliver, leaving an NHS hospital with the most complex procedures. It requires Monitor and the NHS Commissioning Board to take account of variations in the range of services provided by different providers, and the complexity of the needs of patients treated, to ensure a fair level of pay for providers. As a result, providers undertaking only the more simple interventions would be paid a suitably lower price. We are not seeking to stop providers choosing which services to deliver; the issue is making sure that they are paid a fair price for each of them. If prices accurately reflected the cost of services, private providers simply would not have the incentive to cherry-pick and damage the viability of other providers.

[Baroness Meacher]

Lower prices may be determined for simpler procedures, but this matter is far more complicated than that. If a lot of the simpler procedures are creamed off, the public sector institution may not be viable, which the research again shows. It is not straightforward. People concerned with long-term and complex conditions fear that over time such a differential organisational and pricing structure could lead to a two-tier system.

[Earl Howe]

My Lords, it is a concern that I understand. The destabilisation of the NHS will naturally be a concern to all commissioners, which is why they can protect that situation through the contract. They could insist through the contract that a provider provided the full range of services rather than a select few. I simply say to the noble Baroness that we are alive to that concern and I have no doubt that commissioners will be as time goes on.

On the amendment tabled by the noble Lord, Lord Warner, he will be disappointed to hear that I am not drawn to going any further than the Bill does, much as I understand that his idea is well-intentioned. I say that because of Monitor’s overarching duty to protect patients’ interests and prevent anti-competitive behaviour that would harm those interests. This amended duty reflects what the Future Forum recommended and it is right that we stick with that. I can, however, offer the noble Lord, Lord Warner, some reassurance. First, in carrying out its duty to address anti-competitive behaviour, Monitor will necessarily have to identify it. Secondly, Monitor would have the power under Chapter 2 of Part 3 to conduct market studies and to refer potential barriers to new entrants for further investigation by the competition authorities where necessary. I hope that that is of some comfort also to the noble Lord, Lord Adebowale.

We had a most constructive debate in Committee about the Secretary of State’s accountability for securing a comprehensive health service in England and his role in holding Monitor to account for its duties. I thank my noble friend Lady Williams for proposing an amendment which adds much to the Bill in this area. Clause 61 already requires Monitor to carry out its functions in a manner consistent with the Secretary of State’s performance of his duty to promote a comprehensive health service. My noble friend’s amendment would strengthen these provisions and thereby improve the Bill on a key issue. This would help to ensure that the Secretary of State can discharge effectively his responsibility for the health service in England and that Monitor carries out its functions to that end. I support my noble friend’s amendment.

Clause 64 specifies the range of matters that Monitor would be obliged to have regard to in carrying out its duties. In Committee, the noble Baroness, Lady Murphy, and my noble friend Lady Williams raised some concerns about that list. I agreed to reflect on these concerns and have tabled Amendments 168 to 171, which would rationalise the list and make it clear that maintaining patient safety would be the paramount consideration. I hope that the noble Baroness and my noble friend will be content with that rationalisation.

On the amendment tabled by noble friend Lady Cumberlege, the Bill ensures that patient and public involvement is embedded at every level of the healthcare system. However, unlike the NHS Commissioning Board and clinical commissioning groups, Monitor would not be responsible for securing NHS services to meet patients’ needs. It is a regulator, with economic and more technical functions. Clause 61 reflects this and gives Monitor the responsibility for determining arrangements for patient and public involvement as appropriate to its functions. So I am afraid that I do not regard my noble friend’s amendment as appropriate. She asked what could be done if Monitor did not involve patients in the right way. Well, the Secretary of State would hold Monitor to account as to how it discharged its functions. Monitor would have to report to the Secretary of State on how it was discharging its duty on patient and public involvement as part of its annual report. The Secretary of State could also request a specific report on how Monitor discharged this function and intervene where there had been a significant failure in meeting this duty. The Bill provides for HealthWatch to send advice to Monitor as it seems appropriate. Monitor would then be required to respond to this advice in writing. I hope that my noble friend will take comfort from those points.

I stress once again that the purpose of Part 3 is to strengthen sector regulation in healthcare to protect and promote patients’ interests. The current system is inadequate, fragmented and duplicative. It fails to protect the interests of all patients. Part 3 recognises that the NHS is not and never has been a single institution. The reality of the NHS is a comprehensive health service that has always been delivered by a diverse range of providers.

Part 3 would address gaps in the current system by extending equivalent safeguards to protect patients’ interests irrespective of who provides their NHS services. It would also make sector regulation in the NHS more effective in driving improvements and enabling integration during an absolutely crucial period of economic challenge.

I am very happy to support the amendments of my noble friend Lady Williams, which would improve the Bill, but I urge, following the reassurances and explanation that I have been able to give, other noble Lords not to press their amendments.

[Baroness Finlay of Llandaff]

Before the Minister sits down, will he answer a straightforward question in relation to my amendment? Given that the Bill at page 88 states,

“functions with a view to preventing anti-competitive behaviour”,

and my amendment, which is not being accepted, states,

“functions with a view to preventing anti-collaborative behaviour”,

will the Minister confirm that that means that competition is trumping collaboration?

[Earl Howe]

No. Collaboration, if it is in the interest of patients, will always trump competition.

[Baroness Finlay of Llandaff]

What instances are there of when collaboration has not resulted in improved patient outcomes? I have not been able to find any.

[Earl Howe]

Nor have I, which is why I listed earlier some prime examples of collaboration. Clinical networks are a prime example of collaborative behaviour which is clearly in the interests of patients. The noble Baroness is asking me to think of examples in my head of collaborative behaviour in the NHS that does not advantage patients. I cannot think of any, which is why it would be hard for Monitor to find fault with collaboration where it has clearly been designed to improve patient care.

[Baroness Thornton]

In response to that last remark, it depends on whether Monitor decides it is collusion or collaboration. That is the key point. We suggested that that was a problem right at the very beginning of the Bill—how you distinguish between collaboration and collusion and what you do about that. I do not think we are any closer to finding the answer.

I turn to remarks that were made during the course of this very useful if diverse debate. I want to take one moment to say something to the noble Baroness, Lady Williams, and her colleagues and to the noble Baroness, Lady Murphy, about the fact that they feel misrepresented in social and other media. Indeed, as politicians it goes with the territory that you may be misrepresented from time to time. I have the greatest respect and admiration for the noble Baroness, Lady Williams, and she knows herself that that is where you are when you are in politics.

However, the noble Baroness herself wrote in an article in the Guardian on 13 February about dropping the chapter on competition, and in a letter that the noble Baroness and her leader wrote to their own MPs and Peers, they set a high bar for how Part 3 of the Bill might be made safe. It is just and proper that everybody will be looking at the noble Baroness and her friends to see and test whether they have succeeded and met their own aspirations. At the moment, I think that that is open to question. I do not think that it has been achieved. I know that that might be painful, but that is the case.

We have had some thoughtful amendments and contributions. As usual, the noble Baroness, Lady Finlay, in her amendment and questions put her finger on a very important issue that the Bill needs to address even at this late stage. I had a great deal of sympathy with the amendment of the noble Baroness, Lady Cumberlege. I rather hoped that she would get a more positive response than she did and I am sorry about that.

[Baroness Williams of Crosby]

The noble Baroness is perfectly entitled to say what she had said. I accept that fully and I am sure that she said it in all sincerity. But the difference between us is that I believe that the Government have moved a long way, particularly because of the Minister. I believe that that culmination of changes will enable us to bring about an improved NHS. I may be proved wrong. I freely accept that I may be proved wrong. But I believe that the changes that have been made are so far reaching that we can make the NHS better than it is today. I know that the noble Baroness, who herself has been responsible in her attitude towards the Bill, would wish to see that, even though she may not think that this is the way to do it.

[Baroness Thornton]

I am not sure whether this is the way to do it. We disagree. I do not think that the Liberal Democrats have achieved it, but there we are. As the noble Baroness said, history will see who is right and who is wrong.

I am extremely pleased to see that the noble Baroness, Lady Meacher, has transferred her attention from the Welfare Reform Bill to this one. She is quite correct that it is impossible to stop the negative impact that has been observed in the studies that she referred to. She is completely right about that. This whole debate illustrates the problem: half of the Bill seems to be there to mitigate the damage that the other half does. What used to be, for example, a clear duty to co-operate—and it was a simple duty—is now dense and complex.

Turning to our Amendment 163B, I should like to say to the noble Baroness, Lady Murphy, that it does not rule out the economic regulator function. That amendment does not seek to do that, so I hope that the noble Baroness, with that reassurance, might support our amendment. We seek to clarify and put beyond doubt that Monitor should have that function. We seek to do it in the first part of the Bill. We want Monitor to keep its current role. We believe that there should be two bodies and that it is difficult for Monitor to do both jobs at once, but it is important at this point of this first part of the Bill that we make it completely clear. Where the Bill says that Monitor should be the,

“Independent Regulator of NHS Foundation Trusts”,

we need to make it completely clear that it will continue to do that job.

We are not trying to weaken the role of Monitor. We think that foundation trusts are facing huge risks and huge reorganisation. They need the support that Monitor will offer them. I suspect that the Francis report, as I said earlier, will indeed have something to say about the strength and importance of Monitor as a regulator of foundation trusts. We would like this to be in the Bill because it makes it completely clear that this is an important job that Monitor does and that it should keep doing that job for the foreseeable future. I wish to test the opinion of the House.

18:18

Division 3

Ayes: 183

---

Labour: 156
Crossbench: 16
Independent: 4
Democratic Unionist Party: 1
Plaid Cymru: 1

Noes: 255

---

Conservative: 145
Liberal Democrat: 64
Crossbench: 35
Bishops: 2
Ulster Unionist Party: 1

18:33

Amendment 163BC had been withdrawn from the Marshalled List.

Schedule 8 : Monitor

Amendment 163C

Moved by

[Lord Marks of Henley-on-Thames]

163C:Schedule 8, page 368, line 17, after “functions” insert—
“(b) include a statement of what it did to comply with the duty under section (Secretary of State’s guidance on duty under section 61(9))(2) (duty to have regard to Secretary of State’s guidance on duty under section 61(9)), and(c) include a statement of what it did to comply with the duty under section 64(1)(ja) (duty to have regard to Secretary of State’s guidance on relevant parts of document on improving quality of services).”

Amendment 163C agreed.

Clause 61 : General duties

Amendments 163D to 164 not moved.

Amendment 165

Moved by

[Baroness Finlay of Llandaff]

165:Clause 61, page 88, line 5, at end insert—
“( ) Monitor must exercise its functions with a view to preventing anti-collaborative behaviour in the provision of health care services for the purposes of the NHS.”

[Baroness Finlay of Llandaff]

In summing up after the previous debate, the Minister spoke about the service currently being fragmented and duplicative, and I would agree that it is. I am glad that the Government’s intention is to have a service where healthcare providers collaborate more than they do at the moment. I accept that there will be a range of providers, and I support having a wide range of providers to provide a spectrum of services. However, I do not understand—and have not understood from the answers—why anti-collaborative behaviour should not be up there as a general duty for Monitor with anti-competitive behaviour. Because of that, and because of all the discussion that we have had over integration and collaboration, I feel that it is a duty that I have to those who wish to collaborate in the NHS to test the opinion of the House, so that there is equal status between anti-competitive and anti-collaborative behaviour in the event of there being a conflict between the two.

[Earl Howe]

I hoped that I had already made it clear to the noble Baroness that collaborative behaviour when it is in the interests of the patients—and I distinguish that from collusive behaviour, which is almost certainly not in the interests of patients—will be regarded by Monitor as trumping the need for competition to be deployed in services. I am not sure that I understand what the noble Baroness’s problem is in this area; she should be reassured by that.

[Baroness Finlay of Llandaff]

I am grateful to the Minister for trying to clarify these matters, but my concern relates to anti-competitive and anti-collaborative being of at least equal status. I would prefer anti-collaborative to be on the face of the Bill. Is the Minister prepared to have a discussion with me after this debate to see whether we could insert some other wording to prevent both anti-collaborative and anti-competitive behaviour? In that way, even when a provider states that it intends to collaborate and that is put down clearly, if it is demonstrated as time goes on that the provider is not fulfilling that, Monitor will have the leverage to say that it was in open competition but the provider has not fulfilled the requirement to collaborate.

[Earl Howe]

I am of course willing to hold discussions with the noble Baroness, but I remind her that we have explicitly provided for Monitor to use its licensing powers to support integration and co-operation when that is in the interests of patients. We were fully aware of that issue when drafting the Bill. Later amendments, which we will debate today, will strengthen the ability of Monitor even further.

[Baroness Finlay of Llandaff]

I recognise that they will strengthen Monitor further and that they will come later, but my disappointment is that they are not in the core general duties that will override the way in which Monitor functions. They will come later on and in detail, and I can see that in the amendments that the Government have tabled. But my concern persists, and I wish to test the opinion of the House.

18:38

Division 4

Ayes: 171

---

Labour: 147
Crossbench: 11
Independent: 3
Democratic Unionist Party: 1
Bishops: 1
Plaid Cymru: 1

Noes: 221

---

Conservative: 137
Liberal Democrat: 57
Crossbench: 22
Ulster Unionist Party: 1
Bishops: 1

18:51

Amendments 166 and 166A not moved.

