Health and Social Care Bill Debate
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Baroness Thornton
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Health and Social Care Bill
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Baroness Thornton
“CHAPTER A1Principles of regulations of health and adult social care servicesPrinciples of regulation of health and adult social care services
Any person undertaking any regulatory functions under this Part or any functions in relation to services provided under this Part shall exercise all such functions based on the principles of universality and social solidarity.”
Baroness Thornton
My Lords, at last we come to the heart of the Health and Social Care Bill—Part 3. On 3 March, David Cameron was again telling his party about the need for greater competition and for the private sector to be encouraged. He has since justified his remarks by saying that it would have been easier not to have addressed the “invisible crisis” in the National Health Service in England. So, the “invisible crisis” which no one but the coalition Government seem able to see is the justification for fragmenting our NHS and opening it up to the private sector.
Our fundamental disagreement with the two parties opposite is that we think that competition should be used only within a managed framework and when it adds value. There has to be freedom to use non-competitive means and to deliver co-operation, collaboration and integration. For a moment we thought that we had a new recruit to the argument, when the Secretary of State announced that he had lost faith in competition. He was all for it in his landmark 2005 speech to the NHS Confederation, and he was all for it when he and his coalition allies launched this Bill with price competition and an economic regulator to promote competition. Now, however, it is reported that he is not so sure.
We on these Benches have not changed our minds. We share the view expressed by the noble Baroness, Lady Williams, that Part 3 should be dropped—a view which is shared by almost all the professional bodies, as well as the staff in the NHS. Even the evangelical GP commissioners are very aware of competition, and we note that the drive to force through any qualified provider for the operating framework for 2011-12 has just been thwarted—a highly embarrassing defeat for government policy.
Making competition central to the reform of the NHS, as opposed to making it one component of a more rational and comprehensive reform with collaboration and co-operation at its heart, remains dangerous. Even with the amendments already agreed, Part 3 is a mess; and even at this late stage the Government should think again and try to build on the very wide consensus that accepts a role for competition only when it adds value for patients.
The three amendments in this group—and the late arrival of a manuscript amendment in the name of the noble Lord, Lord Clement-Jones, which I will return to in a moment—seek to address fears that have been widely expressed about the way that competition will intrude into the NHS in ways that we do not want, and that do not benefit patients. The fear is supported by the legal advice of many experts, who foresee how the Bill will open up opportunities for legal challenge in ways that are not currently acknowledged.
We also see that some clinical commissioning groups are asking awkward questions about how autonomous they will be, and how free to do the job that they are given. We know that they will have to obey the rules set out for them both by the NHS board and by Monitor, but is it worse than that? Will they have to employ legal and consultancy support on a grand scale to avoid being challenged by the courts or by whatever the co-operation and competition panel turns into? Will fear of challenge deter the innovation that the Bill claims will be unlocked?
Amendment 178A is the best effort of many legal minds collectively to solve the problem of ensuring, so far as is possible, that commissioners can do their job. When one looks at the old NHS, or even at Wales, one sees that there is a very high degree of confidence that arrangements made between different parts of the NHS will not be subject to legal challenge on competition grounds. There are no contracts on the arrangements of which the law may get traction. However, even in Wales, if there is a decision that some aspect of provision may require non-NHS providers to be engaged, the full force of competition law applies. We all know that. We are part of the EU so these rules apply.
We know that health services can, as Part B services, get some protection from the full force of EU competition law. We believe that that protection will be chipped away over the years. Although procurement is simpler under Part B, it is still open to challenge if the basics around transparency are not met. If there is an intention to enter into a contract that is enforceable in law, you quite rightly have to go through the correct procedure. This is no different from what is set out in the current principles and rules, which, if you read them, make a lot of sense—as they should, because my Government wrote them.
The doubt and the opportunities for challenge will remain unless you construct in the legislation a framework to protect commissioners of the kind that we set out. Such an approach might not be perfect but it is the best that major brains can come up with. Since the coalition Government’s stated intention is that commissioners should be free, we should be able to see either their version or their legal advice—but we have not. The purpose is not to give unfair preference to NHS providers, or, indeed, to prevent third sector providers; the purpose is to free commissioners to make decisions that would have to pass the test of reasonableness in any event. Neither the third sector nor private sector providers would be any worse off, because they would still have to go through procurement procedures under any circumstances if a service went out to tender.
We think that Amendment 163BZZA, at the head of this group, and the following amendment are the right place to recognise this important principle from the outset. Amendment 163D follows a line that our Liberal Democrat colleagues have also explored, which is to define our NHS in a way that makes it clear that it is not a market despite what the Bill states.
The principle of social solidarity is used in the courts to help differentiate national social policy from the EU internal market and competition law. Social solidarity is therefore not an invention of the Labour Party, it is a term used in EU law. Social solidarity means “provided for that purpose as a matter of social policy” and as such may be considered by the courts to restrict the application of EU internal market law. All this has the same objective—to limit the scope for EU law to be applied in ways that do not help.
The noble Lord, Lord Clement-Jones, has, as it were, come to the party somewhat late by tabling his manuscript amendment. My colleagues and I have been in discussion with him and his colleagues, including the noble Baroness, Lady Williams, for many months, and we have shared with them our thinking on this matter. Indeed only last week I wrote to the noble Baroness, the noble Lord and their colleagues about exactly what we thought we should do together on Part 3. In that letter, as point one, I said:
“Your amendment 177”—
the manuscript amendment—
“and our 163 cover the same kind of point and should be combined”.
