Health and Social Care Bill

Earl Howe Excerpts

Tuesday 13th December 2011 Lords Chamber

[Baroness Murphy]

Thank you very much indeed. I just want to comment briefly on the amendments on licensing. Some of them are asking quite a lot of the licensing procedure, but there may be other mechanisms that achieve what they want to achieve. I am sympathetic to people’s desire to add these conditions, but I think that it is important to see the licensing arrangements as part of the system, in conjunction with registration with the CQC. It enables Monitor to approve the compliance arrangements to achieve good governance and the information requirements needed to monitor that the organisations are delivering the right standard of care.

The threat of licence revocation enables Monitor to pick up at an early stage the problems of quality and finance which other people have spoken about. Obviously the providers will be very concerned to hold on to their licence, which seems to be a very powerful and potent tying-in of organisations to the ethos and objectives of the NHS. We must be very careful not to regard the licensing process as something within which to impose too many conditions, but as a basic framework that ties the licensees into the system. That is particularly important when organisations start to go wrong. We will discuss later how they are rescued from those predicaments. However, it seems to me that this creates a basic level playing field, and that it would be a mistake to use that process to do much more than tie everyone into the basic system. It sort of replaces the old authorisation process on compliance and quality that was operated by old Monitor, but it is a way of going forward as new organisations come into the NHS as providers of NHS services. I just wanted to add those comments because I think that these amendments might be adding a bit too much to the responsibilities of the licensee.

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

My Lords, licence conditions will be the mechanism through which Monitor will be able to prevent potentially anti-competitive behaviour and enable service integration, where this is what commissioners want. Monitor would also use licence conditions to collect the information it would need to set prices, and to help identify at an early stage—at an early stage—if a provider was at risk of financial distress. If that was the case, it could work with the provider to address potential problems, as well as supporting commissioners to ensure continuity of services. I completely understand the concerns in that area.

First, I think that I need to make clear that all providers of NHS healthcare services will be subject to the requirement to hold a licence. This includes providers of primary medical services, which is the question posed in Amendment 279A. Furthermore, where a provider is providing services that carry a requirement to be registered with the Care Quality Commission, that registration will be a prerequisite to being granted a licence by Monitor. We all want to see close operational links between Monitor and the CQC. The Bill emphasises this by placing duties of co-operation on both organisations, not just in matters such as information sharing, but also in the development of the joint application mechanism for providers seeking registration from both bodies.

We are also clear that regulation must be proportionate, and impose the minimum of additional burdens on those being regulated, while still safeguarding the interests of patients and the public. To that end, the Bill makes provision for the Secretary of State to make regulations establishing an exemptions regime, so that licensing can be targeted towards those parts of the health service where there is the greatest need for regulation. While we are clear that there must be an exemptions regime, we also recognise the importance of making sure that we get the scope of it right. To that end, we are already committed to consulting fully next year on our proposals for the exemptions regulations. Noble Lords may also be aware that the Delegated Powers and Regulatory Reform Committee of your Lordships’ House has recommended that the first set of exemption regulations should be subject to the affirmative resolution procedure. We agree, and both Houses will have the opportunity to debate them before they come into force.

The Bill provides for Monitor to attach conditions to licences. While the Bill sets a framework for the scope of those conditions in Clauses 95 to 97, we are clear that it will be for Monitor itself to develop the detail as the sector regulator. The intention is that the conditions will support Monitor in exercising its functions and that Monitor will be best placed to know how they should be framed to achieve that. Therefore, including large numbers of mandatory conditions on the face of the Bill, as some noble Lords have suggested in certain amendments—for example, Amendments 283, 285ZA and 287A—would undermine the Monitor’s independence, which we do not think is desirable if it is to be a robust and vigorous sector regulator.

Nevertheless, I would like to reassure the Committee that there will be proper oversight of Monitor’s proposals for conditions. My right honourable friend the Secretary of State will have the power to veto the first set of licence conditions. We are clear that Monitor must be able to operate freely and autonomously within the legislative framework established by the Bill. We have built in reasonable checks and balances through requirements for key products, such as the licensing criteria and conditions, to be subject to approval by the Secretary of State. Although I understand entirely the reasoning behind amendments tabled by noble Lords which would increase the level of the Secretary of State’s involvement in provider regulation—for example, Amendments 281A, 282A and 282B—regrettably, I feel that these go a step too far in limiting Monitor’s independence.

The noble Baroness, Lady Thornton, asked me quite a number of questions to which I feel I should write in response. In particular, however, she asked whether Monitor will have the role of resolving disputes and whether all disputes would go to court. The answer to both of those questions is no. The NHS standard contract already provides for contractual disputes to be resolved through arbitration and this will not change. Licence holders have to agree special conditions or modifications to conditions. If the provider disagrees and Monitor then wants to proceed, it must refer the matter to the Competition Commission for consideration.

My noble friend Lord Clement-Jones spoke to Amendment 281A. I want just to comment briefly on that. The amendment would increase the minimum length of notice period during which representations could be made following publication of a notice of proposed exemptions. I am grateful to my noble friend for that. The Bill is clear that the notice period should be not less than 28 days. It could therefore be much more than that, and our expectation in most cases is that it will be. But there will be times when the Secretary of State needs to act quickly, so being locked into a notice period of not less than 90 days could be detrimental to a particular provider or group of providers.

My noble friend Lady Williams spoke to two amendments, Amendments 287EA and 287EB, where the purpose is to ensure that licence conditions on providers of NHS services restrict the income they can earn from private patients and the number of private patients they treat, as well as that funds provided for NHS care are not used to subsidise private treatment offered by foundation trusts, with various conditions attached. I understand my noble friend’s concern about this. However, the amendments would be impractical, and in particular for licence holders who are not NHS bodies they would be highly undesirable. Foundation trusts’ principal purpose—we will come to this in a later group of amendments, when we discuss the private patient income cap—is to provide goods and services for the NHS in England. It means that they must earn most of their income, over 50 per cent, from NHS services. We are tabling a government amendment to make it clear that the majority of every foundation trust’s income will continue to be from NHS service provision. Foundation trusts must comply with their principal purpose or they will be breaking the law. They could be at risk of successful legal challenge if they fail to meet their principal purpose. We are tabling a second government amendment to require foundation trusts to show in their annual reports how income earned from private activities has impacted on the provision of NHS services. Using NHS income to subsidise private patient work would lead to foundation trusts breaching the NHS constitution. The Government also gave a commitment that foundation trusts will have to produce separate accounts for their NHS and private-funded work.