Amendment 166B

Moved by

[Baroness Williams of Crosby]

166B:After Clause 61, insert the following new Clause—
“Secretary of State’s guidance on duty under section 61(9)
(1) The Secretary of State may, for the purpose of assisting Monitor to comply with its duty under section 61(9), publish guidance on—
(a) the objectives specified in the mandate published under section 13A of the National Health Service Act 2006 which the Secretary of State considers to be relevant to Monitor’s exercise of its functions, and(b) the Secretary of State’s reasons for considering those objectives to be relevant to Monitor’s exercise of its functions.(2) In exercising its functions, Monitor must have regard to guidance under subsection (1).
(3) Where the Secretary of State publishes guidance under subsection (1), the Secretary of State must lay a copy of the published guidance before Parliament.
(4) The Secretary of State—
(a) may revise guidance under subsection (1), and(b) if the Secretary of State does so, must publish the guidance as revised and lay it before Parliament.”

Amendment 166B agreed.

Clause 62 : General duties: supplementary

Amendment 166C not moved.

Clause 63 : Power to give Monitor functions relating to adult social care services

Amendment 167 not moved.

Amendment 167A

Moved by

[Baroness Finlay of Llandaff]

167A:Clause 63, page 89, line 34, at end insert—
“( ) Regulations may provide for Monitor to make the granting of a licence conditional upon performance in relation to matters set out as in section 64.”

[Baroness Finlay of Llandaff]

My Lords, some of the amendments in this group are in my name and that of the noble Lord, Lord Northbourne, who is unable to be in the House today because of ill health. They relate to the transition of care between different sectors and build around the principle of integrated working.

The problem that arises is that the responsibility for care of children will sit with different groups. There is a need to make sure that, when children make the transition from being the responsibility of social services to being the responsibility of the local authority and, in adult care, of the clinical commissioning groups, there is adequate provision for how that handover occurs. A clear date for it should be set and it should make explicit the duties for each party involved in handing on information. Without that, there is a concern that as these young people—many of whom will have mixed mental, physical and social care needs—transition across, information about those needs may not adequately pass from one agency to another. There is a concern that they may fall into a gap and that the responsibility at the time of transition will not be clear. We are also concerned that, without a clear, fixed date for the transition with a default time set in legislation, it will be easy for a young person’s care to drop out of sight, particularly if they are not supported by people well able to advocate on their behalf.

Also in this group is Amendment 174A, which concerns the general duties of Monitor and is in the name of the noble Baroness, Lady Young of Old Scone. She has asked me to speak to this amendment, which again emphasises the importance of integration of services. Her concern is about diabetes but goes far wider than that. Where there is a multiplicity of providers, how they work together will depend on how Monitor specifies service in the national tariff. Since patients with complex conditions require input from many different providers, there is a concern that, without a real emphasis in the Bill on provision being integrated, they may end up being told that their care is not the responsibility of one person or another. These amendments, which have been grouped together, seek clarity on the seamless provision of care. The principle behind them is to address those gaps that we have identified in that seamless provision of care.

I return to the amendments in my name and that of the noble Lord, Lord Northbourne. We are well aware that it can be very difficult to differentiate between the social and mental health needs of young people. For that reason, we feel that it is important that transition is clarified. I beg to move.

[Lord Beecham]

My Lords, we certainly support these amendments. I am particularly pleased by the reference in Amendment 171A to the transfer of information between child and adult social care authorities, which picks up a point that was raised in an earlier debate. These are sensible amendments, although there is an error in Amendment 238G, which refers to health and welfare boards, instead of health and well-being boards. On that not untypically pedantic note, I support the amendments and trust that the Minister will give them a favourable response.

[Baroness Northover]

My Lords, there is a clear consensus on the importance of further integration and more services being joined up around patients’ needs. The Bill seeks to encourage and enable the delivery of integrated services and contains strong provisions to ensure that this takes place. We are placing a duty of integration on all bodies, including clinical commissioning groups and health and well-being boards, to ensure more joined-up provision of services for patients, social care service users and carers. Furthermore, all NHS bodies and private and third sector providers supplying NHS services are required by the Health Act 2009 to take account of the NHS constitution in their decisions and actions. This includes the principle that the NHS works across organisational boundaries and in partnership with other organisations in the interests of patients, local communities and the wider population.

The Bill takes this further by making it clear that, in exercising any of their functions, commissioners must act with a view to securing that services are provided in a way that promotes the NHS constitution; and with a view to securing continuous improvement in outcomes, including effectiveness, safety and quality of patient experience. Commissioners must also exercise their functions with a view to securing that health services are provided in an integrated way where this would improve the quality of those services, including outcomes, and/or reduce inequalities in access to services and outcomes. The intention is, therefore, that it would be for commissioners to drive integration and co-operation between providers in the light of local circumstances and needs, and to enforce this through legally binding contracts. This would apply equally, and perhaps all the more importantly, in relation to the provision of services for long-term conditions where multidisciplinary care is required.

19:00

As we have heard, the job of Monitor is to protect and promote patients’ interests. This will be the guiding principle for Monitor in resolving potential conflicts. However, hugely important as enabling integration is, it is a means to those ends, and we are not convinced that it should supersede all other considerations.

In respect of Amendment 174A, to which the noble Baroness, Lady Finlay, has spoken on behalf of the noble Baroness, Lady Young, we feel that the list at Clause 65(5) must relate to Monitor’s functions and the impact on its overarching duty. The noble Baroness, Lady Finlay, is absolutely right that decisions on the use of competition should take account of the potential impact on integration where this is needed to improve outcomes for patients, and the noble Baroness, Lady Young, has emphasised the need for this as regards diabetes and other conditions. The Bill would place that responsibility on commissioners while ensuring that they act transparently and can justify their decisions in the best interests of the patients.

The amendments in the names of the noble Lord, Lord Northbourne, and the noble Baroness, Lady Finlay, to which the noble Baroness has spoken, raise the wider issue of young people’s transition between different services, including to adult services. We agree that all transitions should be managed as effectively as possible, and this is a vital area in which to get integration right. The noble Baroness, Lady Finlay, is absolutely right about that. I am sure that your Lordships are aware that Sir Ian Kennedy’s review of children’s services highlighted problems in handling the transition from children’s to adult care, especially in mental health and services for disabled children. We strongly believe that there is a real opportunity to support young people moving through key transition points and into adult care. There are a range of interlocking policies which we believe will result in more integrated and personalised care for children. I hope that I may explain some of the stages involved in this.

Earlier I said that the Bill places integration duties on all bodies. I should have said integration duties across the NHS.

Health and well-being boards will have a vital role as regards the stages in children’s care. The joint strategic needs assessments and joint health and well-being strategies drawn up by the local health and well-being board will ensure that local commissioners consider the needs of young people as they move into adulthood. The boards will bring together the key agencies when assessing, planning and commissioning local services. For example, in relation to children and young people, each health and well-being board will have the local director of children’s services as a statutory member to ensure the needs of children and young people are taken into account. I hope that the noble Baroness, Lady Finlay, and the noble Lord, Lord Northbourne, will find that reassuring. As your Lordships may also be aware, the current draft of the statutory guidance on the preparation of joint strategic needs assessments and joint health and well-being strategies goes some way to highlighting points around integration and the need to provide services for each stage of the life course. I assure the House that we will look to strengthen this further with a specific reference to the importance of considering needs of individuals during key transition points.

Your Lordships may also be aware that the Secretary of State has commissioned the development of a children and young people’s health outcomes strategy. This strategy will seek to set out the outcomes that matter most to children and young people, and will describe the contribution that the different parts of the system need to make to support their successful implementation. The strategy is being informed through a children and young people’s forum, which brings together a wide range of people with a record of expertise and commitment to improving healthcare provision for children and young people. Children and young people, including those with special educational needs and disability, will be asked their views on the outcomes that matter most to them. The transition to adult services has been identified as a key theme that will have a special focus within the strategy’s development. The forum will report back to the Secretary of State with its recommendations in the summer.

Work is also under way to explore how to develop integration in practice. As part of the special educational needs Green Paper Support and Aspiration, published in March 2011, the Department for Education together with the Department of Health has appointed 20 pathfinder areas covering 31 local authorities, PCT clusters and emerging CCGs to test different ways of improving care for children and young people in this category. Critically, this includes a single assessment process and plan for education, health and care needs from birth up to the age of 25 for children and young people with a disability or special educational need. All the pathfinders will address transition and how children’s and young people’s needs and support can be joined together across all services. This will, of course, include the transition from children’s to adult social care. The learning from the pathfinder programme will be applied across all local areas as quickly as possible.

In earlier debates we discussed the social care White Paper. That will address integration and the reaction to that will be coming forward. I understand and accept entirely the spirit of these amendments but I hope that I have demonstrated our commitment to integration. I am entirely certain that our existing proposals and wider programme of work already address the underlying objective of these amendments. I hope I have reassured noble Lords and that they will feel able to withdraw their amendments.

[Baroness Finlay of Llandaff]

I am most grateful to the noble Baroness for the assurances that she has given. I am particularly grateful to her for focusing on the integration with educational needs as well as social care needs and physical and mental health needs, with a single point of assessment. I beg leave to withdraw the amendment.

Amendment 167A withdrawn.

Amendment 167B not moved.

Clause 64 : Matters to have regard to in exercise of functions

Amendments 168 to 171

Moved by

[Earl Howe]

168: Clause 64, page 90, leave out line 2 and insert—
“(1) In exercising its functions, Monitor must have regard, in particular, to—”

169: Clause 64, page 90, line 3, at end insert—
“(2) Monitor must, in exercising its functions, also have regard to the following matters in so far as they are consistent with the matter referred to in subsection (1)—”

170: Clause 64, page 90, line 5, at end insert “and in the efficiency of their provision”

171: Clause 64, page 90, line 6, leave out paragraph (c)

Amendments 168 to 171 agreed.

Amendment 171A not moved.

Amendment 172

Moved by

[Earl Howe]

172: Clause 64, page 90, line 20, leave out paragraph (h)

Amendment 172 agreed.

Amendment 173 not moved.

Amendments 173A to 173C

Moved by

[Earl Howe]

173A: Clause 64, page 90, line 27, at end insert—
“(ja) where the Secretary of State publishes a document for the purposes of section 13E of the National Health Service Act 2006 (improvement of quality of services), any guidance published by the Secretary of State on the parts of that document which the Secretary of State considers to be particularly relevant to Monitor’s exercise of its functions,”

173B: Clause 64, page 90, line 28, leave out paragraphs (k) to (m)

173C: Clause 64, page 90, line 36, at end insert—
“( ) Where the Secretary of State publishes guidance referred to in subsection (2)(ja), the Secretary of State must lay a copy of the published guidance before Parliament.
( ) The Secretary of State—
(a) may revise the guidance, and(b) if the Secretary of State does so, must publish the guidance as revised and lay it before Parliament.”

Amendments 173A to 173C agreed.

Clause 65 : Conflicts between functions

Amendment 174 not moved.

Amendment 174ZA had been withdrawn from the Marshalled List.

Amendment 174A not moved.

Clause 69 : Failure to perform functions

Amendments 175 and 176

Moved by

[Earl Howe]

175:Clause 69, page 93, line 38, after “Monitor’s” insert “, other than a function it has by virtue of section 70 or 71,”

176:Clause 69, page 94, leave out lines 8 and 9 and insert—
“( ) For the purposes of this section—
(a) a failure to perform a function includes a failure to perform it properly, and(b) a failure to perform a function properly includes a failure to perform it consistently with what the Secretary of State considers to be the interests of the health service in England or (as the case may be) with what otherwise appears to the Secretary of State to be the purpose for which it is conferred; and “the health service” has the same meaning as in the National Health Service Act 2006.”

Amendments 175 and 176 agreed.

Amendment 177 and 178 not moved.

Clause 73 : Requirements as to procurement, patient choice and competition

Amendment 178A

Moved by

[Baroness Thornton]

178A:Clause 73, page 96, line 30, at end insert—
“(5) An NHS commissioner shall be entitled to undertake a review (“a Commissioning Review”) of all or any part of the health services that the NHS commissioner considers are reasonably required in order to discharge its functions under this Act, and, upon completion of such a Commissioning Review, an NHS Commissioner shall be entitled to determine that the most appropriate way to deliver all or any part of such services shall be through the conclusion of arrangements with one or more health services bodies or one or more NHS Foundation Trusts.
(6) NHS Commissioners shall, when conducting a Commissioning Review, have regard to the following factors—
(a) the need for NHS services to be provided in a way that is economic, efficient and effective;(b) the need to commission services in a way that maintains or improves the quality of the services;(c) the need to commission health services in a way that promotes the integration of health and social care services;(d) the need for health care services provided for the purposes of the NHS to be provided in an integrated way where this will—(i) improve the quality of those services (including the outcomes that are achieved from their provision) or the efficiency of their provision, (ii) reduce inequalities between persons with respect to their ability to access those services, and(iii) reduce inequalities between persons with respect to the outcomes achieved for them by the provision of those services;(e) the likely future demand for health care services;(f) the desirability of patient choice.(7) An NHS commissioner shall be entitled, as part of any Commissioning Review, to seek expressions of interest from health services bodies or from NHS Foundation Trusts which may have an interest in providing such services, and shall be entitled to undertake such processes as it shall consider appropriate to determine which of such bodies is able most appropriately to provide any such services.
(8) A Commissioning Review and decisions made following a Commissioning Review to make arrangements with one or more health services bodies or NHS Foundation Trusts shall not constitute anti-competitive behaviour for the purposes of this or any other Act.
(9) The Public Contracts Regulations 2006 shall not impose any obligations on an NHS commissioner which undertakes a Commissioning Review or makes decisions to make arrangements with one or more health services bodies or NHS Foundation Trusts following a Commissioning Review.
(10) Regulations under this section shall not impose obligations on an NHS commissioner undertaking a Commissioning Review.
(11) The NHS Commissioning Board may, after consultation with Monitor, publish guidance to NHS Commissioners concerning Commissioning Reviews.
(12) The National Health Service Act 2006 shall be amended by adding the following after section 9(4)(r)—
“(s) An NHS Foundation Trust”.”