I am very pleased that this burst of late enthusiasm from the noble Lord, Lord Clement-Jones, has led to his agreeing that we should combine our amendments, and I am absolutely delighted to say that I would want to accept his amendment as an amendment to our amendment. I hope that noble Lords will have time to work out what exactly is going on here as the discussion progresses. Essentially, however, the noble Lord, Lord Clement-Jones, wants to amend our manuscript amendment with his manuscript amendment—which I am sure he will explain. I apologise to the House that this has been done as a manuscript amendment, but I am happy to report that we seek the same end. When the time comes, I will be very happy to accept the noble Lord’s amendment.
Our amendment does not oppose the use of competition, in its place, and will enhance the Bill. I also like its use of the term social solidarity, as that appropriately describes what our NHS is, and why and how it exists. I beg to move.
Amendment 163BZZB (to Amendment 163BZZA)
Earl Howe
My Lords, competition in the health service is a complex topic and very often, in my experience, misunderstood. It is important that we start with a misconception which several noble Lords have raised with me outside the Chamber and, indeed, in Committee. We need to be clear that competition already exists in the NHS and that the Bill does not herald its introduction. The last Government fully recognised that and encouraged it. The last operating framework which they put in place for the NHS stated:
“We shall enable this by … re-affirming our commitment to the ‘any willing provider’ approach for free choice of elective care, reducing the barriers to the entry of new providers”.
The previous Prime Minister, Gordon Brown, giving evidence to the Liaison Committee in December 2007, said that,
“the private sector … is expanding, will continue to expand and will be a lot bigger in the next few years than it is now”.
The Labour Party manifesto of 2010 said:
“Patients requiring elective care will have the right, in law, to choose from any provider who meets NHS standards of quality at NHS costs”.
The previous Government’s policy of increasing the use of competition is already benefiting patients. The recent report from the Office of Health Economics Commission on Competition in the NHS concluded 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 health care”.
Baroness Thornton
I thank the noble Earl for allowing me briefly to intervene. He has given some useful and selective quotes. Do not those quotes go on to warn very seriously about cherry picking?
Earl Howe
I think that the noble Baroness and I agree that cherry picking is highly undesirable, which is why this Bill outlaws it.
I do not see, as some do, competition and integration as polar opposites, nor are they mutually exclusive. I agreed entirely with the Future Forum when it said in its report last year:
“We have also heard many people saying that competition and integration are opposing forces. We believe this is a false dichotomy. Integrated care is vital, and competition can and should be used by commissioners as a powerful tool to drive this for patients”.
That is worth keeping in our minds.
In response to my noble friend Lord Clement-Jones, let me turn to competition law. I understand that some noble Lords want to prevent competition law ever applying to NHS services. That is to wish for the impossible. The question is not whether competition law should apply to the health service but how. That is why I agree with my noble friend that we must make sure that the NHS is insulated from the inappropriate application of competition law. In particular, we must ensure that clinicians are free to commission NHS services in the way that best serves patients’ interests and that there are no impediments to beneficial co-operation to increase integration, improve quality or reduce inequalities. Under our proposals, a series of protections will provide the sort of insulation against inappropriate application of competition law that my noble friend and others require. I hope that the House will allow me to set this out in a little detail.
Co-operation for the benefit of patients should not breach competition law. Article 101(3) of the Treaty on the Functioning of the European Union and Section 9 of the Competition Act lay down exemptions which apply if the wider benefits of an agreement outweigh its anti-competitive effects. On an individual basis, we would expect collaborative arrangements whose overall effect was beneficial to patients to meet the criteria in Article 101(3) and Section 9.
Competition law would be unlikely to apply to a wide range of NHS services. Some obvious examples are accident and emergency, trauma, critical care, maternity, specialist surgery and many others, particularly in remote or rural areas.
Monitor would support the NHS to understand where competition law does and does not apply. A key benefit of establishing Monitor as a sector regulator, with concurrent responsibilities under the Competition Act, is that it will be able to provide authoritative guidance to the NHS on where that law would and would not apply. The Government’s firm expectation is that Monitor would produce sector-specific guidance and address this question in terms of relevant examples, including models of integrated care and clinical networks, which would be updated in line with developments in healthcare practice. This guidance would help reduce unnecessary fear of legal challenge and uncertainty for both commissioners and providers.
Monitor could also provide informal advice in individual cases, building on what the Co-operation and Competition Panel does now. For example, that might include commenting on what types of collaborative arrangements and specific provisions within such arrangements are and are not likely to comply with the competition rules. Any such advice would be without prejudice to any future decision that Monitor might have to take to enforce the provisions of the Competition Act. However, like the guidance, such advice would provide reassurance to providers and could help them to avoid unnecessary legal costs.
If and when it became appropriate, Monitor could make the case for block exemptions. That would mean that the Competition Act would not apply to specified arrangements for the provision of NHS services. At this stage, it is not clear whether or where block exemptions might be appropriate, but an example of the sort of arrangement that could potentially be covered is clinical networks. In any event, this protection would remain available and there is no doubt in my mind that Monitor would be better placed than the OFT to determine when and where it might be needed.
In these and other areas, competition is unlikely to be effective in providing services on the scale or in the way that best promotes patient's interests. The NHS often acts to promote social objectives to ensure that patients receive the level of service that they could not afford or which private companies might not find it profitable to provide. Applying competition law in such contexts makes little sense and such activities are likely to fall outside its scope.