Finally, I want to mention briefly the amendments that will fall to me to move in relation to licensing: Amendments 280A, 281B, 284A to 284C, 285A, 286B, 287C and 287D, and 288A to 288F. These are without exception minor tidying-up amendments to improve the drafting or clarify meaning, and I hope that the Committee will accept them when they are moved. I hope, too, that the Committee feels reassured by my explanation of how we envisage licensing to operate and that the noble Baroness will be able to withdraw her amendment.

[Baroness Finlay of Llandaff]

My Lords, can the Minister provide clarification on the questions I asked? First, who is going to define what is expected of primary care services in terms of how they are integrated? If that does not form part of their licensing, who will define the minimum standard across the country? Secondly, in Amendment 282ZC I set out that:

“A criterion for a person or organisation to be granted a licence must be that that person or organisation demonstrates a commitment to education, training and research”.

I would be grateful if the Minister could explain the situation when someone may well be good enough to provide clinical services but shows absolutely no commitment to any aspect of education and training, even for the development of their own staff, or to any of the research developments that might be happening in their field. I would include in this physiotherapy and occupational therapy assistance, such as people putting appliances into homes and those providing supportive care-assistance services in health, but not the secondary and tertiary-care specialised services which are covered very adequately by all the criteria from the royal colleges. It is about the minimum standard.

My third question relates to indemnity: do the Government feel that it is acceptable for a provider to be licensed without having to demonstrate that it has adequate indemnity?

[Earl Howe]

My Lords, I apologise to the noble Baroness if I skirted over the considerable number of questions she asked, and if it would be helpful to her I will write her a letter on all of them. Perhaps I may cover two at this point. As regards her Amendment 282ZC, our expectation is that Monitor’s licensing criteria will be light-touch and broadly drawn, to encompass a wide range of providers. The amendment she has tabled does not lend itself to that approach. Much as I understand the importance of this particular issue, requiring any and every licence applicant to meet a definition of,

“commitment to education, training and research”,

that Monitor has developed does not fit with the principles of proportionate and targeted regulation. But I will write to her with further reasoning on that.

As regards the noble Baroness’s Amendment 282ZB, which is about indemnity, if she will forgive me, again I think that I will have to write to her.

[Lord Clement-Jones]

I have another amendment on which the Minister might find a lacuna—Amendment 287A, which deals with the Nolan principles.

[Earl Howe]

Will my noble friend allow me to write to him on that?

[Lord Clement-Jones]

I assumed that he would make that undertaking.

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[Baroness Williams of Crosby]

My Lords, I wish to address my Amendments 274AA, 274C, 274D and 274E in this group. I shall speak as briefly as I can. I share many of the concerns expressed by the noble Lord, Lord Warner, on whether we are overloading Monitor with too many requirements to make judgments, to intervene and to be responsible to enable any single body to function, however brilliantly led it might be.

This amendment is about the conflict of goals on the part of Monitor. I believe that it is a very important amendment, although it looks modest enough. The Bill states that if Monitor has a conflict of objectives—or, more clearly, a conflict of duties—that will in essence be resolved by the head of Monitor making a statement about the nature of that conflict and the ways in which it could be resolved and then turning it back to the perpetrators to solve the problem as best they can. Those conflicts are substantial. We should make it clear that they are fundamental to the whole argument that we have been having, including in the brilliant previous debate because, first and foremost, the general and primary objective of Monitor is supposed to be the promotion of patient health and patient care. That is fundamental. We heard in the very eloquent speech of the noble Baroness, Lady Meacher, how she thinks Monitor has changed its philosophy of life within the NHS and has become much more concerned with patient care and patient protection than with the pursuit of competition primarily for its own sake. That is a very important step forward in our understanding of the Bill.

However, it still leaves open the possibility of a conflict arising between the duties of Monitor. I have just mentioned the first of those duties—the care and concern about patients who are dependent on the health service. The second duty continues to be a concern with anti-competitive policy, and the third is concerned with integration and collaboration, about which there has been a great deal of discussion and many amendments in this House. The Bill gives us very little guidance on any conflict over which of those duties should be given priority over the others. It says that a conflict of duties or a conflict between responsibilities is to be resolved in this rather heavy-handed way of a statement being made about the nature of the conflict and how it might be resolved, which is then distributed to all those concerned. However, there is no resolution of the conflict. It remains part of what one might describe as an ongoing negotiation that some day might resolve itself in one direction or another. It has interesting parallels with yesterday’s events. However, Amendment 274E sets out very clearly that we believe that ultimately conflict should be resolved by the Secretary of State. We accept all the intervening proposals in the Bill at present—that statements should be made, that the conflict should be defined, and that it should then be passed on to those involved to try to find a solution. If, at the end of the day, no solution is found, it is absolutely crucial, in our view, that this becomes the responsibility of the Secretary of State as the ultimate goal of any accountability or responsibility within the service itself.

In this House I think we have got much closer to recognising how significant this final duty over a range of issues is. The Secretary of State is open to accountability to Parliament and to the general public, the people of England, so we say in Amendment 274E that if no solution can be found, there should ultimately be a reference back to the Secretary of State, who then has to make this ultimate decision. We have deliberately framed it to say that he is the ultimate decider, not one of those deciders on the way, although Monitor certainly has a role in resolving the conflict.

Since the future health service will in part be defined by what is seen to be the most significant of those duties, I think the Minister and most of us in this House believe that that central duty has to be responsibility to the patient and to the care and protection of the patient. I urge us to give this very serious consideration, because it is part of the pyramid that was set out in the brilliant speeches in an earlier debate by the noble Baroness, Lady Thornton, by my noble friend Lord Clement-Jones, and by my noble friend Lord Newton of Braintree, who has now had to leave us. I therefore propose the amendment in that spirit. It puts into a microcosm the concept of where the most responsible and urgent duties on Monitor lie.

