Health and Social Care Bill

Lord Clement-Jones Excerpts

Tuesday 13th December 2011 Lords Chamber

[Earl Howe]

What the noble Baroness says it quite right. It would be open to a future Secretary of State to extend the period under which Monitor retained that role. My purpose at the moment is to set out the Government’s position. I am sure we can come on to debate these things, if the noble Baroness will allow, but it is important for the Committee to have the Government’s prospectus in their minds.

The remit of Monitor would be expanded to cover all NHS-funded healthcare providers. This approach ensures that Monitor and everything that it does is governed by a single, coherent legal framework and that all its functions are bound together by a single, overarching statutory duty—the one that I read out. For that reason, I would counsel noble Lords to resist amendments that may seek to achieve similar aims, but do so by retaining a separate legal framework for regulation of foundation trusts.

Many people have sought to portray the new role for Monitor as some sort of mighty club-wielding behemoth, dictating to commissioners how NHS resources should be spent. This is not the case. Monitor’s role, as set out in Part 3, is intended to support and complement the role of commissioners, as set out in Part 2. Our aim is to empower those commissioners—GPs and other clinicians—to take the lead, arranging access to services to meet their patients’ needs and stimulating innovation and improvement. Commissioners will have various tools at their disposal to do this. They will need to decide how to use co-operation, integration and competition to improve quality or efficiency or reduce inequalities.

In that context, the appropriate role for Monitor would be to support commissioners by enabling integration and where competition is used, ensuring that this operates effectively. Monitor’s role is not—I repeat, not—to impose competition from above. Competition is not now and will not be an end in itself.

Our strategy for improving the provision of NHS services is firmly based on the principle of autonomy and accountability for providers. Building on this, we have proposed functions for Monitor that aim to strengthen incentives for providers to improve, rather than simply relying on the ability for Monitor to set and enforce rules. Promoting competition is part of this, but again the context of promoting is quite different from the idea of driving competition through top-down controls. It will not do that, and it would not be effective even if it did.

What has struck me, looking at these amendments, is that, while there are clear differences between some noble Lords and the Government, I also feel that there is a significant consensus emerging. I want to reiterate that the Government are always willing to listen to how the Bill could be improved. I have listened to the points made by the noble Baroness, Lady Thornton, but I have also studied very closely the amendments tabled by other noble Lords, particularly my noble friends Lady Jolly, Lord Clement-Jones, Lady Williams and Lord Marks, as well as the noble Lord, Lord Whitty and the noble Baroness, Lady Murphy.

I am sympathetic to a number of the concerns raised by noble Lords, which we shall hear about. I would like to highlight four at this point. The first is the Secretary of State’s ability to specify matters that Monitor must take into account. I am sympathetic to noble Lords’ concerns that we should clarify the mechanisms by which this can happen. The second is the conflicts between Monitor’s functions. It has always been our intention that Monitor should take responsibility for making appropriate arrangements within its organisation to avoid potential conflicts. However, I will explore this further with Monitor in time to provide greater clarity and reassurance before Report stage. The third area is failures to co-operate. Again, I am sympathetic to noble Lords’ concerns that Monitor should have the ability to address abuses and protect patients’ interests. We believe that the safeguards in the Bill already achieve this aim, but we will look to ensure that Monitor is properly equipped to enforce this. The final issue is reviews by the Competition Commission, where I sympathise with noble Lords’ concerns that the provisions as drafted may not yet fully reflect the revisions to Monitor’s role that were introduced in response to the NHS Future Forum.

That is all that I propose to say for now. I hope that it has been helpful for me to speak early in this debate to give some additional clarity to the Government’s intentions in this vital area of the Bill.

[Lord Clement-Jones]

My Lords, I very much appreciate the opening speeches from both sides on this group of amendments. I particularly recognise that the noble Baroness, Lady Thornton, has put a great deal of care and consideration into the amendments that she has tabled and they represent a huge amount of work, particularly without the benefit of a Bill team. It is also clear from both speeches that now is the moment to start the debate about the application of EU and domestic competition law to the NHS.

The Bill contains a number of measures that could increase competition within the NHS at the expense of collaboration and integration and which, in my view and that of many of my noble friends, increase the risk that UK competition law will apply as if healthcare were a utility like gas or telecoms. Amendment 288G is the first of a number of amendments tabled by me and my noble friends seeking to minimise that risk.

