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Lords Chamber

Volume 723: debated on Thursday 16 December 2010

House of Lords

Thursday, 16 December 2010.

Prayers—read by the Lord Bishop of Bristol.

Royal Assent

The following Acts were given Royal Assent:

Finance (No. 3) Act,

Equitable Life (Payments) Act,

Local Government Act,

Savings Accounts and Health in Pregnancy Grant Act,

Superannuation Act,

Terrorist Asset-Freezing etc. Act.

Women: Economic Policies


Asked By

To ask Her Majesty’s Government what assessment they have made of the impact on women of their economic policies.

My Lords, all departments will assess the impact on gender, race and disability of our economic policies as required by the equality duty laid down in legislation. This is the first time that has been done. The Treasury published an overview of the impact of the spending review on equalities alongside the main spending review announcement.

I thank the noble Baroness for that response. It is all well and good, but has she read the Women’s Budget Group report on the impact of the CSR on women? Will she accept that there are different kinds of fairness and that women often lose out due to their caring responsibilities, among other things? Will she also accept that this impacts on their employment opportunities, and say whether an assessment has been made of that?

My Lords, I have read the report. I am very keen to support the fact that this Government are making fairness a key priority. I do not accept that the report sets out exactly what the Government are doing. Therefore, it is only right that noble Lords are informed that we have taken out of income tax 880,000 of the lowest paid workers, who are predominantly women. We are also protecting the lowest paid public sector workers from the pay freeze. Added to that, we are including and increasing flexible working for all people, rather than for just mothers and carers, so that we can enable women to enter a workplace that suits their needs rather than the needs always of employers.

My Lords, earlier this year the Women and Work Commission estimated that improving women’s participation in the workforce is worth between £15 billion and £23 billion to the economy each year. With the British economy clearly in need of such extra financial input, what plans do the Government have to ensure that both the private and the public sectors maximise talent at its appropriate qualification level? I ask this not least in light of the drastic cuts being made to government services, which will mean that the major job losses are in fact for women.

My Lords, in responding to the noble Baroness, Lady Massey, I pointed out that the Government take seriously the fact that the impact will fall predominantly on the lowest paid workers. That is why the Government have decided it is much better to ensure that flexible working is available to far more people. It means that women who often work in jobs below their potential are able to work at times better suited to them and their families, and that fathers are able to take more responsibility for caring at home.

My Lords, will the Minister confirm that the present Government aim to have more women on the boards of major companies? Does she think it is important to have women at that level coming through? If such board representation existed, it might have a filter-down effect that helps women all the way down the scale.

My noble friend raises an absolutely crucial point, and it is why we have asked the noble Lord, Lord Davies of Abersoch, to look at how government and business can work together to make sure that the boardrooms of public and private bodies are better represented. It is unacceptable that measurements taken in 2009 show that only 12.5 per cent of the board members of the FTSE 100 companies were women. We need to ensure that we are able to do this by having better arrangements for flexible working and through a culture change within those organisations.

My Lords, is the Minister aware that among families with children, those headed by women face double the cuts in benefits and services of other families? Is she further aware that among pensioners, those who are single, female and elderly—mostly widows—face double the cuts of other pensioners? How can it possibly be “fair”—a word the Minister used extensively in response to my noble friend Lady Massey—that those women, who are the poorest, who earn least and who own least, face double the cuts of everyone else?

We need to take on board that we have introduced the triple guarantee to uprate the basic state pension by the highest of earnings, prices or 2.5 per cent from 2011. This is a difficult time for most people. Unfortunately, it is the result of what we have inherited.

Is the Minister aware that during the passage of the Equality Bill the previous Government completely failed to tackle the problem that the provisions of the laws dealing with unequal pay for work of equal value for women are tortuous and unworkable? Do the Government have any plans to look at those provisions with a view to making the law effective and persuading employers to look at their pay scales and practices to eliminate direct and indirect sex discrimination?

My Lords, we are ending the pay secrecy clauses and working with businesses to ensure that they voluntarily work towards ensuring that pay between men and women is far more equalised. The equality duty that we will bring in in April will ensure that organisations are more transparent in how they are engaging across the board, not only on gender issues but on minority and disability issues, to make sure that everyone will be able to access a fair day’s pay for a fair day’s work.

My Lords, why out of the £16 billion being brought back into the Treasury from direct tax benefits will £11 billion come from the tax benefits to which women were entitled?

My Lords, I go back my first response. We have taken 880,000 of the lowest paid workers out of income tax. The majority of them will be women.

Public Disorder


Asked by

To ask Her Majesty’s Government whether, in the light of the public disorder that took place on 10 November and 9 December, they will introduce public order legislation prohibiting the wearing of masks or disguises at otherwise lawful demonstrations, marches and protest meetings.

My Lords, the police already have powers under Section 60AA of the Criminal Justice and Public Order Act 1994 to require the removal of face coverings worn for the purpose of concealing identity. The police also have powers to seize such items.

My Lords, it does not appear so when we have these disturbances. It would be very helpful for the police if potential troublemakers did not wear masks, so enabling the police peacefully to move them on to avoid trouble.

My Lords, the tradition of policing in the United Kingdom is by consent and to maintain as far as possible the trust of the public with whom the police are working. It is therefore a matter of judgment for the police whether someone who puts on a mask during a demonstration in the middle of a very large crowd should immediately be arrested. We have to trust the judgment of the police on that. I am assured that a number of the arrests that took place at the end of and since recent demonstrations were of people who put on masks during part of the demonstrations.

Does the Minister agree that this issue requires a proportionate and balanced response, and not an overreaction? There is a long history of masks and disguises being used peacefully by protesters as part of their repertoire of raising and ridiculing issues and sometimes individuals. Paradoxically, by donning a mask out of context, protesters can draw attention to themselves as potential troublemakers who are worthy of additional attention.

I thank the noble Lord for that question; he has of course great experience in this matter. The definition of a mask worn for the purpose of concealing identity and with the intention to commit acts of violence is tightly drawn. I passed someone at Victoria station this morning whose face was covered, I think, to keep him warm. Two days ago, I passed some Japanese tourists outside here who were wearing gauze face masks which I think were intended to prevent them catching the European version of Asian flu. They would not be caught by the Act.

Does the noble Lord accept that while one has great sympathy with the reasons behind the Question—I appreciate what has just been said about the necessity of balance in approaching this issue—there is one other balancing issue that should be taken into account: that police should not appear on such demonstrations with their identity numbers concealed or otherwise removed?

My Lords, does my noble friend realise how terrifying it can be when a mass of people are protesting and people come up wearing masks? It might be fine for great strong men like him, but it is not fine for a lot of people. The arguments against banning masks just do not hold water. Surely if there was a rule which stated that masks could not be worn, someone wearing a mask would be arrested. That would be the law. Why cannot we have it?

My Lords, Section 60AA is very tightly drawn, requiring police to be authorised in the particular circumstances to require any person to remove any item which the constable reasonably believes that person is wearing wholly or mainly for the purpose of concealing their identity. We have all of us been watching the demonstrations in recent weeks. We know how difficult it has been for the police to maintain the balance for the great majority of demonstrators who wished to undertake peaceful protest. I am sure that all of us wish to maintain the right to peaceful protest in this country. How the police deal with the minority of violent protesters is a matter that we must leave to operational judgment on the day and at the time.

My Lords, the noble Lord is surely right to say that this matter has to be left to the judgment of the police. Does he agree that it shows some of the difficulties that the police have and that they need support? Does he really think that the Government are giving the police the necessary support in the light of the drastic cuts in budgets that are going to be made to the Metropolitan Police Force?

I might well have anticipated that question, as it comes up on all possible occasions. The Government are giving the police all the support that they can. I am informed that a number of the people arrested after demonstrations are people identified as having been wearing masks, but if they have also been identified as taking part in more serious offences, they will be charged for the more serious offences first.

My Lords, will the Minister please think about this point again? The offence as currently on the statute book is very tightly drawn and, consequently, means that policemen engaged in a situation will be very cautious in their approach to things. We might like to take into account the experience in Northern Ireland, where, for decades, it was an offence simply to wear a mask in public, and it did not cause any of the difficulties alluded to earlier.

My Lords, one simply has to ask whether it helps when police are attempting to control a very large demonstration to ask for police snatch squads to try to go in to the middle of a demonstration to seize particular demonstrators, which is in effect what the noble Lord is asking for. We have to leave this to the judgment of the police on the day. I am assured that a number of those who were wearing masks and, for example, in the 24 November demonstration, vandalising a police van in the middle of Whitehall were identified afterwards and some of them have been arrested.

My Lords, I have already quoted Section 60AA of the 1994 Act, which says,

“for the purpose of concealing … identity”.

I have also said that there are plenty of other reasons, not simply including religious identity, for which people may indeed wear masks. If it gets colder in the next few days, we can expect to see many more white Christian Englishmen, perhaps even including the noble Lord—I am not sure whether he is a Christian or not, but that is up to him—wearing masks that keep their faces warm.



Asked By

To ask Her Majesty’s Government whether they will make representations to the Government of Indonesia regarding the initiation of a dialogue with the indigenous West Papuan opposition.

My Lords, the UK remains committed to the territorial integrity of Indonesia. We will do all we can in support of measures to address the widespread poverty in the area in question, and to raise our concerns about human rights abuses wherever they occur. We encourage, along with other international partners, a meaningful dialogue which would be of assistance in finding an acceptable solution.

I thank the Minister for his reply, but would he urge on the Indonesian Government the sheer seriousness of the present situation? He will not need to be reminded of the statement of the Foreign Secretary in the other place that friendly relationships with states should in no way preclude our raising human rights abuses in the strongest terms. Would he draw the attention of the Indonesian Government to the fact that 10,000 people are assembled in June to reject the so-called special autonomy measures? The West Papuan people do not believe that these are helping them, and a dialogue is needed with their leaders.

I appreciate the very strong feelings on this subject, not only of the noble and right reverend Lord but of many people about some of the reports from that area. I fully endorse what my right honourable friend the Foreign Secretary said in another place. Our ambassador raised with the governor authorities only a couple of weeks ago some aspects concerning human rights that clearly concern us greatly. The Deputy Prime Minister raised questions of human rights in the area and of access of journalists, to see just what is going on, when he met senior Indonesian Ministers at the Asia-Europe summit in October. So we certainly have not been silent on this matter, but we do believe that it really is the responsibility of the central, district and provincial Governments and all the parties concerned to work out exactly how a dialogue is going to go forward. There are real restraints on how much we can do from outside, except to keep raising our voice about the clear abuses of human rights that have, sadly, occurred.

My Lords, I declare an interest as having been involved for two and a half years in the negotiations between the Indonesian Government and the Acehnese people, which led to a successful conclusion. Has the example of that process, and in particular the use of mediators, been considered by the parties? If not, could it be suggested by the Government to the Indonesians?

In instances such as the one that my noble friend has mentioned, mediators and facilitators can play a part. We have not been asked to play such a role ourselves, but I would not question the proposition that in very difficult and intense situations of the kind that we are discussing, this kind of mediation can undoubtedly play a part. However, we have not been asked to play that part.

Will the Minister confirm that the Indonesian Government are maintaining their ban on foreign journalists going to Papua? If that is so, does he not agree that the ban is entirely counterproductive, because it nurtures the view that there is something going on there that has to be concealed? Will he therefore say whether the Government will follow up the intervention by the Deputy Prime Minister at the Asia-EU summit and press the point on the Indonesian Government in their own best interests?

Certainly what has been raised by the Deputy Prime Minister will be followed up. The noble Lord mentioned concealment. If he has visited websites, as I have, to look at reports of what is going on there, he will have seen enough to realise that horrific and dreadful things have occurred. While the case for greater access for journalists is always strong and we will pursue it, we can already see what is happening there.

My Lords, the noble Lord will be aware that one of the associated problems in Indonesia is that of people smuggling. In view of the tragedy overnight off Christmas Island, will the Government do everything in their power to raise again in international fora the need for concerted international action against people smuggling?

Yes, of course we will. One has to echo the words of the noble Baroness about the sadness and tragedy so graphically depicted in photographs in our newspapers this morning of these refugees—boat people of a kind—going to a terrible death in the storms off Christmas Island. It is very sad.

My Lords, the Minister was kind enough to tell us that the ambassador raised these issues, as did the Deputy Prime Minister at the summit a couple of months ago. Will he tell us what the response of the Indonesian Government was to having these matters raised?

Not in detail, except that they recognised we have these concerns. The ambassador was in the West Papua region and talked to the governor and to the police authorities. He made the point very clearly that the reported abuses of human rights are completely unacceptable and that we are very concerned. As far as concerns their response, we must try to look forward to the possibility of getting a dialogue going so that an acceptable solution can be found. However, from outside it is very difficult for us or for any other international partner to define what that solution should be and how it should go forward.

Extradition: Gary McKinnon


Asked By

To ask Her Majesty’s Government what is their current position regarding the request for the extradition of Gary McKinnon.

My Lords, a judicial review of a decision by the previous Home Secretary to uphold an order for Mr McKinnon’s extradition stands adjourned. My right honourable friend the Home Secretary is reviewing the case against the sole legal test, which is whether, given Mr McKinnon’s medical condition, extradition would breach his human rights. My right honourable friend has sought Mr McKinnon’s consent to a psychiatric assessment by clinicians recommended by the Chief Medical Officer. A response is awaited from his solicitors.

I declare an interest in so far as I chaired the independent review of autism services in Northern Ireland and currently chair the Northern Ireland autism regional reference group. I am grateful to the Minister for her Answer, but does she accept that inadequate recognition and the total lack of appropriate interventions for those with an autistic condition, which was first identified and defined by Kanner in 1943, have deprived someone in Gary McKinnon’s age group of his human rights and that to extradite him would exacerbate the social neglect that he has suffered? Do we not have a more compelling moral responsibility in this instance than a legal one?

Medical science has advanced through the ages, and we have a better understanding of some of these conditions. With regard to Mr McKinnon’s case, it is of course precisely the issue of the state of his medical condition and whether the extradition would breach his human rights that is at issue at the moment. We hope that he will be willing to undertake an examination, with agreed clinicians.

My Lords, many of the judicial avenues open to Mr McKinnon have now been exhausted. The sad part about it is the particular state of disablement that he suffers. A conversation was recorded between the Prime Minister and President Obama in July this year where they said that they were looking for agreeable solutions. Has such a solution been found? Will the Minister confirm that the Extradition Act 2003 does not require contestable evidence? Does it not work to the detriment of British citizens, and should it not be reviewed?

On the first point, as my right honourable friend the Home Secretary has made clear, we have a legal framework within which Mr McKinnon’s case is being considered. On the second point, my right honourable friend has asked for a review of extradition provisions, including the US/UK treaty as well as the European extradition warrant. Sir Scott Baker will be considering some of the issues to which she has made reference.

My Lords, having been actively involved in the other place in the Gary McKinnon case, I have read his psychiatric reports that were made available to the Home Secretary before the general election. I understand that the Minister is seeking further medical reports. Does she agree that the evidence already before the Home Office shows overwhelmingly that the threat of self-harm is not an idle threat but is very real? Does she also agree, in the light of the damage that has been caused to the American Government by Wikileaks, that, rather than trying to imprison an autistic savant, the Pentagon would do well to employ Gary McKinnon to sort out the weaknesses in its computer system?

If I might respond to the first part of my noble friend’s question, one of the factors that influenced my right honourable friend the Home Secretary to stay the judicial review that was in progress was precisely the desire to take a second look at the question of Gary McKinnon’s medical condition. The House will understand that she has asked for a separate and impartial view to be taken of his medical state.

My Lords, did the Minister or any members of the current Government have discussions with the Americans about this case when they were Opposition, and were they given any indications about how the Americans would behave with regard to it?

I have not had any discussions with the Americans and I cannot, without notice, answer for other members of the Government.

My Lords, I want to ask my noble friend about the timing of the Scott Baker review. Clearly, this is an increasingly urgent matter, given this and other sad cases. The latest parliamentary Answer that the Minister has given is that it will take place in late summer, which is a fairly broad date. Could we have an update on the timing? Does the Minister not share my regret that this unbalanced treaty was slipped—not passed—through by the previous Labour Government without any parliamentary scrutiny at all?

My Lords, I would hope that the legislature had done its proper job. As regards the review being conducted by Sir Scott Baker, he has indeed been asked to report by next summer. The reason for that is to allow him to conduct a proper review. If I might say so, there is a general feeling that some of the provisions need looking at. If they are to be looked at, they need to be looked at thoroughly. They include such matters as the breadth of the Secretary of State’s discretion; the operation of the European arrest warrant; whether we should commence the forum bar; whether the UK-US extradition treaty is unbalanced; and the whole question of whether requesting states should be required to provide prima facie evidence. This is a long and substantial list of items. I am sure the House will agree that it is right that those conducting the review should be able to do a thorough job.

My Lords, we will clearly look forward to the outcome of the review with a great deal of interest. I hope the noble Baroness will agree that there should then be parliamentary debate. However, will the noble Baroness confirm that the 2003 Act, which was debated in Parliament, enabled the UK to align extradition arrangements with EU member states, the US, Canada, Australia and New Zealand, and has been instrumental in bringing back to this country people who have committed crimes against UK citizens?

The noble Lord is correct in saying that the Act has enabled the UK to request the return of citizens to this country for trial. There are some erroneous figures out in the open about the operation of the UK-US treaty. The numbers in each direction are pretty much the same. There have been 25 cases of people returned to the UK and 29 of individuals returned to the US by the UK.

Arrangement of Business


My Lords, immediately after the conclusion of the debate in the name of the noble Lord, Lord Moynihan, my noble friend Lord Marland will repeat a Statement on electricity market reform.

Loans to Ireland Bill

Business Statement

My Lords, with the leave of the House I will make a Business Statement about the Loans to Ireland Bill, which had its First Reading last night and was printed this morning.

On 22 November, my right honourable friend the Chancellor of the Exchequer announced that the United Kingdom, alongside the International Monetary Fund and the European Union—the eurozone and other member states—will participate in the international financial assistance package for Ireland. The United Kingdom has agreed in principle to make a bilateral loan to Ireland of approximately £3.25 billion, as it is in our national interest that the Irish economy and banking system are stable. The Government have therefore introduced a short Bill, designed to provide the necessary authority for HM Treasury to advance these funds to Ireland.

The intention is to fast-track the Bill. It is important for the Government, the IMF and the other lenders to be sure that the legislation will be passed so that they can assess the adequacy of the whole international support package. The IMF board is meeting to discuss the package today. Noble Lords will appreciate that insuring against further financial market instability is also imperative in the current environment. The Bill was introduced in another place on 9 December. In line with recommendations on fast-track legislation made by the Constitution Committee of this House, the Explanatory Notes to the Bill contain a full explanation of the case for fast-tracking and address the key questions set by the committee. In particular, the Explanatory Notes set out that the Bill contains a sunset provision, so that the authority to lend to Ireland and the power to increase the cap lapse after 8 December 2015—five years after the date of introduction in another place.

At the completion of stages in another place yesterday, the Bill was certified as a money Bill by Mr Speaker because its sole purpose is to authorise financial expenditure. The usual channels have agreed that the Second Reading of the Bill will be taken next Tuesday, 21 December, before Committee stage of the Public Bodies Bill resumes, and that remaining stages will be taken formally immediately after Second Reading, as is usual practice for money Bills. This will allow the Bill to receive Royal Assent before both Houses rise for the Christmas break. A list of speakers for Second Reading of the Bill next Tuesday is already open in the Government Whips’ Office. This approach has the agreement of the usual channels and I hope that the whole House will support it.

Business of the House

Motion on Standing Orders

Moved By

That Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on 21 December to allow the Consolidated Fund Bill to be taken through its remaining stages that day.

Motion agreed.

Procedure Committee: Third Report

Motion to Agree

Moved By

My Lords, this report covers several matters, some of which are, I hope, self-explanatory. However, I hope it will be helpful if I refer briefly to three of our recommendations.

First, we have considered the proposals of the Leader of the House regarding the future timetabling of Thursday debates, both for the present, two-year Session, and for future Sessions, which will run from spring to spring. We are satisfied, on the basis of figures and projections provided by the Clerk of the Parliaments, that the Leader’s proposals will provide the same number of Back-Bench debate days as the current arrangements. We therefore recommend this proposal to the House.

Secondly, we have endorsed a suggestion by the Leader of the Opposition that the limit on the number of topical Oral Questions allowed per Member should be increased for the duration of the present, long Session. In deciding on an appropriate limit, we have had to balance the length of the Session against the growing number of Members wishing to table Questions. We therefore recommend a one-off increase in the limit from four Oral Questions per Session to five.

Finally, we have considered the conduct of Oral Statements. We recommend that in future Members wishing to ask questions on an Oral Statement should, as a courtesy to other Members, be present to hear the whole Statement read out. This is a modest change, but I hope that the House will welcome it.

Motion agreed.

Gulf of Mexico: Oil Spill


Moved By

To call attention to the implications of the Deepwater Horizon oil spill in the Gulf of Mexico; and to move for papers.

My Lords, I declare an interest as one of many long-term investors in BP shares as part of a pension fund and, more important for today’s debate, as a director of Rowan Companies. I have had the privilege to sit on Rowan’s board for 12 years and have chaired its health, safety and environment committee since its inception. We are a high-spec jack-up rig company with a manufacturing and land drilling business headquartered in Houston, Texas. I should add, in the context of today’s debate, that Rowan has no involvement in deep-water drilling activity.

The explosion that we are considering, and its consequences, occurred on the Transocean Deepwater Horizon at 10 pm on 20 April this year. It is known that the crew had been fighting circulation issues on the rig, where the weight of the muds and pressure of oil were not matched. The explosion was a horrific human disaster that rapidly turned into one of the worst environmental catastrophes in the history of the energy business.

In 1990, when I was appointed Minister for Energy with responsibility for implementing the Cullen report, a different approach was followed by the British Government from that energetically pursued by the Obama Administration before the mid-term elections. Back then, on 6 July 1988, the Piper Alpha rig, a North Sea oil production platform, was the subject of a tragic explosion and the resulting fire destroyed the rig and killed 167 men, with only 59 survivors. The Government of the day, with the support of the Opposition, responded calmly and worked with the industry on both sides of the Atlantic—indeed, with the US company Conoco leading—to implement a new safety regime, which currently leads the world.

Deep-water drilling is the future of the industry. Such drilling characteristically takes place in hostile conditions and is at the leading edge of drilling technology. Deep water is where the world’s hydrocarbon growth market exists and is the main area for offshore production growth, with deep-water discoveries accounting for 50 per cent of world discoveries over the past three years. The deep-water discoveries are significantly larger in size than the new onshore discoveries, with 150 million barrels of oil equivalent being the average size of a deep-water discovery compared with 25 million barrels onshore. Deep-water production has doubled over the past five years and is expected to double again over the next five years. The reality is that, given the annual discoveries required to meet world demand, in 20 years’ time we will need to discover and produce as much from deep-water drilling as we do in total world wide today. However, as we have seen, deep-water exploration and production are still in their infancy, and the focus has been on exploratory wells. A backlog of needed development drilling may indeed be building.

Against that background, we need to consider not only what is happening in the offshore oil and gas drilling business but the relevance of this morning’s announcement that the US intends to take legal action, as was expected. It would be inappropriate to comment on the legal implications of that, but equally the announcement was part of due process and those who follow the industry recognised it as such. What is relevant is that the decision has formally spread the net much wider; many counterparties have been added, and I anticipate that more will be added. The announcement underlines the fact that Deepwater Horizon was a major industrial accident, but I have to say that the approach being taken is in stark contrast to the total focus on BP by the Obama Administration before the mid-term elections.

That point about BP brings me to my remarks on governance. The British, much more than the Americans, favour the separation of powers between the chairman and the CEO. This is not just for good governance, as the role of the chair is to provide air cover for the CEO. In the case of BP, the chair should have been available to cover while his CEO focused on the operational issues, for the only person who can provide such cover is the chairman. Regrettably, Tony Hayward had no port of call, as he had no effective chairman. As a result, he had become too close to the action. When the chairman finally appeared, to the embarrassment of many his reference to “the little people” on the lawn of the White House achieved the unthinkable by yet further damaging the reputation of the company. As a result, BP presented a soft public-relations target.

Interestingly, BP is in the interesting position that there may be a silver lining for the company in this tragedy. The real problem facing the major oil companies is growth. Many are simply too big. BP has been forced to shrink substantially, to a level from where it can begin to grow again. I believe that the very size of the behemoths in the industry will lead to potential safety incidents in the future, unless these issues are addressed very seriously world wide today. Over time, the reaction will be for these very large companies to break themselves up into refining, marketing, midstream and downstream businesses. I sensed that the noble Lord, Lord Browne—an eminent former CEO of BP—came very close to this point.

A second issue, which is well known to the Minister from his previous professional life, results from insufficient capacity in the insurance market. The liabilities are now too big for few except the majors to deal with. The question that I pose is whether the insurance market can be encouraged to provide more cover and, if so, how. Most available capacity is about £2 billion yet, post the Deepwater Horizon disaster, capacity needs to be of the order of £20 billion or more.

The nature of deep-water drilling—indeed, the nature of our offshore licensing regime—requires work in partnerships. On many occasions in the North Sea, BP has benefited from working with small independents, which often have the ability to show more ingenuity, more innovation, more responsiveness and more fleetness of foot. Small independents can be more focused on the success of an individual well, which can have a major impact on an independent’s balance sheet, whereas the majors can sometimes lose sight of the detail within a wider portfolio of assets and innumerable drilling activities, which dilutes the focus of the senior management. Put simply, on many occasions independents have brought a more user-friendly approach to drilling activity. I am a believer in diversity in the industry, as you get the most out of any situation from having a range of players involved in an activity. However, the disaster in the Gulf of Mexico has pushed back deep-water exploration to the big battalions, in an unseemly battle between a major oil company and a sovereign Government.

