NHS: Competition

Lord Hunt of Kings Heath Excerpts

Monday 10th February 2014 Grand Committee

[Lord Hunt of Kings Heath (Lab)]

My Lords, I declare my interests as chairman of an NHS foundation trust, as president of GS1 UK, and as a consultant trainer with Cumberlege Connections Ltd. I, too, welcome my noble friend’s debate and the opportunity to return to the issue of competition. I think that it has to be seen in a wider context. No one can be in any doubt about the pressure that the National Health Service is currently under, often because of conflicting policy objectives that the Government are setting. On the one hand, quality and safety demand more staff, but on the other hand, that must take place at a time when the NHS is in its worst financial position. The health service also has to face up to huge demographic pressures. However, the response so far has been to see a vast number of frail elderly people being admitted to hospital and then staying in too long because of a lack of appropriate community care and support. We have debated the urge for seven-day working in our hospitals, which is to be highly commended, but that is being jeopardised by the failure of primary care and social care to respond in parallel. Instead of leadership, co-ordination and partnership, the Lansley changes have bequeathed a dysfunctional system where essentially the Government have legislated for fragmentation—and fragmentation is certainly what has been delivered.

Clinical commissioning groups, often staffed by very good people working with the best will in the world, cover too small a population to be able to give strategic direction across a health economy. The local area teams of NHS England are focused exclusively on micro-management rather than leadership, under the weight of excessive performance management from NHS England headquarters. NHS England was itself promised autonomy, but is getting anything but. Its target-obsessed approach seems strangely at odds with the post-Francis culture that is required. Fragmentation at the local level seems to be matched by confusion that reigns at the national level. The Lansley “hands-off” model has been ripped up by the current Secretary of State, who intervenes at every turn. How else can we explain the weekly meetings that he has with the bosses of NHS England, Monitor and the CQC, all supposedly independent bodies? Independent, my foot.

On top of all this, we have competition, which we have debated many times. Of course, choice and competition have a role to play in the National Health Service—on that, I agree with my noble friends. Indeed, when in government I was involved in involving the private sector to help provide extra capacity, speed up hip replacements and cataract surgery, and reduce waiting times for the NHS. Moreover, I have no doubt whatever that where existing services have consistently underperformed, alternative providers, including the private sector, third sector, mutuals and social enterprises, are important as a way to turn things round. However, to conclude that market principles are a panacea is simply wrong. It is enforced competition and enforced marketisation that we on the opposition Benches are opposed to.

I know what the Minister is going to say. He has consistently told us when we have debated these issues that CCGs were free to commission services and would not have to create markets against the best interest of patients, but I remain of the view that Part 3 of the 2012 Act and the Section 75 regulations mandate the open tendering of services.

I listened with great interest to the noble Baroness, Lady Brinton, and welcome her to our debate. I say to her that while I accept that the Section 75 regulations were withdrawn and rewritten, my reading of them remains as I read them at the time: that, in the end, CCGs will essentially be forced to tender all services. That is certainly what the health service thinks. We can see already the impact of this. FOI requests have unearthed the fact that in the first six months of the new system, clinical commissioning groups had spent at least £5 million on external competition lawyers. We also know that NHS providers have reported a sharp rise in their legal bills as a result.

Both my noble friends have mentioned the intervention of the Office of Fair Trading, which is causing absolute havoc. We have the cases in Dorset and in Bristol. The impact of this has been the putting of a lot of sensible reconfiguration proposals into cold storage but, my goodness me, how much we need bold reconfiguration proposals to be implemented in order to provide high-quality, safe care. What has happened in Greater Manchester, where the move to centralise cancer services into fewer top-performing specialist centres is apparently in jeopardy because it is being claimed that it will be anti-competitive and reduce patient choice? My noble friend mentioned the Blackpool case, and I hope that the Minister will respond to that. My understanding is that the CCGs have had to hire administrative staff to collect thousands of documents, tracking every referral from GPs. What a complete waste of time and effort. I refer the noble Earl to a survey of hospital chiefs conducted by the Health Service Journal last December, in which 88% of them said that securing change to competition and choice rules should be a priority for the incoming chief executive officer of NHS England. What a lot of priorities he will have to face when he starts in April.