I am not against competition in the NHS—I suspect that very few of us are—but it must be where it is appropriate. It is not appropriate in all circumstances. Public and patient benefit can often be secured in other ways. We have discussed integration of services throughout the Committee as an alternative and as a complement to competition. Having a balance and choosing the appropriate mechanism that is best for patients is what the debate about Monitor’s powers has focused on to date.

I accept that EU competition law has had some application within the health service for some years now. However, along with many others, I do not want to see EU competition law apply universally across the health service so that our commissioners and providers are required to operate a market-based NHS, red in tooth and claw, without being able to choose where it should apply and where it should not. In my view and that of my noble friends, the risk, for reasons that I shall explain, 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, first, potential deregulation of FTs from 1 April 2016, in terms of Monitor no longer having the power to set special conditions under Clause 109 for foundation trusts. That is what Amendment 288G is designed to address. The stand part debates for Clauses 110 to 112, which I support, are also relevant.

Secondly, there are so many new areas where the Competition Commission is deployed. There is the role where Monitor has given notice to include a special condition in a licence in determining whether the matters subject to the proposed condition are potentially contrary to the public interest and whether the special condition provides a remedy. That is Clause 99. There is also its role 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. That is Clause 76. Its role where there are objections in setting the method of setting prices for the national tariff by Monitor is in Clauses 118 onwards. Finally, there is oversight of foundation trust mergers as a result of the application Part 3 of the Enterprise Act.

Thirdly, after the potential deregulation of foundation trusts and the role of the Competition Commission, there is the lifting of the private patient income cap for foundation hospitals, in Clauses 161 and 162, which opens the way for some foundation trusts to derive the majority of their income from private patients. In that context, I am very pleased to see Amendment 299ZA, tabled by the noble Earl.

If EU competition law were to apply in an unrestrained manner across the NHS, private sector companies that bid unsuccessfully for NHS contracts could make a European competition complaint and challenge commissioning decisions in the courts, and/or the status of foundation hospitals, undermining the mainstream of the NHS in the delivery of services such as intensive care units, A&E, emergency cover, teaching, training and research. The number of such complaints across the EU has increased over recent years.

It was, of course, to minimise the risk of the unrestrained application of EU competition rules that the rules of co-operation and competition and the Co-operation and Competition Panel were devised in 2008. But this Bill, on the face of it, goes much further in encouraging competition. There is a view that the incorporation of those rules in statute is yet another reason to believe that the NHS is at risk in this way.

The applicability of domestic and European competition law to an NHS body, whether commissioner or provider, essentially turns on whether it is an undertaking for the purposes of competition law. Only a grievance between undertakings and abuses committed by dominant undertakings are within the scope of the Competition Act 1998 and Articles 101 and 102 of the Treaty on the Functioning of the European Union. There is, in fact, no definition of the term, “undertaking”, in domestic or European legislation, so the scope of the term has been developed and considered through case law of the domestic and European courts.

I do not propose to give your Lordships a legal lecture—I do not believe I would be able to—but briefly, there are two cases in particular that are of some importance. The question of whether an NHS trust is an undertaking for the purposes competition law was considered by the Competition Appeals Tribunal in the case of BetterCare Group Ltd in 2002. BetterCare was a UK provider of residential and nursing home care, which complained to the OFT that the North and West Belfast Health and Social Services Trust, acting as a purchaser of nursing and residential care home services, was abusing its dominant market position in Belfast. The OFT rejected the complaint on the basis that the trust was not an undertaking for the purposes of competition law. On appeal of the OFT’s decision by BetterCare, the Competition Appeals Tribunal determined that the trust was acting as an undertaking both in the purchasing of services from BetterCare and in the direct provision of elderly care by its own statutory home. This was for various reasons, but of particular importance in the current context, is that in providing care through its own homes, the trust was also a participant in a market for residential care, alongside independent providers, and the trust was in a position to generate the effects that the competition rules seek to prevent.

In FENIN, a case brought by an association of companies involved in the marketing of medical goods used in Spanish hospitals, the European Court of First Instance in 2003 upheld a decision by the European Commission rejecting a complaint alleging abuse of a dominant position by 26 bodies or organisations, including three Ministries of the Spanish Government, which run the Spanish national health system. The Commission had rejected the complaint on the grounds that these bodies were not acting as undertakings in their dealings with suppliers. The Court of First Instance considered that where an organisation purchased goods not for the purpose of offering goods and services as part of an economic activity but in order to use them in the context of a different activity, such as one of a purely social nature, it does not act as an undertaking simply because it is a purchaser of those goods.