If I were running an independent today, the first question that I would ask my management team is, “Are we engaged in operations anywhere in the world that could bring down the company?”. If so, deep-water drilling is not a risk that I would be prepared to take. However, there is little evidence that the independents can receive protection from the insurance market. I put it to the Minister that this is potentially a huge loss to an industry that is focused on the deep-water exploration that, as I outlined earlier, is so essential to the future of oil and gas production. We must avoid a scenario in which the independents are precluded from deep water.

I turn to the implications that I believe will follow. The first and most important issue for any oil and gas company—indeed, for any company—is safety. Safety is everything. Safety cases need to be in place on oil rigs, not gathering dust. Active, live safety regimes are critical to the safe performance of activities in very hostile conditions. Nothing is more important than a strong safety culture. There needs to be more on-board safety exercise, with all persons on rigs required to participate.

I propose for the consideration of the industry that, in each country world wide, a single entity should have broad safety and pollution prevention responsibility to avoid the gaps, overlap and confusion that exist in some safety and regulatory regimes. The regulator’s core responsibilities and objectives must be clearly identified. Safety management and regulatory priorities should also be identified through a comprehensive risk assessment programme.

At the heart of safety is training. Training and competency programmes must take account of new risk information. Contracting strategies need to take account of safety and risk implications.

I have always believed that government and industry should promote an improvement mentality, not a compliance mentality. Continuous communication is essential—communication among regulators, operators, contractors, workers, industry associations and public interest groups—if we are to achieve that objective of a continuous improvement in safety. Operators and contractors must manage their companies to achieve safety objectives and must continually assess the effectiveness of their management programmes. I believe that regulators world wide should seek not to resolve problems but to serve the industry by distributing information by, for example, hosting workshops so that the industry itself can solve the problems.

Wherever possible, the best standards should be identified and applied internationally. The industry should not have different standards in different countries. Accident investigations should always be conducted independently, and findings should be promptly and broadly distributed and discussed with all personnel.

Industry and government cannot rely solely on incident data to identify risks. New indicators must be explored and assessed, particularly for major hazards and safety culture. Worker input into safety culture is absolutely essential—you are as strong in safety as your weakest link. Peer-based audit programmes should be considered for both regulators and operators. I hope that the Minister will agree that all personnel should be trained to be safety leaders and should be empowered to stop work on a rig without blame. In the context of the disaster in the Gulf of Mexico, inspection of life capsules also needs to be reviewed. Why were two life capsules not deployed on the Transocean rig?

As I mentioned, training is critical. Back on land, training to plan for managing disasters offshore—from media training and helicopter co-ordinator training to incident command training—needs to be reviewed in order to understand better how to handle an incident.

A final point on the implications of those safety considerations is the importance of a clearer definition of the respective roles of the drillers and operators. While the operator is the overall supervisor and co-ordinator of the project, the processes and the people lie within the control of the driller.

Against that background, I congratulate the Government on their measured response to the incident. However grave the human and environmental disaster—and there is no denying the scale of severity of both—this was not the time for the fury of a nation to be turned on a major drilling accident. The aftermath became grossly political and over-reactive, from the press coverage to the McCarthyesque attempt at character assassination by some at the congressional hearings. Both of those damaged American national interest and were in stark contrast to our reaction to the Piper Alpha disaster, with its huge loss of life.

The Secretary of State, Chris Huhne, was right to state that the Deepwater Horizon gives us pause for thought and, given the beginning of exploration in deeper waters west of Shetland, there is every reason to increase our vigilance. DECC has increased the oversight of drilling operations by requiring additional inspectors in its Aberdeen office. Can the Minister confirm that the number of annual inspections of drilling rigs will double? If that is the case, do the Government feel that there should be further changes to the inspections, both in content and frequency?

I understand that DECC is also reviewing the indemnity and insurance requirements for operating on the UK continental shelf. Can the Government respond to my earlier observations on the cost of cover and exposure, which will be prohibitive for many of the independents on which the success of North Sea exploration and production has been built? Does my noble friend agree that this could seriously damage future activity in deep-water, high-pressure fields to the detriment of activity in UKCS waters? If so, what action do the Government intend to take in this context? Have the Government asked the insurers to work with a new group of regulators and oil companies—the oil spill prevention and response advisory group, or OSPRAG—to study this issue and come forward with solutions? If action is not taken, only the very few, strongest self-insured operators will, as I have argued, be able to participate.

Having made some observations earlier on the chairman of BP, I hope that the House will allow me to end by paying tribute to the substantial contribution that Tony Hayward made to the company throughout his lifetime of service. His knowledge base and talent were identified, recognised and nurtured by the noble Lords, Lord Simon and Lord Browne, who as his predecessors encouraged his exceptional talents. On the occasion of the explosion of the Macondo well, in terms of the safety culture that he had rigorously sought to implement since first setting foot in the CEO’s office, Tony Hayward’s instincts, initial judgments and strategy were sound in the immediate aftermath of that crisis and helped to pave the way to assist many thousands of people affected by the tragedy. The problem grew into an issue of how those judgments and strategy were put into effect and how to handle the media and inevitable US pre-election political assault. History will show that it can never be said that Tony Hayward did not recognise the incident’s heavy toll on the Gulf, its inhabitants and the workers on the rig. Nor can anyone doubt his total commitment in seeking to address the nightmare that was engulfing the industry, BP, his colleagues, his family and himself on the very subject to which he was committed—the safety of his workforce in the world’s most hostile yet necessary industry. That industry will fuel much of the world’s economy in the 21st century through deep-water offshore oil provinces, in which so much of the industry’s future will be based.

While the rhetoric has subsided to a large extent on the oil spill disaster, nevertheless the reality of the event has to be recognised and recent events taken into account. For BP, the event was a near-death experience. It appeared that BP did not know what was happening as it seriously underestimated the flow-rate discharge. It appeared not to know how to stop the flow, as three attempts to stem the well failed. It appeared unappreciative of the depth of the concern regarding the effect of the spill on the environment and the impact on other businesses in the gulf.

The Macondo spill resulted at one stage in a 50 per cent fall in BP’s share price, while the stock market had concerns about whether the asset base of the company was deep enough to meet its ultimate liabilities. BP’s stock briefly rallied following the initial disaster but this morning it fell again as the US Government announced their plan to take legal action against BP for the disaster in the Gulf of Mexico. They are planning to sue BP, in addition to Anadarko of the US and Mitsui of Japan, its partners in the disastrous Macondo well; Transocean, the owner of the Deepwater Horizon drilling rig; and the QBE syndicate 1036 at Lloyd’s of London, which insured the rig. The claim is for $21 billion.

Following extensive political debate and government discussion undertaken in the full glare of publicity, BP has responded to stabilise the situation. Among the measures taken, it has set aside $20 billion in an escrow account under third-party control with no cap on its liabilities and excluding potential penalties. BP is perhaps grateful for the political pressure to withhold two quarters’ dividend payments, with the challenge to resume but not restore dividend payments in 2011. It must be borne in mind that this affected the pension funds of many people on both sides of the Atlantic. In addition, BP has cut its capital expenditure and, since the disaster, has now disposed of $43 billion value of assets to increase liquidity. The spill over the 87 days before the capping stack attempt succeeded in stemming the leak is estimated at 4.9 million barrels and resulted in a record $17 billion second-quarter loss to the company.

The company has made its internal inquiry extensively available. The internal inquiry did not identify any single action or inaction that caused the accident. Rather, a complex and interlinked series of mechanical failures, human judgments, engineering design, operational procedures and contractor interfaces allowed an escalation of errors. The report presented eight key findings related to the causal chain of events and recommendations that have been examined throughout the industry and between national regulatory regimes.

The UK already has a robust regulatory regime introduced following the Piper Alpha disaster of 1988. For deep-water drilling, operators are being required to demonstrate that the factors identified in the BP report have been satisfactorily addressed—that there is effective co-ordination between all the companies involved and between companies and relevant government agencies. In this light, it is correct that the UK Government do not see a case for any ban on deep-water drilling. The strength of the UK regulatory regime was recognised in the initial report from the US Department of the Interior, which identified that elements of our regime should be implemented there, in particular a case-by-case safety appraisal, independent verification of the design of wells and, most important, the separation of the health and safety function from the licensing function within government.

The Macondo incident has shown that co-ordination between all the companies involved and between companies and relevant agencies is an essential part of safe operations and will be a requirement to be demonstrated. The industry needs an environment where best practice is shared and lessons are learnt. The UK regulations also contain a range of additional safeguards, statutory requirements, checks and verifications. While it is impossible to say that such a blow-out as occurred in the Gulf of Mexico could never happen in UK waters, our regulations provide a reduced probability of such an event.

The US has separated health and safety from licensing in two different agencies and has implemented two new rules to improve safety. First, there is the drilling safety rule to make mandatory several requirements for the drilling process and, secondly, there is the workplace safety rule to make programmes to identify potential hazards and to introduce risk reduction protocols.

Since the capping of the well on 15 July, BP has had to revise its business to ensure that safety is placed at the heart of its operations. Finance and reputation have been further strengthened through structural and personnel changes. Under the guidance of a new chief executive, Bob Dudley, the exploration division has now been split between exploration, production and development, each with separate leaders reporting to the chief executive. In addition, BP has re-examined the low-probability, high-impact quartile of its risk register and introduced a new executive role with powers to intervene, also reporting to the chief executive. These changes help to ensure that a greater emphasis is placed on risk management.

Furthermore, BP has examined its relationships with contractors to review the balance between, on the one hand, its incentives and reward structures, with the corporate emphasis on operational objectives such as timely fulfilment, and, on the other hand, the emphasis on safe operations. It needs to introduce further measures to incentivise safety. BP has identified improvements to its response capability in operations made complex by the very nature of deep-water drilling.

I am informed that BP, with the rest of the industry, is examining best practice in communication and sharing of experiences. In hindsight, it is examining the disincentive to share near-miss experiences, such as the one that happened in the Shell Sedco 711 platform in the North Sea in December 2009, when a blow-out preventer worked and shut down operations, in contrast to what happened in the Gulf of Mexico.

I am grateful to the Minister for making his contacts in BP available to outline their changes to business practice. Not only is it necessary to focus on preventing major oil disasters and disastrous events, but examination of all leaks, spills and seepages in operations must also take place, with the necessary reporting structures to build up a culture of continuous improvement within the industry and with the emphasis on safety and the minimisation of environmental degradation.

In response to the gulf inquiry, an industry-led initiative has set up the Oil Spill Prevention and Response Advisory Group—OSPRAG—to liaise with industry and government. I would like to ask the Minister what discussions have taken place with this group. What areas of concern are being addressed? Will it continue to meet to a regular timetable?

In light of the huge amounts of dispersant that have been used in the gulf, can the Minister tell us what monitoring and research is happening and being shared with Her Majesty’s Government concerning dispersant effects on the environment? I understand that no advances in dispersant technology have occurred since the 1989 Exxon “Valdez” spill.

I am grateful to the department for making available the shareholder map of responsibilities in respect of the regulatory framework. Action 9 of the department’s annual energy statement makes a commitment,

“to undertake a full review of the oil and gas environmental regime following the outcome of the investigation into the causes in the Gulf of Mexico incident”.

Can the Minister advise the House when that review will be finalised and whether it will include a best-practice review by the Better Regulation Task Force or the Risk and Regulation Advisory Council?

Finally, I ask the Minister whether the Government are setting up any formal structures to improve dialogue internationally between Governments, especially with the United States, to monitor exploration as it takes place in ever more remote and potentially hazardous environments as the search for oil reserves continues.

The North Sea remains an extremely important resource to the UK: the UK’s oil and gas resource is estimated to be up to 24 billion barrels equivalent. The sector at present provides about 60 per cent of the country’s energy and benefits the balance of trade to the tune of some £30 billion a year. This disaster highlights the challenge to move decisively towards a low-carbon economy. Recently a report from a group of business leaders drew attention to what it called the peak oil debate and urged an added emphasis behind renewable energy that green campaigners have been longing for. Meanwhile, BP announced yesterday a significant discovery in the deep-water west Nile delta in Egypt. It cannot be a return to status quo practices. We must press on and continue in the transition to safer, more sustainable energy. I look forward not only to the Minister’s reply but to his Statement later today.

My Lords, the BP oil spill in the Gulf of Mexico was the biggest oil catastrophe in American history and possibly in peacetime history overall. Eleven people died; numerous others suffered injuries as a result of the explosion on the Deepwater Horizon platform; an estimated 5 million barrels of oil escaped into the sea; and we will never know how much oil ended up in the deeper ocean. There was considerable damage to people’s livelihoods, and to marine and wildlife, as well as to the reputation of a distinguished multinational connected to this country.

While my noble friend Lord Moynihan and the noble Lord, Lord Grantchester, have greater expertise on the technical aspects of this catastrophe and what it means for safety regulation for oil rigs in the deep seas, I shall concentrate on the unsustainable and insatiable American appetite, and that of the developed world, for fossil fuel in non-renewables. The implications for the UK are equally profound.

I merely note that the debate about the technical failures of BP and the other companies involved is of great significance because we must learn the lessons from it. As a recent report on the “Today” programme revealed, a Shell platform only narrowly avoided a similar incident in December 2007. The safety review discovered a series of misinterpretations and mistakes by the crew operating the platform, which was very similar to what happened in the BP case. Fortunately, as the noble Lord, Lord Grantchester, said, the blow-out preventer worked and a major oil catastrophe was averted in the North Sea. While the risks of deep-sea drilling are thus evident and widespread, I want to focus on some of the bigger lessons on which we need to draw for a British policy on energy and oil, and on climate change and the environment.

The BP oil spill is not an isolated case with tragic outcomes. It is in fact symptomatic of the larger risks that we are forced to take as the world reaches the point where our demand for petroleum outstrips our capacity to find and produce it. It is a simple geological truth that the world’s oil reserves are limited. What is not known is the amount of oil that is still available to us for commercial exploitation. For decades, the international oil companies and the Governments in oil-rich countries have assured us that there was no danger that we would soon come close to exhausting world oil reserves. They told us that the doomsday scenario of a so-called “peak oil” was misguided. This optimistic outlook seemed justified over the past several decades as new oilfields were discovered and technological innovation allowed us to dig for ever more remote reserves. But in recent years peak oil theory has gained traction in international energy debates and can no longer be dismissed as scaremongering or out of hand.

In 2009, the UK Energy Research Council carried out a major review of about 500 studies of future oil reserves. It concluded that,

“a peak in conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020”.

Other bodies, such as the respected International Energy Agency, have also begun to change their forecasts for oil reserves. In 2007, the US Department of Energy warned that,

“peak oil presents the world with a significant risk management problem of tremendous complexity”.

We in the UK should be particularly receptive to these warnings, for our own experience with oil production provides a classic illustration of what an oil peak looks like, albeit in a regional context. Oil production in the North Sea peaked in 1999 and is now on a declining path. Britain has been a net importer of oil since 2005—something we did not anticipate and plan for quite well enough.

As other oilfields are becoming unavailable, either because they have reached the end of their lifetime or because they are in the hands of state oil companies, we need to search for oil in ever more inaccessible parts of the world. As the BP oil spill demonstrated, the scramble for unconventional oil comes with growing safety and environmental risks. They are also likely to lead us into civil war and conflict—not least if you look at countries as far apart as Equatorial Guinea, Nigeria or Saudi—to doing business with those we may not wish to be so dependent on.

What are the answers? A tightening of safety standards and regulatory oversight of the oil industry will be an important answer to the BP issue. But if we focus solely on this aspect, then we miss the bigger threat of our continued dependence on oil, which is fuelling the search for unconventional oil reserves deeper and deeper in inhospitable waters, literally. In fact, given current trends in road and air transport in the UK, our oil dependence is set to grow even more. We may be able to replace coal and oil-based energy production with renewable energy sources and nuclear energy, but oil remains an irreplaceable fuel for the transport sector. Although households and industry have been able to reduce their dependence on oil since the 1970s oil crisis, the transport sector’s share of oil consumption has steadily risen. Cars, trucks and airplanes now consume about 50 per cent of oil in the United Kingdom.

There are compelling reasons for reducing our dependence on oil. The fight against climate change requires us to reduce greenhouse gas emissions, chiefly those from the burning of fossil fuels. A shift away from oil would also be beneficial for the UK’s foreign policy, which I have already touched on. As more and more oil reserves are controlled by Governments that are neither liberal nor democratic, we would do well to reduce our addiction to oil and our dependence on the good will and co-operation of often unpalatable and unpredictable regimes in oil-rich regions.

The BP oil catastrophe should thus be seen as a wake-up call. It brought to light extraordinary failings in safety procedures and management structures by, as I have said, a proud international oil company. It is also shone a light on how our dangerous dependence on oil is forcing us into ever riskier forms of oil exploration. We cannot address the former problem without dealing with the latter as well. It is for these sound environmental reasons that this Government have embarked on a radical overhaul, and we will hear today about the electricity market reforms. We look forward to my noble friend’s Statement in a short while and the consultation process that is to follow.

My Lords, I should declare a number of interests that may confuse your Lordships as much as they do me. I am grateful to my noble friend Lord Moynihan. My first interest lies in my great aunt Jenny Mitchell-Thomson, a canny Scot from the east coast who, 50 years ago, left to the nephews and nieces, of whom I was one, £500 in British Petroleum shares with instructions that they should never be sold except in dire emergency. I did actually sell some of those shares briefly to help pay for the education of my son, Calum Mitchell-Thomson—the same name as my own—who has a degree in marine economics and is the managing director of one of the larger investment banks dealing with energy. He is my specialist adviser from time to time.

I declare another interest in that 20 years ago Earl Jellicoe, a mentor of mine as he was of the noble Lord, Lord Moynihan, appointed me at a young age to serve on one of the EU committees, together with the noble Lord, Lord Stoddart of Swindon, and other great names. We were to determine where our future would lie, including what would happen when North Sea oil ran out. We said that it would be a worrying time, but that the technology that we would have gained from those developments in the North Sea would benefit us worldwide.

I then asked myself who owns the oil under the sea, and remembered the old Scottish definition of freehold, “All from heaven above to hell beneath”, with a few extra territorial rights in that you controlled the foreshore or the sea as far as you could ride a horse and throw a javelin. Looking out at the North Sea one day, I wondered whether I could design a form of cannon or weapon that would give control of that sea. I looked up Big Bertha, the gun used during the war. I found that no one had yet worked out who owned those areas of the North Sea beyond the 200-mile limits.

I scratched my head and asked what would happen when the oil runs out. Our oil did run out, as the noble Baroness mentioned just now. We had a sudden change from a surplus to a deficit. We have a deficit in manufactured goods of £100 billion a year and in foreign trade of £45 billion, and the decline in revenues from North Sea oil is having an impact. The only conclusion is that the economy of the United Kingdom has to be worldwide. Within that, our expertise in oil and gas in the energy sector is quite significant. My son was briefing me last night and said that I should think of six things—high, high, high; low, low, low. Low—low depth, low pressure, low temperature—exploration that is not complicated. High—high depth, high pressure, high temperature—exploration that is complicated and technically difficult.

I then set out to evaluate this issue, as I tend to do from time to time, and said, “Goodness me, 71 per cent of the earth’s surface is covered by sea. Who owns and controls the sea? Who has, or should have, those rights?”. Not so long ago I suggested in your Lordships’ House that perhaps the 200-mile limit should be extended to 500 miles or something of that sort because the law of the sea is quite complex. I found in my evaluations that the United Kingdom coastline is longer than that of India. Noble Lords might say that that has no relevance, but it has some small relevance because it is full of creeks and inlets that go in and out, and these provide an opportunity for shellfish.

The pollution of our inland and coastal waterways could have a major impact upon shellfish production and £45 million a year of exports. That is only a small amount but a study of the seas of the world—the Pacific Ocean, the Arctic, the Mediterranean, the southern seas—will disclose vast coastlines. Where are these coastlines and to whom do they relate? Some 44,000 kilometres of them relate to the British Commonwealth, including overseas territories, dependent territories, bailiwicks and others. It is the same length of coastline as that of the former Soviet Union. Of course, the Americans’ is much smaller. So we have coastlines to consider within our Commonwealth relationships. Among other former empires and territories, the French and their francophone territories have 34,000 kilometres of coastline. This may or may not be relevant but we need to consider the sea and look not only at the opportunities within in it but at the pollution dangers that can befall us again from an explosion related to oil or to anything else.

We all remember the tsunami, but what few of us knew at the time the first buoy triggered an alarm in the Pacific was that if the telecommunications world had been sufficiently switched on, someone with a mobile telephone could have sent a signal to almost everyone in Indonesia and elsewhere saying, “Get off the beach”. We have to consider the question of communication, including satellite communication.

We already accept that 91,000 vessels sail upon the oceans of the earth, ignoring, of course, the vast numbers of British private yachtsman—I declare an interest as secretary and treasurer of the House of Lords Yacht Club—sailing under 147,000 different flags and ensigns, which is almost as much as anyone else in the world does; and, of course, we are sea-related.

One of the worries is how we can patrol and control the seas when we have lost much of our Navy. However, on the merchant shipping side, as I have pointed out, there are 91,000 vessels. The biggest individual fleet is that of the Japanese, but the Commonwealth has 21,000 vessels. So there again is a relationship, and, perhaps multilaterally with our Commonwealth friends, we should give some thought to the oceans of the world.

As I went down this route I asked myself what technological advantages we have that can determine when disasters, oil-related and others, are picked up. We have satellite technology—I declare an interest as having been secretary of the Parliamentary Space Committee for some years. The new satellites, most of which contain British technology, are the size of a washing machine. I was a director of an Italian washing machine company for a while so I know the size of washing machines. I have mentioned before that these satellites can scour from a relatively low earth orbit the oceans of the world and can pick up oil spills, the migration of fish and almost anything else. They are surveillance satellites, and are within our own capabilities.

The point I am trying to make is that although there may be an oil disaster—and we all worry about health and safety—we must accept that, at the end of the day, there will be many developments under the earth and under the sea. I pause for a moment to express my regrets for the two recent mining disasters. We do not know how or why the earth suddenly decides to tremble. We know well how tsunamis arrive. We also know that HMS “Scott”, our survey vessel, is the only vessel that can carry out underground surveillance of tectonic plates and, if it had been surveying before, might well have determined the causes or the potential for tsunamis.

Here in this country, with our international relations, we have certain resources and technical capabilities, although we may now lack the financial muscle. We have a lot going for us. The implications of the spill are not just for health and safety; they are for where and how we exploit the underground resources of the world or even space resources.

I feel very worried about the balance of trade and our current difficulties. I do not mind so much about the decline in the value of the pound, because I have to declare an interest in that my great uncle, Stafford Cripps, had the job of devaluing it for the first time. It is within the family. We all talk about these things over Christmas lunches or dinners. I am not optimistic, but what my noble friend has done today is open a door for wider debate. I congratulate him on his own know-how—and know-how, I was once told, is a magic word for turning common sense into cash.

My Lords, I doubt that the noble Lord, Lord Moynihan, could have foreseen quite how topical his debate would become today, with the news coming through late last night that the US Government are to take legal action against BP and eight other firms following the Deepwater Horizon oil spill. The noble Lord clearly highlighted the challenges facing the industry. I found very interesting his assessment of the levels and elements of risk involved.

As we have heard, this catastrophic incident on 20 April this year created explosions and fire on the rig, causing the rig to collapse and leading to the deaths of 11 people with 17 others being injured. The oil spill continued until 15 July, when it was temporarily closed by a cap, and was then declared “effectively dead” on 19 September.

Initially, it was estimated that around 1,000 barrels of oil a day were being released from the well; that estimate was later increased to 5,000 barrels a day. In the largest ever accidental leak in the ocean, millions of barrels of oil were spilled over five months. It can be quite hard to comprehend the scale of such a disaster, the scale of the exercise undertaken to stop the oil spill and the scale of the clean-up operation, let alone the ongoing issue of whether there is adequate research and investment into spill response technology.

It is hard also to comprehend the social and environmental impact. The spill was in an area where 71 per cent of employment came from tourism and recreation. A further 200,000 jobs were in recreational fishing. It is an area on which the nation relied for commercial fishing stocks. It was hugely important also for bird and wildlife watchers.

It may take many years, particularly with the legal action that is now under way, for the financial implications fully to be understood. There is and, as we have seen, will continue to be considerable litigation. As was reported in the Financial Times, there is,

“no way to put this in historical context because we have never faced anything like this before”.

We know from the speeches that we have heard today that the ramifications are likely to be long lasting, not just for the Gulf of Mexico, which has been hit environmentally and economically, but for BP and the other companies involved. As the noble Lord, Lord Moynihan, outlined, there are implications for the future of offshore drilling across the world.

Do we know what exactly went wrong? The Minerals Management Service, which has since been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, is the regulatory and inspection body for offshore oil drilling and rigs in the USA. An investigation by the Associated Press claimed that such examination as was performed was in the most part brief, perfunctory, extremely lax and with poor record-keeping. Crucial safety and emergency procedure information, including documentation for the precise incident that later occurred, was not available. The investigation by AP claimed that after just over the first three years around 25 per cent of inspections were omitted, although that could be explained by weather and other factors, which could mean that an inspection was not possible. However, the last three inspections took two hours or less. Nevertheless, the rig was regarded as having a strong safety record and was never on the informal watch list for problem rigs.

The question is whether we in the UK should take comfort from the difference in our regulations from those in the US. There are key differences. Mr Steve Walker, the head of the Health and Safety Executive's offshore division, described it as,

“additional and different layers of regulation”,

with a system of independent verification enshrined in law, which the US does not have. In his evidence to the Select Committee in the other place, he also considered that our performance-based legislation was more sophisticated than the US checklist of inspection. When asked whether the Deepwater Horizon would have been allowed to operate in the UK, given that it had,

“a single blind sheer ram on the blowout preventer”,

he informed the members that in the UK the HSE would have seen the design 21 days before drilling began, asked questions about the design and would have assessed the answers before deciding whether to take any action. Also, in the UK we have a separation of licensing from health and safety oversight, which helps to ensure the appropriate distance between the interests of the industry and the health and safety of those involved. I welcome the fact that the HSE has made its own response to this incident and will undertake a further examination of the regulation and the record of the UK industry.