Next, commissioners would not have to create markets against the interests of patients. 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 and that they will be under no legal obligation to create new markets, particularly where competition would not be effective in driving high standards and value for patients. As I have already explained, this will be made absolutely clear through secondary legislation and supporting guidance as a result of the Bill.
The Bill already creates duties on commissioners to secure continuous improvement in the quality of services, reduce inequalities and promote integrated services. The Government intend to complement these by making it explicit through regulations under Clause 73 of the Bill that commissioning decisions must be in the best interests of patients, those decisions must be transparent and commissioners will be accountable for them. We would expect the NHS Commissioning Board to maintain guidance to support commissioners in these decisions, based on the available evidence and drawing on academic research.
It is worth reflecting that without Part 3, the main legal provision on commissioning NHS services would continue to be the general procurement regulations for public bodies introduced by the previous Administration in 2006. The application of that law to the NHS is unclear. Without the provision that we intend to include in regulations under Clause 73, commissioners would continue to face risk of legal challenge when they decided not to open services up to competition, even where the decision was in the best interests of patients. That uncertainty is unacceptable.
Finally, the Bill would prevent private companies taking over NHS trusts or foundation trusts. There has been a lot of misconception about that. I assure the House today, unequivocally, that that could not happen.
I now turn to the opposition amendments. Amendment 163D raises the application of competition law to the provision of NHS services. Its intention is to ensure that competition law does not apply to the provision of NHS services. However, as I have said, there is a basic point to make here: it is not within the gift of this Bill to secure that. It is like saying that if you pass a law saying that black is white, that is what will happen. However, what I agree on absolutely is that we need to protect the NHS from inappropriate application of competition law and its undesirable effects. Equally, as I said earlier, we do not want to leave patients unprotected from potential abuses by providers. That would be the effect of the amendment and I hope that the noble Baroness will reconsider her wish to move it.
I also referred to the fact that this Bill would provide for clinical commissioners to decide how to secure NHS services to best serve the interests of their patients. Hence, I do not agree with Amendment 178A.
The NHS has always been a comprehensive service, free to patients, with treatment and care based on clinical need and delivered through a wide range of diverse providers. That includes GPs, dentists, independent sector providers, NHS trusts, foundation trusts and a range of charities and social enterprises. Taken together, these providers operate across the various sectors of healthcare, including the community and mental health. They provide a range of services, including vital specialist services to people in lower socioeconomic and minority groups, and people with rare medical conditions.
Amendment 178A does not acknowledge that reality at all. Instead, it seeks to create an arbitrary and unnecessary presumption in favour of NHS and foundation trusts which would likely act against patients’ best interests. For example, the amendment would make it more difficult for a clinical commissioner seeking to manage long-term conditions such as diabetes or COPD in primary care and in the community—involving GP practices or social enterprises—instead of sending those patients to hospital. That could prevent choice for patients in a very crucial area. It could also prevent choice in end-of-life care by restricting the extent to which organisations such as Macmillan and Marie Curie were able to extend the services that they delivered for the NHS. It could prevent charities such as Turning Point transforming—
Baroness Thornton
My Lords, has the noble Earl actually read the amendment? Paragraph 6(c) says,
“the need to commission health services in a way that promotes the integration of health and social care services”.
Will the noble Earl accept that he just said that it does not say that? It says that; it is there.
Earl Howe
My Lords, we are talking about Amendment 178A. I disagree with the noble Baroness’s reading of it. It is quite clear what it says. It is geared towards making the NHS the preferred provider. The noble Baroness shakes her head. If I have misunderstood and that is not her intention, I will obviously retract that.
Yet the amendment would increase the risk of commissioners facing legal challenge under procurement law. As the noble Baroness pointed out in 2010,
“procurement must be transparent and non-discriminatory”.—[Official Report, 9/3/10; col. 137.]
Amendment 178A would be a retrograde step. I ask the noble Baroness to withdraw it, as well as the other amendment in this group.
Baroness Thornton
My Lords, I apologise to the House for the confusion that has just reigned. I blame the Liberal Democrats for that, but then I would, wouldn’t I? The noble Lord, Lord Clement-Jones, decided to seek to amend my amendment. Then, when I said that I would like to accept his amendment, he refused to allow me to do so. What can a girl do when she has been rejected in this way? My Amendment 163BZZA is the lead amendment in the relevant group. It is very disappointing that the Liberal Democrats did not feel confident enough to vote for their own amendment, again. They seem to be making a habit of that.
Lord Clement-Jones
My Lords, perhaps I may intervene. Has the noble Baroness received legal advice on the benefits of a Pepper and Hart-type statement versus the kind of amendment that her party has tabled, its effectiveness and the width of the statement made by the Minister?
Baroness Thornton
The noble Lord, Lord Clement-Jones, has a very legalistic manner of addressing the House. Of course I understand exactly what was happening there, and I understand exactly what the deal was between his Benches and the Minister, which was that the noble Lord would get a strong statement in response to his amendment. Is he satisfied with it? If so, he is wrong. That strong statement means that the protection comes when legal action starts to take place. I would prefer the protection to be in the Bill. That is what these amendments are about—protecting the NHS. We disagree about that and the noble Lord knows it. If I may address the Liberal Democrat Benches, it seems likely that the noble Lord’s spring conference will agree more with me than with him. However, that is his party’s problem for this weekend—not ours, for now, on the Bill.