[Baroness Thornton]

I beg to move.

19:09

Division 5

Ayes: 157

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Labour: 138
Crossbench: 11
Independent: 3
Democratic Unionist Party: 1
Plaid Cymru: 1

Noes: 203

---

Conservative: 126
Liberal Democrat: 50
Crossbench: 15
Ulster Unionist Party: 2
Bishops: 1
Independent: 1

19:22

Clause 76 : Guidance

Amendments 179 and 180

Moved by

[Earl Howe]

179:Clause 76, page 98, line 26, after “(1)(a)” insert “or (b)”

180:Clause 76, page 98, line 32, at end insert—
“( ) Before publishing guidance revised under subsection (4), Monitor must consult the persons mentioned in subsection (2).”

Amendments 179 and 180 agreed.

Clause 77: Mergers involving NHS foundation trusts

Amendment 181

Moved by

[Earl Howe]

181:Clause 77, page 98, line 34, leave out subsection (1) and insert—
“( ) For the purposes of Part 3 of the Enterprise Act 2002 (completed and anticipated mergers), each of the following cases is to be treated as being (in so far as it would not otherwise be) a case in which two or more enterprises cease to be distinct enterprises.”

[Earl Howe]

My Lords, I speak also to Amendments 182 and 183. There is one simple point to Clause 77: it is there to remove the current legal uncertainty and risk of double jeopardy for foundation trusts under the UK’s existing general merger controls. The OFT already has jurisdiction to review foundation trust mergers under the Enterprise Act, but there is legal uncertainty as to when that applies in individual cases. That creates the risk of double jeopardy for foundation trusts under current arrangements, as their mergers are also reviewed by the Co-operation and Competition Panel. Amendments 181 to 183 are minor and technical amendments which make it clear that Clause 77 applies to both completed and anticipated mergers. I will reserve my remarks on the other amendments in the group until I have heard the contributions of the noble Lords who are proposing them. Meanwhile, I beg to move.

[Lord Clement-Jones]

My Lords, I shall speak to Amendment 184. In Committee, we debated the role of the OFT in merger policy and looking into mergers between foundation trusts. I tabled an amendment because it seemed to me at the time that the Enterprise Act was a relatively blunt instrument for the OFT to use to look at those mergers, compared to the usual way that it would look at the competitive effect or impact on competition of such a merger. The response of the noble Earl, Lord Howe, was extremely helpful in guiding us through the relevant provisions of the Enterprise Act—in particular, pointing out that the OFT has a duty under the Enterprise Act to look at relevant customer benefits.

The issue is that “customer” is not normally how we describe patients in the NHS and the way that the NHS operates is rather different from considering whether Dixons taking over Comet, for instance, will impact on the customer or the consumer. There is a difference. It seemed to me that the best way to handle the matter would be specifically to provide for Monitor to be inserted into the process so that it would give specific advice to the OFT on those matters. Although the definition is “relevant customer benefits”, its perspective would be on the impact on patients.

I appreciate the earlier amendments which the noble Earl has tabled, but this would add the extra dimension to Clause 77 which will enable the OFT and Monitor to have a really powerful role in the way that they oversee foundation trust mergers and, I think, settle some of the concerns which surround Clause 77 as drafted.

[Lord Beecham]

My Lords, the amendments are a good example of the thickets and undergrowth of the elaborate structures to deal with competition generally in the economy into which the health service is being drawn. I have no doubt that the noble Earl is right in describing the amendments as technical; the amendment of the noble Lord, Lord Clement-Jones, is also technical. It is not the worse for that, but this whole area ought to be removed from the Bill. Our Amendment 184A would remove Clause 77 altogether. Our view is that that elaborate machinery and the use of the Office of Fair Trading is not appropriate for mergers of foundation trusts. Having said that, we do not intend to divide the House; we simply deplore the fact that this machinery, somewhat refined by the amendments, is being cranked up to apply unnecessarily.

[Earl Howe]

My Lords, as I said earlier, retaining Clause 77 would have several substantial benefits. The OFT already has jurisdiction to review foundation trust mergers under the Enterprise Act. The problem, as I said, is that there is legal uncertainty as to when that applies in individual cases. That creates the risk of double jeopardy for foundation trusts, as their mergers are also reviewed by the Co-operation and Competition Panel. There is also a problem of unnecessary duplication of specialist skills between the Co-operation and Competition Panel and the OFT which, incidentally, brings with it a cost to the UK taxpayer.

Retaining Clause 77 would avoid that duplication and eliminate the current legal uncertainty and risk of double jeopardy for foundation trusts. That would encompass mergers between two or more foundation trusts and acquisitions by a foundation trust of another foundation trust or a private business, such as UCLH’s acquisition of the London Heart Hospital under the previous Administration.

However, it is important for me to make it clear that the Bill would prevent any takeover of a foundation trust by a private company, contrary to what some commentators outside this House have suggested. Secondly, the OFT has a proven track record for light-touch, proportionate regulation of mergers and ensuring good value for public money. By contrast, under the system we inherited from the previous Government, the Co-operation and Competition Panel has reviewed several mergers of community services at considerable cost and delay to the NHS that would have been permitted automatically under the OFT’s materiality thresholds.

Finally, the approach provides better value for public money by avoiding duplication of specialist resources between the OFT and Monitor. Mergers are a specialist area. Given the variable frequency of mergers in the NHS, it would be a far better use of resources to consolidate the responsibility and expertise within the OFT, where they could also be put to good work for the benefit of the wider economy, rather than resourcing another public body at the taxpayer’s expense.

19:30

I reassure the House that the paramount consideration for the OFT in reviewing foundation trust mergers would be the impact on patients’ interests. This would include, as a matter of necessity, considering the interests of patients in securing sustainable access to a comprehensive health service.

As part of any merger investigation, the OFT and the Competition Commission would engage with Monitor in order better to understand the services involved. In particular, the OFT would obtain Monitor’s view on how a merger would benefit patients. These views would then be considered in the analysis, along with representations from other stakeholders, including local health and well-being boards, and other evidence. However, I sympathise with concerns to ensure Monitor’s involvement in advising the OFT and with the desire that this should be included in the Bill.

Amendment 184, proposed by my noble friend Lord Clement-Jones, would ensure that evidence gathered in reviewing a merger involving a foundation trust would always include expert advice from a healthcare regulator with an overriding duty to protect and promote patients’ interests. I thank my noble friend for what I think is an elegant solution and I hope that it will allay any concerns that remain in the House in this area. I am pleased to tell him that I plan to support Amendment 184, as and when he comes to move it. I hope that, in the light of those reassurances, the noble Lord, Lord Beecham, will feel able not to move his amendment.

Amendment 181 agreed.

Amendments 182 and 183

Moved by

[Earl Howe]

182: Clause 77, page 98, line 37, leave out “have ceased” and insert “cease”

183: Clause 77, page 98, line 40, leave out “have ceased” and insert “cease”

Amendments 182 and 183 agreed.

Amendment 184

Moved by

[Lord Clement-Jones]

184: Clause 77, page 98, line 40, at end insert—
“(3A) Where the Office of Fair Trading decides to carry out an investigation under Part 3 of the Enterprise Act 2002 of a matter involving an NHS foundation trust, it must as soon as reasonably practicable notify Monitor.
(3B) As soon as reasonably practicable after receiving a notification under subsection (3A), Monitor must provide the Office of Fair Trading with advice on—
(a) the effect of the matter under investigation on benefits (in the form of those within section 30(1)(a) of the Enterprise Act 2002 (relevant customer benefits)) for people who use health care services provided for the purpose of the NHS, and(b) such other matters relating to the matter under investigation as Monitor considers appropriate.”

Amendment 184 agreed.

Amendment 184A not moved.

Clause 78 : Reviews by the Competition Commission

Amendment 185

Moved by

[Earl Howe]

185: Clause 78, page 99, line 5, leave out paragraph (a) and insert—
“(a) the effectiveness of competition in the provision of health care services for the purposes of the NHS in promoting the interests of people who use such services,”

[Earl Howe]

My Lords, perhaps I may begin by clarifying the role of the Competition Commission as set out in the Bill because I think that there have been a few misconceptions about this. The commission would not enforce the Competition Act in relation to healthcare services, nor would the commission’s role affect the applicability of competition law to the NHS, and the Bill would not give the Competition Commission direct powers over providers of NHS services.

Instead, the Bill would give the Competition Commission two narrow, specific roles in relation to NHS services. First, the commission would be the independent adjudicator where sufficient providers or, in some cases, commissioners objected to Monitor’s proposals for licence modifications or its methodologies to be used to calculate prices or levies for providers to ensure the continuity of essential services.

Secondly, the Bill currently provides that the commission would undertake reviews of the development of competition in the provision of NHS services and the way that Monitor was fulfilling its functions relating to the provision of such services. Where it concluded that something was or could be averse to the public interest, it could make non-binding recommendations to the Secretary of State, Monitor or the NHS Commissioning Board.

I am aware of a concern that this wording could imply that the review should focus the development of competition as an end in itself. That is absolutely not our intention. That is why commissioners will decide when competition and choice will be used, and indeed whether it will be used, as a means of improving services and enabling patients to have control of their care. To make that clear, we have tabled Amendment 185, which provides that the reviews relate to the effectiveness of competition in realising benefits for NHS patients, rather than the development of competition per se. I hope that noble Lords will agree that this wording provides clarity about the purpose of the reviews and is consistent with the principle that competition should not be pursued as an end in itself. I therefore beg to move Amendment 185.

[Lord Clement-Jones]

My Lords, it would seem convenient, although it alters the groupings, to talk to my Amendments 186, 187 and 188 at this point.

In Committee—and I am very grateful to the noble Lords, Lord Turnberg and Lord Patel, for supporting these amendments—we flagged our general concern about the risks of EU competition law being applied across the board in the health service. One risk that we considered to be high was the involvement to such a great extent in the Bill of the Competition Commission and, in particular, its role in Clauses 78, 79 and 80, as well as its role in reviewing competition within the health service and the development of competition by Monitor.

On these Benches, we, along with Future Forum and following legal advice, believe that it is necessary and consistent to delete Clause 78, which provides for a review of the exercise of Monitor’s functions and, as I said, the development of competition in the NHS. Government Amendment 185 would of course change this to a review of the effectiveness of competition in the NHS in promoting the interests of those who use the NHS. Nevertheless, we have considerable concerns about the involvement of the Competition Commission. The commission occasionally has to apply non-commission principles in its investigations. It may need to consider, for example, whether media plurality would be undermined by a media merger. However, the commission members and staff are steeped in competition law principles and it is difficult to get them to attribute equal weight to non-competition objectives. The experience of those involved with the commission is that it tends to focus far more on the competition analysis and is often reluctant to accept that it might be required to endorse an outcome that may be suboptimal from a competition perspective in order better to promote other objectives.

Judgments about whether competition or co-operation best promote certain objectives, including health sector objectives, are not clear-cut. Which side of the line people come down on will depend on their standpoints and assumptions about the extent to which competition is helpful in general, as well as on their experience. Regular commission members tend to have a strong bias in favour of the benefits of competition, and that strengthens our view on the inappropriateness of the reviews by the Competition Commission. It is not necessary for there to be a review of this kind either of the NHS or of the operation of Monitor. Indeed, I would argue that its very presence in reviewing both the NHS and Monitor increases the risk of competition law applying more widely.

Following the Future Forum’s report, the purpose of Monitor is no longer primarily to promote competition. Clearly there is now explicit recognition of the overriding importance of the benefits to patients. This is the key determinant of which instrument—competition or integration—is appropriate in the operation of the health service.

I have not put down amendments to the more technical areas where there is Competition Commission involvement. It seems that in many cases that may well be relevant in terms of the tariff and so on. However, we on these Benches believe that Clauses 78, 79 and 80 are a throwback to pre-Future Forum days, and we therefore propose leaving them all out.

[Lord Newton of Braintree]

My Lords, perhaps I may intervene briefly, if only to avoid withdrawal symptoms from not having spoken on any day this week. I want to support my noble friend Lord Clement-Jones on the general proposition without wishing in any way to threaten mayhem if we do not get a satisfactory reply. The House is well aware, as I have referred to it on a number of occasions, that last year I went through what turned out to be the trauma of trying to engage in what was technically a takeover, although we presented it as a merger, with the neighbouring health trust. That involved Suffolk Mental Health and Norfolk Mental Health. We finally achieved it on New Year's Day, so I am, so to speak, out of work.

There was a real problem. One got the feeling that the people on the competition and collaboration panel, or whatever it was called, which overlaps quite heavily with the Competition Commission, saw us in much the same category—how can I put this without upsetting anyone?—as two rival sellers of washing detergents. They did not recognise that health is not like that. There were health issues, patient safety issues and quality of service issues that needed to trump the competition issues. I know that we have been told that that will happen, but it is very important to make sure that the machinery will ensure that it happens and that the health issues trump those narrower competition issues. All I seek from the Minister is an assurance that, one way or another, that will be the case.

[Baroness Hollins]

My Lords, I would like some reassurance that the regulation of competition will improve on the current situation in some circumstances. I do not know whether these amendments, or any existing provision in the Bill, will achieve that. I have a couple of examples about which I feel uncomfortable.

First, I am keen to know whether adequate safeguards are in place for the kind of situation that occurred in Surrey, to ensure that the range of providers envisaged by the Government will be able to compete on a level playing field. I remember the wise words of the economist Fritz Schumacher that sometimes “small is beautiful”. Can the Minister tell the House on what basis it was decided that a £10 million bond would be required as surety from bidders for the NHS contract tendered last year for community services in south-west and north-west Surrey? The winning tender was a private company and the loser was Social Enterprise UK, which is currently providing services to central Surrey but which did not have the £10 million in the bank. That organisation is providing high-quality community services which have been acclaimed by the noble Lord's own department. At the end of its three-year contract, will it simply be taken over by the large private company which has more money in the bank?