[Earl Howe]

My Lords, I think that this has been a very useful debate. The Bill provides a more autonomous NHS, and it does so in order to deliver high-quality services and value for money. Monitor, as sector regulator, would establish clear standards and rules to protect patients’ interests in the provision of NHS services. Monitor would be required to lay its annual report and accounts before Parliament and have the accounts audited by the Comptroller and Auditor-General. It would also need to comply with other rules and guidance that cover central government public bodies, including the seven general principles of public life, the Treasury’s guidance document, Managing Public Money, and rules on corporate governance. Monitor would also have to respond in writing to parliamentary committees and any advice from HealthWatch England. The Secretary of State would oversee Monitor’s performance of its functions to ensure that those functions were performed well. The Secretary of State would not have control over Monitor’s day-to-day decisions, but would hold Monitor to account for discharging its duties. That point is extremely relevant in the context of a number of amendments in this group. The Secretary of State would appoint the chair of Monitor and other non-executive directors and would have to give consent to the appointment of the chief executive. I hope that point answers Amendments 260F and 260G.

Baroness Thornton: We are yet again in the territory of Monitor setting its own rules and implementing them, and of the Secretary of State’s role. The Minister has just said that the Secretary of State will, as it were, monitor Monitor. Can he please describe to us how exactly he will do that?

[Earl Howe]

My Lords, I will come on to that in a moment. The Secretary of State would also have specific powers of veto; for example, over the first set of licence conditions and, in individual cases, of provider unsustainability, where he considered that Monitor was failing in its functions to support commissioners in securing continuity of services. In addition, he would be able to request information from Monitor regarding the exercise of its functions as and when he considered it necessary. I hope that this therefore allays the concerns of noble Lords who put their names to Amendment 260H.

However, Monitor needs to be free from day-to-day political and other inappropriate interference in order for it to be able to act in the best interests of patients. In order to maintain the integrity of its relationship with the Secretary of State, Monitor must be able to take independent decisions on the exercise of its functions, such as calculating prices, setting and enforcing licence conditions and resolving conflicts of interests. Making such decisions subject to approval would be inconsistent with this approach, and would conflate responsibilities. In particular, it would undermine the Secretary of State’s ability to hold Monitor to account. There would also be significant risk of decisions being politicised inappropriately. By contrast, independence in such decisions would increase transparency and help ensure that providers were treated fairly.

I understand the motives of noble Lords who added their names to Amendments 274AA, 274C, 274D and 247E, relating to the Secretary of State’s involvement in resolving conflicts of interest. The Government agree that where they occur, conflicts must be resolved, but giving the Secretary of State a role in decision-making would undermine his ability to hold Monitor to account. The Secretary of State would be obliged to keep under review Monitor’s performance in discharging its duties. He would be able to direct Monitor, where it had failed or was at risk of failing significantly, to carry out its functions. In extremis, he could arrange for a third party to perform those functions or perform functions himself. I hope that those points answer the question of the noble Baroness, Lady Thornton.

The Bill also ensures transparency and fairness, through requirements on Monitor to consult widely when discharging functions and appeal mechanisms for the major decisions it makes. Here, I am addressing Amendments 294BA, 294BB, 294BC. In this way, our proposals strike a balance between maintaining sufficient independence and ensuring that the Secretary of State has sufficient ability to hold Monitor to account for the performance of its functions. I believe there is consensus that we need to ensure that this balance is correct.

My noble friend Lord Clement-Jones asked why it should be the Competition Commission that decides on challenges to Monitor’s proposals on licence modifications, pricing methodologies or whatever. I am grateful to him for that question. It is fundamental to our proposals that Monitor would be an independent regulator and that the appropriate role for the Secretary of State is to oversee Monitor’s performance against its duties, and to intervene where he considered that Monitor was significantly failing in any of its functions. However, it is vital that the legislation provides appropriate checks and balances on Monitor without undermining its day-to-day independence from political control. That is why we proposed that Monitor must consult on the licence conditions that it proposes to impose on providers and on its draft methodology for pricing. Providers and, in the case of pricing, providers and commissioners should be able to object to Monitor’s proposals, and where a sufficient percentage objected, there should be a mechanism for independent and impartial adjudication. That is the role we propose for the Competition Commission. It would act as adjudicator on disputed licence modifications and on disputes over the pricing methodology. The basis for this adjudication would be Monitor’s overarching duty to protect and promote patients’ interests.

[Baroness Thornton]

Did the Government consider any bodies other than the Competition Commission as being appropriate to fulfil this role? If so, which were they and why were they not thought to be appropriate? This is a rather heavy-duty form of monitoring Monitor.

[Baroness Williams of Crosby]

I am puzzled by why the Government do not see the Competition Commission’s overseeing of this area of Monitor’s responsibilities as not being neutral. Would not a body such as the Office of Fair Trading be more appropriate? It has a reputation not only of being more neutral but of having shown in the past particular sensitivity and understanding of health as a service provided to the people of England.

[Earl Howe]

I think it is a question of specialist expertise. I do not regard it as heavy-handed to have the Competition Commission acting in this role—which, we hope, would not be a role that it would need to perform with any regularity. It is an established body. It would apply a public interest test rather than a competition test, which is important. One has to question whether the Office of Fair Trading is the right body. I will of course reflect on my noble friend's suggestion, but we believe that the Competition Commission is a good fit in this sense. If the Secretary of State were to play the role of adjudicator, that would be very detrimental. The result would effectively be the politicisation of Monitor's decisions. As I said earlier, that in itself would undermine the Secretary of State's role in holding Monitor to account for the outcomes that it achieves.

