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Health and Social Care Bill

Volume 733: debated on Tuesday 13 December 2011

Committee (12th Day)

Relevant documents: 19th report from the Delegated Powers Committee, 18th report from the Constitution Committee.

Clause 58 : Monitor

Amendment 260EA

Moved by

260EA: Clause 58, page 87, line 9, at end insert—

“(c) is to continue as regulator of NHS Foundation Trusts as set out in Chapter 5 of Part 2 of the National Health Service Act 2006”

My Lords, at last we move to Part 3. I hope the House will tolerate a longer speech from me than I normally make. I have made just a series of very short speeches so far on the Bill. There are many amendments in this part in my name and that of my noble friend Lord Beecham. I would like to take this opportunity to explain the rationale behind the suite of amendments that we have put before the Committee today. I thought the Committee might prefer one longish speech rather than 10 short ones, which will almost certainly save time.

Our amendments are largely in this group, which addresses the role and powers of Monitor, and the next two groups, which address Monitor as a licensing body and its accountability. Later today, in groups eight and nine, there are the issues of pricing and the failure regime.

On these Benches, we decided some time ago that this was the heart of the Bill. Over all the debates we have had in the last 11 days, it has become abundantly clear that the reason we have this mammoth Bill, bringing about the expensive and risky reorganisation of our NHS, is to create a regulated market in the NHS. On these Benches, we have always believed that fundamentally, this Bill was conceived and constructed, around Part 3. Even after the pause for reflection and the report from the Future Forum, that remains the case.

Version 1 of the Bill was at least honest in being the embodiment of what Andrew Lansley had promised to do to our NHS back in 2005. He is at one with his colleagues Oliver Letwin and George Osborne. Mr Lansley wants markets and is against a communally owned and publicly run public sector. Like his Conservative colleagues, he believes that competition solves every problem and is a cure-all. Indeed, Mr Lansley’s background in establishing regulated utilities in his five-year preparation as the shadow Health Secretary makes it clear that he wants to treat our healthcare just the same as gas, water and electricity. That was version 1.

That finally collapsed when people including the Liberal Democrats actually read and understood the White Paper and the Bill. I will not trouble your Lordships’ House by picking over the corpses of versions 2 and 3 of the Bill, but we now have version 4, and I suspect that we are still far from finished. This Bill is a mess. It is now a catalogue of compromises, except, it has to be said, the framework that we have on offer in Part 3, which would, over time, allow Mr Lansley’s vision to be fulfilled. He must be hanging on to that for dear life.

We believe that Monitor is being asked to fulfil too many functions and set too many priorities, and that some of these are potentially, if not actually, in conflict with each other. We hope the House will appreciate that, on these Benches, we have done the House a big favour. We have rewritten Part 3 to make it simpler and more coherent. We have taken out the nonsense parts, such as the voting system in Clauses 116 to 121, which as it were bring the X Factor system into the NHS. Why not have phone-in votes for CCG chairs, for example?

We have taken out the convoluted and bureaucratic ideas around levies and risk pooling. After all, that is part of what the NHS is for—to pool the risks. Our advice is to keep it simple. We believe that the attempt to define the rules-based system for the NHS was always doomed. The idea that, like a true regulated market, we can set out the rules in primary legislation and contracts and then let the courts decide everything is just plain daft—unless you are a lawyer, of course. They must be salivating at the business coming their way if this Bill becomes an Act in its current form. Does the presence of excessive legality and constant contracting sound familiar? It should, because essentially that is what happens in the United States healthcare system.

We have, like Monitor, suggested that instead, the principles and rules for co-operation and competition—PRCC—that we put in place when we were in government should be left as the basis for the system. We also suggest that the Co-operation and Competition Panel should retain its role of advising on complaints about any breaches of the rules, which was at one time the Government’s position, and it may still be. For us, a defining characteristic is that the pinnacle of such a system is that there is a Secretary of State who sets the framework through the PRCC.

I would like to dispel the myth that Labour is against reform. In 1997, we came in to rescue the NHS after many years of neglect. On everything worth measuring, the NHS of 2010 was far, far better than in 1997. It is only in 2011 that we have seen it start to go backwards again, as waiting times get longer and access is restricted. Our track record on reform is there. Clearly, we did not get everything right, but we learnt. The current Administration have launched the biggest reorganisation of the NHS in its history, despite the promises that they would not and despite all the evidence that reorganisations set the NHS back two to three years, and despite the costs and risks involved—except, of course, that we are not allowed to know exactly what those risks are.

Labour introduced independent regulation of quality to the NHS. We support the continued role for Monitor with regard to foundation trusts, which we put in place. We accept the idea of extending tough financial regulation over all providers in the NHS through the use of a licensing scheme. But we do not accept the handing over of economic regulation of the NHS to a quango. We wish Monitor to retain its powers to oversee foundation trusts, and, like Sir David Nicholson, we see the value in retaining the possibility of de-authorisation of a foundation trust into a safe haven to permit restructuring and reconfiguration. But more on FTs later.

We have never been against the idea of competition. Indeed, we set out the principles and rules basis on which it could operate. We have never been against using the private sector where this adds necessary capacity or provides expertise not available within the NHS. Our experience, good as well as bad, informs our response to the Bill.

There is a place for competition. It is not, and never should be, the main driving force for reform of the NHS. We are against the promotion of competition for its own sake, as this Bill originally intended. We believe the balance between co-operation and competition is a matter for the Secretary of State to determine, in the best interests of patients, not for a quango to determine in the interests of some ideological bias.

Further along in the consideration of our amendments, we set out the process by which major reconfigurations could be proposed, consulted on and determined. We set out for the first time the idea of a rules-based failure regime. We do not see failure as a desirable feature of a market system; we see it as a failure of planning and commissioning and as something to avoid, not welcome. But if all early intervention efforts are insufficient, then an orderly rules-based administration process is necessary, so we set one out.

In all these areas, we do not oppose development of the NHS or reform. We simply fundamentally disagree with the approach being used by this Administration, which is highly disruptive and expensive and takes focus away from the Nicholson challenge. Along with the Liberal Democrats of old, we oppose the change to a regulated market at the expense of democratic control. These are the wrong reforms at the wrong time and, we add, for the wrong reason. Healthcare is not another utility to be regulated and privatised. Our NHS has as its foundation the twin principles of universality and social solidarity. It is not a candidate for conversion into a fully fledged market. We introduced regulation to give the public some independent reassurance. We introduced external assessments of quality in the NHS. The role of the quality regulator, the CQC, is unchanged by the Bill. We support the CQC, but only if it is properly resourced. We set up NICE, which is acknowledged as a world leader in its field. We set up Monitor and we think it is too early to evaluate its success, as the move to an all-FT system has taken far longer than envisaged and proved more complicated than was assumed—a lesson not yet learnt by this Government.

The job is really only half done. What we do know is that there is no miracle transformation tool. The evidence is that foundation trusts do not progress any faster than non-foundation trusts. There is little, if any, evidence that foundation trusts are more innovative, more risk-taking or more competitive than their non-FT colleagues. It is a mix.

Given the more powerful role for Monitor, we are proposing two developments to its governance. It should meet in public, like the NCB will do, and we should end once and for all the farce of shared chair/chief executive posts, which is totally against good practice. After the Mid Staffs issues, further changes to governance for regulators are on the cards. None appears to have come out of such an intense and comprehensive investigation with any credibility. The amendments about accountability are in the third group today.

We brought some forms of competition into the NHS, but we never forgot the overriding duty of co-operation. We understand that competition takes many forms. Some services might be amenable to an any-provider model, although we think that it rarely means any provider, but is more like a range of providers. Anyway, for years we have known that such a model can be considered only if five things exist: the service is easily defined; the service is discrete and not interdependent on other services; it is easy to determine the quality of what is provided; there is good quality comparative information accessible to the consumer; and there is good quality information to allow the right price to be set. So in this category, we might find eyes, teeth, pharmacy and perhaps some cold surgery, but vast tracts of the NHS do not and, we believe, never will fit in to this model.

Where these conditions do not apply, there can still be competition in the market, or even for the market, but only with a lot of downside issues to consider. We need to be clear and honest and say that, at least for the foreseeable future, for a whole swathe of services that are not amenable to any form of competition, why waste limited NHS resources on promoting competition in areas where it will not benefit patients, when those resources would be far better spent on direct patient care in a managed system? Rather than some ideologically inspired imposition of competition for its own sake, why not continue with what we started, allowing the Secretary of State to determine the boundaries for competition after due consultation and deliberation. The idea of a choice mandate is propounded by the Future Forum. The Minister might comment on why this particular offering from the Future Forum was not progressed.

We know of good examples where competition did work for patients in the area of heart surgery. Here, the collection and dissemination of good quality information on outcomes shows wide variation leading to competition between peers, but peer support and exchanges around good practices are the key to clinical changes, and so better outcomes. Equally, we know where clinical quality of better patient outcomes was achieved without any competition, though clinical leadership, strategic planning and co-operation. London’s stroke care improvements are the best argument yet for not having a wholly market-driven system.

The other key confuser here is that choice and competition are not the same thing. For the Government, competition is about choice of providers. For the patient, choice is between treatment options. Yet all the drive in terms of information systems is about league tables of organisational performance, not the key priorities for patients. Many argue for an NHS where patients and their carers are fully engaged in their own care. We know from good evidence that this brings better outcomes. The ideas of co-production are developing and featured in the responses to this Bill, but this is not about competition and choice of provider at all. Increasing competition among providers could have the opposite effect of putting barriers in the way of integrated care as an option for the patient. Reform here is not about markets or competition, but about changing clinical attitudes.

Here again we have another major departure from the ideological approach for pushing competition. For the patient, we know that integration around their needs is desired. For us, integration means bringing services to bear in such a way that it eliminates organisational boundaries, like a single care plan. But the Government see integration in terms of supply chains. We have suggested one form of what integration means for patients in an amendment, and others might do better.

The Government bang on about co-operation and competition not being opposites and use examples of how, within a market, competitors may co-operate on developments, for example in Japan. Again, this misses the point that the NHS is not a set of tradable commodities where it is irrelevant who provides the goods. For us, the key is the patient, not the organisations.

These tensions lie at the heart of our fundamental difference with the coalition Government’s approach. Health is not a commodity to be traded, patients are not consumers and choice is not about shopping. Where we might agree is on the need to continue to collect and use good quality outcome data, not just across organisations but across forms of treatment. We might also agree about the concept of contestability. Those who commission services are spending large sums of public money. We need to ensure that they do this wisely, yet we have a national Commissioning Board commissioning £20 billion of treatment with no obvious accountability and performance-managing itself. We argue that commissioners should be required to demonstrate that they periodically review all the services that they commission and make the results publicly accessible. Indeed, they should involve the public—patients as the users of the service—in the reviews. This is very like the route followed by local authorities and many parts of central government. They embraced contestability rather than simply opening every service to competition. For our crucial public services, this has to be a better and more flexible system. As long as we have commissioners who are properly accountable and the information required to deliver this accountability is in the public domain, we can have robust processes for commissioning and we do not need to make them fear legal action if they fail in some duty to promote competition properly.

I now move to the detail of the amendments in this group. Amendments 260EA and 263 specify that Monitor is to continue as the regulator of NHS foundation trusts. Amendment 261 says,

“The main duty of Monitor is to exercise its functions to support the duties of the Secretary of State”,

to promote a comprehensive health service. It also says that Monitor must protect and preserve the interests of users or potential users of the health service and seek improvement in quality and outcomes.

Amendment 262A adds to the other duties on Monitor the requirement to exercise its functions to promote the provision of a health service that,

“is based on the principles of universality and social solidarity”.

Amendment 265 leaves out the subsection stating that Monitor must exercise its functions with a view to preventing anti-competitive behaviour. We believe that the extent to which competition is appropriate is a matter for the Secretary of State, through regulations or a mandate to the board. Amendment 265ZZA would put Monitor under a duty of co-operation that would entail it promoting efficient and effective co-operation between the providers of healthcare services that further the objective of improving quality and reducing inequality of access and outcomes. The Secretary of State shall publish guidance and may issue regulations relating to this duty of co-operation.

Under Amendment 267, Monitor would have to exercise its function with a view to promoting integration of healthcare, health-related and social care services, not simply enabling it. Clause 61 relates to the power to give Monitor functions relating to adult social care. We would like to explore whether this is a good idea. We are undecided, but in the light of Southern Cross, we would like to ask whether this should be done through a specific Act, not through regulations activated at a later date.

Amendments 270B and 274ZZZA seek to simplify the role of Monitor. We would leave out some of the factors that this clause advises Monitor to have regard to. That is covered by Amendments 261 and 265ZZA. The use of resources promoting investment, research, education and training are not the main point to argue against so many other powers.

Amendment 274ZAB avoids conflicts between functions. Monitor must be set up in two separate parts: one to exercise its functions as a regulator of financial trusts; and the other to exercise its function as the licensor of providers of healthcare services. Amendment 274XAA relates to Monitor having no role in determining prices—an issue that we will be discussing later today. Amendment 277A is a new chapter that reinserts the idea of the pre-eminence of co-operation. It keeps the current system, using the principles and rules of co-operation and competition, to specify which services are to be commissioned through specified forms of competition, the Co-operation and Competition Panel to support the delivery to patients and taxpayers of the benefits of co-operation and, where appropriate, of competition, and to advise the Department of Health and Monitor on potential breaches of the PRCC. Clause stand part debates on Clauses 68 to 70 are to debate the functions referred to Monitor concurrently with the OFT and under the Competition Act 1998 and the Enterprise Act 2002. Amendment 277C would add a safeguard that before Monitor takes any actions under Clauses 68 or 69, it must have regard to the regulations made by the Secretary of State, including the PRCC, consult CCGs and the health and well-being boards, and obtain the consent of the Secretary of State.