I should like to make two further remarks on the substantive amendment and what the noble Earl said. He suggested that we were making the procurement rules more complex. We were not; we were making them simpler. The NHS deserves protection in the Bill. The Liberal Democrats have made a deal that sells the NHS short, as happened on the issue debated last week on conflict of interest. That is a great shame.
Lord Clement-Jones
I apologise for interrupting the noble Baroness, but does she realise that the more she attacks us, the more chances we have of a very positive outcome at our Gateshead conference?
Baroness Thornton
I was not actually attacking the noble Lord; I was just speculating about what might happen. I feel for Liberal Democrat Peers when they go to their conference this weekend, because they may be in for an uncomfortable time. However, that is absolutely not my business. I will just witness it with interest. It is time that we moved on and I beg leave to withdraw the amendment.
Baroness Thornton
“(c) is to continue as regulator of NHS Foundation Trusts as set out in Chapter 5 of Part 2 of the National Health Service Act 2006.”
Baroness Thornton
My Lords, this is a large group of amendments led by our amendment. In fact, we have only two amendments in the group, but they address issues regarding Monitor. The amendment suggests that Monitor should continue to be the independent regulator of NHS foundation trusts.
Our Amendment 167B would remove Clause 63. It might be easier if I were to explain why that amendment is there. It is not that we are necessarily opposed to Monitor’s functions as a regulator of social care, but something as important as this matter should be done not through regulations but in a proper manner through primary legislation. That is the only reason why that amendment is there and we seek the Minister’s views on it.
Returning to the amendment, Monitor must remain as the independent regulator of foundation trusts. We do not believe that now is the time to relax oversight of foundation trusts. We can be confident that the Francis inquiry will have views on this. We support trusts becoming foundation trusts, but only half of trusts have achieved foundation status, and the issues facing those unable to achieve the required standard remain. There is yet another drop-dead date; my Government had a drop-dead date and that did not work; we do not think that another drop-dead date will change that situation.
We must also be cautious in overclaiming the merits of the foundation trust model, because time will tell. Monitor has an important role in that, which should continue, although we do not support the need for an economic regulator for our NHS, because we do not see healthcare as a market. I do not intend to rehearse those arguments, but patients are not consumers, and choice for patients is not shopping. Economic regulation and privatisation are certainly linked in the view of those who want to break up our NHS—many of those who want the Bill in the private sector.
The Bill is radical, not evolutionary. We believe that the Government should have taken a different approach, but it is important that Monitor continues to carry out its role. It should not be asked to do two roles: those of the foundation trust regulator and the economic regulator for the NHS. We think that that presents Monitor with an insurmountable conflict of interests and that it lacks the capacity and capability to carry out the enhanced role. I hope that the Minister will accept our sequencing idea—I freely confess that it was stolen from the noble Baroness, Lady Williams, who first used the word sequencing— which is to allow Monitor to become an economic regulator only after it completes the job of authorising all those bodies which will get foundation trust status after a few years’ oversight. We believe that Monitor should take on those new duties and roles only at that point, May 2016, which is in the Bill.
Even for supporters, there is a realisation that Part 3 is a direct challenge to the idea that local commissioners will be free to shape local services as they see fit. The more we have patient choice, the more we have any qualified provider, the more regulatory enforcement around competition, the less need for commissioners. That is the central irony of the Bill. Any commissioner needs to read Clauses 19 and 73.
I think we need a discussion about Monitor’s roles and functions. I will wait until I sum up to comment on other noble Lords’ amendments in the group. I beg to move.
Earl Howe
Nor have I, which is why I listed earlier some prime examples of collaboration. Clinical networks are a prime example of collaborative behaviour which is clearly in the interests of patients. The noble Baroness is asking me to think of examples in my head of collaborative behaviour in the NHS that does not advantage patients. I cannot think of any, which is why it would be hard for Monitor to find fault with collaboration where it has clearly been designed to improve patient care.
Baroness Thornton
In response to that last remark, it depends on whether Monitor decides it is collusion or collaboration. That is the key point. We suggested that that was a problem right at the very beginning of the Bill—how you distinguish between collaboration and collusion and what you do about that. I do not think we are any closer to finding the answer.
I turn to remarks that were made during the course of this very useful if diverse debate. I want to take one moment to say something to the noble Baroness, Lady Williams, and her colleagues and to the noble Baroness, Lady Murphy, about the fact that they feel misrepresented in social and other media. Indeed, as politicians it goes with the territory that you may be misrepresented from time to time. I have the greatest respect and admiration for the noble Baroness, Lady Williams, and she knows herself that that is where you are when you are in politics.
However, the noble Baroness herself wrote in an article in the Guardian on 13 February about dropping the chapter on competition, and in a letter that the noble Baroness and her leader wrote to their own MPs and Peers, they set a high bar for how Part 3 of the Bill might be made safe. It is just and proper that everybody will be looking at the noble Baroness and her friends to see and test whether they have succeeded and met their own aspirations. At the moment, I think that that is open to question. I do not think that it has been achieved. I know that that might be painful, but that is the case.
We have had some thoughtful amendments and contributions. As usual, the noble Baroness, Lady Finlay, in her amendment and questions put her finger on a very important issue that the Bill needs to address even at this late stage. I had a great deal of sympathy with the amendment of the noble Baroness, Lady Cumberlege. I rather hoped that she would get a more positive response than she did and I am sorry about that.
