Health and Social Care (Re-committed) Bill

John Pugh Excerpts

Tuesday 6th September 2011 Commons Chamber

[Frank Dobson]

No, I will not.

I believe that the national health service is popular for two reasons: because, in most parts of the country and for most of the time, it does a good job for people; and because people value the thought that it not only looks after them but looks after their families, looks after their neighbours, and looks after all of us. I believe that, in many ways, that is its most important function.

We live at a time when everyone is filled with growing concern about the divisive elements in our society, and the national health service, along with the feeling that people have for it as a collaborative organisation, is one of the few exceptions to that. The health service does not just bind the wounds of people in this country, but helps to bind us together. That, I believe, is why it is so dangerous that the Government are going against its basic principles, thus risking not only its performance, but its relationship with us and its binding function in our increasingly divided society.

[John Pugh (Southport) (LD)]

I wish to speak to my amendments 1219 and 1220, and against amendment 10. The House is right to be sceptical about the blessings of the internal market in health. It is right to be worried about price competition, which everyone thinks is a race to the bottom. It is right to be concerned about the reckless extension of “any willing provider”, and it is correct in fearing that health services will be increasingly exposed to competition law, including EU competition law. It should fear the huge transactional costs that will be incurred in the hardening of the commissioner-provider split. It should fear the threat to integration, and it should fear cherry-picking, particularly in a narrow tariff system based on payment by results. It should also fear the blurring of the difference between public and private hospitals, and the financial incentives given to the private sector under the banner of choice.

That is why I dislike the greater part of what Tony Blair did to the NHS. Those who are now Opposition Members voted for all that, and that is where we are now: it is the default position. As one Opposition Member said, Labour has put all the bricks in place. A few moments ago we witnessed the strange anomaly of the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) complaining about a feature of foundation trusts—their ability to borrow on the private market—which I consider to be a direct consequence of Labour legislation.

The choice for the House is not between Aneurin Bevan’s NHS and the Bill, but between Blair’s NHS and Secretary of State’s version. If I were to sum it up neatly, I would say that the Secretary of State’s version most closely resembled Blairism with clearer and more equitable rules. First, there is an overt sector regulator instead of the powerful covert regulating body, the Co-operation and Competition Panel, which has been making all the decisions that Monitor will make in a more overt way. Secondly, there is the outlawing of subsidy to the private sector, which is perfectly possible: the Secretary of State is not minded to take such action at present, but current legislation does not prohibit him from doing so. Thirdly, as Members must acknowledge, the Bill makes a clear attempt to forfend cherry-picking and protect clinical networks by safeguarding integrated provision. It is possible to have an argument about how well that is done, but there is certainly an explicit intention to do it—as, to be fair, there was in some of the activities of the CCP, although in that instance the constraints were somewhat weaker.

Fourthly, since the pause a clear attempt has been made to ensure that Monitor merely regulates, without performing a strategic role in promoting much except the interests of patients. It functions as a regulator and adjudicator on what it is intended to do, rather than occupying an unaccountable strategic role in promoting competition. Clearly much will depend on the mandate that it continues to be given and on its personnel: that will vary over time, and we should be watchful in that regard.

I recently had the benefit—as I think other Members have, too—of the legal advice of 38 Degrees, which is in danger of rapidly becoming the provisional wing of the “Evan Harris organisation.” I carefully read what Mr Roderick said, and I would like to share the details of his comments with the House. He says:

“contracting out services to the private sector is anything but a novel proposition in the NHS”

and

“the government has for some years rolled out the policy of Any Qualified Provider”.

Presumably, that is a reference to the previous Government, not the current one.

Mr Roderick also says:

“the application of procurement law is not by any means new to the NHS”.

Referring again to Labour party principles, he says:

“the current internal Principles and Rules for Cooperation and Competition”—

which were set up by Labour—

“seek to inject…promotion of choice and competition principles into the operation of the NHS”.

On the thorny subject of the definition of “undertaking”, which we debated ad nauseam in Committee, he has this to say:

“The NHS has already developed a structure whereby it is more likely than not that NHS Trusts are undertakings for the purposes of competition”.

Mr Roderick is often cited by Labour Members as representing independent legal advice, but that is what he says. He concludes by saying that Labour’s

“recent reforms…have done much to alter”

the basic

“landscape, even in the absence of legislative change.”

As we have both commissioning and a mixed economy—people are not saying that we ought not to have such an economy—there is a chance that there will be challenges from disappointed providers, and we must try to understand how that would go. In terms of EU law it does not matter how many providers there are out there, as even one will do, and it does not even have to be in the UK. The law can be applied in such circumstances. If these issues are to be taken up by providers who are disappointed in one context or another, it is better for that to be handled by a sector regulator such as Monitor than by the Office of Fair Trading, which would be the default situation.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I have been listening carefully to the hon. Gentleman’s contribution. He has been talking a lot about Labour party principles—but I wondered about Liberal Democrat principles, and whether he feels completely relaxed about the opening up of the NHS to privatisation.