All this is well known both to the noble Earl’s department and to NHS England. I do not want to repeat what his honourable friend Norman Lamb said, because my noble friends have already done it, or the evidence that Sir David Nicholson gave to the Health Select Committee last November, when he highlighted the cost and frustration caused by the way in which competition law was being used.

I want to ask the noble Earl about the proposals that NHS England is putting forward to centralise specialist services in a small number of centres—or at least it has been said that that is what it is going to be doing. Can the noble Earl confirm that? Is he confident that such proposals will not lead to Office of Fair Trading interventions if he is reducing the number of specialist centres? In view of what Mr Lamb and Sir David have said, will the Government bring proposals to the House in the next Session to put this right? The Opposition stand ready to help the noble Earl make changes to legislation in this regard.

Clearly, competition has a place—I have no doubt about that. I stand by the work that I did to encourage some private sector involvement in order to get waiting times down. That is a very good example of when it is useful to use the private sector. But competition is not the be-all and end-all; it is not the panacea that some claim. The noble Baroness, Lady Brinton, made a very reasoned argument. My response to her and to the noble Earl is that I know that we are getting guidance and further work is being done in this area, but the fact is that the health service thinks it has to tender almost all services. I am afraid that once you do that, in effect you have a competitive market. That is the problem we face. I hope very much that the noble Earl will tell us that the department and the Government will actually listen to the concerns which have been expressed by a considerable number of people in the NHS, NHS England and his own department.

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

My Lords, I join other noble Lords in thanking the noble Lord, Lord Turnberg, for tabling this topic for debate. I will begin with three simple statements, to serve as mental marker posts, as it were, before I respond to the questions that have been raised.

First, amid the many changes that we made to NHS commissioning through the Health and Social Care Act, one area of the law that has not changed one iota is the law relating to competitive tendering. That law has been in place for a number of years; it has been governed by a European directive; and, as regards the rules governing NHS procurement, the Section 75 regulations change nothing at all.

Secondly, the noble Baroness, Lady Thornton, referred to “Mr Lansley’s agenda” on privatisation. There is no government agenda to privatise NHS services—quite the contrary. We made it illegal in the Health and Social Care Act for the Secretary of State, Monitor or NHS England to have a policy deliberately favouring the independent sector.

Thirdly, the noble Lord, Lord Hunt, spoke of a deliberate policy of enforced competition and marketisation. I must correct him. It is NHS commissioners alone who will decide whether, where and how competition in service provision should be introduced. There are no obligations on commissioners to create or promote markets; nor are they required to fragment services against the interests of patients.

Those three points are key to understanding what the Government are doing and what we are not doing. I will now turn to the place and value of competition in the NHS, which has long existed. As the noble Lord, Lord Turnberg, pointed out, patients have long exercised choice over where they receive services from. I was pleased to hear the noble Lord, Lord Hunt, acknowledge that third sector and independent providers play an important part in providing NHS care; for example, in hospice care for terminally ill patients, mental health services and long-term nursing care for the frail elderly.

We have seen over the past decade the independent sector treatment centre programme and the introduction of payment by results in 2003, the advent of patient choice in 2006, and the transforming community services programme of 2008. I must point out to the noble Lord, Lord Turnberg, that it was this changing landscape that introduced greater competition to the NHS; it was not the Health and Social Care Act. There is robust evidence from a variety of sources that quality-based competition can work to the benefit of patients, and I shall come on to cite that evidence in a moment.

The previous Administration put in place a set of rules to manage that competition, known as the Principles and Rules for Co-operation and Competition, and the Government committed in their response to the NHS Future Forum report to maintain these and place them on a statutory footing so that they could continue to apply to commissioners. That is exactly what we have done; there has been absolute continuity in how the rules apply. Clinical commissioning groups work within this framework to secure the best services for patients that they can, from whichever provider best offers that prospect. In essence that is the value of this framework of rules. They will be supported in this activity by guidance from NHS England and Monitor, and through the work of commissioning support units.