Baroness Williams of Crosby
The noble Baroness is perfectly entitled to say what she had said. I accept that fully and I am sure that she said it in all sincerity. But the difference between us is that I believe that the Government have moved a long way, particularly because of the Minister. I believe that that culmination of changes will enable us to bring about an improved NHS. I may be proved wrong. I freely accept that I may be proved wrong. But I believe that the changes that have been made are so far reaching that we can make the NHS better than it is today. I know that the noble Baroness, who herself has been responsible in her attitude towards the Bill, would wish to see that, even though she may not think that this is the way to do it.
Baroness Thornton
I am not sure whether this is the way to do it. We disagree. I do not think that the Liberal Democrats have achieved it, but there we are. As the noble Baroness said, history will see who is right and who is wrong.
I am extremely pleased to see that the noble Baroness, Lady Meacher, has transferred her attention from the Welfare Reform Bill to this one. She is quite correct that it is impossible to stop the negative impact that has been observed in the studies that she referred to. She is completely right about that. This whole debate illustrates the problem: half of the Bill seems to be there to mitigate the damage that the other half does. What used to be, for example, a clear duty to co-operate—and it was a simple duty—is now dense and complex.
Turning to our Amendment 163B, I should like to say to the noble Baroness, Lady Murphy, that it does not rule out the economic regulator function. That amendment does not seek to do that, so I hope that the noble Baroness, with that reassurance, might support our amendment. We seek to clarify and put beyond doubt that Monitor should have that function. We seek to do it in the first part of the Bill. We want Monitor to keep its current role. We believe that there should be two bodies and that it is difficult for Monitor to do both jobs at once, but it is important at this point of this first part of the Bill that we make it completely clear. Where the Bill says that Monitor should be the,
“Independent Regulator of NHS Foundation Trusts”,
we need to make it completely clear that it will continue to do that job.
We are not trying to weaken the role of Monitor. We think that foundation trusts are facing huge risks and huge reorganisation. They need the support that Monitor will offer them. I suspect that the Francis report, as I said earlier, will indeed have something to say about the strength and importance of Monitor as a regulator of foundation trusts. We would like this to be in the Bill because it makes it completely clear that this is an important job that Monitor does and that it should keep doing that job for the foreseeable future. I wish to test the opinion of the House.
Baroness Thornton
“(5) An NHS commissioner shall be entitled to undertake a review (“a Commissioning Review”) of all or any part of the health services that the NHS commissioner considers are reasonably required in order to discharge its functions under this Act, and, upon completion of such a Commissioning Review, an NHS Commissioner shall be entitled to determine that the most appropriate way to deliver all or any part of such services shall be through the conclusion of arrangements with one or more health services bodies or one or more NHS Foundation Trusts.
(6) NHS Commissioners shall, when conducting a Commissioning Review, have regard to the following factors—
(a) the need for NHS services to be provided in a way that is economic, efficient and effective;(b) the need to commission services in a way that maintains or improves the quality of the services;(c) the need to commission health services in a way that promotes the integration of health and social care services;(d) the need for health care services provided for the purposes of the NHS to be provided in an integrated way where this will—(i) improve the quality of those services (including the outcomes that are achieved from their provision) or the efficiency of their provision, (ii) reduce inequalities between persons with respect to their ability to access those services, and(iii) reduce inequalities between persons with respect to the outcomes achieved for them by the provision of those services;(e) the likely future demand for health care services;(f) the desirability of patient choice.(7) An NHS commissioner shall be entitled, as part of any Commissioning Review, to seek expressions of interest from health services bodies or from NHS Foundation Trusts which may have an interest in providing such services, and shall be entitled to undertake such processes as it shall consider appropriate to determine which of such bodies is able most appropriately to provide any such services.
(8) A Commissioning Review and decisions made following a Commissioning Review to make arrangements with one or more health services bodies or NHS Foundation Trusts shall not constitute anti-competitive behaviour for the purposes of this or any other Act.
(9) The Public Contracts Regulations 2006 shall not impose any obligations on an NHS commissioner which undertakes a Commissioning Review or makes decisions to make arrangements with one or more health services bodies or NHS Foundation Trusts following a Commissioning Review.
(10) Regulations under this section shall not impose obligations on an NHS commissioner undertaking a Commissioning Review.
(11) The NHS Commissioning Board may, after consultation with Monitor, publish guidance to NHS Commissioners concerning Commissioning Reviews.
(12) The National Health Service Act 2006 shall be amended by adding the following after section 9(4)(r)—
“(s) An NHS Foundation Trust”.”
Baroness Thornton
My Lords, I would like to comment on the three amendments in the name of the noble Lord, Lord Clement-Jones, and then speak to the two amendments that we have in this group. They say that imitation is the sincerest form of flattery, so I am very happy that the noble Lord saw fit to take three of the amendments that we tabled in Committee and to make them his own. Those are Amendments 186, 187 and 188. That is fine by us. I understand that the Minister will be very sympathetic to these amendments and might accept them, which is probably just as well, as I would hate to embarrass the Liberal Democrat Benches any further by having votes on amendments that they have tabled and speak to but then do not support.
These three amendments would stop a review from happening. I know that the noble Lord, Lord Clement-Jones, and his colleagues need to tell us that they have won a great victory by getting the Government to concede on these amendments. Far be it from me to intrude on the coalition parties’ love-in, so to speak. When we tabled these amendments in Committee they were part of an overall, comprehensive change to Part 3 of the Bill. In many ways these amendments were part of the tidying up of our suite of amendments to effect radical change to and improvement of Part 3. We certainly support these amendments.