BP has undertaken its own investigation and, as we have heard from the noble Lord, Lord Grantchester, made significant and welcome changes to its own organisation to improve safety, becoming more risk-averse as a result. There are lessons to be learnt for the whole industry. The development of North Sea oil fields has been subject to considerable debate, controversy and conflicting views over many years. Numerous oil and gas companies, including BP and Chevron, which was granted a licence for deepwater drilling in the North Sea on 1 October, are looking to expand their operations and to go forward and deeper to more remote areas than previously. The debate between those who argue that such drilling is necessary for energy security and those who feel that the environmental costs are too high has been intensified by the Deepwater Horizon spill. The comments of the noble Lord, Lord Selsdon, highlighted his concerns about coastline pollution and the impact on the UK. Given his obvious love of the oceans, I am sure that he shares my concern at the news today that so many coastguard stations are to be closed around the coast of the UK.

Drilling for oil has continued; record numbers of bids for new offshore oil and gas licences were submitted in 2010 and, in October, 144 new licences were issued, including more than 20 for drilling in deep sea areas. Greenpeace has now issued a legal challenge against the Government to stop the 22 new deepwater drilling licences until the causes of the Deepwater Horizon explosion have been properly established. The arguments advanced by the lawyers are that the licences are close to environmentally sensitive areas which support legally protected species such as whales and dolphins. I am aware that the Minister can say very little about this issue because it is subject to legal action, but I seek his views on the department's confidence in the UK regulatory regime. The noble Lord, Lord Moynihan, was right in highlighting that safety has been of particular concern on this issue.

Following President Obama's review, the US Government have announced additional rules. Before drilling takes place, stronger environmental and safety standards are to be in place, working on the principle that the Administration should proceed with caution and create a more stringent regulatory regime. Does the Minister consider that the differences in the two countries’ regimes offer greater protection in the UK? What ongoing discussions is the department engaged in with the HSE? Is the Minister satisfied that all the current deep-drilling rigs in the UK fully comply with emergency policies and ongoing training on how to respond in event of an incident? How often does he consider that deepwater drilling rig inspections should take place to be confident of safety procedures, and what lessons have been learnt in the UK from this incident?

The noble Baroness, Lady Falkner, rightly highlighted her concern, shared by many, about the sustainability of the ever-increasing demand for oil and the ongoing quest for new reserves because of this demand. The Minister will be aware of the report last month from a group of business leaders, including Richard Branson, about UK dependence on oil and their concerns about this. What consideration has the department given to this report? With business, there is always the relationship between risk and money. How much will it cost when things go wrong? As we have heard, BP has footed a hugely significant bill for the beach clean-up and may, in addition, become liable to additional financial loss depending on the US Government's litigation. The Department of Energy and Climate Change has reported that licensees operating under the Petroleum Act 1998 are required to have sufficient funds available to discharge any liability for damage attributable to any oil pollution incident. The licence does not set a limit to the licensee's liability and licence applicants must demonstrate that at all times they have sufficient funds to meet expected commitments, liabilities and obligations. Further to the event in the Gulf of Mexico, I understand that the department has asked the Offshore Pollution Liability Association, or OPAL, immediately to revisit its risk modelling for worst case scenarios. Can the Minister provide any information about how this review is progressing and when we can expect to hear results? I appreciate that the news of the US legal action is very new and clearly carries the possibility of profound implications. It may be too early for the Minister to have reflected on these points but, if he is able to say anything further, particularly if there have been discussions between the Attorney-General in this country and the Attorney-General in the US, it would be helpful.

Finally, I thank the noble Lord, Lord Moynihan, for bringing this issue before us today, topical as it turned out to be. This debate should be seen in the wider context of ongoing debates that we are having and the Statement that we will shortly hear from the Minister on the ongoing Energy Bill. This is a huge issue for this country with huge implications. Our role as an Opposition is to work with him to deal with these hugely important and crucial issues. When we are able to support, help and advise, we will want to do so, playing a constructive and helpful role in securing the security for life of this nation.

My Lords, I thank my noble friend Lord Moynihan for bringing this to the House and his invaluable insight and very measured speech on this matter. I hope that my own speech will cover a number of the issues raised by noble Lords in what I think has been an excellent and very informative debate. I think that the Opposition have set out very clearly the state of the nation as regards the oil industry. My noble friend Lady Falkner made very clear the long-term problems for the nation, and I shall deal with some of those points later. Noble Lords must forgive me if I repeat in my speech some of the things that have already been said, but they are worth repeating.

The Deepwater Horizon accident was a most serious and tragic event in recent years. We must not forget that 11 people died, which was a terrible loss of life, harrowing for the families and friends of all those involved in the industry. There were very serious consequences: the resulting oil spill and its after effects caused untold stress and heartache for local communities, with widespread disturbance of fishing, tourism and other activities in the region, which is still recovering from the horrendous Katrina hurricane. But in considering all this, let us keep it in a degree of context and recognise the vital contribution that oil and gas exploration has made to the world economy.

We have all noticed that lawsuits are back in the newspapers today. It is clear that the legal process has had some time to run. We should wait for the due process of the presidential and the Marine Board and other investigations to shed light on where responsibility lies and the action that could be taken. It would be wrong to suggest that there have been extensive cross-Atlantic discussions at this point between legal departments but, obviously, there is an ongoing process that started when the incident happened because BP, among others, is a transatlantic company. Both departments have been talking for a long time, to answer one of the questions asked by the noble Baroness.

We should not forget that BP is a great British company, creating not just wealth and jobs here in the UK but also in the US and many other parts of the world. Millions of pensioners benefit and this Government have been right to stand behind it during this time of crisis.

Ultimately, BP has suffered badly. This was manifested in its stock market value and in the eventual resignation of its CEO, Tony Hayward, to whom my noble friend Lord Moynihan paid tribute. BP is of course working hard to complete remedial actions stemming from the incident, and to learn from it. It is restructuring its safety culture and has reviewed its operations around the world. It has sold some of its assets to provide assurance that it can meet all legitimate liabilities arising from the disaster.

In the UK, while we are working hard to move towards a less carbon-intensive future, we cannot overnight remove our need for hydrocarbons. We will be dependent on oil and gas for several years to come. We have a choice of either producing oil and gas in UK waters, where we are recognised as having one of the most robust safety and environmental regulatory regimes in the world, with all the economic benefits that that will bring, or paying to import oil and gas from elsewhere.

The oil and gas industry, which has been operating here for more than four decades, is a fantastic success story. Its innovation and verve have ensured that we have been able to produce 40 billion barrels of oil and gas in the UK. We should not forget that UK oil and gas still provide around two-thirds of the UK's primary energy needs. However, the contribution is not just to our security of supply, but to our economy. The industry supports around 350,000 jobs directly and indirectly, and another 100,000 people are involved in exporting goods and services. Annually the industry spends around £12 billion in the UK and provides around £10 billion to the Treasury in taxation. The good news is that we still have the equivalent of some 20 billion barrels of oil—perhaps more—left to produce. To realise this potential, we need continued investment and new exploration, and we want to support the industry in every possible way to achieve this.

My department is working closely with the oil industry on a number of fronts to ensure that the right incentives remain to bring the required level of investment and exploration, and that the legislative framework facilitates new developments, for instance by securing third-party access to existing pipelines and facilities. I will bring new provisions in this area in the forthcoming Energy Bill. My department was pleased to offer 144 new licences recently in our 26th offshore round. This shows the continuing confidence in the future of the UK continental shelf and provides a strong basis for continuing exploration and development activity.

We have an innovative and productive industry. The UK was one of the first areas worldwide in which offshore exploration and production took off, and we now have more than four decades of experience. More than 10,000 wells have been drilled in UK waters, including more than 300 in depths of more than 300 metres. This means that the risks associated with drilling wells on the UK continental shelf are well understood. Our regulatory system has been developed to meet the evolving challenges. Following Piper Alpha, safety regulation was brought under the Health and Safety Executive umbrella to get the benefit of its expertise, not least in regulating major hazards.

The recommendations after the Piper Alpha inquiry of the noble and learned Lord, Lord Cullen, shaped the North Sea safety regime that the UK industry has been successfully operating under for the past 20 years. It was a step change, and it was recognised at the time that a more comprehensive approach to regulating safety in the industry was required, with a change of culture that put more responsibility on duty holders to manage risks across the range of their activities. The concept of goal setting was introduced, with duty holders required to identify their hazards, assess the risks they posed and put controls in place to minimise those risks. For high-risk offshore activities it was necessary to formalise the process into a permissioning regime, with the industry required to show in writing, via a safety case, that the health and safety risks were “as low as reasonably practicable”. The regulator’s role is to assess the safety case, accept it when appropriate and initiate inspections to ensure that it is being implemented. Other legislation on evacuation, escape and rescue, management and administration, design and construction, was revised in a less prescriptive style to complement the new safety case regime. I could go on. The key point is that we have a tough and effective regime in the UK that is considered a benchmark around the world, and particularly in Europe.

DECC plays a vital role in overseeing the exploration, development, production and environmental performance of the offshore industry. Following the US incident, an internal review was conducted by senior officers on the basis of the information available immediately after the accident, looking at the implications for DECC’s offshore regulatory regime. Both current and expected future drilling operations were considered. I am glad to report that the review did not uncover any gaps in the regulatory controls, or any reason to doubt their effectiveness. I pay tribute to the previous Government, too, for their activity in this regard. However, it was recognised that, with the prospect of more activity in deep waters, it is increasingly important to be assured that operators are doing what they should be doing. We have taken a number of steps to further strengthen our regime. We have increased the number of environmental inspectors and doubled the number of environmental inspections of mobile drilling rigs. The requirements for OPEPs were revised. All OPEPs submitted for exploration, appraisal and development drilling must now assess the worst-case scenario where all containment barriers have failed, resulting in a well blowout. Pre-drilling inspections are now carried out on deepwater mobile rigs before any final drilling permit can be issued. Containment devices are now available in the UK, and the industry is working on a capping device that we expect will be ready for deployment in the North Sea before the end of next year. I hope that that answers one of my noble friend’s questions.

The ceiling on the industry insurance liability scheme, Oil Pollution Liability Ltd, which the noble Lord also asked about, was increased from $120 million to $250 million, and the industry is looking at liability issues in general to see if anything more is required. I am aware that the European Commission wishes to look at the way in which deepwater drilling activities are regulated across Europe, with the aim of ensuring consistent standards. While we will continue to work on this with our European counterparts and the Commission, everyone should be clear that we will strongly defend the UK’s ability independently to regulate its oil and gas industry, because we have been shown in the past to have a strong regulatory regime. If the exercise is focused on raising standards in other member states’ territories, the UK can provide a strong contribution, given our substantial experience in this world.

Before summarising, I will answer a few specific questions that I have not yet covered, and perhaps amplify my noble friend Lord Moynihan’s question about insurance. I spoke to insurance industry leaders this morning and I do not believe that there is no market available for an increase in liability protection. However, we should recognise that BP was not a great purchaser of insurance and elected to run potential liabilities against its balance sheet. Of course, insurance should not be a substitute for a balance sheet. People should not carry out work unless their balance sheet can cope with the inevitable potential liabilities that manifest themselves.

The noble Lord, Lord Grantchester, asked whether we were in contact with OSPRAG. We are in regular contact and, as I indicated earlier, we are looking for technological advancement. Huge lessons have been learnt from this disaster. We must look at the US review when it comes out; we await it with great interest. We will consider its implications for our own regime and will implement any changes that we think should be made. However, I point out that we suggested to the US regime that they follow our regime, which separates health and safety from departmental issues. The US regime chose not to, but I understand that it is now about to do so. On the wider issue, the G20 has initiated a best practice dissemination work group for deepwater drilling as part of a global marine environmental initiative, and of course we strongly support that.

The noble Baroness, Lady Falkner of Margravine, has told us, rightly, that we cannot continue to depend on oil. I welcome her encouragement of the development of renewables, which we will doubtless be discussing in a few minutes’ time.

The noble Lord, Lord Selsdon, made a most engaging speech. Earlier, I looked up what his interests may be in this field and I was glad that he came out with about 30 or 40 of them in a very short time to demonstrate that he has a close association with the oil industry. I look forward to hearing about his discussions at the Christmas table as much as he looks forward to hearing about ours.

I am grateful to the noble Baroness, Lady Smith of Basildon, for giving me prior notice of one or two of her questions, because that meant that I could do the requisite research to respond to them in a way that I hope she feels is adequate for her needs.

One of the questions was, “Do you consider that the difference in the two countries’ regimes offers greater protection in the UK?”, which was a further amplification of things that I had discussed. The straight answer is that, as I said earlier, we have in place a number of safeguards that offer the UK greater protection. The requirement for a safety case ensures that risks are identified and suitable controls are selected. HSE reviews, well design and procedures are fundamental, while a schedule of well examination by independent and competent persons is an addition to the HSE review. A scheme for the verification of safety-critical equipment, including blow-out preventers, is in place and the HSE monitors well operations on a weekly basis. These are critical issues.

Our department has a close working relationship with the HSE and has accepted safety cases of the current deep-water drilling activities that include the emergency procedures required to ensure safety. After the HSE has accepted the safety case for an installation, it produces an inspection plan and inspects the installation at least once a year—sometimes three times a year, depending on the type of installation and activities being undertaken.

The noble Baroness rightly brought ITPOES, the UK Industry Taskforce on Peak Oil and Energy Security, to our attention and she mentioned that Sir Richard Branson was a member. Of course we welcome any outside suggestions and contributions to this debate. It is not as if we are not carrying out such work ourselves; our chief scientist is permanently in discussion with stakeholders about the threats to oil supply. We started an initiative in that regard in August and we intend to review that and work within its results.

In summary, the Deepwater Horizon accident was a most serious and tragic event, causing 11 deaths and, subsequently, environmental and unprecedented economic consequences. I am sure that the knock-on effects will be felt by local people and businesses in the region for years to come. It was also viewed as a wake-up call for the industry and regulators worldwide.

The oil industry is fundamental to Britain. We will be reviewing the US report once those investigations are complete to see whether there is anything more that we need to do on top of our own significant regulatory scheme. Deep-water drilling in the UK is not a new concept; the industry has been conducting such activities here since 1974. However, we must not be complacent. We have to remain extremely vigilant. I thank noble Lords for their excellent contributions to this debate and I look forward to further discussions as the years go by.

My Lords, I am most grateful to the Minister and to noble Lords for participating in this debate. Over the past 10 years, I have learnt much about the family history of my noble friend Lord Selsdon. Once again, the House enjoyed his contribution, expertise and family insights. May he speak on any subject on which I am fortunate enough to win the ballot in future.

If American politicians were listening, they would have been impressed by the noble Lord, Lord Grantchester, because of his well researched speech and his calm, professional, all-party approach, which has also characterised the approaches of this House and another place to oil disasters, both within the UKCS and beyond our shores. It was echoed in content, delivery and expertise by the noble Baroness, Lady Smith of Basildon, as well as in her welcome focus on the changes that BP has made in the light of the disaster.

I thank my noble friend Lady Falkner for widening the debate to the challenge of macro-energy policy. As the Minister states, the truth is that, whatever steps we take—and we are about to hear about more welcome ones—the global demand for oil and gas will continue to grow over the next 30 years and we had better be prepared for the technical challenges, the political issues and the high prices that will accompany the world’s insatiable demand for hydrocarbons.

I particularly thank the Minister for his speech, for the work undertaken by his excellent officials, some of whom I recognise from over 20 years ago when I was in the department, for his answers to noble Lords’ questions and, above all, for focusing, as indeed has the House, on safety. An unremitting focus on safety is essential and is the most important implication that we should draw from the Deepwater Horizon oil tragedy. I thank noble Lords for their contributions to this debate and I beg leave to withdraw the Motion.

Motion withdrawn.

Electricity Market Reform


My Lords, with the leave of the House, I should like to repeat a Statement made by my right honourable friend Christopher Huhne in the other place.

“Mr Speaker, today we begin consulting on the reform of the electricity market. This programme sits at the heart of my department’s mission to deliver secure, affordable and low-carbon energy.

The case for reform is clear. We need significant investment in our energy infrastructure. As old coal and nuclear plants shut down and demand for electricity grows, we must build the next generation of power stations. The electricity that they deliver must be both affordable and sustainable, helping us to meet our emissions reduction targets and to keep the lights on. The current energy market has served us well but it cannot deliver long-term investment on the scale that we need, nor can it give consumers the best deal. Left untouched, it would lock carbon emissions into the system for decades to come.

Investors and boardrooms around the world want to know whether the UK is a good place to do energy business. Today, we are setting out our plans to make it one of the best places to do energy business. The challenges, and the opportunities, are huge. Put simply, we face growing demand, shrinking supply and ambitious emissions reductions. The demand for electricity could double by 2050 as we decarbonise the economy. Thirty per cent of our electricity must come from renewables by 2020, up from 7 per cent today, to meet our contribution to the EU renewable energy target. In the next 10 years, one-quarter of our existing power plants will need to be replaced as nuclear and coal plants reach the end of their lives.

Without action, we will face a real and growing threat to the security of our supply. The reserve margin of spare generating capacity will fall over the next decade and the risk of interruptions to our energy supplies will rise, so we must build the next generation of power stations and act to ensure that there will be enough reserve capacity to meet our needs. We will need, together with renewables, new gas-fired power stations and new nuclear plant. We must attract more than £100 billion of investment in new power stations and grid connections by 2020—double the investment rate of the last decade.

We must rebalance our market framework to attract investment in the right technologies. At the moment, there is a bias towards low-cost, low-risk fossil fuel generation. Renewables, nuclear and carbon capture and storage all have relatively high upfront capital costs, but a more diverse, lower-carbon energy mix is better for our energy security, our economy and our planet.

Some measures have already delivered investment in new low-carbon generation, such as the renewables obligation and the EU Emissions Trading Scheme, but we must go further and faster. To secure reliable, affordable low-carbon electricity, we must change the market structure. We must create the right framework to ramp up our power generation and secure our supply. We must also deliver cleaner, greener electricity for the 2020s and beyond. Today, we are proposing new incentives to drive our investment while protecting the rules for investment already made. The focus will shift permanently from conventional fossil fuel-fired electricity to low-carbon technologies: renewables, nuclear and cleaner fossil fuels. Our preferred package of reforms is designed to strike a balance between the best possible deal for consumers and giving existing players and new entrants in the energy sector the certainty that they need to raise investment.

Reform will be gradual. We want to reassure industry that rules for existing investments will be protected. By consulting on a process and principles for the transition to the new market arrangement we aim to minimise uncertainty. The competitive market will remain at the centre of our energy policy, but the four elements of the reform package announced today will change incentives in the market and ensure both the security and decarbonisation of our power supply system, while minimising costs to consumers.

First, there will be greater long-term certainty about the additional costs of running polluting plant to make lower-carbon investment more attractive. Proposals set out in HM Treasury’s consultation to support the carbon price directly tackle the core problem—putting a better price on emissions, increasing the cost of fossil fuel-backed generation and strengthening the carbon price for UK electricity generators.

Secondly, greater revenue certainty for low-carbon generation will make clean energy investment still more attractive. Through the proposed ‘contract for difference’ feed-in tariffs, the Government will guarantee greater revenue certainty for low carbon in the form of top-up payments if the wholesale price is below the feed-in tariff and a potential clawback for consumers if wholesale prices are above the contracted tariff.

Thirdly, there will be additional payments to encourage the construction of reserve plants or demand-reduction measures to ensure that the lights stay on. Capacity payments will create an adequate safety cushion of capacity as the amount of intermittent and inflexible low-carbon generation increases.

Fourthly, there will be a back-stop to limit how much carbon any new coal-fired power station emits. An emissions performance standard will reinforce the existing requirement that no new coal is built without carbon capture and storage.

Together, these four reforms make good on our commitments in the coalition’s programme for government. They will make the UK a prime location for low-carbon energy investment. They will ensure that our energy supply is cleaner and more secure. They will protect the consumer as, while prices will rise in the medium term, the additional impact of the reform packages will be small. By 2030, consumer bills will be lower than if we did not reform the market now. The reforms will also lay the foundations for the sustainable economy of the future, bringing jobs up and down the supply chain.

The consultation that opens today invites everyone to tell us whether they think that the preferred package of reforms is the right one and to provide the evidence to support their views. Final recommendations will be published in a White Paper in late spring 2011 and the reforms will be introduced before the end of this Parliament. We are also reviewing the role of Ofgem and the energy regulatory framework and today we are publishing the Government’s response to the call for evidence on the terms of the review. We have a once-in-a-generation chance to rebuild our electricity market, our investor confidence and our power stations. Like privatisation before it, this will be a seismic shift securing investment in cleaner, greener power and delivering secure, affordable and low-carbon energy for decades to come”.

My Lords, I thank the Minister and his departmental colleagues for giving us early sight of today’s Statement. Given the other business before the House, it was helpful to have that advance notice. We certainly welcome the Statement and the high-level recognition of the issues that we as a nation have to tackle.

I want to highlight four key issues that come across in the consultation document: first, security of supply; secondly, the ability to achieve our green targets in the longer term as well as through short-term measures; thirdly, securing the investment of around £200 billion that is needed in order to grow those businesses that will help us to achieve those targets and energy security; finally and crucially, keeping energy prices reasonable. The Minister will be aware of the press speculation today, which has already caused great concern. We face a huge challenge, but the consumer must not bear the whole or too great a burden.

I make it clear that we on this side of the House believe that the programme is absolutely necessary to support security in energy for the future and that we will support sensible, fair mechanisms for reform. Today, we welcome the publication of the paper and the consultation, because it is crucial that the Government put in place the mechanisms to make new low-carbon investment attractive. They also have to bridge the looming energy gap that we face without a rush for unabated fossil fuel generation. The Government also have to provide energy security across a balanced and diverse energy portfolio while considering, at all stages, fairness and affordability for the customer. Although increased energy bills have become a reality, we cannot ask consumers to accept ever increasing bills. We must be able to give them genuine assurances that we are doing all that we can to protect them.

I shall ask the Minister a few questions. The paper is an electricity market reform proposal but, given that we enter this winter with the worst gas storage, do the Government also intend to bring forward some proposals for gas security? Can the Minister also assure us that the Government are committed to low-carbon growth and stimulating investment? Given the welcome announcement today that the green investment bank is to go ahead, what role is the bank likely to play in that?

There are a number of challenges and the Government have to seize this opportunity, which is why we welcome today’s Statement. However, investment and certainty are paramount. The energy security of the nation means that we cannot allow any delays. We have to act, and act fast. The noble Lord knows that the industry needs certainty if it is to invest at the scale needed. Are the Government able to provide certainty to the industry and to people who are already paying inflated energy bills? Will the programme being put forward today be enough to encourage energy companies to invest in the UK, to create the jobs that this country needs—and the skills to fill them—and to protect customers from unaffordable energy bills?

A number of issues are before your Lordships’ House at present. We have had this consultation; we have the Second Reading of the Energy Bill next week; we have the announcement today of the green investment bank; and we have the Treasury consultation on carbon prices. It is all part of a bigger picture, along with the review of Ofgem. Noble Lords will be aware that the Energy Bill has been introduced and is being debated next week. We certainly welcome the Bill and the opportunity to work with the Government on it, but it presents as many questions as it answers about the Government’s intention on energy policy while, as we can see, much of the detail of the green deal is intended to be included in regulations. I look forward to the Delegated Powers and Regulatory Reform Committee’s analysis of the Bill and to debating the substance of the policies as the Bill goes through the House, so that we can play our part in working with the Government to address these issues.

Finally, we entirely agree with the Minister and the Government about the importance of this Statement and the consultation. This is the once-in-a-generation opportunity that he referred to. As always, we are prepared to work with him and his Government constructively to ensure that we achieve the triple goals of fairness for consumers, a better environment and energy security.

I thank the noble Baroness, as I always do, for her constructive contribution and for being very clear that we are working closely on this, as we have so far with pre-briefings and such things. I do not want to get into the detail of the Energy Bill because we are going to exhaust ourselves over the next few months on that subject, so let us keep our energy pent up and ready for that.

I will deal quickly with the two substantive questions which the noble Baroness asked. We recently agreed to planning permission for a 15 per cent increase in storage for gas. Gas storage is fundamental but not critical because, from the previous Government’s activities, we now have the most flexible gas refinery and ports to import gas. We are in a pretty unrivalled position to import. We have 50 per cent of our own gas supply and a secure supply from Norway of 20 per cent. We are in quite good shape at the moment but we cannot be complacent. As the noble Baroness said, the green investment bank has been given the go-ahead, which is good news. It will be fundamental to pump-priming many of the activities that will be fundamental to the capital investment that is required.

My Lords, while warmly welcoming my noble friend’s Statement, it gives rise to several questions. I have one in particular. Is it part of the purpose of the proposals to provide a longer-term level playing field across the different low-carbon generating technologies? That seemed to be inherent in the Statement last November of his right honourable friend Mr Huhne. However, my noble friend’s department has recognised that the lifetime carbon footprint of nuclear power is roughly equal to that of wind power. For how long will it be justifiable for the consumer to have to pay a substantial subsidy to generate more wind power when you could get a more reliable source of energy at a lower cost from a larger nuclear programme? I would be most grateful for the answer to that question.

There is no greater expert than the noble Lord on these matters. I can assure him that this electricity market reform is to establish a level playing field for renewables and to get a clearer line of benefits and support for it. As to his point about nuclear power, we have cleared the decks for the start of new nuclear. His experience would concur that, unfortunately, the period for establishing a new nuclear power station is a minimum of eight years. Then there are all the other regulatory issues that we must go through in getting to there alone. My noble friend will know—because he is so knowledgeable on all these matters—that the 2050 pathway, which will incur a doubling of electricity demand, means that we will have to obtain electricity from virtually every source we can get our hands on.

