NHS: Competition

Baroness Thornton Excerpts

Monday 10th February 2014 Grand Committee

[Baroness Thornton (Lab)]

My Lords, I hope that the Minister is not feeling got at, and I am extremely pleased to note that the noble Baroness, Lady Brinton, will be speaking in the gap. I think that the lack of speakers in this debate bears out what we knew during the passage of the Bill—that this is a hellishly complicated matter. I wonder, indeed, where the noble Lords, Lord Clement-Jones and Lord Marks, and the noble Baroness, Lady Williams, are. I know that the noble Baroness, Lady Jolly, is here today, but she is now bound to support what the Minister has to say. Where are the noble Lords who helped to get the current competition regime through your Lordships’ House and on to the statute book two years ago, and why are they not here to explain how well they think it is working and that their support for it is therefore justified?

We know that people are fearful, as my noble friend has explained. They are fearful on the ground. They do not know how to express their worries, and often they realise too late that something precious has been undermined when the decisions their doctor is making may have something to do with Spire Healthcare or Richard Branson’s Virgin Care on the bottom line than what might be best for them—or that, at the least, those two things are being balanced against each other.

We know that competition comes in many flavours. Peer competition, as expressed by my noble friend, for clinical excellence is fine. Indeed, I have long championed the provision of social enterprises, and what value they can bring to some healthcare as being good for everyone concerned—not least the taxpayer because 5% to 10% is not being siphoned off into the pockets of shareholders across the world. That profit is being ploughed back into the social purpose of the provider and innovation. Indeed, we know that there has always been a mixed market in the provision of healthcare, and always as part of a planned process of provision.

Competition in various forms between NHS providers has been tried, as with the wide choice of acute providers for routine operations. As my noble friend has said, by 2010 the Labour Government had come to accept that there may be some occasions when an incumbent NHS provision could not be brought to the required standard and an open competition might be best. Tactical use of open competition could therefore be a tool. However, the Health and Social Care Act was always about competition as a strategy which essentially sees healthcare as a commodity and, essentially, Part 3 of the Act brings into play the ideas that have been used for the privatisation of utilities in the past. We went through this at length and, on this side of the House, we predicted what might happen.

The NHS has now tendered three-quarters of new contracts to competition. Section 75 regulations were made under the Health and Social Care Act in April last year. They appear to force competition on to the NHS in contravention of ministerial promises made during the stormy passage of the Act itself. At a critical juncture, the then Health Secretary Andrew Lansley wrote to the new local—as they became—clinical commissioning groups, telling them that,

“I know many of you have read that you will be forced to fragment services, or put services out to tender. This is absolutely not the case. It is a fundamental principle of the Bill that you as commissioners, not the Secretary of State and not regulators, should decide when and how competition should be used to serve your patients’ interests”.

He told the House of Commons:

“There is absolutely nothing in the Bill that promotes or permits the transfer of NHS activities to the private sector”.—[Official Report, Commons, 13/3/13; col. 169.]

Indeed, the noble Earl, Lord Howe, promised us here in your Lordships’ House:

“Clinicians will be free to commission services in the way they consider best. We intend to make it clear that commissioners will have a full range of options”.—[Official Report, 6/3/13; col. 1691.]

However, when the regulations emerged, there was a storm of protest. The noble Earl repeated:

“It has never been and is absolutely not the Government’s intention to make all NHS services subject to competitive tendering”.—[Official Report, 12/11/13; col. GC266.]

Can the Minister put a percentage on what he thinks is a reasonable amount to go out to tender and what he thinks is not a reasonable amount to do so?

Critics, including leading lawyers, say the redrafted regulations did no such thing; they did not fulfil the promise that the noble Earl had said that they would. They still enforced compulsory markets in the NHS, regardless of clinical or local wishes and in contravention of government promises. Indeed, my noble friend has given some examples.

In the debate on 24 April 2013, Liberal Democrat health spokesperson, the noble Lord, Lord Clement-Jones, told the House of Lords:

“Commissioners will not be forced to tender”.—[Official Report, 24/4/13; col. 1486.]

Indeed, the noble Earl backed him up, saying that,

“it is NHS commissioners and no one else who will decide whether, where and how competition in service provision should be introduced”.—[Official Report, 24/4/13; col. 1508.]

The noble Baroness, Lady Williams, told the Lords:

“We have learnt in the debates in this House to trust the noble Earl, Lord Howe”.—[Official Report, 24/4/13; col. 1496.]

Well this is a matter not of trust or otherwise, but of whether the Government’s course is the right one. We believe that the evidence now shows that, indeed, it is not. The proof of the pudding is in the eating, as my noble friend has said.

Is the Minister now prepared to release the Government’s legal advice on this matter, which has not been released so far despite requests from various people, including my noble friend Lord Hunt? Overall, the impact of the Health and Social Care Act has been negative, as it has deflected money and energy from clinical care into administration. We have seen the fears from CCGs around what Section 75 means. It appears to mean—certainly, this is what many CCGs understand—that almost every service has to be competitively tendered.

We have seen a CCG offering the biggest NHS contract in history, in Cambridge, and making a thorough mess of that process. We have seen claims by a CCG in Oxford to be leading on competition for outcomes, and, again, stalling when confronted by providers. My noble friend has also mentioned what has been happening in Blackpool, in relation to Spire. I would like the Minister’s comments on what has happened in Blackpool, and what he thinks are the implications of the Spire challenge, and Monitor’s support for it.