I turn to Amendments 196A and 196B, which stand in my name and that of my noble friend. We do not understand why the noble Lord, Lord Clement-Jones, did not also table those amendments as he is going to be very successful in having his amendments agreed to. In fact we think that there is no need to have any mention of the Competition Commission in the Bill. For the sake of completeness, we would have preferred those amendments to be included. Perhaps I may implore the Minister to accept them as well.
Earl Howe
My Lords, Amendments 196A and 196B, tabled by the noble Baroness, Lady Thornton, would remove the provision for adjudication if a significant proportion of those affected object to proposals by Monitor for methodologies to be used to calculate prices of levies to ensure the continuity of the central services or proposed licence modifications.
I am clear that we must have a process for adjudicating on Monitor’s proposals if a sufficient number of those who will be affected by them object; otherwise, in these circumstances, either Monitor would have no way of proceeding with disputed proposals or those affected would have no other way of disputing proposals other than by judicial review. Either way that would be unacceptable and could result in significant harm to patients, for example if a licence condition that Monitor proposed related to securing essential NHS services. For pricing methodologies, for example, the amendments would mean that Monitor could go ahead with its proposals even if sufficient numbers of those affected objected. The only way that providers, in the case of pricing commissioners, would be able to ensure that their concerns were taken into account would again be through judicial review. We need to ensure a fair and transparent system of pricing, securing competition on quality and not price, and removing incentives for providers to cherry-pick the services that they deliver or the patients whom they treat.
I am therefore clear that we should have a process for adjudication. I am also clear that the Competition Commission should undertake that role. It has other adjudication roles. The commission has experience of working across a range of sectors, on the basis that it does not necessarily have the knowledge which it needs about those sectors in-house. It would be free from political intervention in making these judgments. It is well respected by other regulators across the economy, for which it performs a similar role. In our earlier debates, some noble Lords expressed concern that there should be appropriate checks and balances on Monitor’s powers. The provision for adjudication by the Competition Commission creates one such check and balance. These amendments would remove it. For those reasons, I oppose Amendments 196A and 196B, and I hope that on reflection the noble Baroness, Lady Thornton, will withdraw them.
I turn to the Competition Commission’s role in reviewing how competition is benefiting patients in the NHS. After briefing myself, I came to the conclusion that the reviews will bring considerable benefit to the NHS because they will help us understand further what effect competition has on NHS services for patients. They will also increase Monitor’s accountability because they will consider how Monitor is discharging its functions. The commission will be well placed to conduct them because it is an independent body with a long history of performing such reviews across the economy. It is the body where the expert technical knowledge needed to perform this function already resides, and it understands and reviews how markets and regulation work in the best interests of people. That was why the provision was put in the Bill.
However, I listened to the points made this evening by my noble friends Lord Clement-Jones and Lord Newton. On earlier occasions my noble friend Lord Clement-Jones was quite vocal in expressing his views to me on this subject. I have some sympathy with the argument that prescribing reviews every seven years, as the Bill stipulates, may place too great an emphasis on competition. Greater flexibility about the timing and specification of reviews may be helpful. Therefore, I am clear that such reviews of competition in the NHS, when they happen, should focus on benefits to patients. On the basis that prescribed seven-year reviews may place too great an emphasis on competition in the NHS, and given the role of the Competition Commission, if it is the view of the House that Clauses 78, 79 and 80 should be removed from the Bill, I will not oppose Amendments 186, 187 and 188.
I turn briefly to the issues raised by the noble Baroness, Lady Hollins, on procurement in Surrey. The issue was raised earlier by the noble Lord, Lord Adebowale. I agree with her and with the noble Lord that social enterprises can and do play an important role in providing innovative, high-quality services, often to very vulnerable people. Turning Point is an excellent example. The key aim of our reforms is that patients should be treated by the best providers; that bureaucratic procurement practices should not frustrate this; and that it should be quality that counts. We will take all this into account when framing the commissioner procurement regulations.
On the example quoted by the noble Baroness, I understand that the requirement for the £10 million performance bond to which she referred was subsequently withdrawn and therefore played no role in the decision to appoint a preferred bidder. However, I will write to her with further details on this.
Baroness Thornton
Baroness Thornton
My Lords, we now move on to pricing. We believe that setting the national tariff is a matter of policy and that it should be set by a Secretary of State, not Monitor. That is the main thrust of these amendments. Amendment 201A is about setting the national tariff as a matter of policy. Amendment 201B proposes that regulations to the national tariff must state how the prices and methods were determined, that any proposed change to the national tariff will be subject to proper evaluation and testing, and that there must be evidence of consultation between the Secretary of State and Monitor. Amendment 201C states that the national tariff should not be allowed to vary in relation to different descriptions of provider. Amendment 201D states that where a commissioner of a health service receives an offer from a service provider who is licensed by Monitor at a price below the national tariff—I am sorry; that is my noble friend’s amendment. I beg his pardon. Then there are a whole set of amendments which seek to delete clauses—Amendments 211A, 214A, 214B and 214C—because if the Secretary of State is setting the national tariff, these clauses are unnecessary.
At present, the national tariff is set by the Department of Health, often in ways that are mysterious, probably less than optimal and without sufficient consideration of unintended consequences, and often without enough testing. Nevertheless, we remain firmly of the view that price setting is such a fundamental part of the system that it has to remain the responsibility of the Secretary of State and the Department of Health. We do not have an answer as to why you would give such a potentially potent policy lever to the regulator. I should be grateful if the noble Earl could explain that. Why keep price control with Monitor? I should be interested to hear what he has to say. I am sure that we would all agree that the key point is that we get tariffs right. We therefore seek to insert the need for proper consultation and transparency in the tariff-setting process. I beg to move.