My Lords, it looks as though we are in for another cold weekend. As the weather gets colder, the confidence of consumers in being able to turn on the heating without worrying too much about price needs to be reinforced. To do that, we need to have confidence in our supply. Building on the last question, can the Minister give some assurance about developing nuclear to help fill the energy gap, and developing it on time, particularly given the Health and Safety Executive’s decision not to issue final certificates to new forms of nuclear technology? Similarly, can he give some assurance that the Government will invest in skills so that we can grow such skills in the eight-to-10-year window? Will we develop those skills domestically in areas such as Somerset, down the road from where I live, where we want to see the nuclear skills academy going ahead with confidence?

The noble Lord makes an extremely good point on skills. There has been inertia in nuclear. I pay credit to the previous Government for reversing public opinion on nuclear, but not for the fact that there has been no activity. We have created much activity. Nine months ago, or when we got into power, people would have asked what was going to happen on nuclear. SIs have now created the opportunity for new nuclear. It has become a fundamental part of our programme. There is a serious task in obtaining the skills to satisfy that programme. I welcome the noble Lord’s support for that. It is fundamental because we have lost those skills in the past 20 years and it will be no small task to regain them. Therefore, we must have a programme that runs concurrently with the development to make sure that they both happen, and that we can cope with the eight or nine power stations that will, we hope, be built in the next few years.

My Lords, I join noble Lords who have thanked the Minister for repeating the Statement, which was made in the House of Commons by the Secretary of State, my right honourable friend Chris Huhne. It gives noble Lords in this part of the House great confidence that this important area is in the hands of Chris Huhne, our Liberal Democrat Secretary of State, and his team of Ministers in both Houses.

In view of the importance of making sure that consumers get a fair deal, does the Minister have confidence that this package will deliver more decarbonisation and low carbon for less cost? Is it true that this package shows that we can reach half the level of carbon in the electricity system at a lower cost than that which was planned by the previous Government?

I am grateful that my noble friend champions my boss, Chris Huhne, who has been excellent to work with. I compliment my fellow Ministers on the Conservative Benches for their excellent work on this matter. The key to this reform package is to ensure that we have a pricing structure—which would otherwise be going out of control through the uncertainty of fossil fuel prices in the future—that gives us electricity security through our own supply of electricity from renewables. We have no alternative but to achieve our targets because they are set down in European law.

My Lords, as an aside, I hope the noble Lord, who is normally very courteous about all these matters, will not repeat the canard that the Labour Party was uniquely responsible for not getting nuclear to be more advanced than it already is. After Chernobyl in 1986, all western Governments got cold feet about nuclear; it took an awfully long time to bring the world around to the reasoning for going forward, which has several elements, as we all know. The Labour Government got us to the starting gate more or less before the election.

I come to three questions about this announcement. First, I particularly welcome the fact that the Treasury, as far as I know, has for the first time produced a consultative document that will lead to a Statement in the new year about a carbon price floor. That is the Treasury’s phrase. However, in not revealing what the carbon price floor might be in pounds, dollars or euros, the Treasury only lifts its petticoat as far its ankle. There is no further gleam as to where it might wind up. For 20 years, ever since Rio, we have known that—

The second question is coming up, if noble Lords would mind not interrupting. Secondly, how does the Minister reconcile this Statement with the Energy Bill, the Second Reading of which we will debate in this House next Wednesday? This is a rather important Statement, but the government decisions announced in it were not available when the Energy Bill was published. Does he agree that it is rather surprising—if you take a half-interest in these matters—that he has not said anything about the implications of our now having to table a considerable number of amendments to the Energy Bill? Finally, on the European aspect of the carbon regime, we are now talking as if we are acting on our own. I cannot believe this is the case. Will he comment on that as well?

Clearly the noble Lord was not listening when I gave credit to the previous Government for reversing public opinion. I thought that I gave fulsome praise in that regard. As for the carbon floor price, as the noble Lord rightly says, the Treasury has lifted its skirt and has said that it will publish the results of its consultation by 2011. It hopes to have the new carbon price support in place by 2013. The Treasury is carrying that matter forward now.

I am not sure what point the noble Lord makes about the EU. He may be suggesting that we are the only people who have signed up to our renewables target. However, this is a mandated, cross-European target, to which we are signatories.

My Lords, I have a simple question for my noble friend on the Statement. He mentioned that energy prices could well decrease. Will he assure me that, in any format or framework that will be produced by him and my noble friends, the consumer will benefit as soon as the price goes down, rather than the usual practice at the moment whereby as soon as the price goes up the consumer is hammered and eight, nine or 10 months pass before any adjustment is made? It ought to be very easy to adjust the rate automatically by computer. I suggest that he deals with this matter through Ofgem and the investment criteria for investing companies.

I thank my noble friend for her excellent point. I do not want anyone to go away thinking that electricity prices are going to go down in the foreseeable future. The whole point about this programme is that they will go up less if we do not have to rely on the unpredictable price of gas, which went up by some 80 per cent in four years and which is very volatile at the moment. The department predicts that by 2020 electricity prices will have gone up 33 per cent. This is of course very unsatisfactory, but results from the fact that as a nation we have underinvested in our electricity generation infrastructure for years. We have sat back and relied on North Sea oil and that is now no longer available in the same quantity. However, I assure my noble friend that if electricity prices do go down, they must be passed on to the consumer. This is fundamental to Ofgem’s monitoring of it. Ofgem will be subject to a review, and during that process we will ensure that we take on board her very valuable comments.

My Lords, I declare an interest as the chairman of a company that is endeavouring to promote renewable marine energy. What limits are there on the additional payments to help to construct reserve plants to cushion the capacity of intermittent providers of electricity—presumably principally wind power—and what calculations have been made as to the possible cost of that to the Exchequer, bearing in mind that many wind farms are in remote areas that do not require energy in the vicinity and that the National Grid indicated in May that it was not prepared to improve the grid in such areas? This problem could be exacerbated by the development of offshore wind. What economic projections have been made by the Government in offering to make these additional payments?

On the last point, the Energy Bill clears the way for offshore wind to link into the grid and to facilitate that. I shall comment on that further when we discuss the Energy Bill. The noble Lord is right that it is fundamental that we have the reserve capacity to cope with peaks, such as the well-known “Coronation Street” kettle peak, or with very cold periods. Therefore, we are developing a capacity payment to encourage people to create facilities for providing capacity at peak storage times. The development of storage technology for wind farms is also fundamental. We will drive forward very hard to ensure that that technology advances quickly.

My Lords, in declaring an interest as chair of Pelamis Wave Power, I welcome the Statement. I join noble Lords who have underscored the importance that the Government attach to the all-important issue of creating greater investor certainty in the electricity market. Can the Minister comment on the importance of consulting on the construction of the necessary electricity upgrades and new infrastructure to bring offshore gas and renewables onshore at increasingly competitive prices, including third-party access to pipelines in the gas market? Will he confirm that his department still believes that security of supply is best achieved through diversity of supply?

I assure the noble Lord that, as I think I referenced earlier, third-party access is a fundamental part of the Energy Bill, the Second Reading of which we will debate next week, and we will welcome his contributions, given his knowledge platform. Clearly, this whole EMR seeks to encourage a broad spread portfolio of electricity supply, whether it be renewables, nuclear or clean fossil fuel. As my right honourable friend Chris Huhne said on the radio today, it is rather like having a share portfolio—we cannot rely on one and not the other; we need all of them and a balance of them.

NHS: Reorganisation


Moved By

To call attention to the reorganisation of the National Health Service; and to move for papers.

My Lords, it is a privilege to open this debate on a matter as important as the National Health Service. The NHS was the subject of my maiden speech in the other place more than 15 years ago and, like many noble Lords on all sides of the House, I feel very passionate about the service. It is easy to take this great service for granted, but we should never forget how fortunate we are to live in a country that has such high-quality healthcare available for each and every citizen, free at the point of use.

I pay particular tribute to those who work in the National Health Service. Their commitment to their patients and to ensuring the best outcomes for those whom they treat is the bedrock of the NHS. Without their dedication, the NHS would be nothing. The fact that the service provides some of the best healthcare in the world is a reflection on their professionalism and hard work. We should never lose sight of that.

We have a health service that we can be proud of and that has certainly improved over the past 12 or 13 years, but we now have a new Government who seem determined to impose their own vision on the National Health Service—a vision which, perhaps not surprisingly, is riddled with inconsistencies and risks having a negative impact on patient care. It is notable that the British Medical Association has reacted in a decidedly mixed way to the Government’s proposals. In response to the White Paper, Equity and Excellence: Liberating the NHS, which was published in July, the BMA reacted most strongly against the increased commercialisation and competition that the Government seem determined to foist upon the service. I am sure that I am not alone in sharing those worries.

Most concerning is that, despite the increased emphasis on competition in the recent past, there is still little evidence that such measures have any benefits for the patient. The Government came to power promising to make policy that was evidence based, yet expanding competition in the NHS flies in the face of that pledge. Indeed, increasing competition seems to have more to do with ideology rather than the welfare of the patient. I share the BMA’s view that high-quality care can be delivered in the most cost-effective way by encouraging co-operation across primary and secondary care.

I fear that, rather than encouraging co-operation and collaboration between care providers, the Government’s policy risks discouraging the sharing of information and good working practices. Such discouragement, it seems to me, is the logical consequence of forcing care providers into competition. It is normal commercial practice for competing service providers to keep new information or successful developments to themselves so that they can exploit them and improve their market position. Obviously, such providers do not share information that gives them an advantage over their competitors. That makes perfect sense in the commercial private sector, yet in the NHS such an approach would massively undermine the ability of care providers to adapt to changing circumstances and ensure best practice. Decreasing co-operation and collaboration would, I fear, be the natural consequence of further increasing competition in the NHS—a view that is shared by the BMA. Therefore, I hope that the Government will put patients’ interests and the views of professionals before their ideological agenda.

I am also concerned by the Government’s “any willing provider” policy, which risks exacerbating the difficulties with increased competition. The policy has the capacity to undermine local health economies by replacing existing multiservice natural monopolies with a plethora of smaller units that provide more limited services. As well as radically undermining the efficiency and value for money achieved by the NHS, that risks creating obstacles to the NHS working co-operatively for patients as a public service.

The concept of competition and of the “any willing provider” policy is supposed to allow patients to make meaningful choices about their care, but in my experience—which I am sure is shared on all sides of the House—what most patients want is high-quality providers close to where they live that offer timely and competent diagnosis, treatment and support. I fear that the Government’s policy risks undermining this central patient wish. It risks turning care providers into nothing more than businesses which, rather than supporting each other and striving for better provision of healthcare across the whole NHS, seek only to improve their own market position. If the outcome of increasing competition is to undermine the central priority of patients, I have to question the benefit of increasing competition.

The Government have also decided that they want all NHS trusts to obtain foundation status within three years. That undermines the whole rationale of the concept of foundation trusts, which was that foundation trust status was supposed to be a mark of quality and achievement. Evidently, if all trusts become foundation trusts almost overnight, foundation status will cease to be a mark of quality and in some regards will become meaningless as a concept.

The White Paper signals the Government’s intention to return to the GP fundholding scheme that we had under a previous Tory Government. The noble Lord, Lord Walton, who is held in high regard by noble Lords on all sides of the House, spoke about this in July. He said to the Minister who made the Statement on the White Paper,

“Many of those who are so proud of the NHS have major concerns about the GP-commissioning element of the White Paper”.

The noble Lord continued:

“No doubt the Minister will remember GP fund-holding under the previous Conservative Government, which was not a great success and had to be withdrawn in the end because it failed to fulfil the objectives”.—[Official Report, 12/7/10; col. 537.]

He was right. The House will not need reminding that GP fundholding, which was first trialled the last time that the Conservatives were in Government, did not work.

There are many other lessons that the Government must learn from pushing ahead with such a policy. In 1992-93, 5 per cent of GP fundholders overspent their budgets by more than £100,000. In the same year, 21 per cent—one in five—underspent their budgets by more than £100,000. Across the NHS last year, the underspend was almost £32 million—millions of pounds that Parliament voted for the health service but were not used.

There is now another worry concerning funding. In an analysis of the comprehensive spending review and of the White Paper that the Nuffield Trust published in October, the trust points out a little-noticed proposal in the spending review that would make a major change to the rules governing underspends across government and would have a profound impact for health. The NHS had a £5.5 billion cumulative underspend at the start of the financial year and plans to have a further underspend of around £l billion in 2010-11. The CSR announcement will mean that none of that money will be returned to the NHS. The Nuffield Trust said that, in effect, that amounts to a retrospective cut in health spending.

There is more. It is important in the context of GP-led commissioning that GPs are properly accountable for the decisions that they take. The big concern must be that GP commissioning will be less transparent and less accountable. Inadequate experience of commissioning a range of treatments will lead to a postcode lottery in NHS provision. For example, it would be possible for a group of GPs with a specialist interest who know where to obtain the best treatment to provide high-quality care for cancer patients. Another GP commissioning practice may have no such knowledge or specialist interest so its patients would might not be so well provided and cared for.

The Secretary of State this week attended the Britain against cancer conference hosted by the All-Party Parliamentary Group on Cancer. When the audience of health professionals, doctors, patients and politicians was asked whether GP commissioning would improve or worsen cancer care, the conference voted unanimously for the proposition that care would worsen. With great respect to the Secretary of State, he seemed not to pay much attention to that. He went on to say that GP commissioning was a chance to improve GPs’ knowledge. Turning the National Health Service upside down to improve GPs’ knowledge is one hell of a risk to take. The Secretary of State left the conference with the message that he wanted GPs to be thinking new thoughts. What in God’s name is that supposed to mean? I have no idea whatever.

So far, some 52 GP practices have signed up to become pathfinders for GP commissioning. That number could increase to 500, and those commissioning consortia would replace 150 primary care trusts. However, that leads to further problems. The NHS relies on data collection to improve healthcare. How will that be done, when some 500 consortia are doing the job of collecting the data that are currently collected by 150 PCTs?

The National Audit Office and the Public Accounts Committee in the other place have done excellent work in establishing best practices to achieve value for money across public spending. In achieving value for money, will GP commissioning consortia be incentivised to save money? Perhaps the Minister can tell us. If that is the case, what will the Government do to ensure that the NHS does not drown in a sea of medical negligence claims? If a GP consortium is incentivised to save money, there is a danger that patient care will suffer and that someone will then rush off to the lawyers—it will be a litigant’s paradise—in order to get some redress.

There is a common GP contract in England and Wales. How will the new arrangement in England intersect with what is happening in Wales? Will it mean separate GP contracts? How much will that cost and who will pay? It is clear from the response to the White Paper that many GPs lack the experience to run a commissioning service and many do not want to do so. Will they be encouraged to buy in solutions from private healthcare providers, such as the American-owned UnitedHealth or Humana, which on its website describes itself as the “Human Face of Healthcare”? Those companies are already touting for business and advertising their ability to manage GP consortia on their websites. Does the Minister agree that outsourcing the management and commissioning of health provision can, and probably will, lead to conflicts of interest? What steps will be taken to ensure that a healthcare company brought in to manage a GP consortium will not place work with itself as a healthcare provider?

Many noble Lords want to speak so I shall bring my remarks to a conclusion, but there is one further point that I should like to make. Much has been said in recent times about the enhanced role of the third sector in providing services. Earlier this week, together with a number of noble Lords whom I see in the House today, I attended a meeting of the All-Party Parliamentary Group on Stroke—stroke is the second major contributor to dementia—where we had a general discussion about the planned changes for the National Health Service. Some of the comments that were made at that meeting are worth repeating. “Left entirely to market forces, stroke will slip down the agenda”, was one view. Talking about top-down targets, another contributor commented, “If not targets, we certainly need objectives”. Another asked, “What is the future for the stroke impairment network?”. A final comment was that, “PCTs are at last understanding stroke. If we have to start from scratch again, let’s not lose the gains we have made in transition”. Those remarks will, I am sure, be repeated right across the health-supporting third sector.

The White Paper risks undermining the very fabric of our National Health Service; it risks reducing co-operation within the NHS; and it risks undermining the progress that has been made in improving patient care and outcomes. Most important, the proposals risk moving us away from a National Health Service that works co-operatively for patients as a public service—a move that I think would deeply harm patient care. Those outcomes would be disastrous for patients, doctors and the country as a whole. I hope that the Government will think again about their proposals.

My Lords, I thank the noble Lord, Lord Touhig, for introducing the debate today, and I welcome him to the list of the usual suspects who discuss health matters in the Chamber. I have been discussing these matters here for more than 40 years. I cannot say that he made any constructive criticism at all. I remind the noble Lord that the Government are committed to protecting NHS funding and to increasing that funding every year.

I am aware, of course, that the BMA feels that the Government have not listened to constructive criticism of the plans, and it believes that the changes will be difficult to implement effectively. However, I welcome the reorganisation and look forward to hearing the views of other speakers, as it is my intention to concentrate on the issues that affect dentistry. I declare an interest, as I have been a practising dentist for more than 40 years. I am still on the register and am an officer of the All-Party Parliamentary Group for Dentistry.

NHS dentistry in England is undergoing a major overhaul. Three separate changes—shifting responsibility for commissioning dental care from primary care trusts to a new national commissioning board, the creation of new contractual arrangements for primary care dentistry, and the changes to public health—will all impact on the delivery of primary dental care.

I welcome today’s announcement and publication of the plans for pilots for a new, more preventive contract for NHS dentistry based on registration, capitation and quality, and I hope that the Government will ensure that the pilots are fully evaluated in consultation with the profession. These will begin in 2011. They will test new models that focus on providing continuing care for registered patients and they will improve access. The new dental contract will replace the 2006 Labour contract, which unfortunately continued the “drill and fill” treadmill. Plans to increase access to NHS dentistry and improve oral health include a capitation and registration system. This should bring back the real sense of having your own dentist.

We know that the commissioning of dentistry will change as part of the reorganisation of the National Health Service. The White Paper, Equity and Excellence: Liberating the NHS, outlines that dentistry will be commissioned by the NHS commissioning board. This decision has been broadly welcomed by the British Dental Association. We know that in the past local commissioning has been fraught with difficulties. There are significant advantages in the central commissioning of dental services by the NHS commissioning board, but it is important to emphasise that there will be a delicate balance to be struck between central determination and local flexibility.

Local expertise will continue to be vital in understanding and satisfying local needs. There needs to be a strong channel of communication between those tasked with understanding local needs and those responsible for national commissioning. For example, consultants in dental public health play a pivotal role in identifying need and balancing the provision of services to provide the maximum health benefits to diverse populations. It is central to the long-term efficacy of NHS dental services that the expertise of consultants in dental public health is fully utilised in any new system. Therefore, what plans do the Government have to utilise those local dental experts, including consultants in dental public health, dental practice advisers and local dental committees, in the new commissioning arrangements? In addition, we need to be careful that the Government’s positive work towards a new contract is not inhibited by the simultaneous reorganisation of the NHS.

We know that under the Labour Administration, in 2006, a new dental contract was introduced at the same time as PCTs were reorganised, merging them from 303 to 152. During the restructuring, many dental leads and commissioners were not in post to oversee the implementation of the new contract. This caused a number of problems, with many general dental practitioners being offered a contract in the days and weeks before they were expected to deliver it. As a result, a number of practitioners moved away from NHS dentistry.

At a time when growing bureaucracy, red-tape burden and increasing administration are eroding the morale of high-street dentists—and I do believe that this is a serious problem—what assurances can the Government give that we have learnt from the problems of the past, thereby ensuring that another cohort of practitioners is not lost?

My Lords, the noble Lord, Lord Touhig, in his introduction to the debate talked about a sense of passion for the National Health Service—a passion which I think all of us in this Chamber share. However, it is not the only emotion that is connected with healthcare. One thing that struck me when President Obama embarked on his programme to improve the quality and breadth of healthcare in the United States was the profound emotional reaction against it. I was astonished, when talking to friends and colleagues who are genuine people, to find that they were frightened that any change would lead to disadvantage, when manifestly for many people in the United States such change would open up new possibilities of healthcare.

I think there is a danger that a similar thing could happen to us, and I certainly understand why. It is not just that people are generally frightened when healthcare is touched but in a time of austerity—something we are all very clear about—there is a fear that any change will be primarily financially driven, the purpose being to cut the amount of money going into healthcare. Even when the Government say something different, it is not really believed. That is a sad legacy of how things have been for a time. It is particularly unfortunate because the previous Government increased the resource available. For a long time, we said to ourselves and to each other, “We’re not spending as much per capita as other European countries”, and the previous Government tried to increase it, with considerable success. But it did not lead in all areas in the health service to a better sense of morale that things were improving. On the contrary, many general practitioners and hospital consultants, who are now paid more and do not have to produce more, have a lower sense of morale and a lower sense of empowerment in running the service. They have felt that their concerns as clinicians—this is not just true of doctors, but is true of social workers, psychologists and all sorts of other professions within healthcare—and decisions about the health service have moved away from them towards what I call managerialism. I have had that expressed to me, which is why I am not at all surprised by the BMA’s approach that any new approach to the health service inevitably means fewer resources available—contrary to historic evidence—and moving away from decisions by clinicians to decisions by managers.

When management was introduced increasingly to the health service it was not a bad thing in itself. It was necessary. The world was becoming more complex but there were seeds of difficulty within it. It became apparent, for example, that when nurses, social workers and others were going to be promoted, they were always promoted out of clinical work and they lost touch with what was happening clinically. Doctors tended not to be, at least in the early days, but their priority was always attending to their clinical work and they found that they did not—or would not—attend meetings; they got more and more frustrated and deskilled, and removed themselves from management. Increasingly, management became managerialism so that the driver was not to ensure that the outcomes of the service were clinical and patient-driven outcomes but, rather, management driven.

We want to see increased numbers of things. For example, when the problem of cancer care was addressed, GPs were told that they could flag up cases that should take priority over any other case. What did that mean? GPs quickly discovered that if they stuck a red flag on a case it would get attention above all the rest, which perversely meant that many of the real risk cases in the pathologist’s waiting list did not get attention, whereas the red flagged one did, not necessarily because it was more important but because there was a perverse incentive to the general practitioner to mark it up in that way. That is what I mean by managerialism as distinct from management, which is necessary and essential.

It is also important to understand that when we look at the need for diversity the phrase “postcode lottery” is used. That can happen but there have to be differences in services. In my professional background of psychiatry everyone knows that there is an urban drift. People with chronic psychotic illnesses, alcoholism, and so on, drift to the centres of large cities, so the kind of service you need to provide is different in a city than in a rural area. To say that it is different does not mean it is worse; it may mean that it is more appropriate. But it means that local people—not just clinicians, but local representatives, patient groups and others with a real concern, and, importantly, those involved in social services—need to be involved in the construction of the services that are available.

In looking at the proposals that are coming out, I started from a position where I was becoming increasingly depressed about whether the health service could ever be fixed. When I retired as a doctor earlier this year I felt extremely depressed about the health service. I genuinely think that there is a chance for things to be better if we can ensure that the resources are sustained, which is an important question at this difficult time. We must ensure that all clinicians—not just doctors or GPs—are involved in the commissioning process and that local people, including elected representatives, patients and those who run other third-sector services are involved in that commissioning process, and can hold those principally involved to account. If that can help us to move to greater integration of health and social care, which is already provided by local authorities and is key in so many of our services for the elderly, as well as maternity and psychiatric services, we can put aside our fear that we are moving to some kind of American system—which we are not, and frankly do not want to see—or a completely commercial service. That is the direction we have been moving towards under previous Governments for quite some time, and it is not the direction of travel that we want.

We need to release the creativity and sense of empowerment of those involved in the service, particularly clinicians of all kinds, along with a sense for patients and others that their concerns matter and their ideas can be transformational. Those at the centre should be prepared not just to let go and give them encouragement but to provide the resources and support to make a health service fit for all of us in a variegated pattern that is appropriate across our country.

My Lords, I, too, thank the noble Lord, Lord Touhig, for having secured this important debate and I declare my interest as a practising surgeon, clinical academic and chairman for clinical quality at University College London Partners Academic Health Science Centre.

The purpose of the White Paper and the health and social care Bill that will follow is good. It will ensure that the focus for the delivery of healthcare is very much on patients and on improving clinical outcomes. Those important principles are shared widely throughout the world and the proposals in the White Paper will ensure that the NHS gets to a position globally where it shows leadership in the quality movement, improved clinical outcomes and the efficient and effective use of resources, providing the very best healthcare for the people of our country.

Coupled with the proposals in the public health White Paper, there is the opportunity, if it is handled appropriately, to transform the healthcare experience for patients in our country and, more importantly, to start to focus resources in such a way that we maintain good health rather than continuously focusing only on treating patients, many with chronic disorders. The real question is how effectively we can take forward what is ultimately agreed, and therefore applied, to improve the outcomes and lives of our patients. That will require clinical leadership. It is regrettable that over so many years the National Health Service has failed to develop a sustainable mechanism to ensure that we can engage clinicians in leadership rather than just management. There is a very important distinction between the two.

One of the approaches in which I have been involved—I declared my interest in University College London Partners—is the establishment of the NHS staff college. It is modelled on the Army staff college. Indeed, we have engaged the faculty of the Army staff college to work with us in helping us to identify, through the self-reflection of those involved, and then to develop clinical leaders across the spectrum of primary care, including physicians, those working in secondary and tertiary care, managers and other healthcare professionals, to provide true leadership and ensure that the interests of patients and the utilisation of resource available within our healthcare system is applied effectively, to help these and other changes that may be applied for the benefit of the country. Will the Minister say what arrangements are being made and what strategy is in place to run in parallel with any changes proposed in the health and social care Bill for the sustained development of clinical leaders? That is a crucial issue, which warrants careful attention and appropriate thought to organise a leadership strategy that will help to deliver any changes that are finally agreed.