My second question relates to the culture within the NHS and medical practice. Since the NHS began over 60 years ago, most doctors have worked primarily in the NHS and used their clinical skills first and foremost for NHS patients. There have been special contractual arrangements in place to ensure that NHS specialists with a private practice do not neglect their NHS patients. I think it is fair to say that specialists with a thriving private practice usually put their extra energy into their private practice. They are not the ones who contribute to managing and developing NHS services, and nor do they usually make much contribution to research.

Let me give the House one example of how the culture within medicine is being encouraged to change. The presidents of many if not all of the medical royal colleges have been invited to a champagne reception and dinner at a posh London venue in a couple of weeks’ time. The invitation comes from a firm of solicitors and the Royal Bank of Scotland, and it states:

“Against the backdrop of challenging economic conditions and massive pressure on the public purse, we are keen to explore how other professions might be able to support your membership and the healthcare sector generally”.

This seems to be a new phase in encouraging and supporting doctors to turn their attention to setting up in private practice, in chambers and in other private healthcare organisations. That is a departure from our history. Is this the direction that the Government hope the medical profession will move in? What safeguards does the Bill contain with respect to competition to protect the NHS?

19:45

[Baroness Thornton]

My Lords, I would like to comment on the three amendments in the name of the noble Lord, Lord Clement-Jones, and then speak to the two amendments that we have in this group. They say that imitation is the sincerest form of flattery, so I am very happy that the noble Lord saw fit to take three of the amendments that we tabled in Committee and to make them his own. Those are Amendments 186, 187 and 188. That is fine by us. I understand that the Minister will be very sympathetic to these amendments and might accept them, which is probably just as well, as I would hate to embarrass the Liberal Democrat Benches any further by having votes on amendments that they have tabled and speak to but then do not support.

These three amendments would stop a review from happening. I know that the noble Lord, Lord Clement-Jones, and his colleagues need to tell us that they have won a great victory by getting the Government to concede on these amendments. Far be it from me to intrude on the coalition parties’ love-in, so to speak. When we tabled these amendments in Committee they were part of an overall, comprehensive change to Part 3 of the Bill. In many ways these amendments were part of the tidying up of our suite of amendments to effect radical change to and improvement of Part 3. We certainly support these amendments.

I turn to Amendments 196A and 196B, which stand in my name and that of my noble friend. We do not understand why the noble Lord, Lord Clement-Jones, did not also table those amendments as he is going to be very successful in having his amendments agreed to. In fact we think that there is no need to have any mention of the Competition Commission in the Bill. For the sake of completeness, we would have preferred those amendments to be included. Perhaps I may implore the Minister to accept them as well.

[Earl Howe]

My Lords, Amendments 196A and 196B, tabled by the noble Baroness, Lady Thornton, would remove the provision for adjudication if a significant proportion of those affected object to proposals by Monitor for methodologies to be used to calculate prices of levies to ensure the continuity of the central services or proposed licence modifications.

I am clear that we must have a process for adjudicating on Monitor’s proposals if a sufficient number of those who will be affected by them object; otherwise, in these circumstances, either Monitor would have no way of proceeding with disputed proposals or those affected would have no other way of disputing proposals other than by judicial review. Either way that would be unacceptable and could result in significant harm to patients, for example if a licence condition that Monitor proposed related to securing essential NHS services. For pricing methodologies, for example, the amendments would mean that Monitor could go ahead with its proposals even if sufficient numbers of those affected objected. The only way that providers, in the case of pricing commissioners, would be able to ensure that their concerns were taken into account would again be through judicial review. We need to ensure a fair and transparent system of pricing, securing competition on quality and not price, and removing incentives for providers to cherry-pick the services that they deliver or the patients whom they treat.

I am therefore clear that we should have a process for adjudication. I am also clear that the Competition Commission should undertake that role. It has other adjudication roles. The commission has experience of working across a range of sectors, on the basis that it does not necessarily have the knowledge which it needs about those sectors in-house. It would be free from political intervention in making these judgments. It is well respected by other regulators across the economy, for which it performs a similar role. In our earlier debates, some noble Lords expressed concern that there should be appropriate checks and balances on Monitor’s powers. The provision for adjudication by the Competition Commission creates one such check and balance. These amendments would remove it. For those reasons, I oppose Amendments 196A and 196B, and I hope that on reflection the noble Baroness, Lady Thornton, will withdraw them.

I turn to the Competition Commission’s role in reviewing how competition is benefiting patients in the NHS. After briefing myself, I came to the conclusion that the reviews will bring considerable benefit to the NHS because they will help us understand further what effect competition has on NHS services for patients. They will also increase Monitor’s accountability because they will consider how Monitor is discharging its functions. The commission will be well placed to conduct them because it is an independent body with a long history of performing such reviews across the economy. It is the body where the expert technical knowledge needed to perform this function already resides, and it understands and reviews how markets and regulation work in the best interests of people. That was why the provision was put in the Bill.

However, I listened to the points made this evening by my noble friends Lord Clement-Jones and Lord Newton. On earlier occasions my noble friend Lord Clement-Jones was quite vocal in expressing his views to me on this subject. I have some sympathy with the argument that prescribing reviews every seven years, as the Bill stipulates, may place too great an emphasis on competition. Greater flexibility about the timing and specification of reviews may be helpful. Therefore, I am clear that such reviews of competition in the NHS, when they happen, should focus on benefits to patients. On the basis that prescribed seven-year reviews may place too great an emphasis on competition in the NHS, and given the role of the Competition Commission, if it is the view of the House that Clauses 78, 79 and 80 should be removed from the Bill, I will not oppose Amendments 186, 187 and 188.

I turn briefly to the issues raised by the noble Baroness, Lady Hollins, on procurement in Surrey. The issue was raised earlier by the noble Lord, Lord Adebowale. I agree with her and with the noble Lord that social enterprises can and do play an important role in providing innovative, high-quality services, often to very vulnerable people. Turning Point is an excellent example. The key aim of our reforms is that patients should be treated by the best providers; that bureaucratic procurement practices should not frustrate this; and that it should be quality that counts. We will take all this into account when framing the commissioner procurement regulations.

On the example quoted by the noble Baroness, I understand that the requirement for the £10 million performance bond to which she referred was subsequently withdrawn and therefore played no role in the decision to appoint a preferred bidder. However, I will write to her with further details on this.

Amendment 185 agreed.

Amendment 186

Moved by

[Lord Clement-Jones]

186: Clause 78, leave out Clause 78

[Lord Clement-Jones]

My Lords, I thank the Minister for what he said. I recognise that it is not easy to take away a piece of architecture that the Government had thought was necessary. I believe that the piece of architecture effectively fell away with the Future Forum report. I do not at all recognise his description of me as “vocal” in any circumstances.

As to the Opposition and the noble Baroness, Lady Thornton, I recognise that it is a bit difficult to acknowledge on the Floor of the House that the Government today made many concessions in collaboration with these Benches. I will promise to be gracious—if the noble Baroness is listening—about the role that she played in tabling these amendments in Committee if she will cease to be ungracious on Twitter about the achievements of, and amendments to, the Bill. I beg to move.

Amendment 186 agreed.

Clause 79 : Reviews under section 78: powers of investigation

Amendment 187

Moved by

[Lord Clement-Jones]

187: Clause 79, leave out Clause 79

Amendment 187 agreed.

Clause 80 : Reviews under section 78: considerations relevant to publication

Amendment 188

Moved by

[Lord Clement-Jones]

188: Clause 80, leave out Clause 80

Amendment 188 agreed.

Amendment 189 had been withdrawn from the Marshalled List.

19:55

Sitting suspended.

20:26

Clause 87 : Licensing criteria

Amendment 190

Moved by

[Earl Howe]

190: Clause 87, page 104, line 36, leave out subsection (3) and insert—
“(3) Monitor may not set or revise the criteria unless the Secretary of State has by order approved the criteria or (as the case may be) revised criteria.”

[Earl Howe]

My Lords, I beg to move Amendment 190 and speak to Amendments 193, 194, 195, 299 and 300. We have tabled Amendments 190, 299 and 300 to comply with the Delegated Powers and Regulatory Reform Committee’s recommendations. These sought to ensure that key elements of the licensing arrangements are subject to appropriate levels of parliamentary scrutiny.

In line with that, Amendments 190 and 300 provide that the Secretary of State’s approval of Monitor’s licensing criteria will always be made by order, and the first such order must be subject to the affirmative procedure. Subsequent orders, in the event of Monitor wishing to revise the criteria, would be subject to the negative procedure. Similarly, Amendment 299 provides for the first set of exemption regulations made by the Secretary of State under Clause 84 to be subject to the affirmative procedure.

I turn now to Amendments 193, 194 and 195, which deal with the hugely important issue of integration of services. There is a clear consensus around the importance of having further integration and more services joined up around patients’ needs. The Bill seeks to encourage and enable the delivery of integrated services.

All NHS bodies and private and third-sector providers supplying NHS services are required by the Health Act 2009 to take account of the NHS constitution in their decisions and actions. This includes the principle that the NHS works across organisational boundaries and in partnership with other organisations in the interests of patients, local communities and the wider population. The Bill takes this further by making it clear that in exercising any of their functions, commissioners must act with a view to securing continuous improvement in outcomes, including effectiveness, safety and quality of patient experience. Commissioners must also exercise their functions with a view to securing that health services are provided in an integrated way, where this would improve the quality of those services, including outcomes, and/or reduce inequalities in relation to access to services and outcomes. The intention is, therefore, that it would be for commissioners to drive integration and co-operation between providers in the light of local circumstances and needs, and to enforce this through legally binding contracts.

Monitor would have an important role to play in supporting commissioners by enabling integration of services. That is why Clause 61 expressly requires Monitor to exercise its functions with a view to enabling integration. Nevertheless, in Committee the House raised further concerns around the extent of Monitor’s role in enabling integration and co-operation. We listened carefully to those concerns, and ultimately agreed that there was more that we could do.

We have tabled Amendments 193, 194 and 195 in order to establish express power for Monitor to set and enforce licence conditions for the purposes of enabling integration, and enabling co-operation between healthcare providers where it would improve the quality or efficiency of NHS healthcare services, or reduce inequalities. Licence conditions could therefore be used to support commissioners in promoting integration and co-operation. This would also allow for licence conditions to fully cover the relevant principles and rules of the current Principles and Rules for Competition and Co-operation.

20:30

I hope that these amendments will reassure your Lordships that we have significantly strengthened Monitor’s capability in relation to integration. Not only will enabling integration be part of its general duties but it will now be able to set and enforce licence conditions specifically for that purpose. I beg to move.

[Lord Patel]

My Lords, my Amendment 191 relates to the standard conditions that Monitor must determine, in public, to be included in each licence under this chapter. It is a fairly straightforward amendment and I hope the Minister will recognise that it in no way affects the core principle behind the Bill; it is just an attempt to improve it.

Clause 95(7) says:

“Before determining the first set of the standard conditions Monitor must consult the persons mentioned in subsection (8)”.

Subsection (8) mentions the Secretary of State, the Commissioning Board, primary care trusts, the Care Quality Commission and, importantly,

“such other persons as are likely to be affected by the inclusion of the conditions in licences under this Chapter”.

Of course, the people most likely to be affected are the patients. If that is the case, it would be unusual not to include any bodies that work or speak on behalf of patients and the public. Therefore my amendment suggests the inclusion of “Local Healthwatch” and,

“the appropriate health and wellbeing board”,

“Local Healthwatch” being the organisation that speaks for local people and the health and well-being board having a role in commissioning. I hope that the Minister sees the value of including these two bodies.

[Baroness Cumberlege]

My Lords, I support this amendment, which is in my name and those of the noble Lords, Lord Patel and Lord Warner. The noble Lord, Lord Patel, has introduced it with his customary elegance and clarity. I can see no reason why these amendments should not be made. Bearing in mind that the noble Earl was so generous to me earlier when we included HealthWatch in another amendment, I live in great hope.

[Lord Warner]

My Lords, I, too, support this amendment. Since the noble Earl was so beastly to me over social care, I hope he will actually support this amendment.

[Baroness Finlay of Llandaff]

My Lords, the government amendments are indeed welcome because they reflect concerns that have been expressed. I am sure that all those who expressed those concerns are grateful.

The amendments in my name in this group relate to education and training. I know that we have somewhat threaded education and training through the Bill at all stages. Amendment 192 relates to considering education and training when setting licence conditions, and I put “education and training” because in addition to education, staff training at every level is essential.

I hope that the Government will support the view that no organisation should be fit to provide services if it does not ensure that its staff are being kept up to date and if it is not providing an environment from which people can learn. This does not mean that they all have to be recognised educational providers.

Amendment 196 in this group relates to indemnity. This amendment has been tabled again because, despite the response that we were given in Committee, concerns continue over indemnity for patients. Should a patient develop a problem subsequent to a provider going out of business, they should be covered by indemnity. It is interesting that we have the Legal Aid, Sentencing and Punishment of Offenders Bill in parallel with this Bill. We have concerns over legal aid for medical negligence. I have attached my name to amendments to that Bill concerning legal aid for the victims of clinical negligence.

I hope that the Government will see that there is a need to have indemnity within services, whoever the licensed provider is. There should be a read across to the protection of patients in the event of something going wrong or being done wrong that has harmed them, particularly if they have been harmed in such a way as to incur ongoing costs for healthcare and social care as a result of the problem that arose with the provider, whether it be a voluntary sector provider or a private provider.