[John Pugh]

Perhaps the hon. Lady has not understood the point that I was making. Her own Government were responsible for the opening up that she talks about and fears, and most Labour Members voted for it. I did not vote for foundation trusts, nor did many of my party colleagues. Clearly Labour Members did, however, and we will return to that.

It is a fair point to say that if we have Monitor, that does not take us out of the whole legal web, as it cannot stop other legal processes, or a disappointed provider going further. However, it dramatically lessens the impact, and dramatically reduces the probability of that happening. We can only escape this legal web effectively if we take Mr Roderick’s advice and re-examine each and every element and characteristic of the NHS structure—or, to put it simply, if we reverse Blairism.

--- Later in debate ---

[John Pugh]

Is there not a big difference between making fundamental decisions, as we accept Monitor will sometimes have to do, and what the hon. Lady has just described, which is about taking the lead in the integration and sourcing out of services, which presumably is what the commissioners do? If she has read the other bits of the Bill, as I am sure she has thoroughly, she will be aware that the commissioners have a pivotal role in determining the shape, structure and character of local services.

[Liz Kendall]

I should add that, as the hon. Gentleman will see, page 6 of the briefing notes that the Government published on the Bill says that clause 104 would

“give Monitor discretion in determining where it is appropriate to include standard licence conditions for the purposes of securing continuity of services”.

As the NHS Confederation asks, how will Monitor have the local information and intelligence to make such complex judgments? How should patients and the public be involved? Monitor then has to keep the level of risk of the service under review, as well as taking decisions about whether and how to set differential prices for providers, to ensure the continuity of the process. How it is supposed to do that and how Members of this House, patients, the public or local councils are meant to hold it to account for that process is far from clear.

My biggest concern about the proposals is that they leave Monitor to intervene proactively to prevent services from reaching the point of failure. None of us wants such an outcome, but it is completely unclear when or how Monitor would do that. Page 10 of the technical annexe to the proposals said that the Government would

“expect Monitor to establish transparent and objective tests to determine when intervention is necessary and what level of support a provider would require”,

and claims that

“This would provide certainty to patients and providers”.

However, we have seen none of those details, and nor do we have any way of changing or influencing what Monitor does about the process, which is a real issue for hon. Members. Even under this Government’s flawed approach, it is astonishing that they say that they would only “expect” Monitor to publish criteria for early intervention. Why is that not in the legislation? Why is Monitor not required to publish and widely consult?

I want briefly to set out a couple of other concerns about the process. If it ends up not being possible to prevent a service from failing, what happens next? A trust special administrator will be appointed to take control of the hospital and report to Monitor and then to the Secretary of State. However, there is nothing in the legislation to say that local clinicians, let alone locally elected representatives, have to agree or sign off such proposals. Indeed, page 15 of the technical annexe says that “where possible”, the trust special administrator should

“secure agreement from clinical senates and clinical advisers”.

The idea is that clinicians would not be required to sign off the decision—the trust special administrator might also consult the health and wellbeing board, for example—about which I know many Government and Opposition Members have been concerned. There is nothing in the proposals to say that Monitor has to look at the impact of decisions in one part of a hospital or service on either the rest of the hospital or the wider health community. With the abolition of strategic health authorities, which take that regional view, that becomes a real concern.

The reason these proposals are so important is that there is a risk that there will be more failing services in future, and not only because of the financial squeeze that the NHS is facing—many hon. Members have talked about the real issue out there, which is that services are struggling to keep going, experiencing problems in balancing books and keeping on NHS staff—but as a direct result of Government policy to drive a full market into every part of the service, albeit without any ability to manage the consequences. In fact, the Government’s own documents make it clear that that is the point of competition. Paragraph B112 of the explanatory notes to the Bill states:

“For competition to work effectively, less effective providers must be able to…exit the market entirely”.

The Secretary of State likes to try to explain his way out of this system, but he cannot have it both ways. Either he wants that—for services to fail and new providers to be brought into the system—or he does not.

--- Later in debate ---

[Caroline Lucas]

New clauses 19 and 22 also have my name on them, and I should like to say a few more words in support of them as I have not been reassured by the Minister. I find it unacceptable that taxpayers’ money has ever been used to allow private patients to jump the queue and use NHS facilities. The history of the cap was all very interesting, but the bottom line is that it serves an important purpose, which is why it should stay. The Government argue that income from private patients is put back into the NHS and ultimately benefits the health service, but the reality is that when people become ill and need treatment, it is hard to justify asking them to wait longer because capacity in our NHS hospitals is being taken up by private patients. The bottom line is that an NHS hospital has to treat NHS patients, and I do not believe that we have adequate spare capacity sloshing about in the system to justify private queue-jumping.

Some Members will recall that foundation trusts were brought in after Alan Milburn visited the state-owned but privately run Fundación hospital in Madrid. The then Health Secretary was apparently impressed when he was told that the foundation hospital outperformed the Government-controlled hospitals. However, he ignored the argument put forward by the local unions that it was able to do so precisely because the more costly and difficult patients were sent to the fully public hospital nearby.