Amendment 277D would ensure that in relation to procurement, patient choice and competition, the Secretary of State sets the rules, which will be the PRCC. Regulations dictate that procurement exercises can be undertaken only if the administrative cost of doing so is justified by the anticipated improvement in the service and is affordable, given the resources. Regulations require the board and the CCGs to discharge their functions in a way that would promote co-operation, and regulations shall not allow or require the board or CCGs to replace any existing provider that is delivering services via contract in a form approved by the Secretary of State, unless that contract has been lawfully terminated due to a breach by the provider.

Clauses 72 and 73 refer to Monitor on various powers of investigation, declaration and direction related to procurement, patient choice and competition requirements. We argue that these functions can be left to the existing Co-operation and Competition Panel. On Clause 75, we argue that the Enterprise Act 2002 should not apply to mergers involving FTs. The Co-operation and Competition Panel should apply the PRCC, not the Enterprise Act applying competition law.

On Clause 76 stand part, we argue that a review of competition is unnecessary, especially if there are not equivalent powers to review co-operation and integration. We fear that this provides a disproportionate incentive on Monitor to develop competition. Clauses 77 to 79 all apply to competition law and the role of the Competition Commission. We argue for the Co-operation and Competition Panel and the PRCC rules instead. On Amendment 288EA, guidance published by Monitor relating to its enforcement must include information on the regulations issued by the Secretary of State. Amendment 288GA and Clauses 110 to 112 are about keeping the role of Monitor in relation to authorisation and oversight of foundation trusts the same and are very similar to Amendment 288G, tabled by the Liberal Democrats. We argue that there should be no cut-off date or transition period.

I beg to move.

My Lords, I thought it might be helpful to the Committee if I intervened relatively briefly at this point to put this part of the Bill into context and explain what we are trying to achieve. Part 3 has been much discussed and, I am afraid to say, much misunderstood. It is, in my view, fundamental to the modernisation of the NHS. It is worth restating why that modernisation is so important.

We need to improve health outcomes and we need to increase productivity in the NHS. Achieving both of these is essential if we are to meet the challenges of caring for an ageing population, managing increased prevalence of chronic disease and funding the rising costs of new drugs and other technologies.

Part 3 helps to enable this by establishing a clear and comprehensive legal framework for sector regulation to protect patients’ interests, based on the principles and values enshrined in the NHS constitution. Monitor’s distinctive role would be to secure value for money in the provision of healthcare services, in the interests of patients. Its overarching statutory duty, which is crystal clear in the Bill, is to protect and promote patients’ interests by promoting economy, efficiency and effectiveness in the provision of services while maintaining or improving quality. The key words there are “protect and promote patients’ interests”. This overarching duty would provide Monitor with a clear and enduring purpose. The duty would be the guiding principle for Monitor’s decisions, for example in resolving any conflicts that may arise in the exercise of its functions. For example, if in future Monitor were to have any doubt about a decision, it would come back to that guiding principle. Equally, it will not be open to Monitor to do anything that infringes that principle.

The duty would also provide the basis on which the Secretary of State would hold Monitor to account. Our proposals would establish a comprehensive and coherent framework for sector-specific regulation in the NHS, overseen by Monitor. For the first time, this would be applicable to all providers of NHS services, thereby fully protecting patients’ interests.

The NHS already has a competition policy, and I pay credit to the previous Government for making important advances in this area, such as the Co-operation and Competition Panel, which was described by Ben Bradshaw, who was the Minister at the time, as the NHS’s first ever competition policy. So it was, but the previous Administration took piecemeal steps, which left gaps, confusion and ambiguity. The Bill rectifies that. Under the Bill, Monitor would at the same time continue its role as the specific regulator of foundation trusts.

The noble Earl knows that that part of the Bill does that only for a limited period of time. He also knows that many people involved with foundation trusts think that should be a consistent and ongoing role of Monitor. Have the Government reassessed so that that is a more complete and comprehensive approach for Monitor, signalled clearly in the Bill?

What the noble Baroness says it quite right. It would be open to a future Secretary of State to extend the period under which Monitor retained that role. My purpose at the moment is to set out the Government’s position. I am sure we can come on to debate these things, if the noble Baroness will allow, but it is important for the Committee to have the Government’s prospectus in their minds.

The remit of Monitor would be expanded to cover all NHS-funded healthcare providers. This approach ensures that Monitor and everything that it does is governed by a single, coherent legal framework and that all its functions are bound together by a single, overarching statutory duty—the one that I read out. For that reason, I would counsel noble Lords to resist amendments that may seek to achieve similar aims, but do so by retaining a separate legal framework for regulation of foundation trusts.

Many people have sought to portray the new role for Monitor as some sort of mighty club-wielding behemoth, dictating to commissioners how NHS resources should be spent. This is not the case. Monitor’s role, as set out in Part 3, is intended to support and complement the role of commissioners, as set out in Part 2. Our aim is to empower those commissioners—GPs and other clinicians—to take the lead, arranging access to services to meet their patients’ needs and stimulating innovation and improvement. Commissioners will have various tools at their disposal to do this. They will need to decide how to use co-operation, integration and competition to improve quality or efficiency or reduce inequalities.

In that context, the appropriate role for Monitor would be to support commissioners by enabling integration and where competition is used, ensuring that this operates effectively. Monitor’s role is not—I repeat, not—to impose competition from above. Competition is not now and will not be an end in itself.

Our strategy for improving the provision of NHS services is firmly based on the principle of autonomy and accountability for providers. Building on this, we have proposed functions for Monitor that aim to strengthen incentives for providers to improve, rather than simply relying on the ability for Monitor to set and enforce rules. Promoting competition is part of this, but again the context of promoting is quite different from the idea of driving competition through top-down controls. It will not do that, and it would not be effective even if it did.

What has struck me, looking at these amendments, is that, while there are clear differences between some noble Lords and the Government, I also feel that there is a significant consensus emerging. I want to reiterate that the Government are always willing to listen to how the Bill could be improved. I have listened to the points made by the noble Baroness, Lady Thornton, but I have also studied very closely the amendments tabled by other noble Lords, particularly my noble friends Lady Jolly, Lord Clement-Jones, Lady Williams and Lord Marks, as well as the noble Lord, Lord Whitty and the noble Baroness, Lady Murphy.

I am sympathetic to a number of the concerns raised by noble Lords, which we shall hear about. I would like to highlight four at this point. The first is the Secretary of State’s ability to specify matters that Monitor must take into account. I am sympathetic to noble Lords’ concerns that we should clarify the mechanisms by which this can happen. The second is the conflicts between Monitor’s functions. It has always been our intention that Monitor should take responsibility for making appropriate arrangements within its organisation to avoid potential conflicts. However, I will explore this further with Monitor in time to provide greater clarity and reassurance before Report stage. The third area is failures to co-operate. Again, I am sympathetic to noble Lords’ concerns that Monitor should have the ability to address abuses and protect patients’ interests. We believe that the safeguards in the Bill already achieve this aim, but we will look to ensure that Monitor is properly equipped to enforce this. The final issue is reviews by the Competition Commission, where I sympathise with noble Lords’ concerns that the provisions as drafted may not yet fully reflect the revisions to Monitor’s role that were introduced in response to the NHS Future Forum.

That is all that I propose to say for now. I hope that it has been helpful for me to speak early in this debate to give some additional clarity to the Government’s intentions in this vital area of the Bill.

My Lords, I very much appreciate the opening speeches from both sides on this group of amendments. I particularly recognise that the noble Baroness, Lady Thornton, has put a great deal of care and consideration into the amendments that she has tabled and they represent a huge amount of work, particularly without the benefit of a Bill team. It is also clear from both speeches that now is the moment to start the debate about the application of EU and domestic competition law to the NHS.

The Bill contains a number of measures that could increase competition within the NHS at the expense of collaboration and integration and which, in my view and that of many of my noble friends, increase the risk that UK competition law will apply as if healthcare were a utility like gas or telecoms. Amendment 288G is the first of a number of amendments tabled by me and my noble friends seeking to minimise that risk.

I am not against competition in the NHS—I suspect that very few of us are—but it must be where it is appropriate. It is not appropriate in all circumstances. Public and patient benefit can often be secured in other ways. We have discussed integration of services throughout the Committee as an alternative and as a complement to competition. Having a balance and choosing the appropriate mechanism that is best for patients is what the debate about Monitor’s powers has focused on to date.

I accept that EU competition law has had some application within the health service for some years now. However, along with many others, I do not want to see EU competition law apply universally across the health service so that our commissioners and providers are required to operate a market-based NHS, red in tooth and claw, without being able to choose where it should apply and where it should not. In my view and that of my noble friends, the risk, for reasons that I shall explain, of a number of elements of the Bill being taken together increases the likelihood of NHS services being found by English and EU courts to fall within the scope of UK and EU competition law. These include, first, potential deregulation of FTs from 1 April 2016, in terms of Monitor no longer having the power to set special conditions under Clause 109 for foundation trusts. That is what Amendment 288G is designed to address. The stand part debates for Clauses 110 to 112, which I support, are also relevant.

Secondly, there are so many new areas where the Competition Commission is deployed. There is the role where Monitor has given notice to include a special condition in a licence in determining whether the matters subject to the proposed condition are potentially contrary to the public interest and whether the special condition provides a remedy. That is Clause 99. There is also its role in reviewing the development of competition in the NHS in the provision of healthcare and the exercise by Monitor of its functions in relation to the provision of healthcare services. That is Clause 76. Its role where there are objections in setting the method of setting prices for the national tariff by Monitor is in Clauses 118 onwards. Finally, there is oversight of foundation trust mergers as a result of the application Part 3 of the Enterprise Act.

Thirdly, after the potential deregulation of foundation trusts and the role of the Competition Commission, there is the lifting of the private patient income cap for foundation hospitals, in Clauses 161 and 162, which opens the way for some foundation trusts to derive the majority of their income from private patients. In that context, I am very pleased to see Amendment 299ZA, tabled by the noble Earl.

If EU competition law were to apply in an unrestrained manner across the NHS, private sector companies that bid unsuccessfully for NHS contracts could make a European competition complaint and challenge commissioning decisions in the courts, and/or the status of foundation hospitals, undermining the mainstream of the NHS in the delivery of services such as intensive care units, A&E, emergency cover, teaching, training and research. The number of such complaints across the EU has increased over recent years.

It was, of course, to minimise the risk of the unrestrained application of EU competition rules that the rules of co-operation and competition and the Co-operation and Competition Panel were devised in 2008. But this Bill, on the face of it, goes much further in encouraging competition. There is a view that the incorporation of those rules in statute is yet another reason to believe that the NHS is at risk in this way.

The applicability of domestic and European competition law to an NHS body, whether commissioner or provider, essentially turns on whether it is an undertaking for the purposes of competition law. Only a grievance between undertakings and abuses committed by dominant undertakings are within the scope of the Competition Act 1998 and Articles 101 and 102 of the Treaty on the Functioning of the European Union. There is, in fact, no definition of the term, “undertaking”, in domestic or European legislation, so the scope of the term has been developed and considered through case law of the domestic and European courts.

I do not propose to give your Lordships a legal lecture—I do not believe I would be able to—but briefly, there are two cases in particular that are of some importance. The question of whether an NHS trust is an undertaking for the purposes competition law was considered by the Competition Appeals Tribunal in the case of BetterCare Group Ltd in 2002. BetterCare was a UK provider of residential and nursing home care, which complained to the OFT that the North and West Belfast Health and Social Services Trust, acting as a purchaser of nursing and residential care home services, was abusing its dominant market position in Belfast. The OFT rejected the complaint on the basis that the trust was not an undertaking for the purposes of competition law. On appeal of the OFT’s decision by BetterCare, the Competition Appeals Tribunal determined that the trust was acting as an undertaking both in the purchasing of services from BetterCare and in the direct provision of elderly care by its own statutory home. This was for various reasons, but of particular importance in the current context, is that in providing care through its own homes, the trust was also a participant in a market for residential care, alongside independent providers, and the trust was in a position to generate the effects that the competition rules seek to prevent.

In FENIN, a case brought by an association of companies involved in the marketing of medical goods used in Spanish hospitals, the European Court of First Instance in 2003 upheld a decision by the European Commission rejecting a complaint alleging abuse of a dominant position by 26 bodies or organisations, including three Ministries of the Spanish Government, which run the Spanish national health system. The Commission had rejected the complaint on the grounds that these bodies were not acting as undertakings in their dealings with suppliers. The Court of First Instance considered that where an organisation purchased goods not for the purpose of offering goods and services as part of an economic activity but in order to use them in the context of a different activity, such as one of a purely social nature, it does not act as an undertaking simply because it is a purchaser of those goods.

The complainants appealed the decision to the European Court of Justice, which, in 2006, dismissed the appeal, confirming the view of the Commission and the CFI that a purchasing activity is subject to competition law only if it is undertaken for an economic purpose, such as the supply of goods or services on a market rather than for a purely social purpose. The Commission’s argument, summarised in paragraph 24 of the ECJ judgment and accepted by the court, makes the point that it is the act of placing goods or services on a given market that characterises the concept of economic activity, not purchasing the activity as such.