It is also well recognised that research and academic endeavour is hugely important to improving healthcare. Indeed, patients treated in systems where there is active research activity often tend to have better clinical outcomes. The academic health science centres have been discussed previously debate in your Lordships’ House in the excellent debate initiated by the noble Baroness, Lady Finlay, on academic health partnerships. The academic health science movement is now well established in our country. The issue with the proposed reorganisation is whether the focus on academic health—the partnerships that are required to ensure the leavening effect of academic medicine in improving standards across the entire system—will be sustained. That will require some careful thought in terms of the approach that the future NHS commissioning board takes on the nature of services and some of the innovative work that the academic health science centres can undertake, not only in improving outcomes and ensuring the best delivery for populations within their own remit, but as a test bed for ideas and innovations. By that I mean not only new treatments but new pathways of care that can be tested in the populations associated with the current academic health science centres. If proven effective, they can then be rapidly adopted throughout the National Health Service. Therefore, I ask the Minister whether there will be some opportunity to ensure that, in any discussions about the specific work and purpose of the commissioning board, the importance of academic medical research is well established and plays an important role in determining some priorities that the board may set.

Finally, I turn to education and training, which has been covered somewhat in the response on the White Paper that was published yesterday. We all recognise that the education and training of future generations of doctors—specialists, those working in primary care and those working in hospital practice—and allied healthcare professionals, who play such an important role in ensuring that we have effective teams, must remain a priority. From looking at the response, I understand that there will be further responses on education and training, which should be available shortly. However, there are concerns about the direction in which the education and training of a future workforce are going. Of course, it is well recognised that those commissioning local services will have a rightful interest in understanding what type of workforce—after a period of specialist training —will be available to look after the local healthcare needs for which they have commissioning responsibility. There must also be the opportunity to identify and set priorities at a national level for certain elements of very specialist training, to ensure that our country is able to offer the full range of healthcare that its people require. By that, I mean what is set at a local level and more specialist training, ensuring that we have the very best specialists to deal with some of the most complex problems. Therefore, it is important that education and training remain centre stage in all the decisions and discussions moving forward. I hope that the Minister can address that.

My Lords, I thank my noble friend for securing this debate and for his excellent contribution. I declare an interest as a non-executive director of the Heart of England NHS trust; president of the Royal Society for Public Health, of the Health Care Supply Association and of the British Fluoridation Society; a trustee of the Terrence Higgins Trust; a self-employed consultant on the NHS; and a consultant and trainer for Cumberlege Connections.

The paper published yesterday by the Government claimed widespread support for what they propose, but I have not detected that. In fact, there is wide dismay in the health service about what is proposed and the inevitable train crash that will occur. Of course, many of the White Paper’s intentions are supported—who could argue with wanting a service that puts patients first? However, I fail to understand the means chosen to achieve that. Why not build on what is there? Why is the health service being given four years of disruption and disorganisation? I would have more understanding if the NHS was in such a critical condition that it needed major surgery, but it is anything but. The last decade has seen great strides made—300,000 more staff, new facilities, new services, and waiting times cracked. I refer the noble Lord, Lord Alderdice, to the US Commonwealth Fund’s report last month, which looked at 11 major developed healthcare systems and gave the NHS a glowing report; in fact, it said that the NHS was extremely cost-effective. Only two days ago, the British social attitudes survey showed that when Labour entered office in 1997 only 34 per cent of people were satisfied with the NHS. By 2009, the figure stood at 64 per cent, the highest since the survey began in 1983. What is the case for drastic change? The Government have certainly not made out that case.

There is a great risk in what will happen in the next few years and I would like to make three points to the noble Earl, Lord Howe. The first is on the danger of instability. PCTs are in meltdown, facing a lingering death by cluster. GP consortia, untried and untested, are meant to take up the reins. If resources were flowing, perhaps the system could just about cope, but resources will not flow. Some £20 billion has to be taken out of efficiency savings, at the same time as the NHS is facing the consequences of a huge cutback in adult social care funding. The financial challenge is immense. David Nicholson told the Commons Select Committee:

“It is huge … it has never been done before in the NHS context”.

What an extraordinary time to dismantle the very bodies on which one would depend to achieve the efficiency savings. What are the Government doing to the people who will achieve those savings? It will not be the clinicians—the clinicians are never to be found when it comes to these issues—it will be the managers, and the Government are cutting management costs by 45 per cent over four years. That is sheer madness. No wonder Professor Chris Ham said in October that,

“there is a real risk of losing financial control”.

That view is shared up and down the NHS. Whichever part of the country you are in, that is the view that people express.

I then come to GP consortia. I would be interested if the noble Earl could clarify how many consortia he thinks will emerge. When the White Paper was published, some briefing clearly took place that suggested that there would be around 500, with populations of 100,000. Since then, indications are that they will be much larger than that to spread the financial risk. I understand that but, if you make them very large, do you not undermine the whole purpose of giving individual GPs involvement in the consortia? The Government are taking a laissez-faire attitude towards that, according to the documents published yesterday. However, if the intention is for each contract holder to have a clinician representative on the consortium, as is stated, I wonder about the practicalities. Indeed, I suspect that some consortia will make your Lordships’ House seem rather modest in size.

Then there is accountability. Billions of pounds are to be handed over to GPs. What corporate governance safeguards are to be put in place? As a minimum, surely we must have a non-executive chair and non-executive members. The kind of structure that the Government propose would not reach first base of any corporate governance test in any other organisation in this country. How can it be possible to leave that to each consortium to decide? If noble Lords reject that argument, I ask why we have non-execs on public companies. Why do we have trust boards? Why not just hand things to the consultants and let them develop a consortium and make the decisions? It is absolutely incredible that we should hand so much money over to a group of professionals without proper accountability and without the public interest being maintained by non-executives. When the relevant Bill comes to this House, that is one of the most powerful points that my noble friends and I will make.

I shall finalise my theme in relation to GP consortia. Mr Lansley wants the management of care and the management of resources to be put together at the GP level. What happens when, as is happening at the moment, contracts are overperformed by hospitals because, essentially, the GPs cannot manage demand? In the new structure, the consortia will have to face the financial consequences of that. They will then need to tell poorly performing GPs to change their behaviour, but there are no levers in the White Paper for them to do so. I would have supported the contract being placed at the consortia level, but placing it at the national commissioning board level will lead to huge bureaucracy and leave the consortia with no levers whatsoever. Of course, there would be probity issues, but if you had non-executives, you could deal with those.

I hope that the noble Earl, Lord Howe, will reflect on that. The Secretary of State has shown little sign of being willing to have a proper dialogue. My experience is that Secretaries of State who are not prepared to listen or have dialogue will face the consequences.

My Lords, I welcome the noble Lord’s success in the ballot and listened to his speech with great interest. However, I am disappointed that there has been so little discussion of the future of the NHS in your Lordships' House since the White Paper was published in July, five months ago. I had expected a substantive response on one of the Opposition days, as the National Health Service has been a central political issue for more than 60 years. This House is at its best in considered and fair-minded scrutiny, including Official Opposition scrutiny.

I am also disappointed that yesterday's government response to the lengthy process ended with a Written Statement. The House greatly respects my noble friend Lord Howe, but we would have liked to hear his own words. In a recent speech, the Minister said:

“The rhetoric about our reforms is overheated. This is evolution, not revolution”.

With respect, there seems to have been relatively little rhetoric around the White Paper. There are legitimate and strong differences, and a balance of opinion between welcoming radical change and genuine anxiety about upsetting the much improved 21st century NHS. Now, in a document three times longer than the White Paper, the Secretary of State broadly endorses his original thesis.

I was agnostic about the White Paper. I thought that there was too much hyperbole and too much fashionable jargon, and I am not yet wholly persuaded. But I do not share verdict of the hesitant critics, or cautious friends, such as the King's Fund: “Too far too fast”. Once the health Bill has appeared and pre-legislative scrutiny has been completed, I would much prefer Ministers to get a move on. In speaking to the NHS Alliance conference, my noble friend Lord Howe said that, while NHS managers are sometimes misrepresented as bogeymen,

“this is the opposite of the truth”.

He said that he wants a more innovative NHS but that,

“all of our reforms will be impossible without great management”.

I hope that my noble friend will repeat that today and on other major occasions. Hard-working, high-skilled and committed managers are too often diminished as nameless bureaucrats; in contrast to virtuous, efficient doctors and caring nurses.

On the National Health Service as it now stands, it is right to acknowledge that there have been outstanding improvements in the past 10 years. From my personal experience, the National Stroke Strategy is a success story compared to the Comptroller and Auditor General's report, Reducing Brain Damage, covering the earlier part of the decade. Similarly, a few years ago, there was a minimum waiting time for a hearing aid of between nine months and two-and-a-half years, and often there is now no delay at all. Waiting lists for treating major, critical conditions are dramatically down. I will be worried, and patients will be depressed and angry, if there is any reverse of that trend.

On the central issue of the White Paper, I am fascinated by the new NHS commissioning board. It threatens to become the quango of all quangos. In the White Paper, it is described as,

“a lean and expert organisation”,

despite its huge responsibilities—and the new document suggests that there may be more. Its original, tentative, regional dimension seems to have disappeared. I would be grateful if the Minister would explain the regional role of the NHS when the primary care trusts and the strategic health authorities have gone. There is a related problem. Will my noble friend explain the role of A&E departments within the new structure? On the eve of the general election, the then Secretary of State announced that he was personally intervening to prevent the closure of a dozen A&E departments.

Localism is the order of the day. Local people, say Ministers, with real powers, are to decide the services and facilities that they want. On the face of it, local people want high quality and very expensive treatment in every hospital. Who will choose the priorities? Who will decide? I say that because I was impressed by a recent consultation to choose a limited number of new sophisticated stroke hospital units in London. Thirty-one primary care trusts came together to reach an agreement. Who will now come together to make use of the highly contentious and political question of the future of other hospital departments nationwide when the PCTs have gone?

There are still many questions of how to turn the White Paper and yesterday's document into an even better NHS. I hope that I shall soon join the Ministers in the sunny uplands of success, but I have not travelled there yet.

My Lords, I thank the noble Lord, Lord Touhig, for securing this debate. I have been involved with the National Health Service for many years and it is without doubt in my mind the most valuable asset we have. It is an insurance policy for anyone who may be hit at any time by accident, illness, infection, disability or an act of violence. Over the years, the National Health Service has been subject to reorganisation after reorganisation. It is a vast and complicated organisation and recently, the training of junior doctors has complicated care of patients. Being restricted to 48 hours has compromised their training to be safe and competent doctors and surgeons.

If the reorganisation is going to work, the best people must be involved in leadership who can take responsibility and work in unity. There should be efficient systems in place; patients should not have to be left for long periods in x-ray waiting for a porter to return them to a ward; hospital food should be edible and nourishing; and nurses should see that patients are not left without food and fluid. The correct drugs should be administered by competent people; there should be responsible leadership to see that patients are always looked after; and nurses and care assistants, when at the nurses’ station, should be working on behalf of patients, not chatting about their next social engagement. There are many dedicated, hard-working staff in many hospitals, but in many more improvements should be made as soon as possible.

“Putting patients and the public first” is the heading of Chapter 2 of the White Paper Liberating the NHS. It states that the principle of shared decision-making is to become the norm—

“no decision about me without me”.

Many patients will tell you that they have difficulty getting an appointment with a GP of their choice—it can take weeks. It is important that at this time of change in the NHS, the patient’s voice is heard and listened to. First we had the community health councils, then the health forums, and now LINks. The general public do not really seem to know much about them. When something happens, such as a disaster like the tragic situation at the Mid Staffordshire hospital, the Patients Association is asked to comment by the press. It is a small, independent, voluntary organisation supporting patients and it has been inundated with work and inquiries. This shows what a need there is for an independent body to help and protect patients of all sorts throughout the country.

In the health White Paper it is suggested that there should be an organisation locally called HealthWatch, and a national body called HealthWatch England. I went to Google to find out what it said about HealthWatch. What came up was:

“HealthWatch is an independent registered charity … since 1991, who try to promote EBM. We are not Andrew Lansley’s HealthWatch”.

Several other HealthWatches came up. Could there not be confusion? With different HealthWatches, it is possible.

I tend to agree with the NHS Confederation when it says:

“We applaud the adoption of the principle of shared decision-making between GPs and their patients and the responsibility that will be given to the NHS Commissioning Board to champion patient and carer involvement but it is far from clear what levers they will have to enable this”.

It would be sad if relationships between the doctors and patients were damaged because GPs did not give patients what they feel they need. At least now they can blame the PCTs. Rather than give responsibility for complaints advocacy to the local HealthWatch, it would make greater sense to build on the existing well established network of local citizens advice bureaux. These already deal with health complaints as well as complaints about other local services and benefits. However, this would require appropriate additional resourcing and requirements to link with the local HealthWatch. HealthWatch is unlikely to have sufficient public profile or the resources or capabilities to deliver these functions.

If this new NHS is going to work, people and organisations, primary and secondary health, should be working together with enhanced communication for the good of patients. There should not be conflict and a silo situation. That would be a total disaster.

There is concern from many groups representing people with specialist conditions about the specialised commissioning. Will the 10 specialising groups still exist? I ask the Minister, but I am used to him not answering my questions. GPs who are generalists cannot be expected to know everything. I hope the Minister will be able to help with the uncertainties and concerns surrounding these issues, which include community care.

My Lords, I, too, thank the noble Lord, Lord Touhig, for introducing this crucial debate in such an effective way. I strongly agree with my noble friend Lord Rodgers of Quarry Bank when he suggests there should be more opportunities for this House—which has a very substantial level of medical knowledge which is not so clear in another place—to debate and discuss reorganisation, an issue which is still very much in the making. The greater the discussion and debate, the more likely it is that we will get an outcome on which everyone can agree.

I should like to add a personal note, and I hope I will not in any way embarrass my noble friend in saying it. My noble friend Lord Rodgers of Quarry Bank is a remarkable example of the successes of the NHS. Anyone who knows what he has climbed back from will, I think, agree with me. On another personal note, my family and I have always been NHS patients and never private patients. I have to thank the NHS for, on at least two occasions, saving the lives of relatives in the most remarkable conditions. I can find very little to fault it with when it comes to critical illnesses and accidents as compared with other health services, some of which I know very well indeed.

I should like to begin by considering the current position, and here I find myself in some agreement with the noble Lord, Lord Hunt of Kings Heath. If you read—as I hope every noble Lord will, especially those involved in health discussions—the quite remarkable report of the Commonwealth Fund, which is nothing to do with the United Kingdom but to do with the Commonwealth of Massachusetts, which is where the word comes from, you would be standing on the rooftops cheering—or at least you would if you were in any other country except our own. The report is remarkable. It shows that our NHS, along with the one in New Zealand, is almost certainly the most cost-effective system we know. Surprisingly—indeed, amazingly—it also shows that the gap between the service provided to those in very low income groups and those in very high income groups is less than in any other developed country. The gap here is 5 per cent whereas in other countries it ranges from 20 per cent in what one might call core Europe, to as much as 60 per cent in the United States. Perhaps even more amazingly, it also shows that the amount of time taken up in waiting to see a consultant or senior clinician in the NHS is very near the bottom of the list. In other services, some of which are much more inclined to be clinician-led, the time spent waiting is much greater.

We have to think very carefully about how to ensure that reorganisation improves the existing NHS and not try to indicate that the NHS has been a failure. By any international standard it is not a failure. It is one of the most remarkable, dedicated public services anywhere in the world.

There is another truly important point. It is clear that the NHS has, over more than 60 years now, won an astonishing level of public trust. The noble Lord, Lord Hunt, mentioned that. Anyone who cares to look at, for example, the recent study of social attitudes in the United Kingdom will see that the NHS is rated as being at the top of all the large public services. It is, rather sadly, ahead of education, but also ahead of almost all other public services. That means that we have to consider very carefully what we do to reorganise it. The bar has been set very high indeed in terms of public trust and public attitudes.

I should like to say one word to the noble Lord, Lord Kakkar, who is no longer in his place. There is a great importance in giving clinicians the widest public say and influence in the services that their patients can expect. I think that all of us in this House—some of us in this House are clinicians, although I certainly am not—would recognise the importance of their influence on the NHS and any other health service. Picking up on the words of my noble friend Lord Alderdice, I suggest that clinicians on their own will not be an adequate response to the need to change the health service for the better.

Wonderful men and women though many of them are, they are not, any more than the rest of us, completely immune from occasional selfish attitudes. I will give an example, which, in the spirit of a bipartisan approach to the problems of the health service, I hope even the noble Lord, Lord Hunt, might conceivably nod at. Many of us recognise that one of the things that went wrong with the NHS in recent years, apart from the increases in expenditure which were clearly good, was the unfortunate contract that enabled GPs to get very much more money and to do so without making any commitment at all to out-of-hours service. I have quite a lot of GP friends, including my own GP NHS trust, who are embarrassed at the way in which they got so much more money for less work at a time when almost all of us can expect not much more money for a great deal more work. The outcome of this debate would be improved if most of us were able to hang up for the moment our tribal loyalties and look at the responsibilities all of us owe to the NHS and to the reorganisation of the NHS. Those responsibilities are honesty, frankness and admission of our own mistakes.

I move on to what most worries me about the reorganisation, apart from the fact that it did not appear in the coalition agreement in any shape or form. Indeed, the coalition agreement specifically promised no more top-down reorganisation and, at least as important, there is reference after reference to PCTs, which would mean that anyone who read it carefully would think that PCTs were likely to survive and not suddenly to disappear.

I want to suggest to my right honourable friend the Secretary of State—and perhaps at least as much to the greatly admired Minister of State, my noble friend Lord Howe, whose devotion to the National Health Service is known to us and who we all, I think, trust and respect very deeply—that a reorganisation needs to carry with it changes that are seen by the public to be improvements. One of those was referred to by my noble friend Lord Alderdice and he is absolutely right. I suggest that clinicians look at the significance of accountability in a public service that is massively financed by the taxpayer.

The provisions for accountability are very weak and not clearly spelt out. I do not understand why it would not be possible with the White Paper to move towards a different system. PCTs are disappearing very fast, as the noble Baroness, Lady Masham, and others have suggested. Commissioning bodies should include not only clinicians but also representatives of the public, some from local areas. The noble Lord, Lord Hunt, was right when he said that there should be an executive lay chairperson whose responsibility would be to the community and not to clinicians or any other group which is bound to have its own concerns and special interests, rather than the wider interests of the public as a whole. The public would buy strongly into that kind of reorganisation. One which leaves that issue of accountability so vague and so little spelt out will not carry the trust that we need. My right honourable friend in another place who is today the Minister of State in the Department of Health, Paul Burstow, has suggested on several occasions the strengthening of accountability. The outcome has been existent certainly, but not strong. We need a much clearer system of accountability.

I will not detain the House for very much longer, but next I want to refer to my noble friend Colwyn who, in discussing the issues of NHS dentistry—I defer to him because he is much more knowledgeable on that subject than I could ever hope to be—referred to trial or pilot schemes.

My Lords, I hate to do this, but this is a strictly time-limited debate. When the figure seven shows, noble Lords have exceeded their time.

I apologise. I did notice that it was not completely stuck to in several other speeches, but never mind. I will wind up quickly. First, if there were to be a trial period with an outcome that would be open to discussion and debate, I would support it. But that is not my understanding. I believe that these are called pathfinders and are the first wave of the reorganisation. Lastly—

I am sorry, but no one has got close to this length of time. I realise that this is very significant and I hope that we will come back to it in debate.

I apologise. I said that I would wind up in two sentences and here is the second. I am very worried that if we do not think about the reorganisation thoroughly, we will be in real trouble with the public.

My Lords, like others, I thank the noble Lord, Lord Touhig, for securing this debate at this significant time. Having watched the Health Select Committee questioning yesterday of the Secretary of State for Health, Andrew Lansley, I was left with more concerns than I had previously. As always, the devil is in the detail and the detail is where the problems lie.

The importance placed on the patient voice is welcome, but the new local HealthWatch organisations should have powers to call for an inquiry when there are concerns. Of course, there should be no decision about a patient without the patient being involved in and informed of what is going on. There must be respect for the individual, and provision of care that enhances dignity should be at the heart of every clinician, patient encounter. Attitudes in some areas certainly need to change, both in primary and secondary care, if we are really to have the patient’s concerns at heart. Let us push forward with those measures.

However, my two areas of concern are, first, the “any willing provider” approach and, secondly, the wholesale disbanding of PCTs and the effect on patients of the consequent destabilisation of secondary care. As has already been mentioned by the noble Lord, Lord Hunt of Kings Heath, Chris Ham writes today that,

“what is not yet clear is whether the incentives in the new system and regulatory framework will allow integrated services to grow, rather than stand in the way of their evolution. … We would disagree with the assertion that structural changes will help to meet the productivity challenge and the ambitions of the government’s QIPP agenda. While proposals are being phased in more carefully over four years, we share the concerns set out by the Health Select Committee yesterday, that they will still act as a distraction from delivering the enormous productivity improvements required across the system”.

The “any willing provider” requirement risks fragmentation and cherry-picking, which would leave NHS organisations to struggle to provide for those with multiple co-morbidities and complex needs. The Royal College of General Practitioners and the Royal College of Physicians—I declare that I am a fellow of both—and the King’s Fund and the BMA, of which I declare that I am a member, have all alerted us to the dangers. All support using private and voluntary sector providers to fill the gaps—hospices are a prime example—and to support defined roles. However, hospitals need a critical mass of activity to be efficient. Without that, how will good seven-day cover be achieved?

The Government’s response recognises the fluctuations in need that occur in any one area. Neonatal cots, winter beds and so on are obvious examples. How will flexible provision be achieved if foundation trusts are destabilised by being stripped of their profitable elements by the cherry-picking of private sector providers? Clinicians can tell of many examples of patients suffering when providers are in direct competition and not in collaboration.

The tariffs look crude and contain perverse incentives. For example, specialties that have invested in IT teleconferencing follow-up will not be paid. Clinical leadership in primary and secondary care, underpinned by good management, is overdue, but such leadership must be around pathways of care for patients. That means that secondary care needs to be at the table with primary care, because people do not know what they do not know—advances in different branches of medicine are moving forward so fast that GPs cannot possibly be up to speed with everything. In areas where there are good GPs and good relationships between GPs and secondary care providers, cross-fertilisation will happen but in many areas such relationships are not in place.

What will drive up standards of primary care at local level to ensure that patients with long-term conditions are supported in their own homes? To speak of unscheduled care is to gloss over the reality of out-of-hours work. With only 30 per cent of the week adequately covered, how will the reforms specifically address the needs of patients who want to stay in their own homes? All too often, such patients are put in an ambulance and land in A&E if secondary care provision is not integral to the process of determining pathways of care.

The US model seems to underpin much of the thinking, yet we all know that healthcare per capita in the US is vastly more expensive than that of the NHS despite there being 40 million US citizens without any adequate care. Will the profits from services organised by American systems go to the US? That is not the John Lewis Partnership model, which would reinvest in the NHS.

I turn to PCTs. To have evolution not revolution, why did the Government not put GPs in the driving seat by putting a majority of GPs on the boards of merged PCTs, which could have had a lay chairman? The PCTs could have retained the skills of managers in responding to particular local needs and could have used primary and secondary care working arrangements to make joint plans. If patients can register with any GP anywhere, how will care be provided in the patient’s home when he or she is sicker, older and frailer? Who will want to take on a patient who poses a lot of work? If a GP can jump between consortia, how will stability of commissioning be achieved? Without some baseline stability, quality will not be driven up. We have all seen short-term projects wither. Sir David Nicholson has today exhorted trusts to maintain quality standards. To do that requires stability, not the fragmentation of services.

Many of the partnership agreements between PCTs and local authorities are legal agreements under the Health Act 1999. How will the more than 134 statutory functions of PCTs be discharged? Those include safeguarding children and commissioning for vulnerable groups, prison services and so on. Local authorities are already struggling, so I have no confidence that they will be able to take all this on too. Where will pooled budgets and joint commissioning sit? Will the consortia disband those arrangements, or will they have to respect them and build on them?

With estimates of one in four GPs having a commercial conflict of interest, how will the new model ensure probity in healthcare delivery, given that tendering, done properly, can cost around £500,000? How will the £20 billion saving be found with this massive reorganisation? Redundancies in PCTs are already costing money and losing organisational memory. Staff are then re-employed by private providers. That takes people away from the core task of quality assurance of patient care. The Mid Staffs trust is a glaring reminder of that.

The process seems to be storming ahead, with the detail being clarified as we go. We will be faced with legislation when, as the Health Committee suggested yesterday, the train has left the station at a dangerous speed before we have even had time to scrutinise the Bill.

My Lords, in thanking my noble friend Lord Touhig for initiating this debate, I apologise to him for missing the first part of his speech because the business moved a little faster than I had been led to believe. In my allotted time I shall talk about the new arrangements for commissioning patient care that are proposed in the White Paper. To illustrate the current situation, let us suppose that Andrew Lansley, the Secretary of State, is a fruit farmer, with PCTs as the trees producing the fruit, which are patient services. The Health Select Committee report on commissioning published in March this year found that some of the trees—the PCTs—were not in good health, with which the incoming Government agreed. Some of the trees were yielding well, but others were in bad shape. They were in need of heavy pruning as they contained a lot of dead wood. However, the Select Committee did not recommend cutting all the trees down. Properly pruned and treated with fertiliser, which can be equated with clinical input, and insecticide, which can be equated with statisticians and healthcare public health specialists—about which I shall say a bit more later—it was felt that the trees would recover and yield adequately.

However, it seems that Farmer Lansley is determined to cut all the trees down and plant new ones of an untested variety that he, an amateur plant breeder, has developed. He thinks they might be of superior taste without seeing first whether they would thrive on his land. Admittedly, he is now nurturing a rapidly growing form of the new variety called “pathfinder”, but this is being grown in special conditions under glass and there is no guarantee that it will grow successfully on a large scale in the open. A new problem has recently arisen; the main PCT orchard has developed a fungal disease popularly known as planning blight, so that yields may well be less for the next few years. This is an especially unpleasant condition in that healthy and productive branches—the most skilled and experienced managers—are starting to drop off and disappear elsewhere. That is because these managers are easily able to find new employment.