[Lord Clement-Jones]

My Lords, I thank my noble friend Lord Howe for putting forward these amendments, particularly Amendment 193, to which I have added my name. In Committee, we were concerned that the powers of Monitor did not reflect the general spirit of the way in which the Future Forum report talked about the mixture of competition and integration. Although the objectives of Monitor at the beginning of Part 3 were changed to reflect the Future Forum report, some of the back end of Part 3 was not changed to reflect that. These significant amendments, particularly Amendment 193, rebalance the Bill and makes sure that it genuinely reflects the intentions of Future Forum. I am very grateful to my noble friend for putting down these amendments.

[Earl Howe]

My Lords, this has been an interesting debate and I thank in particular the noble Lords, Lord Patel and Lord Warner, and my noble friend Lady Cumberlege for tabling Amendment 191 and for giving me the opportunity to explain the Government’s thinking on the important issue of patient and public involvement in Monitor’s work. We are very clear that patients must lie at the centre of the reformed NHS and that the Bill establishes mechanisms to ensure that that is the case. Health and well-being boards are part of those arrangements and HealthWatch will have a vital role in giving patients and the public a real voice throughout the NHS. I can therefore understand the intent of Amendment 191—and I wish that I could accept it. However, I am sorry to say that in practical terms it is not workable and I will explain why.

The list in Clause 95(8) relates to consultation but this is expected to take place before bodies such as HealthWatch and health and well-being boards are formally established. In other words, Amendment 191 would impose a statutory requirement with which Monitor could not possibly comply. The list at subsection (8) deliberately includes only those bodies that will be in existence at the expected time of the consultation.

I can nevertheless offer the noble Lord and the House firm reassurances on this issue. First, Clause 95(8)(e) gives Monitor powers to include in the consultation “such other persons” as it “considers appropriate”. Clause 61(7) places a general duty on Monitor to secure the involvement of patients and the public in decisions on the exercise of its functions, and we would firmly expect Monitor to use those powers to involve patients and the public fully in the consultation. Secondly, Clause 95(11) would require Monitor to consult with HealthWatch England, with the NHS Commissioning Board and with every clinical commissioning group in the event that the consultation takes place later than currently expected and after these bodies have been established. I hope that I have been able to reassure the House that Amendment 191 is not only unnecessary, but would actually put Monitor in an extremely difficult position, and that the noble Lord, Lord Patel, will feel able to withdraw the amendment.

I turn now to Amendment 196, tabled by the noble Baroness, Lady Finlay. The amendment raises an important issue, that of making sure that patients receive the compensation to which they are entitled in the unfortunate event that they are harmed as a result of clinical negligence. The Government agree that there must be equivalent safeguards in place for patients irrespective of who provides their NHS services. Currently the NHS contract which providers must hold to deliver services requires adequate and sufficient indemnity arrangements to be in place. In addition, to ensure equivalent protection for the future, the Government’s preference is to enable all providers of NHS services access to the clinical negligence scheme for trusts. That would mean that all providers of NHS services would have access to the same level of protection for patients, whether those providers were private, voluntary or public sector. The department has asked the NHS Litigation Authority for advice on the options for modifying the scheme and expects that new arrangements would be in place for the next round of NHS contracts in April 2013.

I hope, therefore, that the noble Baroness will appreciate that I strongly agree with the spirit of her amendment. Nevertheless, I must set out my concerns around its potential effect, if she is thinking of pressing it. First, the amendment could be implemented by employing organisations requiring indemnity from their own staff. Employees would then have to obtain their own personal indemnity. However, I do not believe it would be right to transfer this burden to staff or that employees would support it. Further, I do not believe it would be cost-effective. My second concern is about potential unintended consequences. Currently the Limitation Act 1990 limits the time available that personal injury claimants have to bring their claim. The overwhelming majority of claimants have three years to make their claim under the terms of that Act. Requiring all providers to hold indemnity for the lifetime of all patients, potentially much longer than a patient’s legal entitlement to make a claim, would be disproportionate and incur significant costs. Overall, the effect of such a wide-reaching clause would be to divert resource unnecessarily away from patient care. I am sure that that is not what the noble Baroness would ever seek to do and I do not believe that it is in the interests of patients or the NHS. I hope that on reflection and in the light of my assurances about what we are planning, the noble Baroness will feel able not to press her amendment.

The noble Baroness also referred to her Amendment 192, which I think we debated in a previous group. The Government have listened to concerns on education and training raised by her and other noble Lords and we have brought forward amendments to require the board and CCGs to have regard to the need to promote education and training when exercising their functions. Further, the Bill requires Monitor in Clause 64(j) to have regard to,

“the need for high standards in the education and training of health care professionals”,

when exercising its functions. I suggest to the noble Baroness that Amendment 192 is not required.

At this juncture, it might be worth quickly reminding the House that all providers of NHS services will be licensed by Monitor. The Royal College of Physicians has sought reassurances on how patient choice of any qualified provider would work. Even though the choice of any qualified provider is not in the Bill, I am happy to confirm that providers would always be required to comply with national quality standards. Under our reforms, providers above a minimum size would be expected to take part in the provision of education and training, and to work within agreed local care pathways to ensure safe and joined-up care. I hope that that is a reassurance not only to the Royal College of Physicians but to other noble Lords.

20:45

[Baroness Finlay of Llandaff]

I am grateful to the Minister for his reply on indemnity. Would the risk pool apply to the provider rather than be linked to the individual patient? If there is an acute problem, some hospices will accept referrals directly from patients and their families rather than waiting for a GP necessarily to refer them. Those patients are all being treated in the voluntary sector; they are not paying; they are all being treated the same; and they have been under NHS providers for other parts of their treatment. The Minister may not be able to answer my question now, but I flag up such a situation as a potential that will need to be covered off in providing. However, I am sure that what he has said tonight will be warmly welcomed by the voluntary sector, which provides an important and, in many places, essential clinical service—which, I venture to suggest, hospices do par excellence. Their ability to meet patient and family need at great speed has allowed them to be recognised as being so important.

[Earl Howe]

My Lords, I understand the noble Baroness’s question. It might be best if I wrote to her because the circumstances that she posits are such as to make it important that I do not get it wrong if I give her an answer now. As she knows, the broad answer to her question is that our aim is for all NHS-funded care to be covered. She has raised a particular set of circumstances on which I shall have to take advice, if she will allow.

Amendment 190 agreed.

Clause 95 : Standard conditions

Amendments 191 and 192 not moved.

Clause 97 : Limits on Monitor's functions to set or modify licence conditions

Amendments 193 to 195

Moved by

[Earl Howe]

193: Clause 97, page 109, line 13, at end insert—
“(da) for the purpose of enabling health care services provided for the purposes of the NHS to be provided in an integrated way where Monitor considers that this would achieve one or more of the objectives referred to in subsection (2A);(db) for the purpose of enabling the provision of health care services provided for the purposes of the NHS to be integrated with the provision of health-related services or social care services where Monitor considers that this would achieve one or more of the objectives referred to in subsection (2A);(dc) for the purpose of enabling co-operation between providers of health care services for the purposes of the NHS where Monitor considers that this would achieve one or more of the objectives referred to in subsection (2A);”

194: Clause 97, page 109, line 22, at end insert—
“(2A) The objectives referred to in subsection (2)(da), (db) and (dc) are—
(a) improving the quality of health care services provided for the purposes of the NHS (including the outcomes that are achieved from their provision) or the efficiency of their provision,(b) reducing inequalities between persons with respect to their ability to access those services, and(c) reducing inequalities between persons with respect to the outcomes achieved for them by the provision of those services.”

195: Clause 97, page 109, line 29, at end insert—
“( ) In subsection (2)(db), “health-related services” and “social care services” each have the meaning given in section 61(11).”

Amendments 193 to 195 agreed.

Clause 98 : Conditions: supplementary

Amendment 196 not moved.

Amendment 196ZA

Moved by

[Lord Warner]

196ZA: After Clause 99, insert the following new Clause—
“Notification of commissioners where continuation of services at risk
(1) This section applies where Monitor—
(a) takes action in the case of a licence holder in reliance on a condition in the licence under section 98(1)(i), (j) or (k), and(b) does so because it is satisfied that the continued provision for the purposes of the NHS of health care services to which that condition applies is being put at significant risk by the configuration of certain health care services provided for those purposes. (2) In subsection (1), a reference to the provision of services is a reference to their provision by the licence holder or any other provider.
(3) Monitor must as soon as reasonably practicable notify the National Health Service Commissioning Board and such clinical commissioning groups as Monitor considers appropriate—
(a) of the action it has taken, and(b) of its reasons for being satisfied as mentioned in subsection (1)(b).(4) Monitor must publish for each financial year a list of the notifications under this section that it has given during that year; and the list must include for each notification a summary of Monitor’s reasons for being satisfied as mentioned in subsection (1)(b).
(5) The Board and clinical commissioning groups, having received a notification under this section, must have regard to it in arranging for the provision of healthcare services for the purposes of the NHS.”

[Lord Warner]

My Lords, I shall speak also to Amendment 214G which stands in my name. The amendments arise from our debate in Committee about what we then described as a “pre-failure regime”. The argument that I was trying to sustain, with helpful support from different parts of the Committee, was that it would be better for Monitor to get engaged when it could see failure coming at it down the track rather than waiting for the train crash to occur and use the health special administration procedures that were provided for in the Bill.

My amendment then was probably technically defective but it served the purpose of raising the issue. The Minister was not so off-putting that I thought that I would not have another go at this, so, with the help of the noble Lord, Lord Patel, and the noble Baroness, Lady Williams of Crosby, I put down Amendment 217, which is in this group. Following that, the Minister engaged with me in some rather helpful and fruitful discussions and the results of those discussions were Amendments 196ZA and 214G. In my enthusiasm for tabling these amendments I completely forgot to remove Amendment 217, which is why it is still on the Marshalled List. I assure the Minister that I have no intention whatever of moving Amendment 217.

The nub of what is in Amendment 196ZA is that it provides for Monitor when it can see that a licence holder’s conditions are likely to be imperilled by a current configuration of health services in the wider health economy—not just within that licence holder’s own individual trust. It can draw the attention of commissioners—the national Commissioning Board and clinical commissioning groups—to those risks which it can foresee and it has to give its reasons for doing so. But rightly in my view and, I believe, that of the Government, it puts the onus on the commissioners to do something about it. It does not require a top-down intervention, but it flags up very seriously to the commissioners that a problem is looming and they need to do something about it. Just to give more force to that, each financial year Monitor will publish a list of the notifications that it has issued in that financial year, putting commissioners on notice that they have a problem, that they need to do something about the reconfiguration of services and that they need to take some action to ensure that there are sustainable NHS services in that part of the country.

I pay tribute to the civil servants at the Department of Health because they have done something rather ingenious that I never even thought of in Amendment 214G, which is to take an application by a service provider to Monitor to secure some adjustment in the price paid for particular services to make Monitor think about whether there is anything more significant behind that application and whether there is a risk to the sustainability of services in a particular area. If it does consider that that is necessary, it can again notify the commissioners of its concerns about the need to consider service reconfiguration in that area.

These two amendments, which have been given a lot of technical help by the Department of Health and a lot of support from the Minister, meet my concerns and, having talked briefly to the noble Baroness, Lady Williams of Crosby, I believe that they also meet hers. There is an adequate set of arrangements to put commissioners on notice that failure may be looming so that they can take action under their responsibilities. Just to make sure that they do, each year there will be a list of the notifications that Monitor has issued so that it is on the public record that Monitor has spotted that there is something of concern and has required commissioners to take action.

That meets my concerns and I think that it meets the concerns of the noble Baroness, Lady Williams of Crosby and the noble Lord, Lord Patel. In order to table the amendment in time for today’s debate, I did not have time to collect the signatures of my partners in crime on Amendment 217, but I have every reason to believe that they would be satisfied with the Government’s response to our concerns.

With regard to subsection (5) of Amendment 217, which I have mentioned to the Minister, I think it would be a good idea if the Government were to consider assembling a group with expertise to help local people to reconfigure their services. It is often difficult for people at the local level to think through how they might reconfigure services to make them sustainable. I do not suggest a top-down approach but some sort of panel that could help local people and facilitate the reshaping and redesign of services. That would be a helpful way of proceeding. It might help a lot of people to get through the difficult task of reshaping services when the need arises. Without further ado, I beg to move.

[Baroness Williams of Crosby]

My Lords, my intervention will be extremely short. I am delighted that the noble Lords, Lord Warner and Lord Patel, put down this proposal for what one might describe as precautionary failure. We were very concerned that there might be no regime that would enable services to continue because one had seen in advance the possibility of a particular place getting into a great deal of trouble. This is a very satisfactory proposal to put before the Government to deal with the continuation of health services for an area, even when those services get into difficulties.

I also strongly commend the proposal of the noble Lord, Lord Warner, about the small group of local people. That has one great advantage: that small group will then become part of what one might describe as a lobby for a sensible outcome, for a proper reconfiguration or change in the structure of services. That is very important. Otherwise, you almost invariably get very powerful local opposition to any substantial change and no natural constituency of people who support it. This is an imaginative idea. I am pleased to be associated with the amendment of the noble Lords, Lord Warner and Lord Patel.

[Lord Patel]

My Lords, I support the amendment. The noble Lord, Lord Warner, and the noble Baroness, Lady Williams of Crosby, have said all that needs to be said. I had my name to Amendment 217. To relieve the anxiety—if they had any—of the noble Lord, Lord Warner, and the Minister, I will not move that amendment either. I strongly support Amendment 196ZA.