By the same token, it is generally established that an entity is unlikely to be an undertaking if services are provided on a universal basis on the principle of solidarity—that is, they are funded by the state. However, as the NHS European office itself states, European Court decisions are case-specific. There is uncertainty about how they apply generally.

So it is my contention, precisely in the light of these cases, that if there is no regulation of foundation trusts by Monitor, no special licensing for foundation trusts after 2016, constant involvement of the Competition Commission and no cap on PPI of any kind, foundation trusts will risk falling within the definition of an undertaking for the purposes of domestic and European competition law. NHS trusts may well be acting as an undertaking when carrying out specific functions of a commercial nature.

At the end of the day, the question is whether there is a market for particular healthcare services. There is already a market for private patient services, which is being emphasised and expanded by the provisions of this Bill. Many of us are worried about the future for NHS providers rather than the application of EU competition law to commissioners. We are worried that our local NHS hospital, particularly if it is in London, where already the major trusts compete for private patients, will be chipped away at by private competitors. Markets could be created in a number of different areas of healthcare that it delivers. There is a danger that a hospital trust would increasingly be treated as an undertaking under European competition law across the range of its services, so that unless it competed effectively in those markets, it would no longer be viable as a local NHS facility.

It might be said that this is certainly not the case currently. Only elective surgery is really part of a market. But there is nothing precautionary in the Bill. There is nothing to prevent such a market being created or arising in the future. What is to prevent a future Government deliberately creating a market? Perhaps my noble friend the Minister can tell us. Why have nursing homes, which deliver nursing and social care paid for by public money, become subject to competition law? It is because the previous Government deliberately set out to create a market. The King’s Fund, in an excellent document of November this year, entitled Economic Regulation in Health Care: what can we learn from other regulators?, states:

“The market in health services is heterogeneous. The challenge facing the regulator will be to determine when competition is ‘appropriate’. In health care, as in other sectors, there are some services that are natural monopolies and others where competition may bring benefits. There is almost no evidence to guide this at present, although there are some ideas about how far different sectors in health care lend themselves to competition.

Monitor will need to develop a nuanced approach, balancing its proactive intervention powers to remedy market failures and its concurrent powers with the competition authorities”.

This is very laudable, but all this assumes that Monitor will be able to pick and choose what rules of co-operation and competition to apply. This Bill could open up the NHS to competition in a new and radical way in the future, even if not now. There seems to be little or nothing to prevent that taking place.

I have seen the department’s response to the counsel’s opinion by 38 Degrees, which raises the European competition issue by reference to a number of issues in the Bill that overlap with those that I have raised, and in some cases go beyond them. This does not essentially argue the case, but it simply makes assertions in response. Simple assertions will not suffice. The Department of Health needs to produce independent counsel’s opinion to back up its assertions that the risks have been properly assessed in respect of commissioning and that the contents of the Bill, particularly those areas that I have outlined, do not increase the risk of EU competition law applying, or that it intends to mitigate them by specific amendments. Failing that, on these Benches we will be seeking major changes to the Bill, and I look forward to the reply of my noble friend the Minister.

My Lords, I hope I will not be spending too much time on the excellent argument that we have heard from the noble Lord, who is a lawyer. I agree with everything that he has said, except that I want to draw attention to the absence of detail that, if we do not move now, we will confront when we face regulations on competitive markets and on the whole question of a qualified person.

Let me first say to the Minister that it should be very clear that there is no consensus whatever on this aspect of the Bill. You cannot be aware of the arguments among general practitioners, among surgeons and physicians and within the nursing and midwifery profession and still believe that there is consensus on this question of competition. There is very considerable concern. As to his assertion that all this was fundamental to the modernisation of the NHS, if this is not changed it will be fundamental to the destruction of the NHS.

Let us start with the first issue. We have evidence— like evidence-based medicine—about what unbridled competition does to a national health service. It has been referred to earlier in the debate. I recommend noble Lords to look at the question raised in the article by Colin Pritchard in the Journal of the Royal Society of Medicine this year, comparing health service competition policies in the USA, the UK and 17 western countries between 1979 and 2005. The conclusion is:

“In cost-effective terms, i.e. economic input versus clinical output, the USA healthcare system was one of the least cost-effective in reducing mortality rates whereas the UK was one of the most cost-effective over the period”.

This is not a health service that deserves to be turned upside down and it does not deserve to be exposed to the American healthcare system. I have had 17 years as a non-executive on the board of one of the biggest American healthcare companies, Abbott Laboratories. Many aspects of American medical scientific research are the finest in the world. Many aspects of medical and surgical care in certain specialised hospitals in the United States are undoubtedly the best in the world. There is considerable excellence, but if you look at the system overall there is a deplorable decay in quality of care in some parts of the United States, which would make a third world developed country ashamed. I am not prepared to be borne along by some vague talk of consensus on this Bill. The Bill is hated in many aspects, particularly this aspect, in the National Health Service. The BMA has said that it should be withdrawn and has calculated that it would be less disruptive to withdraw it now than for it to continue.

Let me take up some other aspects. I shall speak to the Amendments 278AA, 278BB and 278BC in my name. Amendment 278BB would insert,

“shall not commission services through competitive markets through a competition-based mechanism”.

“Competitive markets” is a term of art. It has meaning in the world of competition. The requirement to manage competitive markets arises from supra-national legislation, with a detailed regime that must be applied, specified in EU law and reflected in national law. That is an obligation to reflect the EU regime unless some clawback of sovereignty is made.

That is the situation, and it applies right across the board. Mr David Bennett, who is to be the chairman of Monitor, wrote in an article in the Times in February:

“We, in the UK, have done this in other sectors before. We did it in gas, we did it in power, we did it in telecoms … We’ve done it in rail, we’ve done it in water, so there’s actually 20 years of experience in taking monopolistic, monolithic markets and providers and exposing them to economic regulation”.

First of all, I do not concede that the National Health Service is a monopolistic, monolithic market. It is a very interesting fact, which is frequently forgotten, that the GP is an independent contractor, and has been since 1948. Many of the debates in this Chamber focused on this issue. My father was a doctor before the National Health Service. He charged patients because he had to. He hated doing so. But he was adamant that he was not going to go into a National Health Service—which he wanted and which he voted for in 1945—if he had to give up his independent contractor basis. He may have been wrong or he may have been right, but it is a massive difference in how you describe the NHS when you think of these independent contractors who have been there from the start.

There are many other aspects of the hospital basis of the National Health Service, which took on in 1948 the spirit and commitment of voluntary hospitals up and down the country. Their assets were frankly seized by the state, but fortunately a lot of their moral underpinnings and fundamental values were not. It has been one of the triumphs of the National Health Service that it has been able to take some of that voluntary spirit and keep it within the National Health Service. Why was it that for decades, hospital doctors, surgeons and physicians worked very long hours uncomplainingly? What absurdity it is that that has been taken away from them by EU regulations and we have successive Governments who all agree that it is ridiculous nonsense, but they can do nothing about it. We are about to do the same to the whole National Health Service on this EU point. This is not a minor point.

The noble Earl knows that I respect him very greatly as a parliamentarian. He has shown it day after day in the patient way in which he has examined the debates in this House, many of which have not been controversial, but have been informative and intelligent and could make some addition to this Bill. But I am afraid that on the fundamentals he speaks for a department that shows at every serious part of examination of the Bill that it is not prepared to provide us with the true facts. We had this debate about risk assessment. Let me come to the issue about competition. In 2006, a Labour Government commissioned a major study on competition and the effects on the EU. It is a scandal that I have been trying for months through Freedom of Information to get hold of this document so that we would have it before this debate.

I have been obstructed at every turn by the Department of Health. Do not tell me that it wants the facts out here so that we can discuss them and know about this issue. As the noble Lord states, as an experienced lawyer, this is an area of very great complexity and yet we are not allowed to see this study, which we have paid for. It is not the possession of the Government—it was not even commissioned by this Government—but we are not allowed to see it. What is the Freedom of Information Act about? Are you afraid of the facts? Is there something that we cannot be trusted with? We are about to legislate on a very important area, which does have an impact on the EU, and we are deprived of one of the existing studies. So, all of us have had to go around and try to get expertise in this area and it is not easy to do so.

The judgment I get from lawyer after lawyer is that the term “competitive markets” has meaning and substance in the EU. Unless we provide what I call a “French railway” clause, we will be forced by EU legislation. I come back to my earlier quotation that we have done this before in the railway system. Well, the EU has done it on our railway system but it has not done it on the French railway system. The French railway system operates on the basis of a Government who have decided that they are going to be outside EU competition law. I do not know quite how they have done it. I have had a very considerable search through the statute law of the French railway system—it has tested my French language to breaking point—but, with advice from others far more expert than me, I have put together in Amendment 278BC what I call the equivalent of a “French railway” clause. It is not good enough, of that I am quite sure, but I want the Government to focus on this issue. My wording is,

“shall operate in such a way that NHS activities remain wholly within section 1.3b of the General Agreement on Trade and Services, and within the services covered by the Limitations to the Horizontal Commitments contained in the ‘Trade in Services Conditional Offer from the EC and its Member States’ issued from Brussels on 29 April 2003”.

It is quite true that the NHS has not yet come under the full provisions of the European competition and procurement policy. Let us be clear about procurement policy; it is an extremely important aspect of this whole issue. The reason it has not been done is that, despite what a lot of people seem to think, Brussels is not always endlessly trying to pick fights. It knows that we have a National Health Service which is hugely popular and much cherished by the British people and it has not, until recently, even contemplated coming in on the NHS.

I have to admit to a story. During the 1975 referendum I was the Minister for Health and my overall boss was the Secretary of State for Health and Social Security, Barbara Castle. During the referendum she made a speech saying that the NHS was threatened by the Common Market. I walked into her room and said: “Barbara, if you make another speech like that I will make a speech which will oppose every aspect of what you said and the press will say the Health department is totally divided. It will do neither us nor the NHS any good.” She listened very patiently and carefully and never made another speech, but I have to admit I was clearly wrong. The way the EU has evolved in this regard is potentially a threat to the NHS—I must say I am very surprised—but will be only if the Government decide to make it so. It will only be if we do not provide some form of “French railway” clause to ensure that this does not happen to the NHS.

I do not believe that this is actually even a party political issue. We have heard many different voices about the National Health Service in the debates here and, although I disagree with some aspects of what people think is the right way for the NHS to go, I do not detect a great wish to challenge the fundamentals. It is very clear to me, however, that if we set this Bill in motion we will find that that will happen, not because people necessarily want it to happen but because it has to happen. This is why I do not think it is sufficiently understood what this Bill will do.

“Any willing provider” or, as it is now, “any qualified provider”, sounds like a sensible thing. Why was it that the then Secretary of State, Andy Burnham, in possession of the opinion about the EU and its threat to competition policy, changed “any qualified provider” to say that the National Health Service would be the main provider? I believe that if we put that into the Bill, that alone would be our “French railway” clause, as “any qualified provider” and competitive marketing go together. We should preferably deal with both. This is a fundamental question which we must not disregard.

On studying the Bill, there is practically nothing in it about what the regulations are going to contain. We know that there will be regulations, and I do not dissent from the view that that might be a reasonable way of doing things. However, until this matter is resolved in the body of the Bill, we dare not let this issue go off to regulations. I hope that this House, on this issue at least, will be prepared to vote down the present wording. The Bill does not deserve to be submitted to the country and signed by the Queen with this provision unchanged and unchecked.

I feel strongly about the question. I believe that there is a solution, but I think that it is very hard to even begin to find that solution if the Government persist in refusing to let us see the document. I have not seen it. It may be that the document will strengthen their arguments. It may be that it will expose some of our fears as unjustified. But I urge the Minister, whom we respect, to go back to his Secretary of State and say that this document must be published in early January. They may be forced to do so. Judging from the freedom of information documents coming back to me, there is a belief that they ought to ensure that this is published.

At one stage, people did not even know which year it was. It was thought to be about 2007. Now we have at least established that the year was 2006, which is one of the reasons that I had to put in another submission. I do not think that the Government will be taken seriously when we go on to Report if we have not had that document published in time for us to examine it fully and to get other legal advice. Certainly I, for one, would consider it to be an utter disgrace if we go on to Report and vote on this whole issue of competition if the document has not been published.

My Lords, I rise first to express my regrets to the House that, ironically for reasons connected to an NHS commitment, I shall not be able to be present for a lot of our proceedings later on.

Secondly, and related to that commitment, I should declare my interest as chair of the Suffolk Mental Health Partnership NHS Trust Board.

Thirdly, I do not seek, nor am I qualified, to follow the three speeches that have preceded mine: I refer to the detail into which the noble Baroness, Lady Thornton, went, the important legal points of my noble friend Lord Clement-Jones, and the many of the points which the noble Lord, Lord Owen, discussed. I have a good deal of sympathy with many but not all of the points that each of them made and I hope that they will be carefully addressed by the Minister when he comes to wind up. My purpose, however, is rather more limited and pragmatic.

I say to my noble friend the Minister that I would not reject out of hand the interpretation and explanation of context that he gave in the early part of this debate. I think that there are questions that still need to be answered, as has been made clear, but I am prone to give him the benefit of the doubt on the general approach that he outlined.

I particularly welcome—it is very important, given the uncertainties that we all face about the import of this Bill, underlined by the noble Lord, Lord Owen—that my noble friend gave some clear indications of areas where he thought clarification was possible and where he would give serious consideration to some of these amendments. In the light of that, I would be disinclined to try to shoot him down today, but I would not be disinclined to shoot him down—or try to shoot him down, at any rate— if we do not see some changes and improvements related to these concerns before the Report stage.