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[Earl Howe]

Monitor would ask itself: is the arrangement we are looking at for, let us say, an A&E department that had no competition for miles around, anti-competitive? The answer might well be no, it is not. As I said earlier, the very fact that there is no competition to a service does not mean that it is anti-competitive. Monitor will make a judgment on whether the service is operating in the interests of patients. However, I think that we are getting into an area where it would be beneficial to have a letter from me setting out exactly how the law is applied and by whom.

[Lord Clement-Jones]

I apologise for interrupting the noble Earl. However, to guide the letter, I want to point out that one of the key things is economic activity by the foundation trust concerned. Whether it is engaging in economic activity will, to some degree, be predicated by the behaviour of the decision of the NHS Commissioning Board and the CCGs on whether it is appropriate that there should be a market in particular services from the provider. That gets another actor, or actors, into the equation. This is one of the matters that concerns many of us, because it means that it will be possible in the future, even where no competition currently exists, for competition to be introduced and therefore for Monitor effectively, legally, to have to treat foundation trusts as undertakings.

[Earl Howe]

My noble friend speaks with great expertise. It would be helpful if I could cover that point when I write, as he suggests.

The noble Baroness has indicated that it would be better to retain the Co-operation and Competition Panel as a separate body. I am very clear that the noble Lord, Lord Carter, and his team have done an excellent job within the Co-operation and Competition Panel since it began its work in 2009. The panel has published important reports on NHS consultants and patient choice; their specific investigations have resulted in direct benefits to patients, such as improved access to primary care in the Kingston-upon-Thames area—that is one that I know of. However, I would not advocate retaining the Co-operation and Competition Panel as a separate organisation, because that would result, in my view, in unnecessary fragmentation and, indeed, duplication. The arrangement we have at the moment has resulted in undue delays and duplication of resources, as the decision-makers have inevitably sought to review the panel’s investigations before taking any action. My noble friend Lord Newton highlighted that issue once again. I have examples in my brief which replicate his experience. Those delays caused unnecessary uncertainty for the NHS organisations involved and their patients. I emphasise again that our proposals would address this by integrating the advisory role of the Co-operation and Competition Panel as a distinct identity within Monitor.

The noble Baroness, Lady Meacher, spoke of the searing experience of Mid Staffs. Of course, we all recognise that the problems of Mid Staffs must be looked into carefully. That is going on at the moment and I am not able to say too much for obvious reasons. But the problems at Mid Staffs, as she will be aware, predated its becoming a foundation trust. After authorisation, its governors were new and fairly inexperienced. Learning from what happened, I am confident in saying that quality now plays a critical role in the authorisation process for new foundation trusts. The governance of foundation trusts in which they are accountable to representatives of the public and staff should help organisations to listen and act on feedback. The events at Mid Staffs demonstrated the importance of having strong, transparent and accountable governance arrangements for the safe and effective operation of the trust. The changes we are making should provide greater accountability to the public and staff and increased transparency so that they can better challenge and scrutinise the delivery of local healthcare provision.

My noble friend Lord Clement-Jones asked what would stop Ministers creating new markets. I hope noble Lords will agree that it must surely be right for doctors and health professionals to want to do the best for their patients. Under this Bill, it would be for commissioners to decide if, when and how to use competition as a means to an end in improving services for patients. The Secretary of State would not have the power to direct commissioners on these matters and the Bill expressly prohibits the Secretary of State exercising his powers to make regulations on commissioning or in setting a mandate to increase market shares for private providers. My noble friend Lord Clement-Jones cited the BetterCare and FENIN cases as an example of how NHS commissioners might act as undertakings. As we have previously made clear, the Government’s view is that the NHS Commissioning Board and CCGs will not be undertakings. Unlike in the BetterCare case, neither the board nor the CCGs will be able to provide services. They will only be responsible for commissioning services for the NHS, which will not be an economic activity for the purposes of competition law.

[Lord Clement-Jones]

My Lords, I apologise. I expressly said that the concerns were not surrounding commissioning but around provision.

[Earl Howe]

That is helpful. My noble friend and I are clearly in agreement. I apologise if I imputed any different views to him.

The noble Baroness, Lady Armstrong, indicated that she felt that the oversight powers for foundation trusts should be retained. As the regulator of all providers of NHS-funded services, Monitor will continue regulating foundation trusts under this Bill. These would be enduring functions, not transitional. I hope the noble Baroness is reassured by that. What would be transitional, however, is Monitor’s power to remove foundation trust boards and board members. That is what Clauses 109 to 112 provide for until 2016, although the Secretary of State would be able to extend the transition period by order, as I indicated earlier, if he or she considered it necessary.