The noble Lord, Lord Warner, referred to conflicts in the role of Monitor in overseeing foundation trusts. We are quite open about the fact that there is a risk of conflict of interest here. That is why it is essential that the Bill sets out a robust way for conflicts to be resolved. In a later debate, we can discuss that at greater length. I listened with interest to the speech of my noble friend Lady Williams, and I will of course reflect further on everything she said, as I always do. I think I have covered the main issues raised by the amendments in this group.

[Baroness Thornton]

I think that almost the first sentence I uttered in this debate was: will Monitor meet in public; and what do the Government intend to do about joint chairmanship and chief executiveship? If the Minister answered those questions, I did not hear him and I apologise.

[Earl Howe]

The answer is yes.

[Lord Clement-Jones]

The Minister said that he thought that the amendments tabled by my noble friend Lady Williams—Amendment 274AB, et cetera—would undermine the role of the Secretary of State and his ability to call Monitor to account. That seems a very far-fetched way to describe an attitude to conflict-resolution. The Secretary of State, particularly under Amendment 274E, is asked to resolve conflict. This is an addition. There is no other way, as far as I can see, of resolving conflict. A key issue, which has also been raised by the noble Lord, Lord Warner, in this debate, has been the multiplicity of roles of Monitor. Therefore, there is a strong need to resolve such conflicts.

I ask the Minister to consider further whether that is really detracting from the Secretary of State's ability to monitor Monitor—in the words of the noble Baroness. We need a mechanism to resolve conflict. Faute de mieux, this seems to be the best one.

[Earl Howe]

My Lords, I hear what my noble friend says, but the fact is that the amendments he refers to would reduce Monitor’s independence from political interference. We are clear that we do not want political interference in Monitor’s activities. The intent of the amendment is clearly to give the Secretary of State increased accountability for the decisions around Monitor's functions. We believe that Monitor will be an effective regulator and able to deal with conflicts of interest. Clause 63 requires Monitor to resolve conflicts between its functions. If a failure to resolve conflicts between functions was significant, then the Secretary of State already has the power to intervene under Clause 67. Therefore, there is an intervention mechanism but we suggest that it should be triggered only in the circumstances to which I have referred.

[Lord Walton of Detchant]

Will the Minister say whether, if Monitor is to meet in public, it will have reserve powers to allow it to go in camera if for any reason it may be required to consider highly sensitive personal information, which ought to preserve confidentiality in respect to the individuals concerned? It is crucial that such a power should be available to it.

[Earl Howe]

The answer is yes, although we do not expect that Monitor would ever have occasion to see named patient records.

[Baroness Thornton]

My Lords, I think this has been an extremely useful debate. I can see why this Government may not trust their Secretary of State to hold Monitor to account. However, I am concerned about the idea that because we—and I do not just mean Members on this side of the House—are anxious that accountability rests in the right place in the Bill, that must therefore translate into political influence or micromanaging. I do not think that is at all the case here. Therefore, we do have an issue still to explore regarding the accountability of Monitor.

I also think we need to explore whether the Competition Commission is the right place for a public interest test to rest. The noble Baroness, Lady Williams, may have made a useful suggestion about which other bodies could possibly undertake that function. Again, we find that this quango is determining its own rules and then implementing them. That is not a satisfactory situation. However, I did take hope from the fact the Minister said yes to the question of whether the chair and chief executive of Monitor would not continue to be the same person, and that Monitor should meet in public. Is the Minister accepting Amendments 260EC and 260GA, or is that the statement of principle with a government amendment coming forward at a later stage or, indeed, a letter from the Minister, clarifying the issue? Otherwise, I beg leave to withdraw the amendment.

[Earl Howe]

I was accepting that particular principle, but I will follow it up in writing.

Amendment 260EC withdrawn.

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[Lord Patel]

My Lords, briefly, we are getting a bit confused between the amendment of the noble Lord, Lord Warner, which I support and is about anti-competitive behaviour, and people talking against competition. The amendment is quite clear. It asks Monitor, within a year, to identify barriers to quality care that are anti-competitive. The noble Baroness, Lady Murphy, gave one example and there are others, such as optometry services, which can, if given the opportunity to expand, not only provide good diagnostic services but also treat some minor ailments that do not need referral to hospital. Our amendment is about anti-competitive behaviour. It is not about competition.

[Earl Howe]

My Lords, there are some extremely helpful amendments in this group. Indeed, there has been a great deal of valuable debate both inside and outside the Chamber on the roles of competition and integration in the health service. I am grateful for much of what the noble Lord, Lord Warner, said in his introductory speech.

The Government have been clear that both competition and integration can be important tools for commissioners to drive up the quality of services for patients. We have also been clear that it will be for commissioners to decide where and how these tools should be used—not Monitor. There will be no “one size fits all” or a model prescribed by government.

To help ensure that both competition and integration are effective, Part 3 of the Bill seeks to establish appropriate powers for Monitor. Where there is competition, Monitor will have powers to ensure that it operates effectively in the interests of patients and to safeguard against anti-competitive conduct that can work against those interests. The Future Forum concluded that Monitor, as a sector-specific regulator with knowledge and expertise in health services, would be best placed to achieve this. Let me remind the Committee that this is if there is competition. In some circumstances, I freely concede that commissioners may decide that the best way to achieve high-quality services for patients is not to have competition.

On Amendment 265C, I hope that noble Lords will agree that it is the right approach to require Monitor’s focus to be on considering the interests of patients. That will allow Monitor the scope to take account of a broad range of factors. This approach also provides continuity with the requirements of the existing system rules, the Principles and Rules for Co-operation and Competition, which we have committed to retaining and giving a firmer statutory underpinning through Monitor’s sectoral powers. Those powers are the setting and enforcement of licence conditions for providers and the overseeing of commissioning regulations set by the Secretary of State. Along with the concurrent powers to apply the Competition Act with the Office of Fair Trading, they will provide necessary safeguards to ensure that the interests of patients are protected.

To pick up on the sorts of circumstances cited by the noble Lord, Lord Whitty, that would include, for example, safeguarding against providers exchanging information to agree lower levels of service quality than they would otherwise supply if they were in competition; or a commissioner removing a well performing provider from the choices available to patients, or seeking to direct patient referrals to one provider and not another on non-clinical grounds.