It is often argued that foundation trusts are about choice, but I would argue that such private treatment should be offered only when there is surplus provision in the system. It is one thing to talk about a choice of general goods and services, but it is enormously inefficient and massively costly to apply that mentality to the health service. Now, we see the present Government trying to use the model introduced by the previous one to allow foundation trusts to do as they please, and lifting the cap on the income that can be derived from private sources.

The hundreds of constituents who are contacting me about this do not want private queue-jumping; they want NHS services paid for from taxation. The future of the NHS should be about developing whole systems, not isolated institutions, and private health care in the NHS should be phased out. The NHS needs to be about building networks across professional and institutional boundaries, not about creating new barriers. It needs to be about IT and information sharing, not reducing connectivity, and about getting more people treated in the community and in primary care. The danger with this Bill is that it will do exactly the opposite and return us to the fragmentation of the time before the NHS.

[John Pugh]

I supported the amendment tabled by the hon. Member for Islington South and Finsbury (Emily Thornberry)—or, rather, I tabled it independently. I accepted at the time that it was not the most elegant way of dealing with the problem, but I recognise that there is a problem, as do foundation trusts. The cap as it stands has certain perverse consequences, and the NHS cannot fully profit from sources such as intellectual property. NHS profits help to subsidise public services. As the Minister has pointed out, there is no cap on non-foundation trusts, and the current format was to some extent a political compromise because Labour Members raised certain considerations during the passage of the legislation on foundation hospitals. That does not mean that their concerns were not valid at the time.

I am not concerned by the prospect of dramatic privatisation overnight; nor do I think that queue-jumping is the real danger. By abolishing the cap altogether, however, we run the risk that foundation trusts will run on the wrong side of state aid rules, and that their activity will be perceived as economic activity under EU competition law. The more they subsidise general NHS services, the more they will be perceived as engaging in economic activity.

I do not take a doctrinaire view on this issue. Very sensible people, such as Steve Field and the NHS Confederation, have raised the matter. The hon. Member for Leicester West (Liz Kendall) raised it, as did, if I recall correctly, the hon. Member for Islington South and Finsbury in a spirit of compromise in Committee, making the point—I think I am quoting her correctly—that the only alternative to a bad cap is not no cap at all.

There is a genuine fear, however, among people who are far more expert than most hon. Members in this field, which is caused by the blurring of the boundaries between public and private hospitals. We could end up theoretically with a private hospital that has 90% of its patients provided by the NHS. I know we cannot end up with an NHS hospital filled by 90% of private patients, but there is a threshold at which things could quite easily start to become complicated. This a critical issue, which will have to be dealt with in the House of Lords.

[Emily Thornberry]

The hon. Gentleman has quoted me, so let me clarify that I was quoting the Deputy Prime Minister when I said that the only alternative to a bad Bill was not no Bill at all. I was talking about a Bill as opposed to a cap.

[John Pugh]

I may not have paraphrased the hon. Lady correctly, but I believe that the sentiments I described were expressed by her in discussions of a particular amendment on this subject, but we can go and look at the Committee proceedings to find out whether I am right.

It seems to me that what has happened on this occasion is that the Secretary of State has rehearsed the arguments that we have already heard in Committee. That does not advance things massively. He has supplemented that by saying that better efforts should be made to explain how the cap operates by the foundation trusts themselves, which will be more accountable, as I think he said, to the governing body of the foundation trust. That is an explanation and good explanation is to be desired. The point is, however, that expert opinion—independent of this House— perceives this to be a problem, but it has not been addressed.

[Chris Leslie]

I intended to make only a short intervention, but given the Minister’s cap on interventions, I decided that I needed to find a brief opportunity to say that removing the private patient cap is the wrong thing to do. The Minister’s basic argument— “I do not think I’m wrong”—really does not cut it. Removing the cap will remove an incentive for reducing waiting lists. The two issues of waiting lists and waiting times and the degree of private business within the NHS cannot be separated: they go hand in hand.

In a sense, a bit of ancient history is required, because it is important to note that the previous Labour Administration reduced waiting times so much that many of the private health insurers were, frankly, complaining. Long waiting lists matter because they are also the lifeblood of the private medical industry. We need only look at the advertising slogans of many private medical insurers to see how they try to entice people with promises of “speedy service” and “getting your health situation sorted out quickly”. This, however, can happen in the context of NHS hospitals.

What we must do is ensure that we put the needs of NHS patients first. My worry about removing the private patient cap is that it changes the incentives relating to how the foundation trusts will work, putting revenue generation ahead of patient treatment. The allure of revenue will, of course, be there, but keeping waiting lists high is, in a sense, part of ensuring that revenue continues to come in. I want to see trusts focused absolutely and completely on reducing waiting times. That is incredibly important.

It has been interesting to hear some of the important points raised by some Government Members—and not just about state aid rules. To me, however, the issue of waiting times and, particularly, this Administration’s watering down of the targets set for them and the issue of removing the patient cap are two sides of the same coin. It is all about driving people to go in a direction that they often do not want to go. People might have some savings and feel they have no choice but to use them for private provision because of the fear of long waiting lists in future. That might be the only way people feel that they can get treated quickly. It is all part of the design to change the whole fabric and nature of the NHS. That is the wrong direction in which to head, and I hope that we can retain the private patient cap.