I also want to ask the noble Earl about the amount of money that has had to be spent in Bournemouth and Poole on the merging of the hospitals there. The merger seems to be completely justified on clinical grounds; however millions of pounds have been spent on lawyers and paperwork. This is one of the hospitals that already have a deficit: the merger is urgently needed. Does the noble Earl think that can be justified in today’s cash-strapped NHS?

We have heard from many people that they believe that the requirement for competition is hindering the need for integration and co-operation—as we said it would. The people who seem to be benefiting most from the new regulations and the new NHS, as structured by the Government, are competition lawyers. They are being allowed to call the shots, it would appear. Most of all, the vision expressed by Mr Lansley in 2006 for a regulated market for our healthcare seems to be losing its supporters and its driving force is gone. Indeed, rumours abound that the once-enthusiastic Liberal Democrat fellow travellers are now seeing the light. Much of what Mr Lansley wanted is being rolled back or ignored.

The problem is that the market requires no strategic direction because it has its own impetus, which is to make profits where they can best be made. The NHS needs a strategic direction. The Government, however, are incapable of delivering that strategic direction because in the passage of this Act they have given away the levers that would allow them to do so. They can make statements, they can make plans, they can pass strategies, but they no longer have the levers to be able to deliver them.

What does the future hold? Would the Minister speculate about what the next Conservative manifesto might offer the NHS? Noble Lords may remember that the Prime Minister promised that there would be no more tiresome, meddlesome top-down restructuring. That statement may have been wiped off the internet by the Conservative Party, but we remember it very well. What does the Conservative Party think that it might bring forward in its next manifesto? I finish by quoting what David Nicholson, the retiring head of NHS England, has said about this:

“We are bogged down in a morass of competition law. We have competition lawyers all over the place telling us what to do and causing enormous difficulty”.

He also said,

“All of [the politicians who drew up the Health and Social Care Act] wanted competition as a tool to improve quality for patients. That’s what they intended to happen, and we haven’t got that…”.

--- Later in debate ---

[Earl Howe]

The market, however, did exist, which was the point that I made. The market was out there well before the 2012 Act and well before this Government came to office. It was incumbent on us to clarify and simplify the rules that the previous Government put in place. We did that through Part 3 of the Act. It was not a signal to anybody to marketise the NHS. Indeed, as I said, we explicitly provided for it to be illegal for Ministers or Monitor to prefer the independent sector over public sector providers. That is explicit in the Act, so the noble Lord cannot accuse the Government of enabling legislation to promote marketisation.

[Baroness Thornton]

My noble friend’s question was actually about the signal. If, as the noble Earl has told us, all these things existed before the Act, why did we have to have Part 3 of the Act? Why was it necessary? The only reason that it seems to have been necessary—we think that the evidence now shows that to be the case—is that it increased marketisation in the NHS.

[Earl Howe]

Let me be clear. Repealing Part 3 of the Health and Social Care Act, which is what the noble Baroness appears to be suggesting is desirable, would not stop competition law applying. It would not remove the powers that the OFT has, which were introduced by the previous Government. It would just mean that a health expert regulator—Monitor—would not be the body considering the application of competition law to the NHS. I do not believe that that is in the best interests of patients. That provision was widely welcomed by those who understood these matters.

I was asked about the case involving Blackpool and Spire. It would not be appropriate for me to comment on an ongoing investigation by the independent regulator but I stress that, in considering this case, Monitor is doing nothing that the Co-operation and Competition Panel could not have done under the principles and rules for co-operation and competition. As regards the Greater Manchester proposals which the noble Lord, Lord Hunt, raised, I can inform him that Monitor has closed that case and NHS England is pursuing its procurement of these services.

The noble Baroness, Lady Thornton, asked about Bournemouth and Poole. I want to be clear that there is nothing to stop two providers coming together if it is in the best interest of patients. The OFT has already cleared two out of three mergers. However, while in some places mergers have improved things for patients, there is evidence that some mergers can be costly and may not deliver the benefits that were intended. It is therefore right that these are examined. The competition authorities have listened to concerns raised in the system. That is why, in October last year, they set out their commitment to work together with Monitor to ensure that the interests of patients are always at the heart of the merger review process; that the process works quickly and predictably; and, importantly, that any costs can be minimised.

Monitor will take a more active role in supporting merging parties and advising the OFT. This means that some mergers may not need to go to the competition authorities at all, and that those which do can be dealt with more quickly. For example, the proposed merger involving Torbay and Southern Devon Health and Care NHS Trust—an integration pioneer—and the South Devon Healthcare NHS Foundation Trust is one of the first cases in which, with the help of Monitor, the trusts have been able to self-assess and conclude that they do not need to notify the merger to the OFT, as it would be unlikely to raise concerns from a competition perspective.

The noble Lord, Lord Turnberg, challenged me on the evidence for the value of competition. There is robust evidence, as I have already mentioned. A report of January 2012 by the Office of Health Economics states that,

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

Researchers at the London School of Economics have found that hospitals in areas where patients have more choice of provider have shorter lengths of stay in hospital and lower death rates than in less competitive markets. Research by York University found an increase in quality at a hospital stimulated local rivals to respond, as well as to increase the quality of their services. The research found improvements in relation to mortality rates, stroke readmission and patient satisfaction.

There are various other answers that I would like to give, but I have been advised that I am well over time, for which I apologise. I simply conclude by saying that this has been, as ever, a stimulating debate on a topic to which I am sure we will return in coming months. I hope that my comments today have at least partially clarified the legal position and wholly clarified our intentions regarding the place of competition in the NHS. I hope, too, that they have provided some measure of reassurance to noble Lords that the system is acting upon the concerns that it hears.