However, it is not the case that every arrangement in the provision of healthcare that had the effect of restricting competition would necessarily be anti-competitive. I made that point in one of our earlier debates. I look particularly in the direction of the noble Lord, Lord Whitty, in saying that Monitor’s core duty means that patients’ interests will always come first. For example, in some cases limiting competition by concentrating specialist services in regional centres or in providing services through a clinical network may deliver overriding benefits to patients and would not, therefore, be anti-competitive. Similarly, where an integrated service raises competition concerns, and equally where services offering more choice and control raise concerns over integration, Monitor will always come back to its core duty—to ask itself the question, “What is it that benefits patients the most?”.

--- Later in debate ---

[Lord Warner]

I want to briefly respond to what the noble Earl said about Amendment 266, particularly in the light of the points that the noble Baroness, Lady Murphy, made about a good deal of anti-competitive behaviour being already quite well entrenched in the NHS. Simply waiting longer to get it even more entrenched before Monitor has a go at the issue of the barriers for new entrants to the NHS market simply gives the signal to the NHS that it can go on as it has been going on. It seems to me that it is important to give a signal that there is a new show in town and that the issue of the barriers to entry, particularly in the light of the report by the Co-operation and Competition Panel, are going to be addressed. I am not sure that waiting longer for the new systems to settle down is going to be in the best interest of the NHS or Monitor and I wonder if he might think a bit more about this and perhaps we could have a further discussion.

[Earl Howe]

My Lords, the noble Lord makes a telling point. I took on board entirely what the noble Baroness, Lady Murphy, said in her contribution. I will of course reflect further in the light of what the noble Lord has just said.

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[Lord Beecham]

My Lords, it saddens me to say that 41 years ago I became opposition spokesman on the Newcastle City Council health committee. Within two years, we had the Seebohm report and a change of structure, leading to the creation of a social services committee that embraced both children’s and adult social care and replaced two committees—the old health committee and the old children’s committee. That seemed to me then and, frankly, it seems to me now to have been the right approach, because I do not think that you can sensibly divide children’s and adults’ social services. We do not have that system now. My personal view—which is not necessarily the view of the Opposition—is that it may be time to look again at that division. To an extent, the group of amendments that the noble Baroness has spoken to seeks to secure that objective.

As a consequence of the way in which amendments are ordered, the actual order of the amendments in this group is not quite logical. I suppose one should start with Amendment 269B, which would give Monitor functions relating to children’s social care services. Earlier, we touched on the possibility of Monitor having a role in respect of adult care services. Presumably, one would look at both services coming under their auspices, or neither, rather than keeping a division. Amendment 269B sets out the basic role for Monitor in this context. I note that proposed new subsection (2) would include within the functions,

“inspection of, and reporting on, the potential impact of children’s social care services in a particular area on the potential need for adult social care in that area”.

I am tempted to say “and vice versa”, because so often problems of parents and adults impinge on the needs of the children, and that would make perhaps a more rational disposition of functions.

The other two amendments in this group are, in effect, consequential, and sensibly would require local authorities to ensure a smooth transfer and, as Amendment 270AA puts it, “a careful handover” for children moving into adult social care. All of those seem to me very sensible suggestions. Nevertheless, it is probably better to look at the whole context of where social services fall within the remit of the Bill.

I imagine that there will have been some discussions between this department and the Department for Education, although the way in which Whitehall and, for that matter, local government tend to work, it is not necessarily the case that the relevant organisations come together to discuss these issues. It may be, therefore, that the Minister would wish to consult colleagues in other departments before giving a measured response. Perhaps this matter might be best brought back at Report, because it raises significant issues. As I have indicated, I have felt for some time that the division of responsibilities at the moment is not terribly sensible, with children’s social services being, arguably, at best a sort of fifth wheel on an education coach. At the very least, that matter ought to be re-examined. Perhaps it is too late in the day for it to be part of this Bill, but at some point, I think, this issue certainly needs to be referred to. I congratulate the noble Baroness and the noble Lord, Lord Northbourne, on having put down this amendment, which gives us an opportunity at least to ventilate concerns about this issue.

[Earl Howe]

My Lords, I understand and well appreciate the concern of the noble Baroness to ensure a high standard of children’s social care services and, in particular, a smooth transfer for young people moving from children’s to adult social care services. I would, of course, be very happy to speak to her and indeed the noble Lord, Lord Northbourne, about this issue away from the Committee, if they consider that to be an appropriate way forward.

On the specific amendments that we are looking at, I really do not think that Monitor is the right organisation to ensure that local authorities are carrying out their responsibilities on these issues, or to act as a regulator of children’s social care services. I am confident that existing arrangements for the regulation and inspection of children’s social care are sufficient and robust. Joint working is important and I hope that the noble Baroness will be reassured that the relevant inspectorates are already working together to improve the arrangements for joint inspection, which will address the very important issue of child to adult transition that she has raised.

Children’s social care is regulated and inspected by Her Majesty’s Chief Inspector of Education, Children’s Services and Skills—Ofsted. Its inspection remit covers all local authority social services functions relating to children—that means services for children in need, safeguarding children, children in care and care leavers, as well as adoption and adoption support services. Local authority adoption and fostering functions must be inspected by Ofsted at a minimum of every three years. Ofsted can of course make unannounced inspections.

We are already working to improve these arrangements. Ofsted consulted over the summer on local authority child protection inspection arrangements that will be more child-centred and less bureaucratic. This new type of inspection will begin in May next year. In addition, all relevant inspectorates have agreed in principle to Professor Eileen Munro’s ideal model of joint inspection, which looks at the contribution all services make towards protecting children. Noble Lords may recall that Professor Munro last year conducted a thorough review of child protection arrangements for the Government. The Care Quality Commission is one of the inspectorates working with Ofsted to establish what those services will look like and when they will begin.

For children with special educational needs and disabilities, the recent Green Paper proposes a new education, health and care plan, covering support from birth to 25. The new plan will include a much clearer focus on the long-term outcomes for children and young people including independent living and employment. This should improve outcomes for young people with special educational needs and disabilities as they make the transition from school into employment or training.