Lord Davies of Stamford
My Lords, I shall speak to Amendment 201D in my name. I tentatively proposed this in Committee as a probing amendment. I bring it forward now much more seriously because I have been reinforced in my belief that this is a necessary amendment by everything that has been said. My belief has also been reinforced by the support of a number of colleagues, including explicitly by my noble friend Lord Warner, to whom I am grateful.
It has been clear from our debates that the Government’s intention is that there should be two price regimes in the NHS—one for services for which there is no national tariff and one constituted by the national tariff itself. Services that are outside the national tariff will be contracted for on the basis of a tender offer and good value for the taxpayer or customer. I have no quarrel with that, and the Government have clearly stated that they intend to achieve contracts on the basis of the right reconciliation of quality and price. I argued in Committee—and I am sure that I was right —that that constitutes price competition. The Government do not like the phrase “price competition”, but I am not interested in semantics or the party-political reasons that may lie behind their semantic choices; I am interested in the reality, which is that commissioning services on that basis is entirely rational, and I have no quarrel with it.
The problem arises in relation to the national tariff. The Minister set out the position clearly in his response to me on 13 December. He said,
“we want a system of fixed prices”,
and then stated that,
“the tariff would not be a maximum price”.—[Official Report, 13/12/11; col. 1229.]
In other words, the tariff could not be varied either upwards or downwards; it would be an immutable price. I regard this as extraordinarily irrational and perverse, and I hope that I can persuade the Government to think again. It has at least four problems.
First, if there is an immutable price, you may not be able to pay for certain services that are required and are of the quality necessary for patient outcomes. The Government have recognised that point at least. Indeed, Clauses 124 and 125 appear to address that because they make it clear that there is scope for an agreement between a commissioner and a provider to be approved by Monitor at a price above the tariff. The wording in Clause 124(5) and Clause 125(3) is identical, except for the words “approve an agreement” and “may grant an application”, and states:
“Monitor may approve an agreement”—
or “grant an application”—
“only if, having applied the method under section 116(1)(d), it is satisfied that, without a modification to the price determined in accordance with the national tariff for that service, it would be uneconomic for the provider to provide the service for the purposes of the NHS”.
That makes it clear that it is possible for the commissioner to pay more than the tariff in those exceptional circumstances, with the consent of Monitor, and of course I approve of that, but it is not possible for the commissioner to approve less. That is an extraordinary state of affairs.
I can quite understand why the Government do not want to write into the Bill that it will not be possible for a commissioner to accept a lower price. That would not make the slightest sense. It would be all over the tabloids in headlines. Instead, it is disguised in the language of parliamentary drafting as being a power that would exist only if it was uneconomic for the provider to provide the service for the purposes of the NHS. You can never argue that it is uneconomic to provide a service at a higher price. The amendments provide only for the circumstance in which the commissioner finds it necessary to pay a higher price than the tariff to secure the patient services which the commissioner is procuring.
That is the only one of the four problems raised by that approach to a national tariff which the Government appear to have addressed. The second is that in many cases, it may be possible to provide the same quality of service at a lower price, but the Government are excluding, a priori, from the beginning, outright, in principle, any possibility of that happening. That makes no sense. We and the Government surely agree that the NHS budget will always be under great pressure, that there must be financial discipline in the NHS, and that when there are opportunities to secure the same quality at a lower price it should be the obligation of commissioners to achieve that. My amendment does not go so far as to create an obligation—I was more hesitant than that—but at least there must be the possibility for commissioners, if they see an opportunity, to procure that service at a lower price and save money for the benefit of patients and the National Health Service as a whole.
The third and fourth problems created by government policy in this area are perhaps a little more subtle. The third, which I mentioned in debate in Committee, is that if you deny the possibility of bids coming in at a lower price for any given service, you deny the possibility of ever investigating or having insight into the process of price formation in that sector of activity. You simply do not know to what extent the prices you are working on—the prices you are accepting—contain an unnecessary level of cost and overheads, or the extent to which you are not getting a good bargain. In my view, you should not be sleeping at night if you are a commissioner and you do not know how prices are formed, whether you could be getting a better price and, if so, what that better price would be.
The fourth problem created by the Government's approach to this up until now— I live in hope that they may change it in the light of this debate—is that it dampens or may even be fatal to innovation in this area of the National Health Service. I think we are all agreed in principle that we should encourage innovation, but there is no point in any prospective provider spending time and money on developing a better approach to solving a problem or a new technique for diagnostics, therapy or what have you, which has the same quality and outcomes, or even better, which could be delivered at a lower price, because the price is fixed. You can only come up with the same price because you are not allowed to be given a contract if you tender at a lower price. That makes no sense, so I must press the amendment again.
I emphasise, as I did in Committee, that the amendment is in no sense prescriptive. It does not force commissioners to take the lowest price. There might be an argument for forcing commissioners to take the lowest price where quality remains the same, but I have come up with a much weaker amendment. It is purely permissive. It provides for commissioners, where they wish to and where Monitor approves—so there is a double check, a double brake on the mechanism—to accept a lower price. It is extraordinary that they are not allowed to do something which all of us in every other field of economic activity would feel to be the rational thing to do.