I would like to make a few pragmatic points. First, we ought to acknowledge that what is in this Bill about Monitor is a lot better than what was the previous legal situation about Monitor, where the Secretary of State had no power to intervene at all. I will come back in a different way in a moment to what Monitor took into account, but we should recognise that there are already some signs—and this relates to my experience—that Monitor has got some of the message that is emerging from this debate. I refer back to my own personal interests and experience. I have been chair of two trusts, which have been through the Monitor process. The first of them—the Royal Brompton and Harefield—did happily become a foundation trust after I had become time expired as its chair. The second one—the one I chair at the moment—was in the process of trying to become a foundation trust at the time. Indeed, I was told when I was recruited for it that my task was to get it to be a foundation trust. For reasons I will not go into, that did not prove possible and we went down a different route. My observation—it is related to my comment just now about Monitor—is that in the intervening period there had been a sharp shift in Monitor’s attitude. When I first embarked on this, there was a clear feeling—Bill Moyes, the previous chairman would not thank me for saying this—that all that mattered was the money. Bill Moyes would have denied that, but I can only tell you that that is what it felt like. Then came Mid-Staffs and the whole situation changed, as I judge it, for the better. Patient safety and quality and all those issues began to be as important, if not more important, than the financial ones—not that the financial ones are unimportant.

At any rate, I come back to the story and the plus point for Monitor. Once we had decided at SMHP that foundation trust status of our own did not look likely, we decided that the best bet was merger with the neighbouring trust, Norfolk and Waveney, because East Anglia is a coherent whole, with all sorts of synergy and the rest of it—I will not go into the arguments. So we set about getting together with them as a joint venture. The rhetoric was merger: the legality was acquisition. They were an FT and we were not— I will come back to that point in a moment as well. I have no way of describing to the House just how difficult that proved and how many obstacles were planted in the way by the process.

We were advised that acquisition was simpler than merger, which is one of the reasons we went for it. I can only say that if the Minister wants to get the many remaining trusts that are not FTs into FT status through mergers, he is going to need to make sure that it can be done more easily than was the case in the one of which I have experience. If acquisitions are easy, mergers must be a nightmare.

We originally wanted to merge last April. We have not yet merged and are now due to merge at the turn of the year, the Secretary of State willing-but I believe he has signed the orders. That is very nearly nine months later than we intended. It has been attended by all sorts of certainty, uncertainties and difficulties for morale and the service. Why? Not because it was not supported by the PCT, the SHA, the department, the two county councils, everybody, but because the Co-operation and Competition Panel issued an adverse report in the early part of the year which threw the whole process back by at last six months and, in my view, was adverse to the interests of patients. That is a tendentious view; they probably would not agree but that is my view. The good point for Monitor, backing up my earlier point, is that almost exactly two months ago Monitor came to a decision, taking account of all the factors, including the opposition of the Co-operation and Competition Panel, and it overruled the panel on the basis that the interests of patients suggested that the merger was sensible and right and should go through. That validates my suggestion that there has already been some learning.

I now come back to my other general points against the background of that experience. The most important point is that we need to be as sure as we can that patient quality and safety is given the real priority it deserves, whatever the detail of this legislation may say. That is nowhere more important than in mental health, where it is so easy to disrupt the care pathway that is now the basic way of approaching the treatment of mentally ill people. I know from my own experience that if you have different bits of care being provided in different ways by different packets of service, there is the risk of disaster if they do not all know what is going on. You need an integrated care pathway to deal successfully with these problems. So, while I have no problem in principle about competition and even less so about choice, I think it is important that where there is any doubt about which factor is going to be paramount, it has to be patient safety and quality not competition that wins the day. I hope that is what I will be hearing in the course of my noble friend’s wind-up. If not, I, along with others, will not hesitate to want to come back to this matter on Report.

My Lords, I rise to speak in support of Amendment 260EA which, as I understand it, seeks to maintain the essentials of the role of Monitor as set out in the 2006 Act. I support the extending of Monitor’s roles beyond those of foundation trusts. However, in response to the argument of the noble Earl, Lord Howe, that we need to change the functions of Monitor in order to achieve cost-effectiveness, improvements in quality and productivity in the years ahead, I would argue that with Monitor as it stands, together with the National Institute for Health and Clinical Excellence and the CQC—a great improvement on its predecessor—we have all the tools we need in the kitbag in order to improve our productivity, quality and cost-effectiveness.

I want to focus on one issue which I believe to be the greatest threat presented by these reforms to the improved quality and cost-effectiveness of the health service. There are two powerful reasons for avoiding the reorganisation of Monitor. The first is that if it ain’t broke don’t fix it. Monitor has been, in my experience, an extremely successful organisation, with one exception to which I will return. The second is that the main new ingredient is, indeed, the promotion of competition that has been addressed so effectively by other noble Lords. Although this will not be based on price, I have absolutely no doubt that it will drive financially driven decision-making.

I want to touch on these two points. Monitor is not broke, as it were. Having been on the receiving end of Monitor’s demanding regime for accreditation as a foundation trust service, I can vouch for the fact that Monitor has been the engine behind the transformation of inefficient organisations, run by boards with weak non-executive directors—who therefore offered very little professional challenge to the executive directors—weak financial systems and weak financial management. That is what we had, and that is what other trusts have had, prior to undergoing the rigorous process driven by Monitor to become foundation trusts. In my case, as chairman, I had no alternative but to get rid of my chief executive officer—no easy task but somehow this process enabled that to happen—and, indeed, to get rid of my non-executive directors. It was as simple as that. The same process continues to take place all over the country. I know this because others tell me. My belief is that we owe to Monitor, more than any other organisation with the possible exception of NICE, the fact that the NHS is now one of the most cost-effective health systems in the world, as the noble Lord, Lord Owen, has said very clearly. We should be proud of that.

At this stage I ought to mention Mid-Staffs, because this is, indeed, the one failure to which people refer. As I understand it, the problem was that Monitor at that stage had no information about quality, and the Healthcare Commission, which at that stage was responsible for quality inspection, did not pass data to Monitor. All those problems have been resolved, and they needed to be, because without the quality information, Monitor was ill-equipped to do the job it had to do.

I come now to my second point, which is about the promotion of money-based competition. I want to emphasise “money-based”, because I support competition, but it must be based on the quality of services to patients. The promotion of money-based competition and private sector provision of health services will be a detrimental and costly experiment. We have only to look to other countries, as the noble Lord, Lord Owen, has said, to realise that this is nothing short of a disastrous route forward. I refer to page 19 of the Department of Health’s document Protecting and Promoting Patients’ Interests: The Role of Sector Regulation. It states:

“Regulation and competition will always play an important role”.

I know that the word “competition” here means money-based competition: not price-based, but financially based or commercially based. It goes on to say that Monitor will,

“provide a fair playing field for all, regardless of ownership”.

I understand that the existing foundation trusts will remain as they are as long as they remain solvent. The document refers to patients wanting more choice. As we know, we can get any answer we want from surveys, as long as we ask the right questions. No patient would want more choice if they were aware of the costs and the appalling consequences of the dominance of the money motive in a commercial system. Patients want choice within the systems that we currently have.

I will not focus on the US, because we know that with health costs soaring towards 20 per cent of GDP and 30 million people excluded from remotely satisfactory health care, this cannot be a model to follow. However, Germany is held up as a good example of a health system which has worked with more competition in the system for a long time. I will start with an anecdote. A German orthopaedic surgeon we met on holiday a few years ago happily referred to the fact that he and his colleagues regularly undertake unnecessary operations if they are short of work. What was remarkable was that he seemed completely unembarrassed that this should be the case and that he should admit such a terrible thing to somebody who is used to working in a country with a national health service. It seemed completely normal; it clearly is.

I want to make available to your Lordships the more considered experience of one of the German consultants, Professor Priebe, who worked as a clinician in Germany for 17 years before emigrating—utterly disgusted with the German system—to the UK to work in the National Health Service. He gave me his comments and pleaded with me to make them available to the Government, because he is so alarmed at the thought that he escaped the German system to come over here only to be followed by something rather similar. I will try and draw on his comments as quickly as I reasonably can.

In Germany, the contractual agreement between commissioners and provider organisations define the funding arrangements. Clinical decisions are then strongly influenced by financial incentives. Computer-based algorithms have been developed to guide doctors on what diagnostic interventions and medical treatments patients should receive in order to maximise the income for the provider organisations. These algorithms consider the characteristics of the given patient as well as the characteristics of the broad category of patients with that particular diagnosis in order that the doctor achieves the,

“most profitable average treatment costs across a diagnostic group of patients”.

Is that really what we want in our country?

In Germany, evidence-based medicine and the interest of patients are much less important. In the UK in recent years, the emphasis has been more and more on evidence-based medicine; that is based, of course, on the professional work of NICE, which I have already referred to. If the drive towards competition threatens this ethos, Britain will lose something extremely precious. Competition not only reduce the flexibility needed to provide individualised effective care, but also requires ever-increasing documentation. Ministers often refer to the bureaucracy of the National Health Service, but if they had the experiences of the bureaucracies of other systems, they might be slightly less critical.

This documentation is supposed to ensure that clinicians can demonstrate that these income-generating interventions have indeed been provided. Commissioners mistrust the providers and require more controls and ever more documentation as well. This waste and inefficiency inevitably drives up costs.

Financial incentives and competition encourage commissioners to accept less costly patients. The providers are inclined to do the same. Here is another major fault in the system. As a result, patients with severe and chronic disorders become disadvantaged. It is no accident that mental health services are relatively well funded in this country, when compared to these competition-based systems, though I should emphasise that even in the UK, mental health remains the Cinderella of the health service.

Financial incentives also lead to the prescription of useless treatments—my anecdote makes the point—and the over-provision of services. Apparently, this is widely known across the German system. The providers then argue for the funding for all these unnecessary operations and superfluous services.

Competition and fragmentation of local service systems create the need for more referrals and associated paperwork and further increased costs. There are multitudes of downsides from these financially driven systems. Our consultant concludes that,

“most of these downsides of a more market orientated system appear to be intrinsically linked to the promotion of competition in health care and to having a system based on independently negotiated contracts rather than one controlled by agencies that are directly accountable to the public”.

In this country, we know from other sectors that markets do not work. The name Jarvis will mean something. Jarvis was, of course, the private maintenance company for the rail companies. Jarvis was found negligent following various rail disasters and, of course, Jarvis no longer exists.

Do we really want to generate these risks of negligence in the health sector? Surely not. I realise that at this point in time, the plan is not to go all the way down the rail route, but the direction of travel is extremely clear and I have no doubt that that is where we shall arrive unless there are safeguards within this Bill to prevent it. Some may point to the apparent savings achieved by fundholder GP practices. The evaluators apparently found, however, that GPs bumped up their prescription costs immediately before becoming fundholders by going to special drugs only to return to generic prescribing once they became GP fundholders.

These are the sorts of games that people play when driven by financial incentives. The OECD makes clear in its recent report that the evidence simply is not there that markets work in the health field. To briefly mention the US, they have extraordinarily low bed occupancy compared with the UK. Why? Because they need lots of beds to be available in order to deal with competition. It is not clear how many patients are actually going to come to them at any point in time, so there is excess supply driven into the system.

In conclusion, the NHS already has very strong competition, but of an entirely healthy variety. I strongly support this. We need competition. We like it as human beings. At the East London NHS Foundation Trust, we pore over the benchmarking information from Monitor and the CQC—I was doing so yesterday, as it happens. We are very concerned about how we are doing and the quality of our services relative to our competitors around London.

I am not against competition but I am against financial competition. I appeal to the Minister, even at this very late stage, to do all that he can to preserve the public service ethos and the healthy competition that we already have, and to avoid at all costs the deeply unpleasant results of replacing competition based upon the best possible care of patients with the money motive.

My Lords, I would like to make a very few remarks on competition versus co-operation from a clinical rather than a legal position, as I am baffled by the complex legality of the amendments on Monitor.

As the noble Earl knows, like many others I have always had concerns about the wisdom of introducing market competition into healthcare. Co-operation and collaboration between providers should always be the norm for the benefit of patients and, as the noble Baroness, Lady Meacher, has just said, it is much less costly. However, it is good to know that competition is now to be on quality and not on price. This removes, theoretically at least, the race to the bottom which has been shown to result in worse outcomes in a number of studies, particularly, as other noble Lords have pointed out, in the United States.

Recently there have been three studies in the UK on competition in healthcare, of which that by Zack Cooper and colleagues at the LSE, looking at hospital data covering 400,000 admissions from 2003 to 2008, is the largest and the best known. They claim to show that competition on quality can improve the outcome for patients with a myocardial infarction or coronary thrombosis. Although carefully conducted, and allowing for many variables, the paper has been criticised by statisticians for the elementary but common scientific mistake of equating correlation with causation.

The mortality rate certainly did fall in the hospitals deemed to have been involved in choice and competition. They were deemed to be such because they were close to other comparable hospitals, mostly in urban areas. The researchers were unable to measure competition as such, which of course is a weakness of the study. The mortality rates in these hospitals were compared to those in hospitals outside these areas with more scattered populations who were likely to have less choice and to use only one hospital. However, differences in the mortality rate could have been due to a number of clinical and diagnostic factors, unconnected to competition, which applied more to the urban than the provincial hospitals. For instance, the urban areas were more likely to contain teaching hospitals, which often lead on the introduction of new treatments.