By deciding to grub up and remove the current orchard, Mr Lansley has involved himself in considerable expense—much more expense than pruning and treating the existing trees would have incurred. This is before the new variety has even been market-tested and at a time when loans to cover the interim period are very hard to come by.

To leave the analogy for a moment, I mentioned earlier the healthcare public health specialists. These are doctors or other healthcare practitioners who receive special training in assessing the healthcare needs of whole populations and how they can best be met using evidence-based interventions. These are the very skills that are required by commissioning organisations, whether they be PCTs or consortia. Although I am a former GP I believe, like the BMA, that the clinical membership of new commissioning bodies should include representatives of all the healthcare professions, not only GPs. They should perhaps more properly be called clinical consortia. However, I take the point made by the noble Baroness, Lady Williams, that due attention should be paid to the representation of patients and the community on commissioning boards.

One of the criticisms of PCTs made by the Select Committee at paragraph 194 is that:

“PCTs employ large numbers of staff, but too many are not of the required calibre”—

the dead wood, perhaps.

“PCTs need to become better at collecting data, for example of the needs of their population, and at analysing it. In particular, it is essential to exploit existing and developing data sources to provide comparative performance information in terms of cost, activity and outcomes”.

These are exactly the skills provided by healthcare public health specialists, but they are in scarce supply. There are perhaps enough of them to staff the current PCTs, and if they are established in roughly the same numbers, they might be able to cover the new consortia, but their skills will also be needed at the local level to act as directors of public health or as their advisers. Therefore, very careful thought needs to be given to where they are appointed and the powers given to them. Perhaps they should have an executive rather than merely an advisory role, so central to policy are their assessments of the healthcare needs of the population that is to be covered.

There is a lot more about this White Paper that I would like to say, but that will have to wait. I would like just to recommend that the noble Earl passes on to his right honourable friend the Secretary of State two documents, both of which are serious contributions to the current debate. They are Public Health Support for GP Commissioning, which is published by the British Medical Association, and the parliamentary briefing sent to all of us by the King’s Fund in preparation for this debate. It is very sound in its assessment of the situation and in its considered advice to the Government.

My Lords, I, too, thank the noble Lord, Lord Touhig, for calling for this timely debate. As a citizen I share with him his concern at the emphasis on competition in this paper. Reflecting over the past 20 years, a lack of emphasis on collaboration and co-operation, and a lack of respect for the professionalism of all our providers working on the front line, has tended to undermine morale. That has led to situations, to which the noble Baroness, Lady Williams, referred, such as doctors feeling that they want to go for the best deal for themselves because they are not respected for their work and the care they give the public daily.

In the time available I shall ask the Minister about the impact of reform on specialist mental health services for children. I shall also ask him for reassurance on the future of the family assessment unit at the Cassel Hospital in London. I apologise for not giving notice of that.

I applaud the Minister and his colleagues for deciding to pass decision-making, as far as possible, back to the social workers, teachers, probation officers and doctors nearest the front line. I welcome the fact that it was recently decided that an offender will no longer be automatically incarcerated if he breaches an order twice but that the probation officer will decide what needs to be done. It seems that the Government are operating on a principle across policy in this area, which I welcome. Of course it has to be balanced and not move from one extreme to another, and it has to recognise the problems of professional capacity near the front line.

I am particularly grateful for the comments of my noble friend Lord Kakkar on leadership in the NHS. His reference to clinical leadership led me to reflect on the work of the National College for Leadership of Schools and Children’s Services and the parallels to be found there. I also welcome the injection of more health visitors, an issue about which we will speak on other occasions.

I am concerned about the future of specialist looked-after children’s mental health services, of child and adolescent mental health services and of targeted mental health services for schools. Can the Minister reassure the House that the lessons learnt from the move to commissioning by primary care trusts some years ago have been fully digested by him, particularly in regard to the difficulty in the strategic commissioning of specialist health services?

Specialist looked-after children’s mental health services have been an important success story in an area that urgently needed improvement. In 2004, the Office for National Statistics found that more than 69 per cent of children in children’s homes had a mental disorder and about 40 per cent had a conduct disorder. The latter can be extremely challenging for staff to deal with. The needs of English children in residential care are generally far more intense than those of children in Denmark and Germany. About half the children in local authority care in those countries are in children’s homes. The figure here is only 10 per cent, and they tend to be the ones with the highest needs because of the high cost of residential as opposed to foster care.

In Denmark, 90 per cent of staff have a degree-level qualification and in Germany 50 per cent have such a qualification, while here only 20 per cent of staff are qualified to such a level. Clearly in these circumstances it is imperative that staff have access to the best professional mental health support both to enable them to reflect on their work with their children and for the referral of children.

A psychiatrist managing one such specialist service for a local authority has pointed out that the needs of the children in children’s homes often differ very little from those in adolescent psychiatric units, and yet the latter are managed by clinicians and staffed by nurses while the former may be managed by someone without a degree, and some staff may have no relevant vocational qualification. Certainly when social workers from Germany and Denmark visit this country the thing that shocks them most is the low status of staff in children’s homes. They would say that the most vulnerable and challenging children demand care by the best professionals.

A 16 year-old woman recently spoke at a meeting in the Committee Corridor. Also attending were several mothers who had had their children removed from them by their local authority. The young woman explained that, for her, being taken into care had been a positive experience. In particular, she felt that she had benefited greatly from the therapy she had received from her mental health services. Another woman, in her early 20s, speaking at a meeting of the Associate Parliamentary Group for Looked After Children and Care Leavers, expressed her view that the child she had recently had removed from her would not have been removed if she had had access to mental health services when she had been in local authority care. There is a great deal at stake here.

Specialist looked-after children mental health services have begun to address these issues, but they are not available everywhere. They are expensive to maintain and so are vulnerable to cuts. I ask the Minister for his reassurance that reform will not endanger these services.

Turning briefly to general child and adolescent mental health services, can the Minister say how they may be impacted by reform? In particular, there is concern that senior posts in CAMHS are already being lost under the pressure of spending cuts. How might the reforms play into this? Will they distract from the urgent need to encourage more medical students to choose child and adolescent psychiatry as a specialism? We urgently need more child and adolescent psychotherapists, together with clinical psychologists. Would the money that is being spent on reform be better spent on recruiting more of these professionals? How may the reforms impact on the transition from CAMHS to adult mental health services, which are currently so poor in many areas?

Let me take this opportunity to briefly express my concern about the fate of the Cassel Hospital family assessment service. The hospital is designated as a beacon of best practice; it is an exemplar of what can be achieved. It trains up many excellent professionals and provides hope in an otherwise somewhat barren landscape. It enables mothers who have experienced abuse and failures in the care system to bond with their child and break the generational cycle of failure. We have learnt that its local health trusts will not fund the service in future. Will the Minister please communicate my concern to the Secretary of State about the future of this beacon service and my request that national funding is found to sustain it if possible? I refer your Lordships to the coverage of the Cassel Hospital in, I think, the Times last weekend if they are interested in finding out more.

I look forward to the Minister’s reply. I recognise that I have not advised him of those questions, and if he would prefer to write to me, that would be very welcome.

My Lords, I, too, congratulate my noble friend Lord Touhig on introducing the debate at such a cleverly opportune moment.

As a physician who has spent most of his life working, in one guise or another, within the NHS, I have always thought it self-evident that patients have to be right at the centre of the health service and that much greater responsibility for providing that service should be devolved to the professionals in the field. So I cannot fault the Government’s aspirations. However, when we consider how these aims are to be achieved, we run into formidable difficulties and I cannot help but feel apprehensive.

It is with the roles and responsibilities of the GP consortia, which will play a pivotal role in the Government’s plans, that I have most concerns. These concerns are largely shared now by the Royal College of General Practitioners. First, there is a suggestion that there will be 500 consortia. Is that so? If it is, we will have a range of problems. Where will they all get the expertise in managing the contracting for services? We have enough problems with the variability between PCTs in commissioning—some are good and some are poor—and so 500 will be very difficult. Then there is the problem of the extra cost of all the staff and infrastructure needed to run 500 new organisations. I ask the noble Earl: how many do the Government imagine we will need?

On contracting for uncommon or unusual diseases, it is proposed that larger groupings of consortia will be formed to gather together the relevant specialist expertise. So we will then have at least three tiers of commissioning organisations—consortia, super consortia and the commissioning board. This system is ripe for confusion, overlap and a potential for competition between commissioners, to say nothing of the difficulties of hospital trusts faced with a confusing array of contractors. We know from experience with GP fundholding that the kind of arrangement where groups of fundholders are supposed to join forces just does not work.

Of course, it is valuable to devolve responsibility to the local level but we cannot ignore the likely effect of this on the variability of the services provided in, presumably, 500 or so different areas of the country. Is the postcode lottery likely to be made better or worse in such a system? What safeguards will be put in place that will ensure that patients of one consortium do not complain that they are getting lesser treatment than their neighbours? I know that the Minister takes these matters very seriously. I will in a moment make some suggestions that might help him overcome some of the problems.

GPs will now have financial responsibility for the care of their patients. Two tensions will arise. First, GPs will make decisions about what care the patient sitting in front of them in their surgery should or should not have. If they feel that they cannot afford a particular treatment, it is a recipe for a loss of trust by the patient in their doctor. GPs will have that responsibility. Let us remember that they will no longer have the back-up of NICE to take these difficult decisions off their shoulders. The doctor/patient relationship is threatened when doctors are seen to be the agents of rationing on behalf of the NHS. It could, for example, tempt GPs into trying to tailor their list of patients to those with the least demanding diseases.

The second tension will arise from the patient being able to choose from “any willing provider”, as the White Paper puts it. Quite apart from the conflict that could arise between the GP trying to balance the books on the one hand and the patient demanding some expensive treatment on the other, there is the whole question of whether this combination of choice and willing providers conflicts with the efficiency with which the service can run and the equity of access that we all cherish so deeply. I do not think that this issue has been given sufficient attention in the rush to push the changes through.

It is not much wonder that GPs are worried and that the Royal College of General Practitioners has voiced clear concerns. They are worried about the financial risks that will be placed on their shoulders, about their lack of expertise in the new skills that will be expected of them and about the threats to the doctor, patient relationship.

Noble Lords have mentioned integrated care. There seems little doubt that the best way for patients to have access to a safe, effective and efficient service is through those in primary, secondary and social services working closely together both in designing care pathways and delivering the care. In the words of the college of GPs, this is the essential cornerstone of an effective healthcare system.

When I brought this up in our debate on 28 October, the noble Earl expressed his strong support for the concept, but there is unfortunately little information around as to how it might be put into practice. Indeed, the competitive environment gives little encouragement that integrated care will be given more than lip service. So I ask again whether the Minister has any information on how integrated care might be put into practice.

Perhaps I may make three proposals that might help ease some of these difficulties. First, the number of consortia should be kept low—probably no more than 20 to 50. This will keep the costs down, allow specialist expertise in management and contracting to be equally available to them, reduce the number of confusing tiers of commissioning bodies and take a burdensome load off the many reluctant GPs. It will be interesting to hear about the experience of the pathfinder consortia. Clearly they are the keen minority, but I suspect that they would welcome such a proposal.

Secondly, I respectfully suggest that we keep the roles and responsibilities of NICE as they are and do not change them at all, at least until we can see how GPs get on with their new responsibilities. Thirdly and finally, can we see whether it is possible to develop a proper system of commissioning that incorporates the concepts of integrated care?

My Lords, I thank the noble Lord, Lord Touhig, for securing this debate. We are entering one of the biggest reorganisations of the health service since 1948 by passing budgets and power locally to GPs. I welcome this move. However, difficult questions must be asked, not just about how we can more efficiently manage, organise and run the health service but about whether the story that we tell as a nation about our health is true, life-giving and sustainable.

In the health debate in October, I asked how we could provide quality healthcare that meets the real needs of patients in today’s world. Is the popular biomedical model of health in which we invest good for our health and sustainable? Will it help those most in need, or does its internal logic present us with a costly and limited view of what a healthy human being is?

The GPs with whom I work tell me that in deprived communities such as Tower Hamlets 50 per cent of the patients whom they see do not need a doctor. One GP at an NHS walk-in centre told me that, out of the 80 patients he saw in one day, only 20 really needed to see him. A nurse told me of one patient who came into her surgery last week to ask her for hand cream on the NHS rather than buying it at the chemist. Let us tell a story about the personal responsibility of patients. Often, “patients” do not need a doctor; they need something else. What presents itself as a health issue may be more to do with a patient’s isolation or the need for a better job or lifestyle. People have bought into a culture of illness because it costs them nothing, but in reality the cost to our society is running into millions of pounds. A Times article this week stated that 7 million patients failed to show up for hospital appointments in the past year, costing the NHS millions of pounds. If those 80 patients at the clinic had had to pay £5 each to see the doctor, they would first have asked themselves, “Is this visit really necessary?”.

A sensible balance and perspective need to be found. There is a cultural belief that there is a pill for every ailment, and that if there is not there should be. We are in danger of medicalising people out of existence and creating levels of anxiety that have unintended consequences. Only last week, “experts” advised those of us over 50—I declare an interest here—to take an aspirin every day, but the sting in the tale was that, for some of us, it might mean bleeding to death internally. I am in danger of becoming a nervous wreck.

We must return to the question that the innovative Dr George Scott Williamson from the Pioneer Health Centre in Peckham asked all those years ago before the founding of the NHS: “What is health?”. Although we love them dearly, the BMA and their powerful allies in the medical profession have many financial and other interests in keeping the health narrative unchanged and unchallenged. Our health is matter not just for our doctors.

Most of us engage with the health service through primary care and not, fortunately, through the acute sector. It is in preventive medicine in primary care that limited funds can have the most impact. Some fantastic innovative attempts in preventive health care have been made, and some successes achieved, by using the power of modern media to change behaviour. Jamie Oliver, a well known social entrepreneur—not a doctor—challenged our preconceptions about unhealthy eating. The Government have published an excellent white paper on public health, Healthy Lives, Healthy People. It underscores the importance of preventive actions taken at the initiative of the community and local businesses.

My colleagues and I have radical plans for a social business to regenerate communities in east London through good food—I declare an interest here, too. We want to teach non-cooks how to cook in their communities and young mums how to create healthy meals for their children. We have partnered with Jamie Oliver’s team and the most well-known academics in the field. We also have support from the local NHS. However, obtaining start-up grants to support this work has not been easy. We suspect that this is because we are unashamedly a social business and not a charity. Why are innovative projects such as this, with all their potential for cost saving, still so hard to get going? Why are more innovative partnerships such as this not being brought together by local GPs and social entrepreneurs? It is because they live in different worlds, and because government and charitable funding silos discourage cross-fertilisation and make it so hard to do. New thinking comes not out of theoretical clouds but out of novel and unexpected practical partnerships. Yet the present professional structures discourage this. Why?

What might a new health narrative sound like? First, the NHS needs to tell a story about a changing demography and the financial realities that lie behind it. We have an ageing population and a health system that is unsustainable. Let us tell people the truth. We all need to take more individual responsibility for our health. The NHS should be a supportive shoulder on which to lean, if and when required, instead of encouraging a dependency culture and maintaining its present stranglehold.

Secondly, Governments must tell a new story about the importance of preventive medicine and illustrate it by telling the stories of GPs who are now forming relationships outside the box. Governments must be more honest with us all and stop feeding on papers, statistics and structures that can magically be manipulated to tell them exactly what they want to hear. They go home happy; the patients do not.

Why not start asking how government can help to bring together doctors and social entrepreneurs, innovators, artists and creative people in shared health buildings so that we develop innovative approaches to basic health care and prescriptions that meet people's real health and social needs? This is not about new money but about asking how money that already exists in local communities can be brought together in a more integrated and efficient way. Let us bring together practitioners from different disciplines into the same building and move beyond the collocation of services to integration. We have in east London.

Thirdly, let us tell a story that admits that ploughing vast amounts of money into the health service does not inevitably improve people's health; it can have unintended consequences. People in poorer areas still die seven years earlier than in richer areas, and health inequalities between rich and poor are getting progressively worse, even after all the investment in recent years. More money is not necessarily the answer. We need to think more imaginatively than this.

I leave a couple of questions for the Minister. How in practice is government going to use the restructuring of the health service to create a new narrative relevant to modern health? Secondly, what is government going to do to ensure that doctors engage with innovators and entrepreneurs?

I add my thanks to my noble friend Lord Touhig for securing this debate. Before I start, I declare an interest in that I did some work recently for the Social Care Institute for Excellence on the establishment of a college of social work. The SCIE is interested in the social care elements of this debate.

I spent some time as an adviser in the Treasury, and whenever a new idea came up the kiss of death from Treasury officials was to bill it as “a solution looking for a problem”. When I came up with a pet idea, it was incredibly annoying—I would be pretty clear that it was a great idea—and I would not for a moment suggest to the noble Earl that this was a solution looking for a problem. However, that experience taught me that even when reform is desirable and well implemented, the costs of transition in so many different ways are so huge in terms of a reduction in productivity and all the disruption that it causes that the test has to be set very high to decide that the game is worth the candle. That is something that concerns me now. We have heard a very good defence today from my noble friend Lord Hunt of Kings Heath and the noble Baroness, Lady Williams of Crosby, who remind us that the NHS, with which we are perhaps over-familiar, is a real and rare jewel and something that we should celebrate and defend. It is something that we should take very careful steps to amend only very slowly, if at all, unless the case for change was overwhelming.

Secondly, if there is a case for change, surely if it is on this scale it should happen only when the weather is fair and the wind is at our back. I am afraid that at the moment it does not feel so. We are aware of the constant pressures on the NHS finances of demographics, complex health needs, and the price of drugs and technology. That is why there has been so much investment in the health service in the past decade, which the noble Lord, Lord Alderdice, was kind enough to acknowledge. Now the NHS will face an enormous squeeze; it has to find £20 billion of efficiencies a year, which is a huge challenge. Who will have to find those efficiencies? It will be the PCTs, which will close and their staff face losing their jobs. The PCTs will have to address themselves to the management of change and prepare for the brave new world.

In that circumstance, the only argument for introducing this level of structural change will be if it can be shown that it was necessary in order to achieve those economies. The King’s Fund, for which I have a great deal of respect, as do other Members of this House, has this week disagreed with the idea that structural changes will help to meet the productivity challenge. Indeed, it said that it shared,

“the concerns set out by the Health Select Committee yesterday, that they will still act as a distraction from delivering the enormous productivity improvements required across the system”.

We should take that warning very seriously.

Thirdly, I shall comment on the new governance arrangements. Like many observers, I have been concerned from the first time I heard of these proposals about what would happen to the community aspects of health. We do not live as individuals and we do not experience our health or welfare as individuals; we live in communities. If we move to commissioning by GP practices gathered together in commissioning groups, who will be responsible, and how, for the health of a whole community? I understand from the Government’s response that the local health and well-being boards will be the vehicle for securing collaboration between the NHS, public health, adult social care and other services. Of course, there is also the local government scrutiny, but will not some health and well-being boards have GP consortia that straddle their boundaries, making co-ordination more difficult? How will that be addressed?

There is also the specific role of local authority scrutiny, but this adds up to quite a complex piece of governance machinery. Accountability will run downwards to service users and communities, and sideways through the health and well-being board, the local authority scrutiny group, and perhaps Local Health Watch. It will run upwards to the national commissioning board and perhaps to the CQC, the national health watch Monitor, and the national public health service. That is quite a complex form of governance. What will happen when those different parts of the system pull in different directions? How should a judgment be made by a consortium if one set of pressures comes down from the national commissioning board and another comes locally or sideways for the local variations? How will that work in practice?

I have two specific questions for the noble Earl. Because they are so specific, I would quite understand if he would prefer to write to me. First, much is said about the need for the integration of health and social care. I am very much behind that principle and wish the Government every success in pursuing it, but could the Minister explain how, in practice, social care will be represented on the commissioning boards? How will it have a place in the commissioning structure to ensure that it is delivered in practice as well as thought about in theory?

My second set of concerns relates to the safeguarding of children. I am sure that the Minister is aware of the comments reported in the Telegraph last week by Tim Loughton, the Minister in another place who is responsible for children, who said that it would be more difficult for doctors to spot child abuse as groups of GPs already adopt widely different standards in relation to that. I am sure that the Minister is aware that a number of children’s charities are concerned that aspects of the health service have long been the weak link. That can be a significant concern when one reads serious case reviews. What will happen in this new system? Will the Minister explain how, if the system is to be changed in the way that is described, the Government will ensure consistently high standards of policy, training and practice in safeguarding under the new commissioning arrangements?

Finally, will the Government think of another way of doing this? I was struck by the comments by the noble Baroness, Lady Williams of Crosby, about the expertise in this House. Given that pathfinders will try this in practice—even allowing for the idea of the noble Lord, Lord Rea, that they might do this under canvas—will the Minister consider, when the pathfinders have run their course, pressing the pause button, evaluating carefully what the results tell us and bringing something back for the scrutiny of this House and another place so that we can work out whether people such as me who are worried are wrong? It is very hard for me to admit that I might be wrong, but I concede that on rare occasions this happens—a little less laughter, please. It may even be true of other noble Lords in this House. That would give us an opportunity to take a step back and consider whether our worries have turned out to be right. If they have not, we can carry on with less concern. However, if we are right, we could protect the NHS from damage. The NHS is a jewel in our crown, and we risk public wrath if we do anything that could damage it.

My Lords, when you are a tail-end Charlie, most of the things that you wanted to say may already have been said. However, the breadth and depth of the proposed reforms are such that there is plenty left for me to say. First, I declare an interest. Like many other noble Lords, I have been a lifelong clinician—in my case for 39 years, in different forms. I have also chaired NHS regulators, standard-setting organisations in quality and safety, and facilitative organisations.

Like other noble Lords, I feel that we need much clarification of the proposed reforms. Apart from the White Paper and the myriad different documents, I have read all the speeches that the Minister has given recently. While his message has been consistent, explanation of how it will all work is not clear. No doubt when we get the legislation in your Lordships’ House we will spend many happy days scrutinising it—and, on my part, helping to improve it.

Today I have some general comments and one or two specific ones. As others have mentioned, the main conclusion of much of the coverage concerns the bringing in of major institutional reforms that attract major costs, coupled with the drive to realise greater efficiency savings in both the health and social care budgets. Small organisations such as consortia may well drive up costs or reduce clinical delivery times. GPs have said that they will need time and resources to develop and deliver a professional-led service. Will the Minister say how this will be possible?

One component of the White Paper is the introduction of an outcomes framework for holding the NHS commissioning board to account. One problem with PCTs was that they contracted with organisations rather than contracting for services and outcomes. The outcomes framework maintains the three domains of quality identified by the noble Lord, Lord Darzi—those of effectiveness, patient experience and safety—and has developed five domains, which on the face of it is all good. However, if the outcomes framework is the means by which the Secretary of State can hold the national commissioning board to account for the performance of the whole NHS, it needs to be much broader. Currently it is focused too narrowly on clinical outcomes. It should be broad and high level. Furthermore, the relationship between the outcomes framework and the commissioning framework needs careful consideration. National goals often become targets that are used for the assessment and management of performance. Does the Minister agree that the commissioning framework for assessing the performance of GP consortia needs to go beyond the outcomes framework to include the commissioning skills and performance of GP consortia?

I turn now to international comparability. Why are we not going to use an internationally recognised framework for assessing healthcare performance, such as the one developed by the OECD, especially as this not only has parallels with the proposed outcomes framework but includes health improvement and risk factors, as well as the three themes of effectiveness, safety and patient experience, with equity as an overarching dimension? The framework also needs to measure integrated care, care pathways and the quality of care, including social care. How will improvement be assessed? What will constitute acceptable and unacceptable performance and how will it be measured?

My next point relates to process measures. The framework accepts that these are important and are needed locally. Why are these not considered appropriate for the outcomes framework? The relationship between GP consortia, health and well-being boards and local authorities seems unclear. GP consortia will have to commission and deliver high-quality care. How will their accountability to the board work, in particular when contracts are held by boards and not by local authorities or consortia?

I turn to regulation. The Care Quality Commission will be the quality inspectorate. In an environment where there will be willing providers and patient choice, how will the CQC ensure the equity or safety of quality for all providers and who will monitor that? The second regulator will be Monitor—the new, stronger economic regulator—with functions to ensure access to key and essential services. What are key and essential services? What is the definition? Will they be available in each geographical area? That needs to be clarified, as does the question of who will ensure that it happens. The other function of Monitor will be to set prices. While sufficient pricing is a worthwhile ambition, the challenge is to set prices at a level that does not compromise quality. In health, as in everyday life, you get what you pay for.

The Government seem to have changed their mind about how maternity services will be commissioned. Initially, they said that they would be commissioned by the national commissioning board. Now it seems that the consortia will do that. The Minister may well be aware, however, that all the professional organisations have accepted that it would be better for the maternity services to be commissioned by the commissioning board and for the maternity networks to be developed to be able to do this.

While we await the Government’s new cancer strategy, I hope that the framework that is produced will recognise that not all cancer services will be appropriate to be commissioned by GP consortia and that commissioning groups should include clinicians with expertise in cancer. Appropriate data related to cancer diagnosis and survival will need to be included and are important as part of the outcomes framework. How information on outcomes is provided to patients so that they can make a choice will also be crucial.

On the question of competition, what evidence exists that increasing marketisation will benefit patients? Is there an example of a country that has had a defined and conscious change to a market-based approach that has led to improved patient outcomes?

My Lords, I join previous speakers in congratulating my noble friend Lord Touhig on ensuring that we have had this debate today, and I thank other noble Lords for the thoughtful contributions that we have heard. In particular, I congratulate the noble Lord, Lord Colwyn, on being the only Conservative Back-Bencher to have participated.