My noble friend Lord Ribeiro sought assurances that all providers will work on a level playing field. I am happy to assure him that all providers will indeed be required to meet the same quality standards for the same procedures. Before being qualified, providers will be required to demonstrate that they can meet those quality standards and Monitor will set fair prices for all providers. Competition, as I have said on previous occasions, will be on quality and not on price. If my noble friend will allow, I shall write to him in some detail with answers to his specific questions, which of course were extremely pertinent. I will copy the letter to all noble Lords who have spoken in this debate.

The noble Baroness, Lady Armstrong, also said that the Secretary of State should not raid the budgets of successful foundation trusts. I can assure her that this Bill would not enable the Secretary of State to direct individual foundation trusts or to raid foundation trust budgets, which she has rightly cautioned against. She said that there was a need to ensure that the new system should allow care to be shifted out of hospital. I share her view on that. It is essential that the new system enables more care to be shifted out of hospital into people’s homes and communities. This will require strong commissioning, and that is a key point made by the King’s Fund.

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[Earl Howe]

Once again, the word “micromanagement” springs to mind. We want to get away from the Secretary of State micromanaging the health service. On the other hand, we think it is perfectly right and proper for the Secretary of State, on behalf of voters, patients and Parliament, to set broad objectives for the NHS, such as the NHS outcomes framework. That document has been very well thought out by clinicians led by Sir Bruce Keogh in the department and has, I believe, commanded universal approval. Surely this is the territory that the Secretary of State should be on: to drive up the quality of care and the performance of the NHS, but not to micromanage.

I recognise that there are fundamental fears that this Bill would increase the role of competition in the NHS and take us down the road to privatisation. I need to be clear that it is not the intention of this Bill, and I do not believe that it is the effect of this Bill, to privatise the NHS. The Bill reaffirms that the NHS will always be there for everyone who needs it, funded from general taxation and free at the point of use. Extending choice and increasing competition is not about privatisation. We want patients to be able to choose to receive their care from the highest-quality providers. Competition in services, where it is introduced, should only be introduced when commissioners genuinely and for good reasons believe that it will benefit patients and the quality of their care. Should we allow this to happen without any check that it is happening legally and properly? Our answer is no; it needs to be overseen fairly and apolitically by a sector-specific regulator with the interests of patients as its core duty.

As with other parts of the Bill, I am more than willing to enter into discussion with noble Lords on Part 3, and I have already indicated that I am sympathetic to some of the key concerns which these amendments raise. With that in mind, I hope that we can move on and debate different issues arising from this part of the Bill and that noble Lords will feel content for the time being not to press the amendments.

[Lord Clement-Jones]

The noble Earl said himself that we are clearly in slightly—very—uncharted territory here, and referred of course to the OFT guidance. It is largely a re-run of the 2004 OFT guidance. It is slightly clearer because the case law is slightly more developed, but not a great deal more. We are in the area of assessing risk in terms of the application of EU competition law, domestic competition law and so on. Therefore, in these circumstances, we need the best advice. As I said earlier in my remarks, it is not so much a matter of the department asserting that such-and-such is the case but of having the benefit of some outside, independent legal advice—not that I am promoting the barrister’s profession, being a solicitor. Somebody well versed in competition law should be asked to advise on the risks that I set out at some length earlier today, otherwise we will struggle on with assertion and counter-assertion.

[Earl Howe]

My Lords, my noble friend’s speech earlier in the debate will repay careful study. I intend to be one of those studying it and will certainly take his proposals forward.

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[Baroness Williams of Crosby]

I would like to address just one of the amendments in this group, which is in my name and that of my noble friend Lord Marks of Henley-on-Thames. Unfortunately my noble friend has been taken ill and is unable to be here. He extends his profound apologies to the Committee.

This amendment is significant in strengthening the general approach towards competition under Section 3 of the Bill, by making it quite plain that the requirements that have to be met, which we will come to in Part 4, must also apply to licence holders. I am in a slight difficulty, as my noble friend Lord Howe will appreciate, as the Government have tabled amendments on aspects of foundations trusts which will arise at a later stage in the Bill, particularly under Clause 161, which are related to the amendment to which I am now speaking. I will therefore do my best to navigate around Clause 161 in so far as I can. However, I may have to make limited reference to it in order to make clear what my own amendment is about. My own amendment is essentially one that would support, and indeed further improve, the proposals put forward in this particular amendment. They should therefore be read together with Clause 161 and Amendments 299ZA and 299AZA in the name of the Government.