[Baroness Murphy]

My Lords, I also add my support to the very practical solution given in Amendments 196ZA, 214G and 217 that will provide Monitor with a mechanism to deal with future, upcoming failure and intervene early. That is very practical. I hope that it will be attractive to the opposition Benches because, in part, it deals with their anxieties about special administration orders. None of us wanted to see those special administration orders used early. We want them as a very rare fallback position, and to use them maybe once in a decade not once a year. If there were a mechanism like this one, enabling a practical way of targeting and getting local commissioners to address local failure, we could avoid some of the draconian measures that it is necessary to have in the Bill but which none of us wants to see used frequently. I hope that the solution will commend itself to the opposition as addressing their concerns about this regime.

[Lord Beecham]

My Lords, I can certainly reassure the noble Baroness on that score. I warmly endorse the amendment moved by my noble friend and I hopefully anticipate a warm response from the Minister.

I shall speak briefly to the amendments in the name of my noble friend Lady Thornton and myself. In Amendments 217ZA and 217ZM we propose to leave out the chapter on financing special administration cases. The whole field of health special administration, which would apply to non-NHS providers to deal with failure, is highly complex. It would be better for the financial side to have the NHS operating as a risk pool; that could be factored into the work of commissioners as part of dealing with non-NHS providers in their commissioning plans. However, it was not my intention to divide the House on this matter.

We also have Amendment 220D to leave out the clause on repeal of de-authorisation and Amendment 221A to leave out the clause on the abolition of NHS trusts in England, as we think that that is unnecessary. But the main thrust of our consideration of this group of amendments is undoubtedly to support the amendments of my noble friend Lord Warner, which deal substantially with most of the significant issues here, and we will not press our amendments.

21:00

[Earl Howe]

As I hope will be clear, the Government’s proposals are for a fair, transparent and comprehensive framework that protects patients and taxpayers’ interests by securing continued access to services through early intervention to prevent failure wherever possible and effective arrangements to secure continuity of NHS services should a provider become unsustainable.

The Bill builds on and improves existing arrangements by putting commissioners in the lead for shaping services for patients and providing a clear role for Monitor in supporting commissioners. It will ensure that change happens when the status quo is unsustainable, and there will be sufficient funding to support this. The Bill goes further and addresses the gaps in existing legislation, such the lack of protections for patients whose NHS core is delivered by social enterprises and other independent providers. The Bill gives Monitor a comprehensive range of powers to intervene proactively to support reorganisation and prevent failure to maintain service continuity.

I turn to Amendments 196ZA and 214G. I am grateful to the noble Lord, Lord Warner, for his patience in working with the Government on this issue. I see that the noble Lord, albeit with a tiny bit of help, has really got to the core of our proposals for ensuring the continuity of services for patients by clarifying a role for Monitor, which is to support commissioners and provide them with information that they need to take the right decisions about services in the best interests of patients. The key aspect of the noble Lord’s amendments is that they reinforce the fact that commissioners remain in the lead for responding to risks to services and, in partnership with providers and other local stakeholders, for engaging on service change to reduce those risks. That is why I am pleased to accept these amendments, which also reflect the King’s Fund recommendation on how the Bill could be improved to support vital service reconfiguration.

However, it is not always possible or desirable to prevent provider failure at all costs. As a last resort, when a provider becomes unsustainable—and I emphasise that that will be only when all other interventions have been exhausted or may not be in patients’ best interests—a continuity of services administrator may be appointed to protect patients’ interests and secure NHS services in line with requirements determined by commissioners. For the first time, there will be similar protection for patients who rely on essential NHS services regardless of who the provider might be. The existing legal framework has no such protection for patients who rely on NHS services provided by independent providers, including the social enterprises established by the previous Government when the noble Baroness, Lady Thornton, was Health Minister. I am sure noble Lords would agree that if a social enterprise delivering essential community palliative care became unsustainable, then surely its patients should receive protections that would secure the continuity of that service, as do patients of the foundation trust.

The reality of the NHS is that it is a comprehensive health service delivered by a diverse range of providers. Part 3 recognises that reality and will protect patients’ access to that comprehensive service. I cannot agree with the noble Lord, Lord Beecham, as his amendments would remove this type of protection for patients. Fundamental to our aim of protecting patients’ access to a comprehensive health service is the need to ensure that sufficient funding is set aside for when things go wrong. The King’s Fund and others have said that they support the establishment of a transparent funding mechanism for securing essential services when providers go into administration. When the noble Baroness was a Health Minister, her Government presided over a period of sustained growth in the economy, but sadly that is no longer the case. Despite economic challenges, the coalition has continued to increase NHS funding above the rate of inflation, but we need to be prudent to be able to guarantee that funding will be available to protect patients when any provider of essential services gets into difficulty. The problem with the noble Lord’s amendment is that it would put that at risk.

That funding is essential because we simply cannot be sure otherwise that sufficient funding would be available centrally, particularly when the Treasury will face competing demands on any surplus funds held centrally by Whitehall departments. A further benefit of our approach is that the funding will be built up from commissioners and providers, including private providers, based on a transparent methodology and in proportion to risk. That will strengthen financial incentives for providers and commissioners to manage risks effectively and help to end the culture of back-room bailouts.

I hope that the arguments that I have put forward demonstrate how Part 3 will strengthen the protection of patients’ interests. Once again, I thank the noble Lord, Lord Warner, for his amendments, which will improve the Bill and undoubtedly benefit patients. I hope that noble Lords will join me in my support for them, and I ask the noble Lord, Lord Beecham, to withdraw his amendment, as he has indicated he will.

[Lord Warner]

My Lords, I am grateful for the Government’s support for this amendment.

Amendment 196ZA agreed.

Clause 101 : Modification references to the Competition Commission

Amendment 196A not moved.

Clause 102 : Modification of conditions by order under other enactments

Amendment 196B not moved.

Clause 111 : Imposition of licence conditions on NHS foundation trusts

Amendment 196C

Moved by

[Earl Howe]

196C: Clause 111, page 119, line 19, leave out subsection (1) and insert—
“(1) Where Monitor is satisfied that the governance of an NHS foundation trust is such that the trust will fail to comply with the conditions of its licence, Monitor may include in the licence such conditions relating to governance as it considers appropriate for the purpose of reducing that risk.
(1A) The circumstances in which Monitor may be satisfied as mentioned in subsection (1) include circumstances where it is satisfied that the council of governors, the board of directors or the council of governors and board of directors taken together are failing—
(a) to secure compliance with conditions in the trust’s licence, or(b) to take steps to reduce the risk of a breach of a condition in the trust’s licence.”

[Earl Howe]

My Lords, I shall speak also to government Amendments 197A, 197B, 197C, 198A, 198B, 199A, 199B, 200A, 300ZA and 300ZB.

Monitor will continue as the regulator of NHS foundation trusts, as I have said. We had always intended this to be the case and I welcome the opportunity to clarify our position. Monitor will regulate foundation trusts through a new licensing regime, which it will administer jointly with the Care Quality Commission. This will help to strengthen collaboration between the two regulators. It will license foundation trusts to provide NHS services, as it would license anyone else who wished to do so, to ensure that NHS services are protected as financially sustainable and of high clinical quality.

Part 3 anticipates that Monitor will set differential licence conditions for foundation trusts to reflect their unique status and governance structures. Monitor would have power to intervene and direct foundation trusts to take action to ensure compliance with licence conditions. This would include the power to enforce requirements on foundation trusts to maintain continuity of NHS services and protect essential NHS assets, consistent with its principal purpose, as defined in statute. Those powers are set out in Clause 105. I emphasise that these enforcement powers would not be transitional.

However, I recognise that this was not as clear in the Bill as it could have been. I am grateful to noble Lords, particularly my noble friends Lord Clement-Jones, Lord Marks, Lady Barker and Lady Tyler, for their work in highlighting this issue. I have tabled four amendments to Clause 111—Amendments 196C, 197A, 197B and 197C—which clarify the position. These enduring powers would enable Monitor to require a foundation trust to remove directors or governors in exceptional circumstances as a form of remedial action, where it considered this necessary. This would be appropriate only in the case of a very serious breach of licence conditions.

In addition, for a transitional period until at least 2016, Monitor would retain express powers to fire or suspend foundation trust directors and governors directly. As now, this power could be used only where a foundation trust had failed to comply with a notice from Monitor to remove or suspend individuals itself. These powers are for use when a foundation trust is at risk of breaching its licence conditions to provide NHS services because of a failure of governance. This is more likely in the early years of a trust’s existence, when its governors are all new to the role and are building up their capability to hold its directors to account. That is why the powers consist of those to fire or suspend directors and governors.

I understand the concerns of noble Lords to ensure that this additional power remains available for as long as Parliament considers necessary, while we work with Monitor, the Foundation Trust Network and others to support governors to develop their capability in holding their boards to account. Therefore, I have tabled five amendments—Amendments 198A, 198B, 199A, 199B and 200A—which provide for Monitor to retain this power unless and until the Secretary of State makes an order to withdraw it, either for all foundation trusts or individual trusts. I beg to move.

[Lord Clement-Jones]

My Lords, I want to speak to my amendments, to express my thanks to the Minister for the amendments that he has tabled, and to give a little rationale for why we were concerned but are now satisfied by the Minister’s amendments. On these Benches we were very concerned about the deregulation of foundation trusts in 2016. We believed that putting foundation trusts on the same footing as all other provider licensees was not only dangerous because of the risk of wider application of competition principles, but undesirable since district general hospitals—essentially foundation trusts—are the core of public provision in the health service. They are public assets, funded either conventionally by the Government or by PFI. Sadly, many of us argued at the time that PFI would be an expensive and inflexible method of financing healthcare infrastructure. Nevertheless, district general hospitals are an essential part of the NHS.

Therefore, we proposed amendments that removed Clauses 111 to 114 and retained Monitor’s special powers over foundation trusts unless terminated by the Secretary of State with the authority of an affirmative resolution of both Houses of Parliament. We were not saying “never” but the Secretary of State, after some years of the new structure, clearly needs to satisfy Parliament as to why particular foundation trusts no longer need to be subject to regulation by Monitor in this way. It may be possible to make the case for the deregulation of foundation trusts in the future, but currently the assumption should be that foundation trusts will be treated differently from other providers in regulation—not just in the transition period but in the medium term—so that Monitor will have the right to appoint and dismiss directors and governors in that period.

To that end, we very much welcome the amendments tabled by the Minister to meet our concerns. Our amendments talk of an order passed by the affirmative process and the Government’s by the negative process but I do not want that to stand between us. The Minister has gone a very long way to meet our concerns, for which I am extremely grateful, as are all my colleagues on these Benches.

[Baroness Murphy]

My Lords, I have added my name to four of the amendments in this group and I am wholly content that the Government have addressed them satisfactorily.

[Earl Howe]

My Lords, I am very grateful to my noble friend and the noble Baroness, Lady Murphy, for their comments.

Amendment 196C agreed.

Amendment 197 not moved.

21:15

Amendments 197A to 197C

Moved by

[Earl Howe]

197A: Clause 111, page 119, line 28, leave out from “notice” to end of line 32 and insert “require the trust to—”

197B: Clause 111, page 119, line 39, leave out from “has” to end of line 43 and insert “failed or is failing to comply with a notice under subsection (4), Monitor may do one or more of the things which it may require the trust to do under that subsection.”

197C: Clause 111, page 120, line 1, leave out from “exercising” to end of line 3 and insert “in relation to a condition included in a licence under subsection (1) the powers conferred by sections 105 and 106 (breach of licence condition etc: enforcement powers which apply during and after period in which this section and sections 112 to 114 have effect).”

Amendments 197A to 197C agreed.

Amendment 198 not moved.

Clause 112 : Duration of transitional period

Amendments 198A and 198B

Moved by

[Earl Howe]

198A: Clause 112, page 120, line 20, leave out subsections (1) to (6) and insert—
“(1) Section 111 ceases to have effect in relation to an NHS foundation trust on such day as the Secretary of State may by order specify.
(2) Different days may be appointed in relation to different NHS foundation trusts.
(3) A day specified under subsection (1) must not—
(a) in the case of an NHS foundation trust authorised on or before 1 April 2014, be before 1 April 2016;(b) in the case of an NHS foundation trust authorised after 1 April 2014, be before the end of the period of two years beginning with the day on which the trust was authorised.”

198B: Clause 112, page 121, line 11, leave out paragraph (a)

Amendments 198A and 198B agreed.

Amendment 199 not moved.

Clause 113 : Orders under section 112 that apply to only some trusts

Amendments 199A and 199B

Moved by

[Earl Howe]

199A: Clause 113, page 121, line 22, leave out from “112” to “, the” in line 23

199B: Clause 113, page 121, line 42, leave out subsections (6) to (11) and insert—
“(6) The Secretary of State, having received a notification under subsection (4)(c), must review Monitor’s determination under subsection (4)(b).”

Amendments 199A and 199B agreed.

Amendment 200 not moved.

Clause 114 : Repeal of sections 112 and 113

Amendment 200A

Moved by

[Earl Howe]

200A: Clause 114, page 122, line 32, leave out paragraph (e)

Amendment 200A agreed.

Amendment 201 not moved.

Clause 116 : The national tariff

Amendment 201A

Moved by

[Baroness Thornton]

201A: Clause 116, page 123, line 6, leave out “Monitor” and insert “Regulations must provide and the Secretary of State”

[Baroness Thornton]

My Lords, we now move on to pricing. We believe that setting the national tariff is a matter of policy and that it should be set by a Secretary of State, not Monitor. That is the main thrust of these amendments. Amendment 201A is about setting the national tariff as a matter of policy. Amendment 201B proposes that regulations to the national tariff must state how the prices and methods were determined, that any proposed change to the national tariff will be subject to proper evaluation and testing, and that there must be evidence of consultation between the Secretary of State and Monitor. Amendment 201C states that the national tariff should not be allowed to vary in relation to different descriptions of provider. Amendment 201D states that where a commissioner of a health service receives an offer from a service provider who is licensed by Monitor at a price below the national tariff—I am sorry; that is my noble friend’s amendment. I beg his pardon. Then there are a whole set of amendments which seek to delete clauses—Amendments 211A, 214A, 214B and 214C—because if the Secretary of State is setting the national tariff, these clauses are unnecessary.