Another report deemed to show that competition is beneficial was commissioned by the Royal College of Surgeons. It showed that outcomes for elective surgery at independent sector treatment centres were better than those for similar procedures carried out in National Health Service hospitals that also offered emergency care. This is not surprising, for several reasons. The patients at the ISTCs were younger and in better general health; they came from more affluent areas; and they were less likely to have co-morbidities. Therefore, the surgeons at the ISTCs had a more straightforward task and by concentrating on a few surgical procedures may have become more skilled in that limited area.

There is nothing to stop National Health Service hospitals setting up dedicated wards and teams to concentrate on routine operations, with doctors working in those sections being protected from being diverted to treat more urgent or seriously ill emergency cases. A number of National Health Service hospitals have done this quite successfully, providing treatments at a lower cost than those commissioned from the private sector. Two years ago ISTCs received some 11 per cent more remuneration than the National Health Service for doing the same work. Of course I am aware that the National Health Service sometimes needs the private sector to clear a backlog. However, this should be temporary, if only for economic reasons. As many other noble Lords said, competition is welcome and necessary within the National Health Service but should be between hospitals, clinicians and other providers vying to be judged the best. In most cases there is only a temporary need to use commercial, competitive providers. I hope that these general remarks have helped the debate.

My Lords, I will intervene only briefly because most of the points on competition were made very eloquently, in particular by the noble Lords, Lord Clement-Jones and Lord Owen. My amendments would rather more crudely delete references to anti-competitive behaviour. One thing I will draw to the Committee's attention is that the terminology maximises the chances of this going wrong. The earlier version of the Bill referred to “promoting competition”—in other words, encouraging more providers—which was a relatively benign intervention if one believes that that is the way to go. By referring to “preventing anti-competitive behaviour” we are turning Monitor from being an accreditor and promoter of more providers to being the policeman of the nascent market. That will put it in a very vulnerable position.

All competition and sector regulators that have this duty are inevitably faced with appeals, complaints and other interventions by unsuccessful providers or potential providers, which go through a quasi-legal process with the regulator. The Bill provides that if that is not acceptable, the issue may go to the competition authorities, which rely on the general principles of competition and also—as the noble Lord, Lord Owen, eloquently underlined—of procurement law. Therefore, in almost every case of commissioning the allocation of the contract will be opened to appeal on the grounds that it overrides competition. However, as noble Lords said, there are hundreds of thousands of situations where collaboration and integration, vertically and horizontally, and even mergers between providers, would be in the interests of patients. The Minister said that clearly in all cases the interests of patients were the most important issue. Indeed, the very useful document describing Monitor’s role states that the regulations would help ensure that competition is not applied inappropriately, and only ever in the interests of patients. Well, that is what we would all wish to see. I certainly would not wish to deny Monitor the ability to encourage competition, but if there is an appeal against a particular award by a particular commissioning body, Monitor and the higher courts have to be in a position of judging whether or not the award was in the interests of patients. That seems a severe restriction on the ability of Monitor to provide its general services because it will be engaged in all these cases of complaint and appeal.

There are things that would fit in with the Government’s overall philosophy— which in this area I do not happen to share—but that would not open the door to such a multitude of appeals and to the wider application, referred to by other noble Lords, of both general EU and UK competition and procurement law, which would tie large parts of the National Health Service up in knots.

My Lords, Amendment 278BA in my name will appear later this afternoon under Clause 71. In view of the discussion so far, however, I think it appropriate that I make my comments now.

This is a probing amendment on which I hope the Minister will be able to provide some clarification. The amendment seeks to address the maintenance of quality standards across all qualified providers, be they NHS, private or the voluntary sector, in three key areas. We have heard mention already today about “any qualified provider” and this is the area on I wish to spend some time. One of the current issues with private sector contracts is that when serious complications arise, requiring intensive care facilities, the patients invariably end up in the NHS. Continuation of care is essential in all areas but it is particularly important in the area of surgery. The experience of the independent sector treatment centres in the NHS, mentioned by the noble Lord, Lord Rea, and others, has not always been a happy one for the medical profession. If the noble Lord, Lord Warner, who has championed their introduction, was here he would have taken some comfort from the recent report that the noble Lord, Lord Rea, referred to.

When I was president of the Royal College of Surgeons I actually instituted a national audit to compare outcomes of care between the NHS treatment centres and the NHS. The Patient Outcomes in Surgery audit was launched in 2007 by the Royal College of Surgeons and the London School of Hygiene and Tropical Medicine. I said at the time:

“This Audit will provide solid evidence as to whether patient outcomes differ between the ISTCs and the NHS. It is imperative that patients receive a sustained, safe and quality service, which is consistent”—

and that is the point, consistent—

“across surgical providers”.

The outcome of the audit, published this October, analysed four operations: hip and knee replacements, hernia and varicose vein surgery across both provider types. It found that the outcomes from the ISTCs were equal to or generally better than the NHS where both elective and emergency patients were treated. Again, the noble Lord, Lord Rea, made the point that the NHS deals with emergency patients as well. The report highlighted the fact that the patients treated in these centres were younger, fitter, healthier and less likely to have co-morbidities than their NHS counterparts, making them a lower risk for complications.

Jan vanderMeulen, professor of clinical epidemiology at the London School of Hygiene and Tropical Medicine, points out:

“Independent sector treatment centres treat only non-emergency cases. The separation of elective surgical care from emergency services is likely to have a positive impact on the quality of care, irrespective of whether the elective surgery is carried out by a private company or the NHS”.

This is something that I believe passionately: the exercise of the ISTCs has demonstrated that if we separate functionally elective from emergency care, we will improve the quality of care for patients, irrespective of whether that is done in the private sector or within the NHS.

There is a downside, however, and this was pointed out by Professor Norman Williams, current president of the Royal College of Surgeons, when he warned,

“we need to guard against any drift that could destabilise hospitals. Sicker patients have needs that only a comprehensive hospital can provide”.

There is a danger that if you move a lot of care over to ISTCs and so on you may destabilise the acute services in the NHS.

Any qualified provider offering a surgical service must adhere to and abide by the same standards as NHS providers. We called for a level playing field in 2007 with respect to ISTCs and it is interesting to note that the noble Lord, Lord Hunt of Kings Heath, who is not in his seat, said in a speech to the NHS Confederation in March 2007:

“We want an even playing field between the NHS and the independent sector. Patients, wherever they are treated, should be assured that the regulation is consistent”.

I would echo the words of the noble Lord and ask the Minister to reassure us that there will be a level playing field, not the inequalities which led the Health Select Committee to report on 13 July 2006 that the first wave of ISTCs cost 11 per cent more on average than the equivalent NHS cost and that some ISTCs delivered only 50 per cent of the cases they were contracted to treat. I believe the tariff would address this but I seek assurances none the less. We wish to see the end of cherry-picking and spot-purchasing and a return to a level playing field for all providers. This Bill will help to cement the role of the private sector in surgery but there needs to be regulation by Monitor to ensure that private providers deal with their own complications and do not become a burden on the NHS. The provisions that have been put in place, such as the requirement to treat patients within 30 days of discharge, are a way forward but do not complete the picture.

The second area relates to the NHS Outcomes Framework 2011-12 which aims to provide a national-level overview of how well the NHS is performing and to act as a catalyst for driving quality improvement and outcome measurements, some of which I have already referred to in relation to the Patient Outcomes in Surgery audit. Quality standards set by NICE will drive the initiative and must be met by all providers, including the private sector and any qualified providers. This is what I assumed the “qualified” part meant. Originally we talked about any “willing” provider and we now refer to “qualified”. As I said, the use of indicators such as the emergency readmission within 28 days of discharge, while an important first step, does not capture non-acute complications like failed hip or knee replacement operations which will require revision surgery. Monitor must have the ability to ensure that all qualified providers adhere to the NHS outcomes framework and this amendment would make that possible. If all qualified providers are required to strive for the goals set out in the outcomes framework, the health of the nation will be improved and this will undoubtedly meet one of the ultimate goals of this Bill.

We discussed education and training earlier so I will not go into that in detail. However, it is important to point out that the first wave of ISTCs was contracted without any need to include education and training. Efforts were made to introduce education and training in the second wave of ISTC contracts but I have no evidence that this actually took place. In the private sector this was not an issue when private beds were within the NHS. Junior doctors used to work in private hospitals providing night cover and receiving some training during the day. These arrangements have more or less ceased and there is no structure for formal training in private hospitals, unlike the structures in some hospitals in the United States. As more and more procedures are done in the private sector—currently an estimated 7 per cent of all elective referrals—trainees are losing the valuable opportunity to observe the many different types of procedures and surgery in hospitals. Monitor must be given the power to correct what has been a training deficit by requiring all providers to have a contractual commitment to education and training and to deliver the standards and outcomes agreed and published by the profession. The royal medical colleges stand ready to undertake the quality assurance of training which, in the case of surgery, can only be done by those who have front-line experience in the speciality in question

The Prime Minister’s speech last Monday introducing a strategy for UK life sciences highlighted once again the importance and value of translational research and the need to get innovation to the bedside as quickly as possible. The £180 million catalyst fund will help to move medical innovation closer to patients and my amendment would allow Monitor to regulate to encourage all providers to engage and participate in research.

The need for equity between the private sector providers and the NHS is pressing. There needs to be a mechanism in place to ensure that any qualified provider, irrespective of the sector, is held to account using the same standards in regards to professional guidelines, education and training, research and the NHS outcomes framework. Amendment 278BA seeks to address this issue and foster debate among noble Lords. I very much hope that the Minister will address some of these points in his response.

My Lords, I have listened very carefully to the debate. I think that it has been one of the best that we have had. I pay tribute to those who have taken part, and especially to the Opposition, for introducing it so fully.

I, too, have been connected with the health service since 1948. Like the father of my noble friend Lord Owen, my father was a GP. This resonates with what the noble Lord was saying about paying for services. My brother is a consultant and I work daily with the NHS—rather, I wish that it was daily. I run my own business, and, sadly, it is not quite daily. However, I want to declare that I run Cumberlege Connections, and that we do not provide any patient services to the NHS. We provide training for doctors, nurses and those working in the service.

Reading the evidence that has come forward from the King’s Fund, from the Nuffield Trust and from other bodies, nearly all of them have said that the NHS needs to improve. Looking at the research, I think that is absolutely true. We have to look forward: the NHS is facing enormous challenges. Our population is changing; it is getting more diverse, as well as growing older. The NHS needs to innovate and adapt to meet the new expectations of patients.

I have had treatment over the past two years in hospitals and have been very interested in how care was given. However, patients have had to sit in out-patient departments, queuing as my mother used to queue just after the war, when there was rationing. Sir Muir Gray, a very respected member of the medical profession, has said that the out-patient department is a relic of the 19th century. So we have to change. I think of banking—perhaps that is not a very good example at the moment. However, at one time we used to have to queue to get our money at a counter. Then the banks introduced a hole in the wall. I remember Barclays saying, “Our customers are much too important to have to go to the impersonal ‘hole in the wall’; we are going to give them personal service at the counter”. No—the public wanted cash quickly, and they went to the hole in the wall. Now we can do our banking in our sitting rooms. The world is changing so fast, and the NHS cannot be stuck in aspic. We really must move on.

I am, therefore, very interested in the debate and the question of choice. One of your Lordships said the NHS was not a shopping spree, or something like that. However, there is a huge amount of competition within the NHS. Would-be doctors compete for medical schools, for a start. Actual doctors compete for the very best jobs in the NHS. NHS hospitals compete with private practice for consultants’ time and compete with non-healthcare employers to retain nurses. GPs have been partly competing for NHS patients since 1948; so have hospitals since 1991. Companies compete to provide the NHS with new medicines and diagnostics. NHS researchers compete for grants. The NHS competes with schools, prisons and the Armed Forces for public funding. So competition in the NHS is both long-standing and inevitable. It involves not a yes/no ideological choice, but pragmatic and nuanced judgments about how, not whether, to make use of it. Competition gives NHS patients choice. The phrase, “I want a good local hospital” is a familiar refrain, just like the desire for good local schools and shops. Yet the very fact of choice and its implicit challenge, as we have seen in the previous Government’s introduction of independent sector treatment centres, actually shakes up the NHS providers. It is the grit in the oyster that helps to create a better service with higher standards.

Looking at choice and Protecting and Promoting Patients’ Interests, which has been produced by the Department of Health on the role of sector regulation, it was interesting that 81 per cent of respondents wanted more choice in where they are treated; 79 per cent wanted more choice in how they are treated; 75 per cent wanted a choice of hospital consultant in charge of their care; and 75 per cent of respondents wanted a choice of which hospital consultant is in charge of their children’s care. Women and older people, in particular, want to see more patient choice in the NHS. Nine out of 10 people over the age of 55 want to have a greater say in how and where they are treated. So we know that people want more choice, and that choice can go beyond the NHS and into the independent sector; we have got good examples of where that is happening successfully.

It is important that we go with the Government on expanding the opportunities for people to choose the care that they want and where they want it, but we know that if it is going to work well we need a robust economic regulator. That is absolutely essential. That regulator needs to support plurality of provision for NHS patients. In the Bill, we see that Monitor will ensure that tendering to provide services to NHS patients is not unfairly rigged—that is really important; that cost does not take precedence over quality, as has already been said; that the tariff is set independently of politicians in Whitehall, and we do want a very independent regulator; that essential NHS services of patients are protected; and that patient choice is unrestricted without destabilising the NHS. That is what we should be aiming for.

I am grateful to my noble friend for clarifying some of these issues in his opening speech. We have seen problems. We have seen spot-purchasing; that has got to go. We have seen cherry-picking; that has got to go. We have seen a race to the bottom on price; that has got to go.