My noble friends on the Front Bench have made the point several times that there are many situations in which it would not be sensible to take the lowest price in an NHS context. One of them I described in some detail in Committee, so I do not need to go over it too much tonight. There is no doubt that in any field of economic activity where overheads or fixed costs are a high proportion of the total costs there is a temptation or opportunity for predatory pricing. If the fixed costs are a very high proportion of the total costs, then anyone who has the capacity to make a one-off offer can come in with an offer which may be at a substantial premium to variable costs and therefore very attractive to him if he has spare capacity. It would be much lower than the full cost and therefore very tempting but it might be very dangerous for the customer—the commissioner in this case—to accept because it might undercut and perhaps destroy the capacity on which he relies on a long-term basis. Clearly, no one is going to provide services at below full cost on a long-term basis. Therefore, there is always a danger of predatory pricing in healthcare and we must be alert to it. There is no question about that.
Earl Howe
I will be happy to meet the noble Lord to talk about that.
I was talking about the example of the Netherlands and Germany and was about to make the point that bodies of that kind can create a transparent and stable environment for pricing outside the influence of politics so that providers have confidence to invest and regulators can develop strong technical skills in setting prices at efficient levels. The Bill proposes that independent statutory bodies—Monitor and the NHS Commissioning Board—would collaborate to regulate prices. This will give commissioners a key role in price setting, whereas the opposition amendments would prevent this and would return control to Whitehall.
Monitor would publish national tariff prices based on a methodology subject to consultation where providers and commissioners could trigger an independent adjudication to ensure transparency and fairness. I am clear that we must have, as I said earlier, a process for adjudicating on Monitor’s methodology. Otherwise Monitor could just go ahead with its proposals, even if there were a whole lot of people affected by the proposals who objected and the only way that they could see those objections through to a conclusion would be through judicial review. The government amendments in this group ensure that the appropriate providers could trigger independent adjudication.
I am also clear that the Competition Commission should undertake this role. As I said earlier, it would be free from political intervention in making these judgments and is well respected as an organisation across the economy for the role it performs. The opposition amendments would prevent any of these benefits being realised. A key priority for improving the system is to expand its coverage so that more and more services are brought within scope. The previous Government failed to do this in line with their own published timetables, for example, regarding mental health services. The Bill would place duties on Monitor and the NHS Commissioning Board to secure the standardisation of service specifications to support the foundation of a comprehensive tariff system. This will make reconfiguration of services and integration across administrative boundaries easier.
To put matters beyond doubt, the national tariff would be a fixed price, with any competition based on quality and choice, not price. We listened to representations made to us about this, and we amended the Bill to make clear that the tariff would not be based on a maximum price. Of course I understand the points made very ably, if I may say so, by the noble Lord, Lord Davies, and the noble Baroness, Lady Murphy. We all want to see best value for money for taxpayers in the way that services are provided, but our judgment was that, for reasons that I will elaborate on, that is not the right way to go. Where services were not covered under the national tariff, there would be rules to govern those prices locally. Prices and rules within the national tariff would be legally binding and independently enforceable by Monitor to eradicate any abuses. Tariff prices could not be varied for different providers according to their ownership status. That would prevent future Governments paying inflated high prices to private providers.
I shall elaborate a little on what I said in answer to the noble Lord, Lord Davies. The purpose of the tariff is to ensure that providers are reimbursed fairly for the services they provide and to allow competition to be based on quality and not price, as I mentioned. When a maximum price was suggested, the fear was that there would be a drive to the bottom on prices, thus jeopardising the quality of care. The evidence from the UK and internationally suggests that quality-based competition with fixed prices can be very beneficial in producing higher quality care—that evidence is reported by the Office of Health Economics—whereas evidence from the USA sounds a note of caution that the wrong kind of competition based on price can lead to a race to the bottom on quality. Our judgment was that we should stick with our position that the tariff will not be a maximum price.
Finally, the Bill addresses the problem of cherry picking, which I am afraid was a problem that the previous Government did not grip. It places a duty on Monitor and the NHS Commissioning Board when setting prices to consider the range of services provided by different providers and the differing needs of the patients treated. As the Royal College of Psychiatrists noted:
“We are particularly glad to note the Government’s moves to prevent the cherry-picking of services and hope that the safeguards are a success”.
The Opposition’s amendments would actually delete these important provisions from the Bill, thus not addressing the concerns expressed by clinicians up and down the country.
To conclude, the status quo is not an option. The Bill strengthens the current system and meets the concerns raised by clinicians and others. I ask noble Lords not to press their amendments which would fail to address the current fundamental problems and would deny patients and taxpayers the benefits of an independent, fair and transparent system. Finally, I hope the House will accept the minor and technical amendments in my name in this group when I come to move them.
Baroness Thornton
My Lords, the Minister has explained this very clearly. We part company about the transparency, clarity and accountability. I resist the temptation at this time of night to start asking questions of the Minister about this matter, but I fear that it is going to take a very long time to sort this one out. One of the reasons why my own Government had not completed this task is that it is fiendishly difficult and fiendishly complex. I fear that this Bill is not going to make it any less fiendishly difficult and fiendishly complex, but it also might make the whole process a lot less accountable.
This was in fact the final group of amendments that we had put down in our suite of amendments to reform the whole of Part 3 in Committee. The noble Baroness, Lady Murphy, is quite right. If you give the responsibility and accountability for the tariff to the Secretary of State, you undermine the role of the economic regulator. Yes, that was the point of this amendment in the very first place. She got it in one—well done.
At this time of night, it is probably best if we do not delay proceedings. I beg leave to withdraw the amendment.