I hope that the noble Baroness will appreciate that work in this area is ongoing. I sympathise with the tenor of all she said, but if she is content to wait for a discussion following these Committee proceedings, I hope that she will, in the mean time, withdraw the amendment.

[Baroness Finlay of Llandaff]

I am grateful to the noble Earl for his response. It is those transitional points that we have been particularly concerned about. I will discuss this with the noble Lord, Lord Northbourne, and it would be helpful for us to have a short meeting. We are grateful for the fullness of the response from the Minister. I beg leave to withdraw the amendment.

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Moved by

[Earl Howe]

270A: Clause 62, page 89, line 26, after “services” insert “provided”

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[Earl Howe]

My Lords, Clause 63 sets out several provisions detailing how Monitor should deal with potential conflicts in relation to its general duties, and conflicts with regard to its functions. It would be helpful to cover each of these in turn. The noble Lord, Lord Davies of Stamford, will not be surprised to learn that I did not agree with much of what he said. We should not find it surprising, because it is not uncommon for bodies to have potential conflicts of interest. What matters is how they are dealt with, and the Bill sets out a robust framework for Monitor to operate effectively. In theory, there is a possibility that Monitor’s general duties, as set out in Clauses 59 and 62, might conflict—if, for example, the most economic, efficient and effective provision did not deliver fair access because that access was limited to certain days and times or locations. If a conflict did arise, we are clear that it would need to be resolved effectively.

In order to be a successful independent regulator, Monitor would need to be able to resolve any conflicts that may arise. It would be closest to these conflicts, and it would be best able to weigh up the potential risks and benefits. Balancing competing priorities is just a reality of life, and resolving such conflicts is a key function that all public bodies need to carry out. When considering how to resolve conflicts, we believe that Monitor should do so in the manner it considers best, in line with its overarching duty to protect and promote patients’ interests. I am not going to call patients “consumers”, but in response to the noble Lord, Lord Beecham, who has tempted me, it was Alan Milburn who said in 2004, when he was Secretary of State for Health:

“In the business world success today depends on being flexible enough to innovate and responsive enough to meet consumer demands. Public services have to apply the same lessons”.

I do not want to press that analogy too far, but we all know what we are talking about when we talk of patients as consumers who require the same kind of care in terms of centring priorities on their interests.

I want to reassure the Committee that when resolving any conflict, Monitor would have to take into account the need to maintain the safety of the people who use healthcare services. Indeed, Monitor would be able to take this and a range of other issues into account when resolving any conflict between its duties. However, Amendment 274ZA would go further. Its impact would be that, in resolving any conflicts between its general duties, Monitor would always act with a view to maximising safety—potentially at the expense of its other duties. This would be inappropriate: it could cut across the role of the CQC, not to mention potentially undermine the role of commissioners and the independence of clinicians. It could also undermine individual patient choice. I can elaborate on that if noble Lords would like me to.

Similarly, while I sympathise with the desire to ensure that providers do not face unnecessary burdens, there may be occasions where a conflict solution that imposes the least burden on providers is not the most effective. Amendment 274ZAA, in the name of the noble Baroness, Lady Finlay, would impose resolutions that prioritised the least burden on providers over all other considerations. I think that is a mistaken way to go. We believe that Monitor should be free to decide how best to resolve conflicts between its duties, and therefore I would encourage the noble Lords who tabled these amendments to withdraw them. Nevertheless, I will consider—as I indicated earlier—whether it would be appropriate for the Bill to rationalise within Clause 62 matters to which Monitor must have regard. This would help Monitor decide how to resolve any conflicts. Therefore, I hope noble Lords will appreciate that I am not impervious to their suggestions on this clause.

Let me turn now to potential conflicts between Monitor’s functions. For clarity, Monitor’s functions include those it has as sector regulator, which are: ensuring continued access to NHS services; setting and regulating prices; preventing anti-competitive behaviour and licensing providers of NHS services. In the short term, Monitor would also continue with specific oversight functions over foundation trusts. As with Monitor’s duties, we need to ensure that any conflict between these functions is resolved effectively. Clause 63(2) requires Monitor to make arrangements to avoid potential conflicts of interest between its specific functions as foundation trust regulator and its broader functions as sector regulator, which are provided for in this Bill. I think we are all clear that we need to have appropriate arrangements within Monitor to mitigate and manage potential conflicts of interest between its functions. The Bill does not prescribe exactly what arrangements Monitor should make for this; it gives Monitor flexibility to determine the most effective arrangements, but we would expect that this would necessarily involve some separation of decision-making. This may need to be underpinned by informational separation and other working arrangements at operational level.

[Lord Beecham]

Would such proposals by Monitor have to be approved by the Secretary of State or would it be left entirely to Monitor to decide without reference to the Secretary of State?

[Earl Howe]

My Lords, I think we will rely on Monitor to make its own arrangements and, as the Committee will appreciate, there are limits to how far it is sensible to prescribe in legislation what the arrangements should be. Nevertheless, picking up the noble Lord’s prompt, I am sympathetic to the concerns that have been raised in this general area and I undertake to discuss the matter further with Monitor.

To create legal certainty, Clause 63(3) clarifies Monitor’s arrangements to resolve conflicts further, so when preventing anti-competitive behaviour and setting and regulating prices, Monitor must ignore its transitional regulatory functions relating to foundation trusts. I hope that addresses Amendment 274ZB, tabled in the name of my noble friend Lady Williams. The meaning of this provision—

[Lord Davies of Stamford]

My Lords, the noble Earl keeps on referring to Monitor’s responsibilities towards foundation trusts as being transitional, but I recall that earlier today he accepted that in fact they would possibly continue beyond 2016, which is five years away. It hardly seems possible that he should be saying that at one moment and then at the next using the argument that since these responsibilities are only transitional, the conflict of interest will rapidly resolve itself.

[Earl Howe]

I refer the noble Lord to the remarks I made earlier. The provisions are partly transitional and partly not. It depends on which functions we are looking at.