I have to begin, somewhat unusually, by declaring a non-interest. The BBC website, in referring to this debate, refers to me as “former president of BUPA”. I have been neither a member nor a president of BUPA. I am, however, a former president of BURA, the British Urban Regeneration Association, in which position I succeeded the noble Lord, Lord Jenkin.

There is a celebrated case in what used to be called “master and servant” law when a workman was denied compensation in a claim against his employer because he had been injured not while going about his employer’s business but when he was on “a frolic of his own”. That phrase might well be applied to the Secretary of State. After all, despite the fact that he has promoted the mantra of “no decision about me without me”, major decisions have been taken without support, or certainly with very little support, from a wide range of consultees including the BMA, the royal colleges, the NHS Confederation, many patient groups and a number of think tanks. Small wonder, then, that he seems to have been supplied with a minder, in the somewhat unlikely shape of Oliver Letwin, to run a rule over what he is apparently doing, and small wonder that apparently today’s Times editorial questions whether No. 10 is continuing to give wholehearted support to these proposals.

Your Lordships have already been reminded of the high level of public satisfaction with the health service by my noble friend Lord Hunt and the noble Baroness, Lady Williams. In addition, as part of the background to this debate, there are of course the pledges that the Government made in their various component parts. There is the issue of top-down reorganisation, to which the noble Baroness referred. That was explicitly excluded in the coalition agreement, but we are now getting not only a top-down reorganisation but a great deal of top-down commissioning as well.

Then of course there is the pledge about the real-terms increase of the health service. Contrary, I am afraid, to the assertion made by the noble Lord, Lord Colwyn, there is to be no real-terms increase for the health service; I refer, as an authority for that, to paragraph 51 of the report of the Health Select Committee, chaired by Stephen Dorrell, the once—and perhaps future—Secretary of State for Health.

Those pledges join a long list of broken pledges across a range of policy areas. There are tuition fees, of course, which we debated in this House this week, real-terms funding increases for schools and, indeed, a range of health issues including a pledge not to close A&E and maternity units, which have in fact closed on the present Secretary of State’s watch. This indeed has become a Government of serial pledge breakers. In fact, there is some danger that they may be becoming addicted to it and need treatment for it.

On the other hand, it is only fair to say that there are changes in the Government's position, seen in this week’s Statement and Command Paper, which are welcome. I certainly welcome the restoration of public health responsibilities to local government and the decision—in this respect, I beg to differ from the noble Lord, Lord Patel—to have maternity commissioned locally rather than nationally. I also welcome the maintenance of the powers of scrutiny of the health service being to local government, which the original White Paper had proposed to take away. Yet there are governance issues that need to be addressed.

The noble Lord, Lord Rodgers, referred to commissioning at a regional and sub-regional level for services which go beyond an immediate locality. There is the accountability of the national commissioning board to the Secretary of State as opposed, perhaps, to Parliament as a whole. There is, if I may say so, something of a degree of naivety in the praise that the document gives this week to the success of the governance of foundation trusts. Whatever their merits, the membership of foundation trusts is very small in relation to their potential membership and the turnout of votes in elections to them is even smaller. There is also the issue, which noble Lords have already referred to, of whether it is sensible to rush forward with the conversion of all trusts into foundation trusts.

Much of this debate has turned on the issue of GP commissioning and it is certainly the case that this is being piloted in a number of pathfinders. I would hesitate before adopting my noble friend Lord Turnberg’s recommendation, which would lead to perhaps only 50 commissioning authorities, but I join him in asking: what number is envisaged and of approximately what average size, when the present range within the pathfinders is enormous? It ranges from 18,000—which is, I suppose, a general practice—to half a million. That is quite extraordinary. What is important is that there should be a strong degree of coterminosity between the GP commissioning consortium and the principal local authority which has responsibility in particular for social care but also for other relevant services.

Moreover, this week’s document says that consortia will be able to contract, to dissolve, to merge and that their boundaries can be flexed. Is that not a recipe for perpetual motion, in a field where we really need stability? Finally, there is the commissioning of GP services, to which many of your Lordships have referred. I return to the proposition of the Local Government Association, and declare an interest as an honorary vice-president of it, to suggest that GP commissioning should be signed off by the local authority in the relevant area. Of course, coterminosity would be needed to do that.

Part of the debate has focused on the issues of choice and personalisation. I said in a previous debate on this matter, as I have said elsewhere and to my own party when in government, that blurring the distinction between choice and personalisation does not help the debate. The two things are not synonymous. Yet if we are to make choice a reality, particularly in providers, to what will it extend? Will it extend to the closures of facilities and will any group of potential patients ever agree to a closure of a facility?

How will the framework proposal for greater choice in mental health services—the framework document was published yesterday—be met under national commissioning? The noble Lord, Lord Alderdice, referred to the problems in urban areas caused by people moving in from outside, very often with acute social problems. Ought not the services for those people to be commissioned locally rather than nationally? Yet that is not what the framework document says. Again, the document makes a rather bold claim for the national commissioning board. It will, it says,

“ensure people who receive services are involved in their planning and development”.

How will a national board do that, as opposed to local organisations?

There has run through this debate and much of the public debate a thread of deep concern about the competitive principle. The BMA is very clear that co-operation, rather than competition, ought to be the watchword. Several noble Lords, including the noble Baroness, Lady Finlay, referred to the issue of willing providers and the need to avoid cherry picking. I ask the Minister whether there will be any safeguards against such practices. Would he care to comment on the OFT investigation into the private healthcare market that has been initiated this week? Five providers apparently deal with 85 per cent of that market, and there has been a suggestion—which is subject to investigation—that that market may have been neutrally managed, not necessarily to the benefit of the consumers. How will that be avoided in the new set-up? To repeat the question of my noble friend Lord Touhig: will the Government ban companies from advising commissioners on the one hand and providing services on the other? It seems fairly obvious that external organisations will do that. Finally, in this rather Darwinian world of competition, what happens to institutions, hospitals and other services that are deemed to be failing? Will they, as we have learnt about schools this week, simply be allowed to fail and close? What happens then to patient choice?

Finally, there is the issue of cost, which the Select Committee looked into in considerable detail this week. It complained that even now there is no robust estimate of the cost of this reorganisation. It has criticised the Government’s figure of a cost of £1.7 billion. Nor does it agree that social care can be sustained without restricting eligibility on the basis of the recent local government finance settlement. I understand from my brief reading of the documents that were published yesterday that a figure for the overall cost of this reorganisation may be given in the impact analysis to be published in January. If it approaches the £3 billion that credible authorities suggest, is that not a complete distortion of spending needs at a time when services will be very much under pressure? Should the Government not reconsider the scale, the timing and, above all, the cost of the reorganisation?

My Lords, I join other noble Lords in thanking the noble Lord, Lord Touhig, for calling this debate, which has been both wide-ranging and characterised by some extremely thoughtful and eloquent contributions. I welcome the opportunity to discuss these issues, which are so important to us all. Of course, being impressed by eloquence is not the same as being swayed by argument. It will not surprise your Lordships that I cannot identify with the criticisms of the Government’s policy voiced by several speakers. By and large, those criticisms are either misplaced or exaggerated and I hope to show why.

It is perhaps appropriate to start with the question posed by the noble Lord, Lord Hunt of Kings Heath, about why we are reforming the NHS. First, as good as the NHS is, in what is most important for patients and many health outcomes—for many cancers, respiratory disease and heart attacks—we lag behind. Secondly, in its current state, the NHS is unsustainable. We can no longer meet increasing demand by spending ever more money. In every western economy, cost pressures from healthcare exceed GDP growth. There is a basic challenge of affordability. Without reform, the NHS will quickly bend until it breaks.

We seek to address a good part of that challenge through the four pillars of the QIPP programme—quality, innovation, productivity and prevention. In many ways the White Paper is a vehicle for the QIPP reforms, squeezing the most out of every penny invested and creating a better-value and entrepreneurial NHS. Looking more particularly at the prevention agenda, our focus on public health through Public Health England will do as much to keep people healthy as the NHS does to make them well.

Although some see the reforms as a big step—I do not disguise the fact that there will be some big changes—they amount in several other respects to a series of small steps. GP-led commissioning builds on the experience gained from previous reforms, particularly practice-based commissioning and GP fundholding. Our any willing provider policy is an extension of the choice agenda initiated by the previous Government. Without lowering the quality bar—I say that particularly to the noble Lord, Lord Touhig—we are completing the rollout of foundation trusts, only this time with robust arrangements for provider failure. The reforms resolve and bring coherence to a series of sometimes disjointed measures rolled out under the previous Administration. Our aim in doing this is very clear: it is to transform the health service into a sustainable system with outcomes as good as any in the world.

Noble Lords need to ask themselves what the alternative would be. Without reform, the alternative is to salami-slice the health service as it is now, with obvious risk and detriment to patients. We know that the previous Administration put aside £1.7 billion for NHS reorganisation of some sort. We will never know what precisely they would have done, but if it was not something similar to our proposals then I wonder what it was.

The other vital strand to the new NHS—again, this was a clear ambition of the previous Administration—is the genuine integration of health and social care, which was mentioned by a number of noble Lords, including the noble Baroness, Lady Sherlock, and the noble Lords, Lord Turnberg and Lord Beecham. We are putting a lot of money into integrated care. I say to the noble Baroness, Lady Sherlock, that the involvement of social care in commissioning will be a key role of the health and well-being boards and the related joint strategic needs assessments that will need to be undertaken by consortia and local authorities working together. What she will see, based on those joint strategic needs assessments, will be better, more integrated health and social care services for patients.

The Government’s response to the White Paper consultations was also published yesterday. This sets out the legislative framework and next steps for the White Paper as we move towards publishing a health and social care Bill in the new year. I wish to pick out two or three issues from this. First, as regards commissioning, the best decisions are those taken closest to those whom they affect. Unfortunately, time prevents me from expatiating on the excellent theme of the noble Lord, Lord Mawson. However, GP-led commissioning will place decisions about the future design of local health services in the hands of clinicians—GPs and their colleagues across the NHS and social care working together. These are people who see their patients and service users every day.

Last week, in response to the consultation, we announced the first 52 in a rolling programme of GP consortia pathfinders. These are in essence the pilots to which the noble Baroness, Lady Williams, urged us to direct our efforts. This first batch involves more than 1,800 GP practices and covers a quarter of the population—some 12.8 million people. The noble Lord, Lord Turnberg, doubted whether integrated care was truly achievable. I visited a pathfinder last week in Nottinghamshire and came away completely inspired by what I saw there in terms of joint working, creative thinking and the breaking down of professional barriers. Noble Lords who have thus far viewed the Government’s proposals solely from the printed word should consider experiencing what is actually happening on the ground. Pathfinders will enable emerging consortia to become more involved more quickly in commissioning. They will explore the issues involved in effective implementation before consortia take on their statutory duties in 2012-13.

The noble Lords, Lord Hunt and Lord Touhig, and others somewhat poured cold water on the whole concept of GP-led commissioning. However, it will remove the current disconnect between clinical decision-making and financial decision-making by putting both in the same place. Those who question the wisdom of that approach should speak to some of the pathfinder GPs. They do not see themselves as being presented with a problem; they see themselves as being able at long last to manage budgets in a way that will change services and bring maximum benefit to all their patients without “the system” getting in their way. The brutal truth is that a budget that is subject to the kind of managerialism referred to by my noble friend Lord Alderdice risks depriving some patients of the care that they need. To those who question the enthusiasm of GPs, I say that the first application for becoming a pathfinder was oversubscribed. More will be coming on stream. By the middle of 2011, we believe that the vast majority of GP practices will be members of pathfinder consortia.

At the centre of everything should be the patient. The noble Baroness, Lady Masham, was right in her general point, although I did not agree with everything that she said subsequently. The NHS should be accountable to the people whom it serves. Patients and the public should have a say in how local NHS services are shaped and should be able to hold them to account in a meaningful way. Beyond a straightforward legal duty for NHS organisations to consult the public, the new local patient champion, HealthWatch, will ensure that people’s voices are heard and acted on. It will be supported by a new national patient voice, HealthWatch England—a short step from what we have at the moment with local LINks, but an absolutely crucial one. The patient voice will also be vital for the new health and well-being boards, which will join up the local NHS, public health and social care. The fact that these boards will be based in local authorities will, of itself, inject a high degree of local democratic accountability into commissioning.

The noble Lord, Lord Touhig, and others referred to the trend towards competition, arguing that there is little evidence of its benefits. As we set out in the White Paper, choice and competition can be powerful drivers for quality and efficiency and can force providers to develop services that genuinely meet patients’ needs and preferences. However, we do not want to introduce the choice of any willing provider for its own sake. That makes sense only where it is likely to deliver real benefits. Competition should not be at the expense of co-operation and there is no reason why it should be. There will still be a duty in the health Bill for NHS organisations to co-operate in patients’ interests.

The noble Baronesses, Lady Williams and Lady Finlay, and, indeed, the noble Lord, Lord Rea, with his arboricultural hat on, suggested that we keep PCTs and simply populate them differently. Let me say why that would not have delivered the outcomes that we want. PCTs are administrative units. The way in which they are configured bears no automatic relationship to the way in which clinicians want to deliver services, and clinicians feel no sense of ownership of them. The pathfinder consortium that I visited in Nottinghamshire last week is configured in a way that takes account of patient flows between primary and secondary care, is logical in terms of how health and social care services are best integrated and works on the ground in terms of close professional relationships. Doctors and other health professionals have designed it; they own it and they believe in it. That is the difference.

The noble Lord, Lord Touhig, referred to fundholding, which I agree was not a successful enterprise in some respects, although it had some valuable lessons which we are now picking up on. Fundholding had a conflict of interests because, as the noble Lord said, underspends of the commissioning budgets tended to go to the practice involved. This will not be the case for GP consortia. The only way in which GPs will be able to benefit is if they can improve outcomes for patients.

The noble Lord, Lord Turnberg, and the noble Lord, Lord Touhig, referred to the risk of recreating or accentuating the postcode lottery. Perhaps I may say that the prime purpose of the National Health Service commissioning board will be to inject two main things, consistency and quality, into commissioning. The NHS commissioning board, supported by NICE, will develop a commissioning outcomes framework so that there is clear, publicly available information on the quality of healthcare services commissioned by consortia. It will include measures to reflect a consortium’s duties to promote equality and to assess progress in reducing health inequalities.

The noble Baroness, Lady Finlay, and the noble Lords, Lord Touhig, Lord Patel and Lord Beecham, criticised the injection of competition and choice into local health economies and expressed fears about cherry-picking. In the new system, the NHS board and Monitor will develop packages of services and tariffs for services, taking account of the need for individual providers or partnerships of providers to deliver integrated care. Monitor will have a duty to ensure that competition, where it is appropriate, functions effectively, which means developing systems where providers cannot cherry-pick the easiest patient groups.

The noble Lord, Lord Hunt of Kings Heath, and others raised various issues concerning accountability and governance. I suspect that we will get into the weeds of this when the health and social care Bill reaches your Lordships’ House, as there is no time to do so today. We think that consortia should be free to define their own governance processes but within a broad framework that will be set out in the legislation. Noble Lords will have to wait to see what that legislation says but I can tell the House that the NHS commissioning board will have a role in establishing consortia and, in doing so, it will seek to ensure that consortia have the systems in place to fulfil their statutory functions in a proper way that takes account of the stewardship of public money.

My noble friend Lord Rodgers of Quarry Bank asked whether there will be a regional role for the NHS commissioning board. It will be for the board itself to decide how it designs the most effective and cost-effective operating model. The board will determine the optimal configuration of its sub-structures with the freedom to adapt over time.

The noble Lord, Lord Kakkar, spoke, as he always does, about education and training, particularly their impact on research and academic medicine. We shall shortly be publishing a consultation document on future arrangements for education and training, which I hope will begin to answer his questions. The noble Lord talked about the importance of research. As Research Minister, I am enthusiastically on his side on that score. Supporting and promoting research and development will be a core function of the future Department of Health, and the Government remain committed to providing the right environment for innovation to flourish. I think that the increased funding for health research in the recent spending review gives us a strong platform to fulfil that ambition.

The noble Baroness, Lady Masham, asked about the position of the 10 specialised commissioning groups, and the noble Earl, Lord Listowel, referred in particular to specialist mental health services. The new NHS commissioning board will commission national and regional specialised services. The consultation has highlighted the need for criteria to be developed to determine which services should be commissioned by the board or by a lead consortium across a population. We will consider the best way to keep the specialised services portfolio under regular review and, as Minister for specialised services, I can tell the House that I will keep a close personal eye on those issues.

The noble Baroness, Lady Masham, doubted whether the HealthWatch model was the way to proceed and she referred to the constant reinvention of patient and public involvement. While local HealthWatch organisations will retain the current functions of LINks, they will also gain additional functions, providing advice and signposting, as well as advocacy, for NHS complaints. We are continuing to work with LINks to build on the valuable work that volunteers have taken forward. As I mentioned, HealthWatch England will be established as a national consumer champion both to give patients and the public a voice at a national level and to provide advice and support for the new local HealthWatch organisations.

The noble Baroness, in her criticism, was doubtful that the local LINks and HealthWatch, as they are to become, will be up to the job. The Command Paper sets out that, while HealthWatch should have an advocacy role, which is one of the roles that we envisage for it, this will not have to be through its own staff. Local authorities will have the flexibility to commission services from other providers, which could include citizens advice bureaux, for example. We have done this. We have created that flexibility, as we recognised the expertise that is required in advocacy services.

The noble Lord, Lord Kakkar, asked what arrangements there were for the sustained development of clinical leaders. Clinicians with leadership skills are central to our efforts to deliver better outcomes for patients and a critical part of successful commissioning. The National Leadership Council’s commissioning work scheme will provide targeted development for GPs who wish to lead consortia. Its work will ensure that, with the advent of consortia in 2013, there will be a suitably skilled group of individuals prepared to lead these organisations.

The noble Lord, Lord Turnberg, spoke about the role of NICE. There is no time for me to reply in detail, except to say that on this subject he was 100 per cent wrong. I will write to reassure him. He also asked about the likely number of GP-led consortia, as did the noble Lord, Lord Beecham. We are intending this to be a bottom-up process, so we have no set expectations of how many consortia there may be. There are, as I mentioned, 52 pathfinders, which we announced the other day, covering 25 per cent of the population. What we will see emerging is the pathfinders exploring the issues involved, including which services are best commissioned at which level.

The noble Lord, Lord Patel, asked what the key essential services will be and how we will make sure that they are available. We will set out the definition of essential services in the health Bill, but broadly a service will be defined as essential if the commissioner could not turn to a suitable alternative service for patients if the incumbent provider stopped offering it. Monitor will be responsible for the process of identifying essential services and ensuring that they are protected, working closely with the board, consortia and other stakeholders.

As the noble Baroness, Lady Sherlock, suggested, we will return to these issues. The Government are committed to the values of the National Health Service: healthcare for all, free at the point of need. In view of all the talk about privatisation, that needs stating. But we are equally committed to doing everything possible to ensure that the quality of that healthcare, as measured by clinical outcomes, is as good as it is possible to be. I believe that our reforms will enable us to achieve exactly that.

My Lords, as barely a minute is left in this debate, I am unable to thank all noble Lords individually for taking part. Other than a general thanks, I cannot comment on all the points that were made. The standard of debate here was much better than in the other place. There is such wide experience, which is a huge benefit. I thank the Minister, who did very well in responding to all the questions raised by noble Lords. His eloquence does not equate to the power of his argument, as those who expressed doubts and questioned these changes won the argument. I have no doubt that we will return to these issues.

Motion withdrawn.

Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010

Motion to Approve

Moved By

That the draft order laid before the House on 27 July be approved.

Relevant documents: 7th Report from the Joint Committee on Statutory Instruments and 7th Report from the Merits Committee

My Lords, the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010 will direct Ofcom to take certain action in respect of radio spectrum management. It is an important step in achieving the Government’s objectives on broadband and the contribution that it can make to a balanced economy.

Wireless communications are now an integral part of everyday life in the United Kingdom. There are now more active mobile connections than people: 3 million access broadband using wireless modems, or dongles, and the arrival of smartphones is changing the way in which people communicate and interact. These devices all require radio spectrum. Without sufficient spectrum being available, mobile services cannot continue to function nor can new and innovative services be brought to market.

The explosion of data traffic across networks is putting the networks under strain. Technical advances can play a part in mitigating the impact of this increased demand but ultimately what is needed is access to additional spectrum. However, spectrum is finite and therefore a scarce resource. Spectrum suitable to deliver mobile broadband services is even scarcer. Where spectrum is available, we need to bring it into use at the earliest possible opportunity. The Government’s proposals will achieve that and accelerate the deployment of high-speed mobile broadband services that can deliver benefit to consumers, citizens and business. It is that desire to secure the release of spectrum suitable for mobile broadband services that is behind this statutory instrument.

I will not detain the House with the detail of the long and tortuous route that has been travelled to bring us to this point, although some of your Lordships will recall it in vivid detail. Some of the issues involved, such as the liberalisation of the 900-megahertz and 1,800-megahertz spectrum, have been the subject of discussion and consultation stretching back several years. This issue has made the progress towards the release of suitable spectrum particularly difficult. That this matter is not particularly politically contentious is demonstrated by the fact that the previous Administration laid a statutory instrument in March, with measures that they considered would address some of the most difficult areas of concern. However, there was insufficient parliamentary time prior to the general election to debate it. There was therefore a need for the new Government to make a decision on how to proceed.

The Government have made it clear that one of their key priorities is to rebalance the economy, in terms both of supporting growth in a broader range of economic sectors and of seeing a more even distribution of economic opportunities across regions and industries. For that balanced economy to develop and thrive, a critical requirement is the right telecommunications infrastructure, specifically the provision of superfast broadband connectivity. The Government have already set out their agenda for accelerating the deployment of higher speed broadband connectivity, and we recognise that the widespread deployment of superfast mobile broadband services will contribute to that objective, delivering significant benefits to businesses and consumers.

In the light of these objectives, careful consideration has been given as to how best to proceed. We have taken into account responses to the initial consultation and have held further discussions with Ofcom and operators to inform our decision. As I have already mentioned, the principal objective is the earliest possible release of this spectrum and to give certainty to the market, so that new mobile broadband services are deployed as quickly as possible. We are already seeing 4G services deployed across the world, including Europe. Further delay would result in the UK falling behind in the availability of these services, and I am sure that noble Lords agree that we simply cannot afford that. We are justly proud of our position as a leading mobile market and we stand to lose that position; indeed, some argue that we already have.

We concluded that intervention by the Government, in the form of this direction to Ofcom, is desirable to achieve an early release of this spectrum, but we are also of the view that the previous set of proposals would have had a disproportionate impact on the functioning of the market. The United Kingdom has enjoyed a competitive mobile market that has resulted in widespread availability of services, and it remains our view that competition will drive the deployment of new mobile broadband services.

For that reason, the Government have decided on a simplified direction. We have been able to remove much of the detail in the draft laid by the previous Administration which we now consider unnecessary. That decision has been further informed by additional analysis by Ofcom on the competitive distortions that might occur through the liberalisation of the 900-megahertz and 1800-megahertz spectrum. Ofcom concluded that the risk of distortion was less than it had previously thought, primarily because of the establishment of Everything Everywhere, the joint venture in the UK between Orange and T-Mobile. It was Ofcom’s view that the joint venture is in a better position to respond to changes in the use of the spectrum than was the case when Orange and T-Mobile were independent of each other.

I recognise that there may be concerns about the removal of the coverage obligations that were included in the original draft order. The Government are committed to achieving the best superfast broadband infrastructure in Europe, and we have recently published our strategy to achieve that goal. Rural and remote areas of the country should benefit from that infrastructure upgrade at the same time as more populated areas.

We also remain committed to ensuring that by 2015 virtually all homes will have access to a minimum level of service of 2 megabits per second. I recognise that there may be concerns about the removal of the coverage obligations that were included in the original draft order. The Government are committing £530 million over the lifetime of this Parliament to supporting the rollout of these services to less well served areas. We will be working with local authorities and communities to ensure that local needs are met. Four superfast broadband pilots have already been announced, which will provide valuable insight into possible technical solutions that can be further exploited. We can expect wireless, whether fixed or mobile, to play its part in achieving these goals.

Alongside that government investment, we expect the market to deliver most of the necessary connectivity. That is why we are directing Ofcom to carry out a competition assessment in advance of the auction, to ensure a strongly competitive market that will help to drive the deployment of services. Ofcom is currently looking at the issue of areas of the country where there is no mobile coverage—either 2G or 3G—known as mobile “not-spots” and how they might be addressed. We also expect Ofcom to consider, as part of the competitive assessment, whether other conditions, such as coverage obligations, are necessary to enable it to deliver its primary duty of ensuring a wide range of electronic services throughout the United Kingdom to consumers, citizens and business. We expect that approach to address the issue of rural connectivity, but we will of course continue to monitor, with Ofcom, the extent to which these services are being delivered to rural and less urban areas.

The statutory instrument will fulfil a number of objectives. First, it will allow the United Kingdom to meet its obligations to implement the European Union’s revised GSM directive, which came into effect on 9 May 2010. That will liberalise the use of 900 megahertz spectrum for new technologies in the hands of the incumbents, and will also implement the accompanying Commission decision harmonising the use of 1,800 megahertz spectrum with 900 megahertz. Those licences will be made indefinite, subject to revocation on spectrum management grounds, and tradable. They will be subject to revised annual fees to be determined by Ofcom.

Ofcom is also being directed to amend licences for the use of spectrum at 2.1 gigahertz, so that they are made indefinite. Those licences will be subject to an annual licence fee once their initial term has expired in 2021. The licence holders will also be required to meet additional coverage conditions, and the licences will also be made tradable. We consider the extension of these licences to be necessary to encourage further investment in 3G services. This technology will continue to be an important part of the wireless broadband landscape for a number of years before 4G services can be fully rolled out. Without the change to the licences, further investment in those networks will be uncertain, to the detriment of users.