There is huge merit in the Bill. I see the creation of an independent sector regulator as one of the great benefits in the Bill, which will facilitate the development of a forward-looking NHS that can undertake efficient investment and support sustainable growth. It is right that the Government should set the framework—that is what we are proposing in the Bill—and it is right that the Government should retain oversight of Monitor as it does of other sector regulators.

I had a very interesting conversation with the regulator for the railways. It is interesting how she is managing that business. Many of us will know Anna Walker, who used to be the chief executive of the Healthcare Commission, and have seen her go from one regulator into another, and how she is managing that. There are some good parallels that we can learn from. Looking at telecoms, there was no intention that BT should remain a monopoly, or that it should go. It is still with us, but it gave other people choice, working through a good regulator.

I am very much in favour of what has been proposed. It moves the health service into this century, because a lot of it is still in the last. It will offer patients and the public a far better service than we have now.

My Lords, I want to ask the Minister questions, although the debate tempts me into other things. I will start with the other things.

I found the debate fascinating. I have also found some of the re-writing of history fascinating. The previous Government introduced competition, and I am very proud of what the previous Government did in rescuing the health service, as my noble friend on the Front Bench said. The reality is that when we introduced ISTCs there was no pricing in the National Health Service. There were no tariffs. Nobody knew what it cost. The amount of money that the private sector charged was substantially reduced because we put a charge on it, but we had to do something to create the market. I have been extremely frustrated by the Minister saying, again and again, that we introduced preference for the private sector. We were taking the very first steps to introduce architecture which could allow the comparison that he now makes in order to get to a level playing field. However, there was nothing there that would have allowed the previous Government to introduce the architecture of a level playing field from the beginning. I remember discussions at the time with organisations such as Bupa which were really concerned that we were bringing down the amount that the NHS would pay them per patient once we introduced tariffs and pricing.

That was a significant development. It then allowed other developments to take place. Yes, it has allowed the Government to take a comprehensive look at all of this, although, as we have been reminded on occasion, the Government did not need ideologically to say that they had to completely open things up. The Government have admitted that 90 per cent of what they wanted to do could have been done without this legislation. I now suspect that the Government wish that they had never embarked on this in the way that they have done. It has actually meant that most people out there think that, following the pause, there will be no competition. Some of them will be surprised by the debate that we have been having today and, indeed, the debate that we had a couple of weeks ago.

The introduction of foundation trusts was very significant and a real revolution. It said that you had to take control in your own area and be responsible for how you were organising hospital services. That principle is very important. Given the changes that the Government are making in allowing the Secretary of State to intervene in the way that the noble Lord, Lord Newton, described earlier, can the Minister assure me that that will not mean that the Government will be tempted to, for example, raid the successful FTs to ensure that they cover up with sticking plaster those which are not succeeding and therefore not take the difficult decisions?

We are having the debate while, outside, there have been significant reports from the King’s Fund and comments from my noble friend Lord Darzi about the challenges in London. Those challenges will demand that the Government recognise that you cannot have comprehensive healthcare that works effectively, let alone efficiently, on every street corner. There will have to be places that specialise in hips and knees. The noble Lord, Lord Ribeiro, talked of the efficiency of ISTCs. Although it is within an NHS hospital, there is what is essentially an ISTC in Epsom. The hospital, from what I read, may be having problems generally, but its unit that just does hips and knees is now the most efficient in Europe, if not the world. It has done incredible things to make it so, such as buying a taxi firm so that it can ensure that it gets people there and so does not lose any slots. That, of course, helps with efficiency.

We are going to face very different challenges and the Government have to be careful that they do not introduce architecture that institutionalises the superiority of hospitals. One of my concerns about our discussion is that sometimes we reinforce the centrality of hospitals in the modern healthcare system when we should not. We ought to be embedding the centrality of the patient pathway, which is much more about the patient’s experience before they go to hospital and after they leave hospital than the period—I hope it will be shorter and shorter—that they are actually in hospital. That is where competition will play an increasingly important part. There has to be some sort of regulation of other providers but it has to be done in a way that does not reinforce hospitals. This has been the experience of Monitor to date, so is it going to be most effective to have it regulating other bits of the architecture? There needs to be regulation of the private sector and of the voluntary sector that are providing pieces of patient care. How do we do that in a way that does not reinforce hospital care?

I have been fascinated by today’s discussion of the European Union and whether the NHS will be subject to the competition law. I remember very well, as Housing and Regeneration Minister, trying to negotiate with Mario Monti, who simply did not understand that we would frequently want to give support from the public sector, but to have that matched from the private sector. That was seen as anti-competitive and a real problem. I do not want the NHS to get involved in that architecture. I would love the Minister to comment on what his colleague Simon Burns said in the Commons. Mr Burns agreed that the application of EU competition law was inevitable but also desirable. Does the noble Earl concur with his friend in the Commons?

I have also been fascinated by the discussion around how competition is to be measured and the fact that we are now going to measure competition on quality as well as price. Ideologically I support that absolutely, but I am not sure how you do it, and I want to know how the Minister intends that to happen. What is it that will be measured so that, at a local level, proper decisions that are not contestable in court are made around the wording currently in the Bill? We all want to get there but the reality is that it is very difficult to find an objective measure that will be clear about the quality of patient care. We have a long way to go in terms of getting an architecture that will deliver the health service that the majority of people want to see where the patient is at the centre of every decision. I have been impressed with the foundation trust board that I have joined in Durham and Darlington. The businessmen on the board are saying that if you get patient care right, the financial decisions will become much easier and more straightforward. I believe that but we have to be able to get there. The real problem is that the Government have got so many things confused that people out there do not see it as simple. They see it as a confused and muddled agenda that has objectives which do not look for a patient pathway that is clear and open to the patient, with the patient getting a hold of how they can be more in control of that pathway. That is where we all want to get to. I am just not sure that the Government have got us there.

Does the noble Baroness agree with me about the pricing of ISTCs? As a surgeon I had a perfectly good idea of the cost of operations in the private sector because I did private work. I also had a reasonable idea of how much it cost in the NHS. One of the principal reasons why the Labour Government introduced ISTCs was to act as the grit in the oyster to challenge the NHS to reduce its costs and to improve the quality of its care. The issue was not just that the Government did not know what the actual price was going to be.

It certainly was not. I do not believe that the previous Government ever acted just on price, despite what the Minister keeps alleging. The noble Lord might have known what the price was but the price in his hospital was very different from the price in another hospital. One of the problems was that there was massive inconsistency across the health service, and that was being addressed. The Government were also challenging everyone involved in healthcare to be honest about what they were doing and to put patients at the centre, making sure that they got treated more quickly—a very important issue for us and our commitment to the public—and as fairly and as well as possible. We were able to get more consistency by driving through a price mechanism.

Is it not the case that procedures can be more easily and more cheaply carried out in the private sector in many instances than in the National Health Service because the costs in the National Health Service must take into account all the other responsibilities of the NHS, including responsibilities for education and training and many other things in which the private sector is not at present involved?

My Lords, I thank all noble Lords who have contributed to what has been a first-class debate. While I will not repeat what I said earlier, the value of this summing up will be in me responding to some of the specific questions and points that have been raised by noble Lords.

The debate has demonstrated broad agreement, if I am not putting words into noble Lords’ mouths—no doubt they will tell me if I am—that competition, when used appropriately, has an important role to play in realising what we all want to see in the NHS. It should be a means of improving the quality of care and productivity in the health service, and of improving patient choice, including choice of treatment. I would like to believe, from what noble Lords have said, that there is no disagreement about that as a general principle. It is consistent with the policies of the previous Government, reflected in published statements on behalf of all the main political parties over the years.

A further area of potential consensus appears to be on the merits of sector-specific regulation that is applicable to both commissioners and providers, with the starting point being the existing principles and rules for co-operation and competition in the NHS, as the noble Baroness, Lady Thornton, made clear.

Speeches from several noble Lords demonstrated the concern that competition law should never be applied to the NHS. The noble Lord, Lord Owen, in particular, expressed that view very forcibly. However, that is not in the gift of the Bill. The Bill provides for Monitor to consider cases of potential breaches of the Competition Act 1998, to undertake market studies and to determine where and when matters should be referred to the Competition Commission for investigation under the Enterprise Act 2002. Establishing concurrent powers for Monitor would not extend the scope of competition law or its applicability to the NHS.

If that is the case, why do 20 clauses in this part of the Bill refer explicitly to the Competition Commission and the panoply of competition law? Should they not be there?

They are there because this is the first time that any Government have attempted to bring together under one umbrella the disparate parts of our existing system for regulating and controlling competition. As I said earlier, we have that system in skeletal form, but there are lots of gaps and inconsistencies. By bringing them under one umbrella, as this Bill does—I am afraid that it inevitably occupies a goodly number of clauses—we will have a coherent system of regulation for the future.

Establishing concurrent powers for Monitor would not extend the scope of competition law or its applicability to the NHS; that is an important point for noble Lords to appreciate. Why have a sector-specific regulator? For me, the reason is that, instead of such matters being reserved for the Office of Fair Trading, Monitor will be able to lead on these issues in its capacity as a regulator with statutory duties to protect and promote patients’ interests and to enable integration, and as a body with much greater knowledge and expertise of healthcare compared with the Office of Fair Trading. That would include, for example, where arrangements such as clinical networks, which may restrict competition, deliver overriding benefits to patients. Just because there is no competition, that does not mean that the behaviour in question is anti-competitive.

That view was forcibly brought out by the NHS Future Forum. As I have said, competition is just one of the tools available to the commissioner in securing access and improving services, and it will be the commissioner, not Monitor, who will decide where and how to use it. That is not new. The use of competition—for example, through competitive tendering—is already well established in the NHS. A range of providers—NHS, voluntary, and independent—are contributing to improving services for patients.

Of course I understand the passion with which the noble Lord, Lord Owen, spoke; my concern is that his amendments would remove from the Bill a protection for patients in relation to the actions of commissioners. That is very important; if the noble Lord’s amendments were accepted we would have commissioners taking decisions that were not overseen or checked in any way, which would be very dangerous. It would also be a backwards step from the existing principles and rules that apply to primary care trusts and that were introduced by the previous Government. The noble Lord, Lord Owen, said very interestingly that according to his research the French railway system is not subject to EU competition law. I defer to his knowledge of French railway legislation but, as is made clear in the OFT’s recent guidance, the issue of whether competition law applies requires an analysis of the activity in question. To insert a clause into the Bill just to say that EU competition law shall not apply to the NHS would not achieve that aim. EU competition law is a fact, so we have to ensure that the system that we put in place protects patients against breaches of the law and that when breaches do occur they are remedied effectively.

What about the issue of letting the House have the information that was produced for the previous Government before they came forward with their proposals? Is he prepared at least to look at that question, which is currently before the Information Commissioner?

I shall indeed look very willingly at that question and I am grateful to the noble Lord for raising it. Although I might not appear to be at times, I am very keen to be as open as possible about as much as possible. Whatever I can do to facilitate this I will, although it is not a matter that I have been directly involved in.

Can I take the Minister back to the all-important matter of Monitor? I think he said this morning that he recognised that there were potential conflicts of interest in Monitor’s role. Monitor will continue to have its role of oversight over foundation trusts until 2016. The Minister has said today that that can be continued beyond 2016. Monitor will now be given responsibility for competition policy: in other words, for all the supply side, whether private sector, independent, or foundation trust. Is there not a conflict with Monitor having this responsibility for foundation trusts and then being responsible for the oversight of the rules of competition and the supply side? Monitor will also be responsible for oversight on the other side: the commissioning and customer side. Is this not an intensely problematic situation, and will the Minister say how he intends to resolve these issues?

My Lords, the noble Lord, not for the first time, is ahead of me. It is no accident that we have a group of amendments that deals with potential conflicts and how these are to be resolved. It might be better, if the noble Lord agrees, to wait an hour or two until we reach those amendments.

My noble friend Lord Newton indicated from his own personal experience that mergers, when they occur, are far too bureaucratic. I fully agree with him. The Department of Health, the Co-operation Competition Panel and, if it involves a foundation trust, Monitor, all currently play a role and may have conflicting views which lead to uncertainty and delay. Our proposals would create a simpler and much more streamlined process for the NHS.

My noble friend indicated his strong view that safety and quality—not competition—should be paramount. I am sure it will not have escaped his notice that improving quality is what these reforms are meant to be about. We have been clear that patients’ interests, especially their safety and the quality of the services they receive, have to be paramount. That is why Monitor’s overriding purpose is to protect and promote patients’ interests. It is why the board will have a duty to improve quality, why the CQC will underpin quality; and why competition will be used only as a means to improve quality. Where there are better ways to improve quality—and there may be—they will be used instead.

My noble friend Lord Clement-Jones, in his extremely interesting and—I do not mean to sound patronising—well-informed speech, took us through some of the intricacies of competition law. Although he did not say this, there has been a suggestion from a number of quarters that we are in a knowledge-free zone when we look at competition laws applied to the NHS. In one sense that is true because there is no case law that can guide us, but in another sense it is not true.

We can say many things with confidence. The point of competition law is to protect people from self-serving abuses like collusion or abuse of market power by restricting access to services. These self-serving abuses that harm patients are already prohibited in the NHS by the principles and rules for co-operation and competition, as introduced by the previous Government. This is not something new introduced by the Bill. Competition law applies to foundation trusts only in so far as they are acting as an undertaking, as my noble friend indicated—in other words, only where they are providing goods and services within a competitive market. Given the lack of directly applicable case law to NHS providers, there is some uncertainty about where that line is drawn.