At present, the national tariff is set by the Department of Health, often in ways that are mysterious, probably less than optimal and without sufficient consideration of unintended consequences, and often without enough testing. Nevertheless, we remain firmly of the view that price setting is such a fundamental part of the system that it has to remain the responsibility of the Secretary of State and the Department of Health. We do not have an answer as to why you would give such a potentially potent policy lever to the regulator. I should be grateful if the noble Earl could explain that. Why keep price control with Monitor? I should be interested to hear what he has to say. I am sure that we would all agree that the key point is that we get tariffs right. We therefore seek to insert the need for proper consultation and transparency in the tariff-setting process. I beg to move.

[Lord Davies of Stamford]

My Lords, I shall speak to Amendment 201D in my name. I tentatively proposed this in Committee as a probing amendment. I bring it forward now much more seriously because I have been reinforced in my belief that this is a necessary amendment by everything that has been said. My belief has also been reinforced by the support of a number of colleagues, including explicitly by my noble friend Lord Warner, to whom I am grateful.

It has been clear from our debates that the Government’s intention is that there should be two price regimes in the NHS—one for services for which there is no national tariff and one constituted by the national tariff itself. Services that are outside the national tariff will be contracted for on the basis of a tender offer and good value for the taxpayer or customer. I have no quarrel with that, and the Government have clearly stated that they intend to achieve contracts on the basis of the right reconciliation of quality and price. I argued in Committee—and I am sure that I was right —that that constitutes price competition. The Government do not like the phrase “price competition”, but I am not interested in semantics or the party-political reasons that may lie behind their semantic choices; I am interested in the reality, which is that commissioning services on that basis is entirely rational, and I have no quarrel with it.

The problem arises in relation to the national tariff. The Minister set out the position clearly in his response to me on 13 December. He said,

“we want a system of fixed prices”,

and then stated that,

“the tariff would not be a maximum price”.—[Official Report, 13/12/11; col. 1229.]

In other words, the tariff could not be varied either upwards or downwards; it would be an immutable price. I regard this as extraordinarily irrational and perverse, and I hope that I can persuade the Government to think again. It has at least four problems.

First, if there is an immutable price, you may not be able to pay for certain services that are required and are of the quality necessary for patient outcomes. The Government have recognised that point at least. Indeed, Clauses 124 and 125 appear to address that because they make it clear that there is scope for an agreement between a commissioner and a provider to be approved by Monitor at a price above the tariff. The wording in Clause 124(5) and Clause 125(3) is identical, except for the words “approve an agreement” and “may grant an application”, and states:

“Monitor may approve an agreement”—

or “grant an application”—

“only if, having applied the method under section 116(1)(d), it is satisfied that, without a modification to the price determined in accordance with the national tariff for that service, it would be uneconomic for the provider to provide the service for the purposes of the NHS”.

That makes it clear that it is possible for the commissioner to pay more than the tariff in those exceptional circumstances, with the consent of Monitor, and of course I approve of that, but it is not possible for the commissioner to approve less. That is an extraordinary state of affairs.

I can quite understand why the Government do not want to write into the Bill that it will not be possible for a commissioner to accept a lower price. That would not make the slightest sense. It would be all over the tabloids in headlines. Instead, it is disguised in the language of parliamentary drafting as being a power that would exist only if it was uneconomic for the provider to provide the service for the purposes of the NHS. You can never argue that it is uneconomic to provide a service at a higher price. The amendments provide only for the circumstance in which the commissioner finds it necessary to pay a higher price than the tariff to secure the patient services which the commissioner is procuring.

That is the only one of the four problems raised by that approach to a national tariff which the Government appear to have addressed. The second is that in many cases, it may be possible to provide the same quality of service at a lower price, but the Government are excluding, a priori, from the beginning, outright, in principle, any possibility of that happening. That makes no sense. We and the Government surely agree that the NHS budget will always be under great pressure, that there must be financial discipline in the NHS, and that when there are opportunities to secure the same quality at a lower price it should be the obligation of commissioners to achieve that. My amendment does not go so far as to create an obligation—I was more hesitant than that—but at least there must be the possibility for commissioners, if they see an opportunity, to procure that service at a lower price and save money for the benefit of patients and the National Health Service as a whole.

The third and fourth problems created by government policy in this area are perhaps a little more subtle. The third, which I mentioned in debate in Committee, is that if you deny the possibility of bids coming in at a lower price for any given service, you deny the possibility of ever investigating or having insight into the process of price formation in that sector of activity. You simply do not know to what extent the prices you are working on—the prices you are accepting—contain an unnecessary level of cost and overheads, or the extent to which you are not getting a good bargain. In my view, you should not be sleeping at night if you are a commissioner and you do not know how prices are formed, whether you could be getting a better price and, if so, what that better price would be.

The fourth problem created by the Government's approach to this up until now— I live in hope that they may change it in the light of this debate—is that it dampens or may even be fatal to innovation in this area of the National Health Service. I think we are all agreed in principle that we should encourage innovation, but there is no point in any prospective provider spending time and money on developing a better approach to solving a problem or a new technique for diagnostics, therapy or what have you, which has the same quality and outcomes, or even better, which could be delivered at a lower price, because the price is fixed. You can only come up with the same price because you are not allowed to be given a contract if you tender at a lower price. That makes no sense, so I must press the amendment again.

I emphasise, as I did in Committee, that the amendment is in no sense prescriptive. It does not force commissioners to take the lowest price. There might be an argument for forcing commissioners to take the lowest price where quality remains the same, but I have come up with a much weaker amendment. It is purely permissive. It provides for commissioners, where they wish to and where Monitor approves—so there is a double check, a double brake on the mechanism—to accept a lower price. It is extraordinary that they are not allowed to do something which all of us in every other field of economic activity would feel to be the rational thing to do.

My noble friends on the Front Bench have made the point several times that there are many situations in which it would not be sensible to take the lowest price in an NHS context. One of them I described in some detail in Committee, so I do not need to go over it too much tonight. There is no doubt that in any field of economic activity where overheads or fixed costs are a high proportion of the total costs there is a temptation or opportunity for predatory pricing. If the fixed costs are a very high proportion of the total costs, then anyone who has the capacity to make a one-off offer can come in with an offer which may be at a substantial premium to variable costs and therefore very attractive to him if he has spare capacity. It would be much lower than the full cost and therefore very tempting but it might be very dangerous for the customer—the commissioner in this case—to accept because it might undercut and perhaps destroy the capacity on which he relies on a long-term basis. Clearly, no one is going to provide services at below full cost on a long-term basis. Therefore, there is always a danger of predatory pricing in healthcare and we must be alert to it. There is no question about that.

21:30

I also accept the argument about networks. Networks have been a splendid innovation in the National Health Service, covering patient pathways a long way or all the way along the pathway. It may be absolutely essential to get a network together to assure the various providers in that network that they will have a monopoly up to a particular number of patients or over a particular region, and that they will not be subject to being picked off by price competition once they have agreed to take part in that network. I fully understand that. However, my amendment poses no threat to any of those things; nor is there any other good reason why commissioners might decline to seek a lower price and accept an offer below the tariff. It purely enables them to do so where they think, and where Monitor has specified, that a lower price can be accepted. I say Monitor and not the commissioner, who may be thought to have some economic or financial interest in saving money. Under my amendment, Monitor will have to satisfy itself that a lower price can be accepted without damage to the structure and capacity of the NHS and without any lesser quality being provided for the patient. Those are two vital provisions at the heart of my amendment, and I hope that the Government will be prepared to think again about this very important matter.

[Lord Warner]

My Lords, I support my noble friend’s Amendment 201D and I do so for a few simple reasons. I am afraid that I am a bit of a heretic on price competition. It has always seemed to me that, if you want to have competition, simply excluding all aspects of price will not necessarily be in the best interests of any public service, health or otherwise. Therefore, I do not start from the position where I think that a blanket refusal to have any competition on price is a sensible way forward. However, that is not what my noble friend’s amendment does. It is, if I may say so, uncharacteristically modest in its approach.

Although I shall not name the person or the circumstances, I should like to share with the House a recent discussion that I had with an innovative GP running a big group practice in something which looks remarkably like an Ara Darzi polyclinic. This practice is innovating the way that it responds to its patients’ needs and it is doing so by providing services without reference to an acute hospital. However, it is caught in a bind. It is making substantial surpluses, about which it is almost embarrassed, simply because it is required by its commissioners to accept the tariff payments. That is a nonsense in the circumstances in which the NHS finds itself, and I am certainly prepared to talk to the Minister privately about some of those circumstances. I am not fabricating this; it is a real case happening day in and day out. I suspect that, on the basis of what I was told, it is not alone in the country in being in that position.

If one thinks about it, this is bound to happen. If we are really serious about driving services outside hospitals and providing them in a facility where a lot of the things that would be done in hospitals can be done on a more out-patient basis but without reference to any in-patient costs, it is likely that we will get ourselves into difficulty with a tariff which at the moment is very hospital-driven. It is a tariff which is set on a basis of acute hospital costs. For a few years, we are likely to throw money at innovators who do not necessarily want that volume of money simply because we have ruled out the ability to pay below tariff, so that people can provide perfectly adequate, perfectly good services for their patients, protecting their interests, but they will actually be paid more than they need to be paid for providing those good quality services. I think that the Government have to look again at this issue. My noble friend has produced a way forward with many safeguards.

Perhaps I could also say a few words about the Secretary of State setting prices. I do so from my experience as the Minister who was involved in the first sets of price setting, when we introduced them across the country back in 2005 and 2006. In those circumstances, one of the places where we looked for experience was Germany. Germany has a separate organisation which sets the prices and collects and analyses the data. That happened because it was thought that there was a lack of trust in Ministers setting the prices. We got a fair amount of criticism in the beginning from the NHS about the price setting not being transparent. At that point, once we had established the tariff system—the payment-by-result system—we were inclined to move the setting of the price away from the Department of Health so that there would be more confidence in the process of setting prices.

In so far as there is a case for the Secretary of State to be involved, it seems to me that the case is stronger, not in relation to Monitor’s pricing, but in terms of the Secretary of State driving the change in the definition of currencies, which is the function that has been given to the national Commissioning Board. Making changes in the currencies is probably the most significant way in which we can improve the way that the tariff operates. I do not have any particular problem with that being with the national Commissioning Board now, but it is certainly an area where I think the Secretary of State will need to keep a close eye on the national Commissioning Board to see that it addresses the need to move away from episodes of care to patient pathways in the way in which the tariff is set.

I am not so sure that I agree with my noble friend on the Front Bench that we want the Secretary of State to set a price, but I think that the Secretary of State should take a healthy interest in the way in which the currencies are set with the tariff.

[Baroness Murphy]

My Lords, the noble Lord, Lord Warner, has said more or less what I was going to say. It seems to me that if you remove price setting from the regulator of healthcare, you do not have an economic regulator. From my experience of watching prices and types of funding formula go up and down over the past 20 or 30 years, it is crucial and admirable to remove it into a system that can be independent and transparent.

As the noble Lord, Lord Warner, says, after the Future Forum amendments, we have a system now whereby the shape of the tariff and the bundling systems, if you like, which will enable the sort of integration and co-ordinated care to be effective, will be firmly with the national Commissioning Board, and Monitor will respond to those design structures. I think that working together will be very healthy indeed. I do not underestimate the difficulties of getting it right; it is an ongoing developmental programme. Nevertheless, I think it is a good way forward. I do not like the idea of removing the price setting from Monitor.

I will briefly say that I am quite attracted to the amendment of the noble Lord, Lord Davies. One cannot not be if one wants value for money. I remember seeing the noble Lord’s face when he first realised that there was going to be no competition on price, and having a good deal of sympathy for where he was coming from. However, the matter is one of transition, and of when the public will feel confident that the way that the Bill intends to introduce competition on the basis of competitive tender will improve quality.

I worry about the response that the media could make to a significant change of this kind, even though I agree with the noble Lord that some services—as the noble Lord, Lord Warner, said—are overpriced and that there are opportunities for driving down these prices. That may come through the way that the national Commissioning Board and the regulator together set prices. After all, the price of a tariff will be a moving thing; it will be negotiated; it will change over time; and we will be able to address areas where there is obvious overpricing. I am attracted to the amendment of the noble Lord, Lord Davies, and it may be that eventually we will need to introduce something of the sort. However, I would be nervous of doing it at the moment in this form, even though it seems quite sensible.

[Earl Howe]

My Lords, the case for regulating prices for NHS services is strong. Many academics agree that competition should be on quality and not price and that this will increase the standard and quality of healthcare services and protect patients’ and taxpayers’ interests. This requires prices to be fixed. Therefore, it is vital that there is an effective system of price regulation that can deliver these improvements and help sustain a universal and comprehensive NHS, free at the point of use. However, a number of problems with the current system have been identified, including by the previous Administration, which mean that it is not as effective as it could be.