We want to make two requirements as a fundamental part of the requirements that licence holders have to meet. We appreciate that, in many ways, the licence-holding requirements are fundamental to the way in which the Bill operates, because it must be the case that providers are brought within the general structure of the Bill itself. Our amendment makes two particular points about that. The first is that the revenue from private patients, as a percentage of the licence holder’s total revenue, must be kept below 50 per cent. Secondly, and at least as importantly, the number of private patients in a foundation trust hospital must also be kept below that proportion.

The main point of this amendment—I think that it is an important one—is again to establish that we are looking at foundation trusts that are part of the provision under the NHS and that a minority of both income and patient numbers would be required for any provision made. We hope, as I think the noble Baroness said, that this set of requirements continues well beyond 2016 as part of the structure of the relationship of foundations trusts to the health services, and that this is therefore not standing alone but a crucial part of the whole strategy.

If the noble Lord, Lord Owen, were in his place, I would say that if this is not the rail track of the French railways, it is at least the rolling stock, and we need both to have an effective railway service. However, I wanted to say one other thing. The first part of the amendment tabled this morning by the noble Earl, Lord Howe, goes a very long way. We will talk about this in more detail later so I shall only sketch it out now, given the time. I think that the first part of the amendment, with regard to income—and indeed the requirement that income must exceed the costs of providing that income, and that it must be used for the purposes of patients within the health services—is a very full and useful advance. It is very close to the phrasing of the 2006 Act, which is a point that I am sure will come across to the noble Baroness, Lady Thornton, and her colleagues, but with the additional wording that makes it, if anything, even stronger.

The noble Earl, Lord Howe, will know from discussions which I and my colleagues have had with him that we would want to see this supplemented, if possible, by a reference to the proportion of patients in foundation trust hospitals. Quite broadly, that is something the public can understand, whereas references to quite complicated percentages of income, although equally important—if not more so—are perhaps less transparent and less apparent.

I will not pursue further the new amendments beyond welcoming them, but I want to advance this particular, although limited, amendment as thoroughly as I can, as I think it would ensure that licence holders were held to the same kind of requirements that we are imposing upon Monitor, the national Commissioning Board and the CCGs. It must be the case that this should be a common approach across the front.

[Lord Clement-Jones]

My Lords, I shall be brief. I wish to speak to Amendments 281A and 288ZA, to support my noble friend on Amendment 287EA and to speak to Amendment 287A.

Amendments 281A and 288ZA deal with what are clearly major decisions that will be made by Monitor. The first is the exemption from licensing, which requires notice to be given, and the second deals similarly with the particular standard licence conditions that may be modified. Currently the Bill provides for 28 days’ notice to be given, but these are major issues, and although this is a probing amendment, I hope that the Minister will be able to give a good explanation as to why this period should be so short. Obviously one does not want to have undue delays, but there are quite a number of stakeholders who are bound to be involved in this and it does look rather like a rushed job. So this amendment provides for 90 days to be the standard term for notice to be given.

I move on to Amendment 287A. This amendment simply permits—indeed, requires—the insertion of a standard condition in the licence that the licence holder should,

“abide by the seven general principles of public life set out in the First Report of the Committee on Standards in Public Life”—

the so-called Nolan principles—and requires,

“the declaration of any financial interest the licence holder may have in a commissioning decision by a clinical commissioning group”.

Nowadays that is increasingly standard. I will not prolong the debate, as we have already had considerable discussion in the course of this Bill about conflicts of interest and the need for transparency in these circumstances. However, I would have thought that licence holders, who essentially will be providers across the whole service, should be under a heavy duty of transparency in order to ensure that they do not have a conflict of interest.

Coming to Amendment 287EA, my noble friend Lady Williams has eloquently set out the issues. What is really required in these circumstances is for the Minister to rebut the presumption that we not only need a provision about the actual total revenue, but also about the number of patients actually treated by a provider. This provision is a belt and braces against the provisions of EU competition law. It is extremely well drafted. I take no credit at all for that, it is my noble friend Lord Marks at work here. We will be discussing the Minister’s very welcome amendment later, but it does not contain the second limb of this particular amendment. It would be useful if the Minister could address this in due course, whether under this group or in the later group, as I recognise the difficulty that my noble friend Lady Williams has also recognised, that this is not grouped with Amendment 299A and probably should be.