I come back to the point I was making on the amendment tabled in the name of my noble friend. This provision says that in preventing anti-competitive behaviour that is against patients’ interests or in setting prices, Monitor must ignore the transitional functions it has as the regulator of foundation trusts. If the subsection were left out as the amendment proposes—although I know that it is only a probing amendment—when undertaking its anti-competitive behaviour or pricing functions, Monitor could also consider its transitional intervention powers. That could result in Monitor treating struggling foundation trusts preferentially by, for example, not subjecting them to its anti-competitive powers. I hope that that is helpful to my noble friend.

My noble friend Lord Clement-Jones spoke about the designation of specialist centres and expressed his view that that should not conflict with the prohibitions on anti-competitive behaviour and that, in essence, patients’ interests have to be paramount. I am with him on this and I would like to reassure him that patients’ interests would be the paramount consideration for Monitor in resolving conflicts that arise in the exercise of its functions in this way. Monitor need not take issue with decisions to designate specialist centres where this would improve quality and protect patient safety, even if it reduced competition.

I hope that those remarks are helpful and that my noble friend will feel content to withdraw his amendment.

[Lord Clement-Jones]

My Lords, I thank my noble friend for that reply, which I have found very helpful. It was robust in one sense and has set out a robust framework in another. Although I was also interested in what the noble Lord, Lord Davies, had to say, in that it would tie us all in knots, I think that the Minister’s exposition was clear in that it has set out a suitable conflict framework. Although I cannot speak for my noble friend Lady Williams, I thought that the Minister explained the necessity for Clause 63(3) very well. His reassurance on the aspect of patients’ interests was extremely helpful as well, although of course it does not mean that the spectre of EU competition law does not still haunt us somewhat and that it will continue to be the subject of discussion, perhaps outside this Chamber. After all, that could override everything else if we are not careful.

I took considerable comfort from the Minister’s undertaking to review Clause 62 as well, because that is quite a shopping list. If it could be clarified, that would be helpful. His general undertaking to the Committee on the conflict area was also very helpful. In the circumstances, I am happy to withdraw my amendment.

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[Baroness Tonge]

My Lords, I rise to ask a question rather than to make comments. I am rather confused about how tariffs work. I am thinking particularly of sexual and reproductive health services. Therefore, I support Amendment 292A tabled by the noble Baroness, Lady Gould.

Sexual and reproductive health services are currently provided by general practitioners and clinics directly commissioned by primary care trusts. They can be family planning clinics, youth counselling clinics or genitourinary medicine clinics. Under the new system, GPs will presumably carry on providing sexual and reproductive health services and abortion counselling services, although I am unclear exactly how they will be remunerated in the future. Those GP services are very variable. Some GPs provide a superb service while others provide a very bad one. Some do not provide certain services at all so it is common for patients to go to clinics in their area which have been provided by the primary care trust.

Under the new health service, local authorities will commission and provide sexual and reproductive health services and abortion counselling services as well as HIV prevention services, but not the treatment, although I do not want to go into that now. They will be responsible for those sexual and reproductive health services. However, I am puzzled by the following matter. Currently, if a patient does not like their GP or finds that the GP does not provide the service they want, they can go to a local clinic. However, because of political or religious arguments within a local authority it may have made those services a very low priority, or perhaps does not provide them at all. It seems to me that there is nothing to compel local authorities to provide certain public health services. If a patient cannot get the relevant services from a GP or does not like them, and cannot go a local clinic because one is not available, can they go to a clinic in another local authority where they are not resident? This could be a problem for many patients all over the country, particularly young people who tend to go to different areas for their services where perhaps they are not known or the doctor does not know them. So I am very concerned.

Could the Minister please say how these services will be affected if no national tariff is set on public health services? How do we know that local authorities will not only provide services for sexual and reproductive health but accept people from other local authorities for treatment? It is a very important question for many people in this country.

[Earl Howe]

My Lords, I think that this debate has clearly demonstrated the importance of having a robust pricing system in the NHS. At a minimum, it must deliver sustainable reimbursement for efficient providers and promote value for taxpayers’ money. In addition, it must support the role of commissioners in securing continuous improvement for patients by strengthening incentives for providers to improve quality and efficiency.

Perhaps I could address one aspect of the opening speech made by the noble Baroness, Lady Thornton. She spoke rather disparagingly, I thought, about the Secretary of State palming issues off on to quangos. Listening to the noble Baroness, the Committee may get the impression that it is this Government who have created quangos for the first time. I make no apology for being part of a Government who believe that arm’s-length bodies can play a very valuable role in public services, especially when given the autonomy to deliver those services free of political micromanagement. The Government also believe that the number of such bodies has grown over recent years to an unsustainable level, and that is why the Bill abolishes a large number of them. So I gently urge the noble Baroness to stop complaining quite so much about quangos and remind herself that she was part of a Government who created a very large array of such bodies.

I begin by addressing the amendment tabled by the noble Baroness which proposes a delegated power for the Secretary of State to make regulations on commissioners regarding a duty as to continuous improvement. I am sure that we all agree with much of the apparent intention behind this amendment, first, that commissioners should act with a view to securing continuous improvement in the provision of services in terms of both quality and efficiency, and indeed in reducing inequalities; that is fundamental to their role. The second intention is that there is a role for regulations in ensuring that commissioning processes operate as means to this end; in other words, that tools such as service reviews, procurement and competition are used transparently and effectively to secure continuous improvement in the provision of services in the interests of patients. Our proposal is that such regulations would be made under Clause 71. They could be updated from time to time, subject to parliamentary resolution. While we would not disagree with some of the suggestions proposed under Amendment 277B—which, I recognise, has been carefully crafted—it may be a bit too detailed for the face of the Bill. In any event, we would want to consult publicly on these matters before putting firm proposals before Parliament.

The role of the pricing system is to underpin and enable continuous improvement—for example, by strengthening incentives for providers to adopt best-practice models of care, in line with commissioning priorities. The noble Baroness, Lady Murphy, was quite right in all that she said on that point. Furthermore, the payment by results programme, introduced by the previous Government, has gone a long way to strengthening pricing within the NHS. It has ensured that reimbursement better reflects the volume and complexity of patients treated, and it has helped to reduce transaction costs. However, a number of problems have been identified with this system over the last few years, including by the previous Administration. These problems have not yet been fully addressed, and we want to do so.