The noble Baroness, Lady Thornton, asked me what I would regard as a reasonable proportion of NHS activity to be put out to tender. I have no view on this, and nor should I. The decisions on tendering are entirely up to commissioners and not Ministers. The noble Baroness also indicated that seven out of 10 NHS contracts have gone to the private sector since last April. I point out that that figure is highly misleading. It was quoted in a newspaper article, but the contracts in the sample that was quoted amount to a tiny and unrepresentative sample of the scale of NHS activity. In reality, spending on healthcare from private-sector providers equates only to around 6% of total NHS expenditure. It was roughly 5% at the end of the previous Administration.

My noble friend Lady Brinton asked whether there will be guidance from Monitor to clarify the duties on commissioners, and the noble Lord, Lord Hunt, suggested that commissioners are confused about that. Monitor has now published its guidance to support commissioners in understanding and complying with the Section 75 regulations. Monitor, along with NHS England, will undertake further engagement with commissioners to support them in understanding the requirements. I acknowledge that there is a degree of misunderstanding out there, but not everywhere. NHS England’s forthcoming procurement guidance will provide further guidance on the EU requirements.

The noble Lord, Lord Hunt, raised concerns about fragmentation and barriers to integration. To the extent that fragmentation exists, I say to him that it existed as greatly under his Government. I am proud to say that this Government are taking practical steps to make integration more commonplace throughout the country. We are supporting a number of integration pioneer sites, which will trailblaze new ideas to bring care closer together. They will be leaders of change—a change we have to see in the system if we want to offer the best-quality care.

We are also supporting the system through the £3.8 billion Better Care Fund, which will encourage organisations to act earlier to prevent people reaching crisis point, to offer seven-day services, and to deliver care that is centred on people’s needs. That idea and that fund have been widely welcomed. Therefore, our focus is for commissioners to innovate and to work with partners in the sector to design integrated care pathways for patients that allow for a seamless experience of care. I assure the Committee that the competition rules do not stand in the way of that. In fact, the Section 75 regulations explicitly allow for it.

Under the regulations, the objective of a commissioner must always be to secure the needs of patients, including through services being integrated. For example, in Milton Keynes, substance misuse services used to be delivered by several providers, resulting in fragmented care. Users found services difficult to navigate, which impacted on treatment entry and retention rates. In response to this, NHS Milton Keynes CCG and Milton Keynes Council developed an outcomes-based approach to commissioning. Existing services were brought together into one fully integrated, recovery-focused service, delivered by a third sector organisation, which enabled more effective delivery of care and efficiency savings of 15% to 20%. That is a clear example of good commissioning delivering improved services for patients.

I turn to the OFT’s role and the review of mergers. Again, it is important to realise that the NHS has long had arrangements in place to review mergers on competition grounds, and that in considering mergers the competition authorities are acting under their existing powers under the Enterprise Act 2002.

The noble Lord, Lord Turnberg, criticised Part 3 of the Health and Social Care Act. Repealing Part 3 of that Act would not remove the powers of the competition authorities. In fact, the 2012 Act was important in clarifying those powers in order to address the legal uncertainty for NHS bodies as to whether mergers between them would be considered by the OFT or the CCP. Without this clarification, providers would have been at risk of double jeopardy, with both bodies potentially seeking to undertake a review.

The noble Lord, Lord Turnberg, cited several examples of challenges being issued on competition grounds which he attributes to the existence of Part 3 of the Act. I do not want to comment on the detail of those cases—it would be wrong of me to do so—but I would point out that challenges of that kind would have been quite capable of being brought even if the Government had never introduced the Health and Social Care Bill.

[Lord Hunt of Kings Heath]

My Lords, I understand where the noble Earl is coming from in relation to the Enterprise Act. However, is it not a fact that essentially what happened was that the 2012 Act was a signal to the market that a market was being put in place? Why have a 300-page Act and why have the Section 75 competition regulations? In essence, the Government opened the door in this regard and that is why these challenges are now taking place. They did not take place before the 2012 Act.

[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.