A body can be an undertaking for some activities and not others. That is very clearly laid out in the OFT’s recent guidance, Public Bodies and Competition Law. For example, the foundation trust might be an undertaking for elective surgery, if it were provided in a competitive market, but it would be very unlikely to be an undertaking when providing NHS services in the absence of competition and while under a licensed obligation to maintain service continuity, which it could well be if Monitor chose to build that into its licence. In so far as foundation trusts may in the future be found to have abused their market power, what would then follow? It is important to understand what the consequences would be. In that situation, Monitor—

Before the noble Earl moves on, I would like to be completely clear. Is the Minister saying that Monitor will decide which parts of the NHS are subject to competition law—and not the Secretary of State?

My Lords, competition law potentially applies to the provision of services throughout the NHS. Monitor is there to protect patients from breaches of competition law, as it perceives them to be. The noble Baroness is right that it will not be the Secretary of State who makes those judgments. We are charging Monitor with that duty as a sector-specific regulator. I hope I have answered the noble Baroness’s question; if I have not, I am very happy to write to her on that.

In a situation where a foundation trust was found to have abused its market power, Monitor or the OFT would have the power to remedy the breach and impose proportionate sanctions, which might be a fine, or it might be to set aside a collusive agreement or to apply to the courts for a director disqualification. The effect would be to ensure that the anti-competitive conduct and the associated harm were addressed. That can be only a good thing. It is in the interests of patients, and it prevents the whole thing escalating further. The noble Lord, Lord Rea, indicated his doubts that there was any evidence that competition really did drive up quality. If he will allow me, rather than taking up time now, I will write to him, because there is quite a deal of evidence to indicate that it does drive up quality.

On reflecting upon the question that the noble Baroness, Lady Thornton, asked a moment ago, Monitor will not decide whether competition law applies; Monitor will apply the law as it exists. In the end, only the courts will decide the question that she put—certainly not the Secretary of State.

In a way, that goes back to my original question: will the Secretary of State no longer decide, for example, that accident and emergency will be exempt from competition law? Will Monitor decide? Could the noble Earl please be patient with me and give me an example of what will be exempt and what will not be exempt, and who takes that decision? Is he saying that Monitor takes that decision and that if Monitor gets it wrong, the matter goes to the courts?

Monitor would ask itself: is the arrangement we are looking at for, let us say, an A&E department that had no competition for miles around, anti-competitive? The answer might well be no, it is not. As I said earlier, the very fact that there is no competition to a service does not mean that it is anti-competitive. Monitor will make a judgment on whether the service is operating in the interests of patients. However, I think that we are getting into an area where it would be beneficial to have a letter from me setting out exactly how the law is applied and by whom.

I apologise for interrupting the noble Earl. However, to guide the letter, I want to point out that one of the key things is economic activity by the foundation trust concerned. Whether it is engaging in economic activity will, to some degree, be predicated by the behaviour of the decision of the NHS Commissioning Board and the CCGs on whether it is appropriate that there should be a market in particular services from the provider. That gets another actor, or actors, into the equation. This is one of the matters that concerns many of us, because it means that it will be possible in the future, even where no competition currently exists, for competition to be introduced and therefore for Monitor effectively, legally, to have to treat foundation trusts as undertakings.

My noble friend speaks with great expertise. It would be helpful if I could cover that point when I write, as he suggests.

The noble Baroness has indicated that it would be better to retain the Co-operation and Competition Panel as a separate body. I am very clear that the noble Lord, Lord Carter, and his team have done an excellent job within the Co-operation and Competition Panel since it began its work in 2009. The panel has published important reports on NHS consultants and patient choice; their specific investigations have resulted in direct benefits to patients, such as improved access to primary care in the Kingston-upon-Thames area—that is one that I know of. However, I would not advocate retaining the Co-operation and Competition Panel as a separate organisation, because that would result, in my view, in unnecessary fragmentation and, indeed, duplication. The arrangement we have at the moment has resulted in undue delays and duplication of resources, as the decision-makers have inevitably sought to review the panel’s investigations before taking any action. My noble friend Lord Newton highlighted that issue once again. I have examples in my brief which replicate his experience. Those delays caused unnecessary uncertainty for the NHS organisations involved and their patients. I emphasise again that our proposals would address this by integrating the advisory role of the Co-operation and Competition Panel as a distinct identity within Monitor.

The noble Baroness, Lady Meacher, spoke of the searing experience of Mid Staffs. Of course, we all recognise that the problems of Mid Staffs must be looked into carefully. That is going on at the moment and I am not able to say too much for obvious reasons. But the problems at Mid Staffs, as she will be aware, predated its becoming a foundation trust. After authorisation, its governors were new and fairly inexperienced. Learning from what happened, I am confident in saying that quality now plays a critical role in the authorisation process for new foundation trusts. The governance of foundation trusts in which they are accountable to representatives of the public and staff should help organisations to listen and act on feedback. The events at Mid Staffs demonstrated the importance of having strong, transparent and accountable governance arrangements for the safe and effective operation of the trust. The changes we are making should provide greater accountability to the public and staff and increased transparency so that they can better challenge and scrutinise the delivery of local healthcare provision.

My noble friend Lord Clement-Jones asked what would stop Ministers creating new markets. I hope noble Lords will agree that it must surely be right for doctors and health professionals to want to do the best for their patients. Under this Bill, it would be for commissioners to decide if, when and how to use competition as a means to an end in improving services for patients. The Secretary of State would not have the power to direct commissioners on these matters and the Bill expressly prohibits the Secretary of State exercising his powers to make regulations on commissioning or in setting a mandate to increase market shares for private providers. My noble friend Lord Clement-Jones cited the BetterCare and FENIN cases as an example of how NHS commissioners might act as undertakings. As we have previously made clear, the Government’s view is that the NHS Commissioning Board and CCGs will not be undertakings. Unlike in the BetterCare case, neither the board nor the CCGs will be able to provide services. They will only be responsible for commissioning services for the NHS, which will not be an economic activity for the purposes of competition law.

My Lords, I apologise. I expressly said that the concerns were not surrounding commissioning but around provision.

That is helpful. My noble friend and I are clearly in agreement. I apologise if I imputed any different views to him.

The noble Baroness, Lady Armstrong, indicated that she felt that the oversight powers for foundation trusts should be retained. As the regulator of all providers of NHS-funded services, Monitor will continue regulating foundation trusts under this Bill. These would be enduring functions, not transitional. I hope the noble Baroness is reassured by that. What would be transitional, however, is Monitor’s power to remove foundation trust boards and board members. That is what Clauses 109 to 112 provide for until 2016, although the Secretary of State would be able to extend the transition period by order, as I indicated earlier, if he or she considered it necessary.

My noble friend Lord Ribeiro sought assurances that all providers will work on a level playing field. I am happy to assure him that all providers will indeed be required to meet the same quality standards for the same procedures. Before being qualified, providers will be required to demonstrate that they can meet those quality standards and Monitor will set fair prices for all providers. Competition, as I have said on previous occasions, will be on quality and not on price. If my noble friend will allow, I shall write to him in some detail with answers to his specific questions, which of course were extremely pertinent. I will copy the letter to all noble Lords who have spoken in this debate.

The noble Baroness, Lady Armstrong, also said that the Secretary of State should not raid the budgets of successful foundation trusts. I can assure her that this Bill would not enable the Secretary of State to direct individual foundation trusts or to raid foundation trust budgets, which she has rightly cautioned against. She said that there was a need to ensure that the new system should allow care to be shifted out of hospital. I share her view on that. It is essential that the new system enables more care to be shifted out of hospital into people’s homes and communities. This will require strong commissioning, and that is a key point made by the King’s Fund.

My Lords, I declare my interest as chair of a foundation trust. It is quite simple for commissioners to be instructed to top-slice, say, 2 per cent of their budget and for the commissioning process to be used to divert money from some foundation trusts to others. What the Minister ignores in his construct of the Bill is the actual practice that is happening in the system at the moment.

My Lords, I do not see how the noble Earl can get away from that. We have recently seen that the Secretary of State, having said that he will not intervene, has made three interventions, twice in relation to PCT behaviour and once in relation to the quality outcomes, and in the last debate the noble Earl said that he would continue to use that mandate in future. It seems to me that we will continue to see these kinds of central interventions. It is as if we were in parallel universes. In one, we have the Bill and the theory. In the other, we have the practical management of the health service. Which is it to be?

Once again, the word “micromanagement” springs to mind. We want to get away from the Secretary of State micromanaging the health service. On the other hand, we think it is perfectly right and proper for the Secretary of State, on behalf of voters, patients and Parliament, to set broad objectives for the NHS, such as the NHS outcomes framework. That document has been very well thought out by clinicians led by Sir Bruce Keogh in the department and has, I believe, commanded universal approval. Surely this is the territory that the Secretary of State should be on: to drive up the quality of care and the performance of the NHS, but not to micromanage.

I recognise that there are fundamental fears that this Bill would increase the role of competition in the NHS and take us down the road to privatisation. I need to be clear that it is not the intention of this Bill, and I do not believe that it is the effect of this Bill, to privatise the NHS. The Bill reaffirms that the NHS will always be there for everyone who needs it, funded from general taxation and free at the point of use. Extending choice and increasing competition is not about privatisation. We want patients to be able to choose to receive their care from the highest-quality providers. Competition in services, where it is introduced, should only be introduced when commissioners genuinely and for good reasons believe that it will benefit patients and the quality of their care. Should we allow this to happen without any check that it is happening legally and properly? Our answer is no; it needs to be overseen fairly and apolitically by a sector-specific regulator with the interests of patients as its core duty.

As with other parts of the Bill, I am more than willing to enter into discussion with noble Lords on Part 3, and I have already indicated that I am sympathetic to some of the key concerns which these amendments raise. With that in mind, I hope that we can move on and debate different issues arising from this part of the Bill and that noble Lords will feel content for the time being not to press the amendments.

The noble Earl said himself that we are clearly in slightly—very—uncharted territory here, and referred of course to the OFT guidance. It is largely a re-run of the 2004 OFT guidance. It is slightly clearer because the case law is slightly more developed, but not a great deal more. We are in the area of assessing risk in terms of the application of EU competition law, domestic competition law and so on. Therefore, in these circumstances, we need the best advice. As I said earlier in my remarks, it is not so much a matter of the department asserting that such-and-such is the case but of having the benefit of some outside, independent legal advice—not that I am promoting the barrister’s profession, being a solicitor. Somebody well versed in competition law should be asked to advise on the risks that I set out at some length earlier today, otherwise we will struggle on with assertion and counter-assertion.

My Lords, my noble friend’s speech earlier in the debate will repay careful study. I intend to be one of those studying it and will certainly take his proposals forward.

My Lords, this has been an absolutely brilliant debate and very helpful to everybody in the Committee; I hope that that includes the Government. I start where the Minister left off about intentions—it is not the Government’s intention to introduce competition red in tooth and claw. However, the Minister must by now have realised that that is not what people understand by what is actually in the Bill and how it might be applied. That is the dilemma that faces the Committee and the Government. We on these Benches will certainly take up the offer that the noble Earl made in his opening statement, which was extremely useful, of discussing how to improve and change this part of the Bill. We would like to be part of that process. There is definitely work to be done on that.

I will briefly sum up our position on this debate. I have a series of questions for the Minister and I am very happy for him to write to me about them. We are not convinced as yet by the idea that having a quango as an economic regulator is the only way to bring a clear and comprehensive legal framework into the Bill. The purpose of Monitor in the Bill is to develop competition, which is why we have the Bill. We believe, and this debate shows us, that the contents of this part of the Bill in fact open the door and invite in the issues that were raised, for instance, by the noble Lord, Lord Clement-Jones. If competition is not at the heart of the Bill, why do we need all that detail? The noble Lord, Lord Clement-Jones, made a very helpful intervention and a useful analysis. I, for one, will be rereading his speech about EU competition law.

I ask that the noble Lord, Lord Clement-Jones, and his colleagues look at our Amendment 262A, which would add a third subsection to Clause 59(1). The proposed paragraph (c) says the provision of health services should be,

“based on the principles of universality and social solidarity”.

We were not making a particularly left-wing statement with that. We were actually lifting it out of European law, which our advice tells us is one of the ways in which you keep at bay the procurement processes of European law. I strongly ask the noble Lord, Lord Clement-Jones, to look at that; I would be interested to hear his comments.

One part of the debate that I have been disturbed about was that raised by the noble Lord, Lord Owen. He also has a freedom of information request in for information that would help to inform the discussions of this House. We know that we have had our debates about the lack of access to the risk register to help us in our deliberations. Indeed, my honourable friends in another place asked if they could also have access to the legal opinions that the department had got on this part of the Bill, and were refused access to that, too. We have all had to find our lawyers to advise us about competition law. We are now all a lot better informed than we were several months ago. The noble Lord, Lord Owen, was right when he said there is no consensus about this; indeed he was right when he said that parts of this Bill are feared and hated. The Minister needs to understand that there is a lot of fear out there, about this part of the Bill in particular. The noble Lord was expressing very grave concerns.

The noble Lord, Lord Newton, made a threat to the Government about patient safety and quality being the order of the day and said that he will be returning to this on Report. He will probably have more effect than the rest of us put together in his interjection on this matter. We will be behind him if he does so, which may not do his reputation any good at all.