We are also directing Ofcom to begin immediately with preparations for the 800 megahertz and 2.6 gigahertz auction. As I have already mentioned, we are requiring Ofcom to carry out an urgent competition assessment in regard to further developments of 3G and future 4G networks, including the potential for new entrants, to inform the design of the auction rules for this spectrum. Maintaining a healthy competitive environment post-auction is a clearly desirable outcome.

That direction to Ofcom will permit the earliest possible release of this important spectrum, benefiting business, the consumer and the telecommunications industry alike, and I look forward to hearing the views of noble Lords.

My Lords, I rise to identify a few problems that are occurring in the relationship between this order, which provides for a clearly welcome increase in spectrum availability, and the railways. I declare an interest as chairman of the Rail Freight Group, but the issue covers the whole railway—passenger, freight and Network Rail itself—and could result in some serious problems in the safety and the operations of the railways.

I welcome the Minister’s comments about the need to rebalance the economy and the provision of superfast broadband being an important part of that. However, it is not much use having superfast broadband if it prevents the running of superfast trains—or even ordinary trains—which are another of the Government’s priorities. Perhaps I can explain the problem in a little more detail.

The problem for the railways is that the 900 megahertz spectrum for mobiles sits quite close to that of the GSM-R railway radio system, which is the modern digital replacement for the very much life-expired analogue system. In terms of safety and operations, GSM-R has very great importance. Its rollout on the railway network is largely complete, and about 6,000 driving cabs are being modified to install the new cab mobiles. All this work is being funded by the Department for Transport. As I understand it, the worst-case scenario is that, in order to contain and eliminate interference between GSM-R—both track-side and in-train systems—and the 900 megahertz mobile systems, there would need to be significant modification, which would cost about £100 million. Network Rail would of course seek funding from the Department for Transport, or maybe from BIS depending on how it all worked.

I think that it is extraordinary that things have got this far. As the Minister said, there has been widespread consultation and I am aware that Network Rail responded pretty heavily, as no doubt did other departments, including the Department for Transport.

We seem to be getting into a situation in which the railways and the broadband systems are both seeking to comply with EU-wide rulings that appear to conflict. Network Rail, which identified this issue quite some time ago, aims to move forward from GSM-R to the new signalling system ERTMS, which is being rolled out. ERTMS already operates in many other member states, including Germany and Finland. Network Rail was involved in commissioning a report—report O-8700—that clearly demonstrates the absolute need to co-ordinate the use of technologies such as UMTS 900 where those are used within four kilometres of any railway infrastructure. In this country, four kilometres either side of a railway does not leave much space. From the little that I know about the issue, I am sure that that would not work for the mobile technology.

Unfortunately, the timing of the order is not terribly good, given that Network Rail has employed consultants ATDI to validate previous work and to produce a set of conclusions to inform a meeting of stakeholders that will take place next month. Therefore, the timing is not very helpful. Everyone wants to work together—as indeed they should—to make sure that everyone fully understands the issues involved. However, the problem is that two independent European studies already show that the deployment of UMTS 900, operating at 900 megahertz, affects the performance of GSM-R and causes interference in radio signals between the trains and the signallers.

These technologies are very different from pulling levers—which you still see in one or two parts of the country—that then make the signal go up or down. As we all know, telephone systems, signalling systems and mobile systems sometimes do funny things. As a safety-related matter, the issue is extremely important. It is important that the GSM-R used on the railways is instantaneously available across the whole network to maintain the protection measures. Some measures must be put in between the railway system and the UMTS900. Otherwise, there may be detrimental effects.

Apart from the cost, which is estimated to be about £100 million to change the railway system, I understand that filters would need to be added to the set in each train. There are also timing implications. As with the mobile phone network, there are concerns about the mandatory withdrawal of existing radio systems and the European requirements to have all these things in place by a certain date, which has already slipped. Given the seriousness of the problem and that £100 million plus a lot of delays is at stake, I would be very grateful if the Minister could comment on what could be done to mitigate the effects. Implementing the order without anything else could raise serious issues for the railways. Going through a signal at red—to use older terminology—could cause accidents.

BIS says that it is required to provide UMTS for mobile in order to comply with EU regulations; railway operators say that they are required to do something similar under other EU regulations. I suggest that the aim is for interoperability, which I am sure we would all welcome, whether for mobile phones or the railways. The existing systems are perhaps well past their sell-by date and something should have been done years ago. If we have really have a situation in which the European Union, for better or for worse, has issued two such regulations—or directives or whatever—that need to be complied with across the EU, it is extraordinary that they should come into conflict with each other. Otherwise, someone has got it wrong. I hope that the Minister can tell us a bit more about that.

As for what the Minister might consider by way of giving assurances to the House, I suggest that he could perhaps withdraw the order completely for further consideration. I suspect that a small change to the order would make life a lot easier for everyone and might save us from some of the problems. I believe that it would be possible for Ministers to require Ofcom to ensure that, within the spectrums, the relevant wavelengths—or frequencies or whatever—that cause the biggest problem for the railways are not sold or issued until it has been fully agreed that the railway operators’ system can be maintained in a safe condition. Perhaps the Minister will comment on whether that would be possible for him to give an instruction to Ofcom to do that.

Finally, given that the railways were there first—the issue has been going on for a number of years now—and the telecom spectrum came later, perhaps the Minister will confirm that, if there is any additional cost of modification for the railway system, his department, rather than the Department for Transport, will provide any extra funding necessary.

My Lords, the Minister will be aware that I wrote to him about this matter earlier today. I apologise for the late notice I gave him, but I did not receive notification about this problem until seven o’clock last night when a member of the railway industry wrote to me to draw my attention to exactly the points just alluded to by my noble friend Lord Berkeley.

This is clearly a significant issue for the railway. It is not a situation where we can take a chance and see what happens. If it is the case that the new broadband width is going to interfere with signalling, obviously the railway will become unsafe. The solution would seem to be the fitting of filters not just to the train sets, as my noble friend Lord Berkeley says, but I understand to trackside equipment as well. The estimate of costs he gave is a figure that I am familiar with as well.

We are all anxious to see the extension of digital Britain. I played a small and modest part in the legislation passed in the previous Parliament, as the Minister knows, and I am keen to see the benefits of broadband extended as widely as possible. This is a potentially unfortunate unintended consequence, but the operation of the railway, if not endangered, will certainly be embarrassed as a result of the introduction of these broadband widths without some mitigating measures. My noble friend Lord Berkeley referred to the possibility of the Department for Business, Innovation and Skills paying the costs, but perhaps it would prefer that the purchasers of the new broadband width should have them built into their contracts. However, it is clearly unacceptable to expect the railway to pay for it, and indeed if the railway were to do so, it would then be for the Department for Transport because it is responsible for the cost of the new signalling system which is being introduced progressively over the next six years.

Again, I apologise for bringing this up so late. It is not a matter that has been considered either in the other place or in your Lordships’ Merits of Statutory Instruments Committee, but it needs to be taken into consideration. I hope that the Minister will be able to give us some assurance.

My Lords, I suspect that, looking at the numbers in the House, we are in rather arcane territory with this order. We are indebted to Kip Meek, the former independent spectrum broker, for having come up with some solutions that are reflected in the order, but of course he has now gone to run YouView, and good luck to him in that very important project. But luckily today we have my noble friend Lord De Mauley, who was fully conversant with all the discussions over spectrum during the passage of the Digital Economy Bill, so I am confident that he will be able both to reassure and to enlighten me about some of the issues underlying this order. It is also a little bit of a reunion when I see the noble Lord, Lord Young, across the way as well.

I broadly support the order, and for those of us who worked in the salt mines of the Digital Economy Bill, the legislative and regulatory background to spectrum allocation is familiar. For the most part so is the content of this order since we were all ready to debate it before the last election. Indeed, we assumed that it would be reintroduced immediately after the election, but the Department for Business, Innovation and Skills appears to have been ruminating on it for some time.

The Minister helpfully mentioned some of the differences between this order and the draft order we saw in March, particularly simplification of the order and the removal of the coverage obligations, but otherwise it is not entirely clear what other differences there are between this regulation as tabled and the previously tabled regulation. The essence, as I understand it, is because there will now be a competition assessment before the auction takes place. What is the thinking behind this change? Is it because this means that the auction conditions can be tailored in the light of the assessment? This is an important and welcome addition, and if so, can my noble friend say exactly when that assessment will happen and what the process will be? I think he described the assessment as “urgent”, so I assume that means that the assessment is imminent.

Given the importance of fair allocation below 1 gigahertz spectrum, can the Minister confirm that Ofcom will conduct the assessment before the existing 900 megahertz licences are varied? Can he also confirm that the key element of the combined auction for the 800 megahertz and 2,600 megahertz licences will continue?

There is then the issue of timing which, according to the CEO of Ofcom, will be 2014. It will be at least a year before Ofcom issues an invitation to bid for the so-called four key radio frequencies that will allow mobile network operators to offer network speeds that are competitive with fixed-line broadband.

As I understand it, the timetable as set out by Ed Richards is as follows. Starting in February 2011, there will be consultation on steps for a competitive auction. On the consultation finishing, in the early autumn there will be a statement on future competition. At the end of 2011 the final auction regulations will be published. The auction will take place and then finally, in 2014 the 4G networks will be up and running. It will be helpful if the Minister can confirm that that is the expected timetable.

Mr Richards appears to describe this timetable as ambitious, but to many it appears rather slow. After all, the first Meek report came out in May 2009 and the final report came out in September 2009. Mobile network operators have been waiting for 4G spectrum in the 800-megahertz and 2.6-gigahertz bands for several years; they want and need the higher frequencies to relieve congestion in their urban networks and they want the sub-1-gigahertz frequencies, which carry further than 3G frequencies for the same power, so that they can extend their coverage cheaply.

These frequencies are also needed to enable networks to roll out the next generation mobile transmission technology known as LTE. The industry, however, has said that this timetable will put the UK well behind other markets. LTE services are already up and running in other European countries; a few networks in Europe are already running or testing LTE in 1800-megahertz and compatible devices, notably dongles for laptops.

What has been the cause of the delay? Was it the threat of legal action by Everything Everywhere because it feared being locked out of the sub-1-gigahertz spectrum, or the threat of litigation by BT on rather different grounds? Is the competition assessment the price of its withdrawal? Or is the real reason why Ofcom has been delaying the 2.6- gigahertz spectrum release until 2014 because it has no other spectrum ready that could be used for wireless cameras during the Olympics?

Have the Government thought seriously about the consequences of this delay? Is there any way the auction can be brought forward? It has been calculated that delay in the 800-megahertz and 2.6-gigahertz auctions is estimated to have already cost the Treasury £6 billion in lost revenues as industry has spent the money elsewhere in the EU buying spectrum. The longer we delay before the auction takes place, the less money industry, it appears, will have left to spend in the UK. Can the Minister tell us frankly what the situation is and why we are so late coming to this order and adopting such a leisurely timetable?

The form in which the spectrum is released also matters. In the current plans, 2.6- gigahertz is split into two blocks; this means that it is less suitable for use by the technology known as WiMax. Does this not need to be changed to ensure technical neutrality between LTE and WiMax? Alternatively, could some of the 2.6-gigahertz allocation be for WiMax and some for LTE? Otherwise, we run the risk of prejudicing WiMax deployment and failing to be technologically neutral, as Ofcom is obliged to be.

On the position of the emergency services and the spectrum allocated to them, I recently asked the Government a number of Written Questions. Had they agreed to find spectrum for secure broadband services for the emergency services from below 1- gigahertz? If so, what steps were being taken to set aside an allocation from within the tuning range of existing Tetra radios and exempt it from being auctioned? Thirdly, did they need to produce a business case to do so? The reply that I have received is baffling if I have not understood, and unsatisfactory if I have.

The Minister, the noble Baroness, Lady Neville-Jones, has said that it is unlikely that the emergency services will use a spectrum band below 1-gigahertz due to the lack of available spectrum in the range. Furthermore, she claims that the technical benefits would be minimal. Public sector organisations apparently “must engage with the market”; BIS does not currently anticipate exempting any spectrum from auction and no business case has been produced. That is what I would call the dustiest of dusty answers.

As I understand it, we have an obligation under EU law to agree on spectrum for the emergency services, and agreement was reached at a recent European Council of Justice Ministers. The only really suitable spectrum bands for the emergency services to use are at a much lower frequency, so the state does not have to invest in double the number of masts. The emergency services network has about 3,500 masts to operate in the 400 megahertz band. It would need nearly double the number to operate in the 800 megahertz band.

This rule applies universally: the higher the frequency, the more base stations are needed. This is why there is such interest in the digital dividend spectrum—it is at relatively low frequencies.

The problem for the emergency services is that it appears that Ofcom and BIS do not intend to make any spectrum available to them at any frequency. They will simply say that the business case, which is required for a direction to be made, is too weak. My interest in raising this matter and urging that some spectrum be exempted from the auction is to protect our population and our first responders. Can we please learn the lessons of past disasters? We must have proper communications for our emergency services.

There appears to be something fundamentally wrong with a situation where the emergency services in Dorset cannot use their radios and do not have enough spectrum, while there is spectrum lying fallow here and not being released in a timely fashion. Is it really the case, too, that some police forces are being asked to send text messages from their mobiles rather use their radios because the spectrum is too expensive? Why cannot a direction be given to Ofcom on use of spectrum for the emergency services?

Finally, there is the aftermath of the settlement with the PMSE sector, which ran such an effective Save Our Sound campaign. I am glad that my honourable friend Mr Vaizey ensured that a better deal than that envisaged by the Labour Government was agreed, so that compensation was not based on residual value of equipment. However compensation will cover only 55 per cent of the replacement cost of new equipment. Some people will struggle to find the balance needed. In addition, I understand that final funding will be signed off by the Treasury only in March 2011. Is this correct? It would be extremely awkward to say the least if the Treasury backed off at the last minute. What is the current status of the agreement? When will payments be made? I would be grateful if my noble friend could answer those questions.

Spectrum allocation may not make the front pages of newspapers, but it is a fast-changing area with fast-changing requirements. The last fundamental review of the UK’s spectrum strategy was the 2005 Cave review. The previous Government did not update it more recently, so it seems that all current decisions are based on a policy which we know to be out of date and where the balance between auction and other means of allocation has gone. Some would say that what we are doing is all a bit ad hoc. Are we really confident that we are proceeding in the right way today? I hope that my noble friend can reassure me and I look forward to his reply.

My Lords, this debate is definitely one for the techies. As a football commentator said, it certainly feels like déjà vu all over again.

I was grateful to the noble Lord, Lord De Mauley, for being one of the few Ministers who has not said that he is doing this because of the terrible deficit left by the previous Government. It was a great relief. I hope that that is not a career-limiting observation.

The last spectrum auction took place 10 years ago under a Labour Government and is widely considered to have been a success in injecting much needed competition into the mobile market. The 3G auction specifically reserved a licence for a non-2G licence holder so as to kick-start competition. The result today, with each of the four mobile networks holding roughly the same amount of 3G spectrum, is a highly competitive market where the operators compete to expand and increase their mobile broadband networks.

While we on this side of the House support this statutory instrument, the proposals to liberalise the existing 2G spectrum ahead of agreeing the rules for the auction of the 2.6 gigahertz and 800 megahertz spectrum run the risk of significantly upsetting that competition. I note that Ofcom has concluded that liberalisation does not distort competition, but that is because its competition assessment examined the effect of liberalisation only on the basis of 80 per cent population coverage. Its assessment completely ignored the advantage that holders of the existing 900 megahertz spectrum gain from being able to use that spectrum for rolling out mobile broadband in more rural areas.

Your Lordships will be aware that sub-1 gigahertz spectrum enables network operators to cover significantly larger geographic areas. Indeed, it was estimated that holders of low-frequency spectrum are able to roll out their networks five times more cheaply than operators who hold high-frequency spectrum. It is this low-frequency spectrum that is critical to ensuring that mobile broadband supports the Government’s own broadband strategy and delivers universal broadband coverage to rural areas. However, there is much less likelihood of this being achieved if competition is significantly weakened. It would be ironic if the outcome of this spectrum auction, under the watch of Conservative/coalition Ministers, undermined the competition delivered by a Labour Government. I noted that there were a couple of attempts to cover that area. Although these are indefinite licences, there was the question of revocation and an annual assessment. I welcome those aspects.

What assurances will the Minister give the House that Ministers will give a clear steer to Ofcom that the auction of the 800 megahertz spectrum must be done in such a way as to ensure that the advantage gained by the current holders of low-frequency spectrum is corrected either through a spectrum cap or, as in 2000, through reserving a licence for a non-2G spectrum holder? In another place, the Minister Ed Vaizey said that Ofcom,

“must draw up auction rules to ensure fair access and competition on spectrum”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 1/12/10; col. 11.]

Would the Government consider an auction that resulted in the concentration of low-frequency spectrum in the hands of the two networks that already hold low-frequency spectrum to be a failure? If so, what discussions have the Government had with Ofcom to ensure that the auction is structured so as to avoid this? I welcome the commitment to competition assessment prior to any decisions. I was interested in the point made about the hope that there would be universal coverage. We talk about the importance of rural connectivity, but the fact that it is not stipulated gives some cause for concern.

Given the importance of the digital economy to the UK’s wider economy, do the Government agree that it is essential that Ofcom actively protects competition in the mobile broadband market? While I share the Government’s view that release of spectrum to the market as quickly as possible is critical, does the Minister agree that the long-term interests of consumers depend on ensuring that the release of new spectrum is achieved through an auction that preserves a level playing field in spectrum holdings? Can the Minister give the House an assurance that Ofcom will have the Government’s full support in taking steps to preserve competition in the mobile broadband market, particularly if that is opposed by companies whose actions have delayed the release of spectrum to the detriment of consumers? I share the concerns of the noble Lord, Lord McNally, about the timetable.

My apologies. I meant the noble Lord, Lord Clement-Jones. I hope that he does not take legal action.

I share the noble Lord’s view on the timetable. It would be good for Ofcom to be challenged on the length of the timetable, given the importance of the introduction of 4G.

There is an ambivalent attitude in this country, in that everybody wants a mobile phone and universal coverage, but people do not want a mast anywhere near them. That pushes to one side those who believe, in my view mistakenly, that they will suffer some deadly effect from the rays from mobile masts. It is usually the aesthetics that concern most people. Will the Minister give any steer to Ofcom to ensure that we maximise mast sharing, so that we do not have the countryside or towns littered with more mobile phone masts than we need? I also welcome the commitment to the previous Government’s policy of ensuring universal 2 megabit per second coverage by 2015 and to the superfast broadband trials.

I conclude by sharing the view expressed by the Minister on the role that mobile broadband can play in delivering universal broadband coverage. Does he agree that the best way of extending coverage is through a market where all operators can compete equally? I share the concern of my noble friends Lord Faulkner and Lord Berkeley about the possible impact on rail signalling systems. I would have thought that that would have been drawn to the attention of Ofcom a while ago. No doubt it is something that the Minister will comment on.

My Lords, I am very grateful to noble Lords for their comments. We have covered a number of key areas, and a number of interesting and important points have been raised. The Government note the concerns that your Lordships raised during the debate. The noble Lords, Lord Berkeley and Lord Faulkner, raised the important issue of the conflict with the GSM-R rail operators’ frequency. I thank them for that. The Government are fully aware of the potential safety issues involving the use of spectrum, specifically of the 900-megahertz band for mobile broadband services, and of the adjacent spectrum planned for the rail safety network system. Noble Lords are absolutely right that safety is a key priority for the Government, and we will not allow it to be compromised. The level and severity of any possible interference is still being investigated, but discussions are taking place between Network Rail, the mobile operators, Ofcom, BIS and the Department for Transport to address the matter. Further technical work is under way to determine the likelihood of any potential interference and the available technical solutions.

As the noble Lord, Lord Berkeley, said, this is not just a UK issue. The use of these bands is harmonised across Europe, so we are discussing this with the Commission, too. I thank the noble Lords, Lord Berkeley and Lord Faulkner, for their helpful suggestions. I will definitely take them back to the department.

I thank him for that. That issue needs to be part of the discussions to which I have just referred.

My noble friend Lord Clement-Jones asked about the reasons for the delay. That is a very justifiable question. The new Government had to consider the options that are open to them and what they wanted to do against a backdrop of a changing market. The process was completed before Parliament rose in July for the Summer Recess. It was not considered immediately after Parliament returned because of the threatened judicial review by Everything Everywhere, and the need to address that threat.

My noble friend asked about a timetable. Ofcom intends to consult on its assessment in February. The 900-megahertz licences will be liberalised before the 800-megahertz licences become available, but Ofcom’s latest analysis is that the competitive distortion is not so great as to require action in the 900-megahertz spectrum. I confirm broadly that my noble friend's outline timetable is what is anticipated, although if there is anything I can add, I will write to him after the debate. I certainly agree with him that speed is of the essence. However, it is a very complex area and it would be equally dangerous to rush things through.

My noble friend also asked about the emergency services. The Government fully recognise the importance of spectrum in allowing the emergency services to operate effectively. The safety and security of the United Kingdom's citizens is of paramount importance, and the Government have consistently stated that spectrum management should pay due regard to this. However, as I said, spectrum is a scarce resource for which there is increasing demand. In these circumstances, the allocation of spectrum should be as efficient as possible. For that reason, the Government's agreed approach is that, in the first instance, such requirements should be sourced through the market. I hope that my noble friend will be somewhat reassured to hear that where this is not possible, a case will need to be made for an administrative allocation to be considered. Any requirement for additional spectrum by the emergency services will be considered within that framework.

I am sorry, my Lords, but the timing of that is rather important. Once the spectrum is subject to auction, the emergency services will not have access to it. The spectrum below 1 gigahertz is of extraordinary importance because it means that the masts do not have to be so close together. It means that you have fewer masts, less cost to the emergency services and so on. What worries me in all this is the question of whether the emergency services should be subject to a market test. It is rather like the NHS—we do not subject that to a market test.

I agree with the noble Lord about the seriousness of the matter. It is, as I said earlier, a complex area. It might be helpful if I wrote to him further about that matter.

The noble Lord, Lord Young, expressed a number of concerns about the auction, competition and coverage. The important thing is that we have asked Ofcom to conduct a competitive assessment of the future development of the 3G and 4G markets in the United Kingdom to inform the design of the auction. Ofcom may well decide that some form of capping is appropriate; the noble Lord referred to that. I agree with him about the importance of competition.

The noble Lord also asked about the benefits for consumers. Again, I broadly agree with him. Widespread next-generation mobile broadband services, which are capable of delivering data at speeds that are considerably in excess of today’s offerings, will be of huge value both to consumers and indeed to business. For the consumer and citizen, access to real-time information while on the move will be invaluable as well as offering a considerable market opportunity to creative industries wishing to develop content.

The noble Lord asked about the perceived blight of masts across the country. One has to say that if people want additional coverage of mobile broadband services, some increase of masts is likely. Given the capital expenditure involved, though, no operator will want to deploy more masts than are necessary to deliver an acceptable level of service.

I agree with the Minister that they will not, but I made the point about encouraging mast-sharing. While I am on my feet—I do not want to do this any more than I have to—there is also the question of universal coverage and how concerned the Government are to ensure that the mobile service is less effective in some parts of the country than in others. How much premium do we put on that?

I broadly agree with the noble Lord about mast-sharing. We have it already and I have no intelligence that it is not going to continue. It seems to be in the economic interests of all parties.

The noble Lord’s other question is about coverage. Again, I agree with him about its importance. The Government believe that our approach, particularly given the need to crack on with it, is the way to achieve that, and that the competitive pressures and the number of participants will assist it. A number of technical advances will also assist that.

On the European network for the GSM-R, my understanding is that Network Rail responded to Ofcom on this some time ago, as well as to BIS. I am concerned about the reported reaction of BIS to these comments, which was, “We understand where you’re coming from, but basically you should have incorporated something into your design in the first place to ensure that the receivers and all the other equipment on the railway were robust”.

The legislation from the commission has been around for a number of years, and I am pretty persuaded that Network Rail and the Department for Transport have got it right, because they take it all very seriously. It seems a trifle arrogant for anyone now to say, “Sorry, mate, something new is coming up and you’d better go and change all your systems—and, by the way, possibly pay for it”. I hope that I have got this wrong. Maybe the Minister could look into that as well.

I am grateful to the noble Lord for his comments. If there is some interdepartmental fencing, that is extremely concerning. I will go back to my department and shake some cages. Having said that, I hope that I have addressed as many of your Lordships’ questions as possible and if I have not I will, as I say, write to noble Lords. This is—

My Lords, I am sorry to interrupt but, when the Minister says that, I hope specifically that he will include the radio mikes PMSE issue as well.

I certainly intend to include that.

This area is, as I say, immensely complicated, as I am sure has become abundantly clear in the course of the debate. There are those who assert that the Government’s approach is flawed or lacks ambition, but it is clear that years of debate and consultation have shown that any proposals—whether they come from the Government, the regulator, or indeed the European Commission—are unlikely to receive universal acclaim. Experience shows that any proposal will receive differing levels of opposition and support. The point is that a consensus on what should be done is, frankly, unlikely.

That lack of consensus has been the case over a number of years. Ofcom’s attempts to find proportionate measures to deal with the issues raised by the refarming of 2G spectrum have faced challenges which, in turn, have led to delay. Any further delay cannot be to the benefit of consumers or business users, nor, I suggest, to the operators themselves. Regulatory uncertainty is seldom helpful to industry. The longer we delay, the further the UK will fall behind other countries that are already deploying new high-speed broadband services.

The issues involved have, as I say, already been the subject of considerable discussion, debate and consultation involving industry, the regulator and the Government. In our view, this direction to Ofcom represents the most appropriate way forward to allow the earliest deployment of next-generation mobile broadband services, to make a valuable contribution to the broadband infrastructure of the United Kingdom and to ensure that this country remains competitive in a digital world. I commend the order to the House.

Motion agreed.

House adjourned at 4.52 pm.