In particular, I will mention two things. First, prices are subject to potential political interference. This means that providers are more risk averse. That inhibits investment and innovation in the sector. As the noble Lord, Lord Warner, said, the methodology for setting prices is not transparent. This makes the system unpredictable—again, inhibiting investment and innovation. Secondly, prices can be inaccurate and may not always reflect best practice models of clinical service delivery. This may result in cherry picking and may hinder providers from expanding and improving quality. Therefore, the case for change is clear and compelling. The Government’s vision is for an independent, fair and transparent system of NHS price regulation that reflects best practice and extends the scope of the tariff when it is in the interests of patients; that ensures that competition is based on quality and choice, and not on price; and that addresses the problems of cherry picking. To deliver this vision, prices will continue to be regulated through a national tariff. This will build on and improve the system of payment by results—which the previous Government said that they would improve but failed to do so.

Perhaps it would be helpful for me to explain in a bit more detail how the Bill will support this vision. In other healthcare systems around the world—for example, in the Netherlands—Governments have delegated price setting to independent organisations. The noble Lord, Lord Warner, cited another example: that of Germany. Such bodies create a transparent and stable environment for pricing.

[Lord Davies of Stamford]

Before we get on to the important matter raised by my noble friend of who is going to fix the tariff, if there is a tariff, and the issues raised by my amendment, will the Minister agree to meet privately me and, I hope, my noble friend Lord Warner—there has been no collusion between us but I hope he will come to that meeting—to discuss in greater detail the technical but important matter of the circumstances in which it is right to accept a lower price bid in the National Health Service?

21:45

[Earl Howe]

I will be happy to meet the noble Lord to talk about that.

I was talking about the example of the Netherlands and Germany and was about to make the point that bodies of that kind can create a transparent and stable environment for pricing outside the influence of politics so that providers have confidence to invest and regulators can develop strong technical skills in setting prices at efficient levels. The Bill proposes that independent statutory bodies—Monitor and the NHS Commissioning Board—would collaborate to regulate prices. This will give commissioners a key role in price setting, whereas the opposition amendments would prevent this and would return control to Whitehall.

Monitor would publish national tariff prices based on a methodology subject to consultation where providers and commissioners could trigger an independent adjudication to ensure transparency and fairness. I am clear that we must have, as I said earlier, a process for adjudicating on Monitor’s methodology. Otherwise Monitor could just go ahead with its proposals, even if there were a whole lot of people affected by the proposals who objected and the only way that they could see those objections through to a conclusion would be through judicial review. The government amendments in this group ensure that the appropriate providers could trigger independent adjudication.

I am also clear that the Competition Commission should undertake this role. As I said earlier, it would be free from political intervention in making these judgments and is well respected as an organisation across the economy for the role it performs. The opposition amendments would prevent any of these benefits being realised. A key priority for improving the system is to expand its coverage so that more and more services are brought within scope. The previous Government failed to do this in line with their own published timetables, for example, regarding mental health services. The Bill would place duties on Monitor and the NHS Commissioning Board to secure the standardisation of service specifications to support the foundation of a comprehensive tariff system. This will make reconfiguration of services and integration across administrative boundaries easier.

To put matters beyond doubt, the national tariff would be a fixed price, with any competition based on quality and choice, not price. We listened to representations made to us about this, and we amended the Bill to make clear that the tariff would not be based on a maximum price. Of course I understand the points made very ably, if I may say so, by the noble Lord, Lord Davies, and the noble Baroness, Lady Murphy. We all want to see best value for money for taxpayers in the way that services are provided, but our judgment was that, for reasons that I will elaborate on, that is not the right way to go. Where services were not covered under the national tariff, there would be rules to govern those prices locally. Prices and rules within the national tariff would be legally binding and independently enforceable by Monitor to eradicate any abuses. Tariff prices could not be varied for different providers according to their ownership status. That would prevent future Governments paying inflated high prices to private providers.

I shall elaborate a little on what I said in answer to the noble Lord, Lord Davies. The purpose of the tariff is to ensure that providers are reimbursed fairly for the services they provide and to allow competition to be based on quality and not price, as I mentioned. When a maximum price was suggested, the fear was that there would be a drive to the bottom on prices, thus jeopardising the quality of care. The evidence from the UK and internationally suggests that quality-based competition with fixed prices can be very beneficial in producing higher quality care—that evidence is reported by the Office of Health Economics—whereas evidence from the USA sounds a note of caution that the wrong kind of competition based on price can lead to a race to the bottom on quality. Our judgment was that we should stick with our position that the tariff will not be a maximum price.

Finally, the Bill addresses the problem of cherry picking, which I am afraid was a problem that the previous Government did not grip. It places a duty on Monitor and the NHS Commissioning Board when setting prices to consider the range of services provided by different providers and the differing needs of the patients treated. As the Royal College of Psychiatrists noted:

“We are particularly glad to note the Government’s moves to prevent the cherry-picking of services and hope that the safeguards are a success”.

The Opposition’s amendments would actually delete these important provisions from the Bill, thus not addressing the concerns expressed by clinicians up and down the country.

To conclude, the status quo is not an option. The Bill strengthens the current system and meets the concerns raised by clinicians and others. I ask noble Lords not to press their amendments which would fail to address the current fundamental problems and would deny patients and taxpayers the benefits of an independent, fair and transparent system. Finally, I hope the House will accept the minor and technical amendments in my name in this group when I come to move them.

[Baroness Thornton]

My Lords, the Minister has explained this very clearly. We part company about the transparency, clarity and accountability. I resist the temptation at this time of night to start asking questions of the Minister about this matter, but I fear that it is going to take a very long time to sort this one out. One of the reasons why my own Government had not completed this task is that it is fiendishly difficult and fiendishly complex. I fear that this Bill is not going to make it any less fiendishly difficult and fiendishly complex, but it also might make the whole process a lot less accountable.

This was in fact the final group of amendments that we had put down in our suite of amendments to reform the whole of Part 3 in Committee. The noble Baroness, Lady Murphy, is quite right. If you give the responsibility and accountability for the tariff to the Secretary of State, you undermine the role of the economic regulator. Yes, that was the point of this amendment in the very first place. She got it in one—well done.

At this time of night, it is probably best if we do not delay proceedings. I beg leave to withdraw the amendment.

Amendment 201A withdrawn.

Amendments 201B and 201C not moved.

Clause 117 : The national tariff: further provision

Amendment 201D

Moved by

[Lord Davies of Stamford]

201D:Clause 117, page 125, line 14, at end insert—
“(5A) Where the Commissioner of a health service receives an offer from a service provider licensed under section 80 at a price below the price that is payable by virtue of this Chapter, the commissioner shall seek the agreement of Monitor before placing any order for this service.
(5B) Before acceding to a request from a commissioner in accordance with subsection (5A), Monitor shall satisfy itself that—
(a) the quality of the service to be provided will not be inferior to the same service provided by another supplier at the price payable by virtue of this Chapter, and(b) there will be no consequent unacceptable impact on the structure or capabilities of the NHS.(5C) Subject to the considerations under subsection (5B), Monitor shall not unreasonably withhold its consent.”

[Lord Davies of Stamford]

I would like to move—

[The Deputy Speaker (Lord Haskel)]

The noble Lord cannot move it.

[Lord Davies of Stamford]

Am I not allowed to say a word in response to the Minister?

[Baroness Anelay of St Johns]

My Lords, I think the noble Lord on the Woolsack is trying to assist the noble Lord, Lord Davies of Stamford, to realise that the rules as they pertain in this House are that if the noble Lord, Lord Davies, wishes now to speak further to his amendment, he must go through the process of moving it, speaking to it—and I am sure the Minister would hope he might then withdraw it. Having spoken to it already, it is not up to him simply to make an extempore statement; he has to go through a procedure to achieve that.

[Lord Davies of Stamford]

My Lords, I am very grateful for that guidance. In accordance with it, I have moved my amendment. I think that the Minister and I are still some distance apart. Once again, I put it to the noble Earl that a price that is not based on competition is not an economic price. A price that is negotiated with one vendor and based on the costs of that vendor, even if they are very transparent, is not an economic price. You cannot rest content that you have done an honest job if you accept that price. A fixed price that may be even remotely correct one day will not be correct in six months’ time or 12 months’ time. You need to continue to put that price to some sort of competition discipline. These points are fundamental. The noble Baroness, Lady Murphy, came nearer to the mark when she suggested that the reasons for the Government’s position had more to do with PR, politics or the media than with the economics of the health service. I was grateful to the noble Earl for the offer to discuss this matter in greater detail. Given that offer, I shall not detain the House further on this matter and will not put my amendment to a vote.

Amendment 201D withdrawn.

Clause 118 : Consultation on proposals for the national tariff

Amendments 202 to 204

Moved by

[Earl Howe]

202: Clause 118, page 125, line 18, leave out “licence holder” and insert “relevant provider”

203: Clause 118, page 127, line 9, at end insert—
“(13A) In this section, a “relevant provider” is—
(a) a licence holder, or(b) such other person, of such description as may be prescribed, as provides health care services for the purposes of the NHS.”

204: Clause 118, page 127, line 10, leave out subsection (14)

Amendments 202 to 204 agreed.

Amendment 204A not moved.

Clause 119 : Consultation: further provision

Amendment 204B not moved.

Clause 120 : Responses to consultation

Amendments 205 to 211

Moved by

[Earl Howe]

205: Clause 120, page 127, line 38, leave out “licence holders” and insert “relevant providers”

206: Clause 120, page 128, line 1, leave out “licence holders” and insert “relevant providers”

207: Clause 120, page 128, line 7, leave out “licence holders” and insert “relevant providers”

208: Clause 120, page 128, line 10, leave out “licence holders” and insert “relevant providers”

209: Clause 120, page 128, line 21, leave out “licence holder’s” and insert “relevant provider’s”

210: Clause 120, page 128, line 22, at end insert—
“( ) In this section and section 121 and Schedule 12, “relevant provider” has the meaning given in section 118(13A).”

211: Clause 120, page 128, line 23, leave out subsection (7)

Amendments 205 to 211 agreed.

Amendment 211A not moved.

Schedule 12 : Procedure on references under section 120

Amendment 212

Moved by

[Earl Howe]

212: Schedule 12, page 381, line 18, leave out “licence holder” and insert “relevant provider”

Amendment 212 agreed.

Clause 121 : Determination on reference under section 120

Amendments 213 and 214

Moved by

[Earl Howe]

213: Clause 121, page 128, line 32, leave out “licence holders” and insert “relevant providers”

214: Clause 121, page 129, line 20, leave out “licence holders” and insert “relevant providers”

Amendments 213 and 214 agreed.

Amendment 214A not moved.

Clause 122 : Changes following determination on reference under section 120

Amendment 214B not moved.

Clause 123 : Power to veto changes proposed under section 122

Amendment 214C not moved.

Clause 124 : Local modifications of prices: agreements

Amendments 214D to 214F not moved.

Amendment 214G

Moved by

[Lord Warner]

214G: After Clause 125, insert the following new Clause—
“Applications under section 125: notification of commissioners
(1) This section applies where Monitor—
(a) receives an application under section 125, and(b) is satisfied that the continued provision for the purposes of the NHS of health care services to which a condition in the applicant’s licence under section 98(1)(i), (j) or (k) applies is being put at significant risk by the configuration of certain health care services provided for those purposes.(2) In subsection (1), a reference to the provision of services is a reference to their provision by the applicant or any other provider.
(3) Monitor must as soon as reasonably practicable notify the National Health Service Commissioning Board and such clinical commissioning groups as Monitor considers appropriate—
(a) of its receipt of the application, and(b) of its reasons for being satisfied as mentioned in subsection (1)(b).(4) Monitor must publish for each financial year a list of the notifications under this section that it has given during that year; and the list must include for each notification a summary of Monitor’s reasons for being satisfied as mentioned in subsection (1)(b).
(5) The Board and clinical commissioning groups, having received a notification under this section, must have regard to it in arranging for the provision of healthcare services for the purposes of the NHS.”

Amendment 214G agreed.

Clause 126 : Correction of mistakes

Amendments 215 and 216

Moved by

[Earl Howe]

215: Clause 126, page 132, line 16, leave out “licence holder” and insert “relevant provider”

216: Clause 126, page 132, line 25, at end insert—
“( ) In this section, “relevant provider” has the meaning given in section 118(13A).”

Amendments 215 and 216 agreed.

Clause 127 : Health special administration orders

Amendment 216A not moved.

Clause 128 : Objective of a health special administration

Amendment 216B not moved.

Clause 129 : Health special administration regulations

Amendment 216C not moved.

Clause 130 : Transfer schemes

Amendment 216D not moved.

Clause 131 : Indemnities

Amendment 216E not moved.

Clause 132 : Modification of this Chapter under Enterprise Act 2002

Amendment 216F not moved.

Amendment 217 not moved.

Clause 133 : Duty to establish mechanisms for providing financial assistance

Amendment 217ZA not moved.

Clause 134 : Power to establish fund

Amendment 217ZB not moved.

Clause 135 : Applications

Amendment 217ZC not moved.

Clause 136 : Grants and loans

Amendment 217ZD not moved.

Clause 137 : Power to impose charges on commissioners

Amendment 217ZE not moved.

Clause 138 : Imposition of levy

Amendment 217ZF not moved.

Clause 139 : Power of Secretary of State to set limit on levy and charges

Amendment 217ZG not moved.

Clause 140 : Consultation

Amendment 217ZH not moved.

Clause 141 : Responses to consultation

Amendment 217ZJ not moved.

Clause 142 : Amount payable

Amendment 217ZK not moved.

Clause 143 : Investment principles and reviews

Amendment 217ZL not moved.

Clause 144 : Borrowing

Amendment 217ZM not moved.

Clause 145 : Shortfall or excess of available funds, etc.

Amendment 217ZN not moved.

Clause 146 : Secretary of State’s duty as respects variation in provision of health services

Amendment 217ZP not moved.

Consideration on Report adjourned.

House adjourned at 9.59 pm.