The problems are as follows. The methodology for setting prices is not transparent for either commissioners or providers. That makes the system unpredictable, and there is evidence of significant variations in the tariff from year to year. That undermines investment and innovation.

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[Baroness Gould of Potternewton]

The difference between sexual health and most of public health is that sexual health provision crosses local government boundaries, otherwise you will restrict any form of open access, which is absolutely essential in providing proper and effective treatment and care for people who need sexual health services. That has to be taken into account. Identifying sexual health provision just in terms of local government areas will make all the work that has been carried out over the past few years to provide better services disappear rapidly.

[Earl Howe]

My Lords, I appreciate those points and I was coming to some words of comfort for the noble Baroness. Not only could Monitor provide technical advice to Public Health England, provided that that was resourced and managed through the framework agreements and the memorandum of understanding between the two organisations, which would be a given, but Public Health England and local authorities could develop their own tariff, if that is what they wanted to do. I understand the noble Baroness’s concern about the underfunding of sexual health services and that the mandate may not set out enough on that score. Her amendment is clearly a way of ensuring that public health services—particularly this type of service—have an agreed cost attached to them that cannot be varied by local authorities, unless they adhere to the rules around variation. I understand all that. However, what the noble Baroness proposes would significantly increase the remit of Monitor and the NHS Commissioning Board and cut across the roles of local authorities and Public Health England. I will, of course, reflect on what she said, but there are probably mechanisms to deliver the kinds of objectives that she is aiming for.

Also on the subject of sexual health services, my noble friend Lady Tonge made some important points. I completely agree with the importance of the issue she raised. It would probably be best if she allowed me to write to her in response.

My noble friend Lord Clement-Jones proposed in his Amendment 292ZA that Monitor should include variations to prices for individuals who experience disadvantage or who have complex needs. While I am sympathetic to his intention, this is already provided for in the broad provisions in Clauses 114(4) and 117(1). In addition, the inclusion of “must” rather than “may” would not provide Monitor with flexibility on when to specify variations and rules.

I move on to the amendment of the noble Lord, Lord Davies of Stamford, who argued the case for competition on price, and I listened with interest to what he had to say. Let me explain what we are seeking to achieve. Overall, we want a system of fixed prices, set locally or nationally, that would ensure that competition was based on quality and patient choice, not on price. Only in specific circumstances could the prices determined by the tariff be varied. These flexibilities would not allow price competition but would rather, as I have indicated, prevent cherry-picking, allow innovation and secure continued access to services. Put simply, the flexibilities would be allowed only where the effect was to improve the efficiency or quality of services provided.

The Government made amendments to the Bill in another place to make clear that the tariff would not be a maximum price. That is vital to avoid perverse incentives for providers to cut costs at the expense of quality. That is entirely different from the competitive tendering scenario to which the noble Lord, Lord Davies, referred. In that scenario, whereby services would be outside the tariff, it is quite reasonable to evaluate bids in terms of best value, not the cheapest price. Guidance published by the previous Government made that clear. I think that we are closer together than perhaps the noble Lord appreciates, but I am grateful to him for what he said. However, he will know that it was the firm view of the NHS Future Forum that competition should be based essentially on quality rather than on price alone. There is of course a danger that we have a race to the bottom if we go too far down that road.

My noble friend Lord Clement-Jones in his Amendment 294M made some telling points. While I am sympathetic to some of them, I can reassure him that agreements for local modification of tariff prices under Clause 122 are intended not to introduce price competition but to sustain the provision of essential services. For example, a local modification may be necessary to sustain provision of A&E or maternity services in a less populated area. It would be inappropriate to remunerate all providers of an essential service at a modified tariff rate without assessing their circumstances on an individual basis.

The noble Baroness, Lady Finlay, in her Amendment 294BZA proposed that it be explicit that Monitor, in establishing the national tariff, have regard to differences in costs of patients incurred by providers and differences between services provided. Clause 116 makes clear that when developing the draft tariff for consultation, both the NHS Commissioning Board and Monitor should have regard to the differences in costs of patients incurred by providers and differences between services provided. However, that amendment raises a valid point around whether Monitor should have regard to these differences when publishing, as well as when drawing up, the national tariff. I can tell the noble Baroness that this issue will be given consideration to determine whether further clarity is necessary in this area.

I now return to Amendment 292ZA, tabled by my noble friend Lord Clement-Jones. He raised the issue of cherry-picking, which we define as something that occurs when providers undertake only the more simple interventions for less complex patients but are paid an inflated price, based on higher average costs. I hope that my noble friend would agree with that definition. Under the proposals in the Bill, Monitor would ensure that the price paid to providers was accurate and reflective of the services delivered. A comprehensive tariff with more reflective prices will prevent cherry-picking. In particular, Monitor and the board would need to consider among other factors the impact of variations in the range of services provided by different providers and the differing needs of the patients treated. My noble friend again asked why the Competition Commission should be used, and again my answer is similar to the one I gave him earlier. The commission is an expert independent body with experience in considering matters such as this—unlike the OFT.

I now turn to Amendment 294AA, tabled by the noble Lord, Lord Warner. It would duplicate what is already stated in this clause, whereby Monitor must send a notice to other persons as it considers appropriate, which may include other clinical groups. Clause 59(8) makes explicit that Monitor must obtain appropriate clinical advice to enable it effectively to discharge its functions. Clause 116(1)(c) provides that Monitor must notify other appropriate persons of the proposed national tariff, which may include other clinical groups. Monitor must publish its consultation containing the draft tariff.

As regards Amendment 294BA, the share of supply percentage that triggers a reference to the Competition Commission will be considered in secondary legislation and agreed through the affirmative resolution procedure. The share of supply percentage would ensure that providers of a service made up of only a few providers would still be able to object to a proposed national tariff and therefore trigger a reference for independent adjudication.