The noble Baroness, Lady Meacher, made a very thoughtful speech, her most important point being that we already have the tools to make the system work. There is no need to put in an economic regulator and the competition regime that this Bill suggests, because the tools are already there. That is very important.

I say to my noble friend Lord Whitty that there is absolutely nothing wrong with a bit of slash and burn to make the point about this part of the Bill. In effect my noble friend was at one with the noble Lord, Lord Clement-Jones.

The message from the noble Baroness, Lady Cumberlege, is that the NHS needs to improve. Yes, we would all agree with that and every health system in the world needs to change and improve. I would, however, refer the noble Baroness to my speech, which embraced change, embraced development and even embraced the use of managed competition. Where we part company is that the way to improve the NHS is not to treat it as a utility or a supermarket; we do not think the evidence is there to prove that. In fact, there is a lot of evidence to suggest that we should be very wary of the introduction of market forces as a way to improve our health service.

My noble friend Lady Armstrong made the important point that we agree with the Minister that there is a case for the use of competition in its place. The challenge before us is how we ensure that this Bill delivers that without threatening the whole fabric of our health service.

Is the noble Baroness aware of Gaynor et al and the work they have done? I quote again from Protecting and Promoting Patients’ Interests: the Role of Sector Regulation, a research study in 2010:

“We find that the effect of competition is to save lives without raising costs. Patients discharged from hospitals located in markets where competition was more feasible were less likely to die, had shorter length of stay and were treated at the same cost”.

All I would say in answer to the noble Baroness is that there is no known health service in the world that shows competition improves health outcomes. I challenge the noble Baroness to send me the information that shows that is the case.

We are talking about the whole system, not a small part of it. We can share our intelligence outside the Chamber; the noble Baroness makes a good point but there is no evidence that says this is the way to improve our national health system.

Perhaps I can be helpful. The noble Baroness referred to a study of the competition element, which was introduced into the British health system by the previous Government, as far as I am aware. That was carefully circumscribed competition. It did not amount to more than 10 per cent. It was based on the insistence that competition be fair in terms of quality, standards and price; it excluded emergency; and it applied only to elective operations. The difference here is not whether competition is beneficial where appropriate. The real question is: where is it appropriate? That is the distinction between the two comments.

My noble friend comes to my assistance in a very appropriate fashion and puts it much better than I did.

Finally, the question that we need to answer is: does the Bill increase the likely interference of competition law in the National Health Service? Does the Bill transfer power from the Secretary of State to Monitor, and is that a good thing? That is why I was pressing the Minister about who takes the decision about where competition law applies.

The Minister said at the outset that Part 3 is misunderstood. He is absolutely right. If the Government really want to put beyond doubt the issue of competition law and its place in the delivery of our National Health Service, we have to simplify, clarify and delete parts of Part 3 of the Bill. We have to take the NHS out of the danger zone of EU procurement law and competition law. That is the challenge that lies before the House when we return to consider this at a later stage in the Bill.

My Lords, before the noble Baroness sits down, does she accept that European procurement law already applies? I do not think there is any dispute about that. I hope she will welcome my offer to write to cover issues relating to competition law, including giving my view on my noble friend’s suggestion of having an independent legal view. I have not taken a view about that at the moment, but I will gladly consider it.

I accept both the invitation and comments that the Minister has made about procurement law. I refer him back to my comment about opening the door wide and inviting in the lawyers. I beg leave to withdraw the amendment.

Amendment 260EA withdrawn.

My Lords, before we move to the next group of amendments, it may be for the convenience of the House if I remind noble Lords that we will interrupt the debate on this group at a convenient moment shortly before 2.30 pm. The House will then resume and, if necessary, adjourn before we take Oral Questions at 2.30 pm.

Amendment 260EB

Moved by

260EB: Clause 58, page 87, line 9, at end insert—

“(d) is to take on the further duties as set out in this Act in relation to authorising through licensing any person who provides health care services for the purposes of the NHS as set out in Chapter 3 of this Act.”

My Lords, I promise that this will be a very much shorter speech. We now turn to the second group, which concerns Monitor’s function as a licensing provider—a part of the suite of amendments that we have put down about reconfiguring Monitor.

The Bill extends the concept of financial regulation to non-financial trusts, and we can see the logic in this. For consistency, however, we argue that all providers of services to the NHS—not just foundation trusts—should have to meet requirements around their financial position and have this subject to oversight, as well as the obvious fit and proper test that they would have to go through.

We can see the argument for a robust evaluation, for example, of capital structures, which certainly would have been helpful in the case of Southern Cross. The regulator should be allowed to make authorisation subject to this kind of probity test—something like a fit and proper persons test. For us, the key aspects of the licensing regime should be determined by the Secretary of State, not by the regulator. The job of the regulator in our view is to operate the system, not to define it. I would invite the Minister to say whether he agrees with that analysis.

With foundation trusts we set out that Monitor shall use the licence to ensure that information flows to the regulator to enable it to have effective oversight and to intervene if necessary. The licence has to extend this to other sorts of providers which may be reluctant to supply information or submit to the idea of intervention. They may claim commercial confidentiality. The Bill resolves this problem, as far as we can see, by simply having no oversight—in other words, the “nothing to do with us, guv” approach to regulation. We believe that the public would not accept this. The Mid Staffs example, where Monitor came into much criticism, or the Southern Cross example might be instructive here.

I am sorry to interrupt. The situation at Mid Staffs arose following the approval of the Department of Health and the Healthcare Commission. It was passed to Monitor as a fit and proper hospital. The scandal emerged only three weeks after it was approved by Monitor.

The point I am making concerns what we need to do for the future. What happened in Mid Staffs has some bearing on that and I said “instructive”.

The tests that we are suggesting should be applied to any organisation wishing to supply clinical services to the NHS around probity and can be enforced through contracts and licensing. Meeting the conditions without trying to argue commercial confidentiality is now the price of doing business with the NHS, in our view.

Finally we have reservations about the interaction between the licensing regime and the use of standard contracts. Why have both as enforcements? What would be appropriate for each? What is the role of Monitor as regards the contracts? What happens to disputes between providers and commissioners? Do they all go to court? What is the role for Monitor in the resolution of disputes? We have accepted that if you have a licensing system then you have to build a bureaucracy to support it, moving from a top-down management bureaucracy to a regulatory bureaucracy. To keep this to a minimum while remaining effective is not simple, as the CQC is finding. But the system set up in the Bill is very complicated and our amendments seek to simplify it. The nature of the operation as to whether it should be a light-touch risk-based approach or continuous direct inspection is another issue which has plagued the CQC and will have to be resolved by the new Monitor. That is a question we need to put on the table.

I now turn to our amendments. In Amendment 260EB Monitor is to take on duties in relation to authorising through licensing any person who provides healthcare services for the purposes of the NHS. Amendment 279A is to remove any potential ambiguity and stress that providers of primary medical services for the purposes of the NHS must hold a licence. Clause 82 stand part is to facilitate a discussion about who can be exempt from the requirement for health service providers to be licensed and who makes those decisions. In Amendment 282A, since this a strong power granted to Monitor to revoke a licence, we add qualifications that in the case of a foundation trust Monitor must consult the Secretary of State, and the Secretary of State may veto any revocation if it is deemed not to be in patients’ or taxpayers’ interests. In Amendment 282B the Secretary of State, not Monitor, should determine the principles or framework behind the licensing conditions and Monitor must then have regard to these. Amendment 283 specifies that the standard conditions included in each licence must set out various minimum standards such as for governance arrangements, meeting in public, employment conditions, co-operation with local-authority overview and scrutiny functions. Amendment 283A contains the issue of there being no need to have different standard conditions for different descriptions of licences.

Amendments 286ZA, 287ZA and 287ZB set limits on Monitor’s functions to set and modify the licence conditions, simplifying its role. Amendment 287BA leaves out the roles of Monitor relating to licence conditions, price and charging. Amendment 287F requires licence holders to be fully subject to the overview and scrutiny functions of local authorities. In Amendment 288ZB Monitor has the power to modify the standard conditions applicable to all licences, and in doing so there should be no need for a vote among providers but consultation and consent from the Secretary of State is required. In Clauses 99 and 100 stand part we raise the issue of minimising the bureaucracy surrounding licensing. In Clause 101 stand part we argue that the requirements for fair eligibility and transparency in selection should be covered under the PRCC. This is a probing amendment designed to strengthen the clause instead of deleting it on Report. We think that that should be a matter for discussion. Amendment 288DZA regards Monitor’s power to impose discretionary requirements, including fines, on providers and licence holders if they fail to provide required documents or information, which can only occur with the consent of the Secretary of State. Any fine must be held by the local CCG for reinvestment in services in that area. Amendment 288DA states that if any provider is in breach of a licence Monitor may take action against them, including the imposition of fines, but only with the consent of the Secretary of State. I beg to move.

I would like to address just one of the amendments in this group, which is in my name and that of my noble friend Lord Marks of Henley-on-Thames. Unfortunately my noble friend has been taken ill and is unable to be here. He extends his profound apologies to the Committee.

This amendment is significant in strengthening the general approach towards competition under Section 3 of the Bill, by making it quite plain that the requirements that have to be met, which we will come to in Part 4, must also apply to licence holders. I am in a slight difficulty, as my noble friend Lord Howe will appreciate, as the Government have tabled amendments on aspects of foundations trusts which will arise at a later stage in the Bill, particularly under Clause 161, which are related to the amendment to which I am now speaking. I will therefore do my best to navigate around Clause 161 in so far as I can. However, I may have to make limited reference to it in order to make clear what my own amendment is about. My own amendment is essentially one that would support, and indeed further improve, the proposals put forward in this particular amendment. They should therefore be read together with Clause 161 and Amendments 299ZA and 299AZA in the name of the Government.

We want to make two requirements as a fundamental part of the requirements that licence holders have to meet. We appreciate that, in many ways, the licence-holding requirements are fundamental to the way in which the Bill operates, because it must be the case that providers are brought within the general structure of the Bill itself. Our amendment makes two particular points about that. The first is that the revenue from private patients, as a percentage of the licence holder’s total revenue, must be kept below 50 per cent. Secondly, and at least as importantly, the number of private patients in a foundation trust hospital must also be kept below that proportion.

The main point of this amendment—I think that it is an important one—is again to establish that we are looking at foundation trusts that are part of the provision under the NHS and that a minority of both income and patient numbers would be required for any provision made. We hope, as I think the noble Baroness said, that this set of requirements continues well beyond 2016 as part of the structure of the relationship of foundations trusts to the health services, and that this is therefore not standing alone but a crucial part of the whole strategy.

If the noble Lord, Lord Owen, were in his place, I would say that if this is not the rail track of the French railways, it is at least the rolling stock, and we need both to have an effective railway service. However, I wanted to say one other thing. The first part of the amendment tabled this morning by the noble Earl, Lord Howe, goes a very long way. We will talk about this in more detail later so I shall only sketch it out now, given the time. I think that the first part of the amendment, with regard to income—and indeed the requirement that income must exceed the costs of providing that income, and that it must be used for the purposes of patients within the health services—is a very full and useful advance. It is very close to the phrasing of the 2006 Act, which is a point that I am sure will come across to the noble Baroness, Lady Thornton, and her colleagues, but with the additional wording that makes it, if anything, even stronger.

The noble Earl, Lord Howe, will know from discussions which I and my colleagues have had with him that we would want to see this supplemented, if possible, by a reference to the proportion of patients in foundation trust hospitals. Quite broadly, that is something the public can understand, whereas references to quite complicated percentages of income, although equally important—if not more so—are perhaps less transparent and less apparent.

I will not pursue further the new amendments beyond welcoming them, but I want to advance this particular, although limited, amendment as thoroughly as I can, as I think it would ensure that licence holders were held to the same kind of requirements that we are imposing upon Monitor, the national Commissioning Board and the CCGs. It must be the case that this should be a common approach across the front.

My Lords, I shall be brief. I wish to speak to Amendments 281A and 288ZA, to support my noble friend on Amendment 287EA and to speak to Amendment 287A.

Amendments 281A and 288ZA deal with what are clearly major decisions that will be made by Monitor. The first is the exemption from licensing, which requires notice to be given, and the second deals similarly with the particular standard licence conditions that may be modified. Currently the Bill provides for 28 days’ notice to be given, but these are major issues, and although this is a probing amendment, I hope that the Minister will be able to give a good explanation as to why this period should be so short. Obviously one does not want to have undue delays, but there are quite a number of stakeholders who are bound to be involved in this and it does look rather like a rushed job. So this amendment provides for 90 days to be the standard term for notice to be given.

I move on to Amendment 287A. This amendment simply permits—indeed, requires—the insertion of a standard condition in the licence that the licence holder should,

“abide by the seven general principles of public life set out in the First Report of the Committee on Standards in Public Life”—

the so-called Nolan principles—and requires,

“the declaration of any financial interest the licence holder may have in a commissioning decision by a clinical commissioning group”.

Nowadays that is increasingly standard. I will not prolong the debate, as we have already had considerable discussion in the course of this Bill about conflicts of interest and the need for transparency in these circumstances. However, I would have thought that licence holders, who essentially will be providers across the whole service, should be under a heavy duty of transparency in order to ensure that they do not have a conflict of interest.

Coming to Amendment 287EA, my noble friend Lady Williams has eloquently set out the issues. What is really required in these circumstances is for the Minister to rebut the presumption that we not only need a provision about the actual total revenue, but also about the number of patients actually treated by a provider. This provision is a belt and braces against the provisions of EU competition law. It is extremely well drafted. I take no credit at all for that, it is my noble friend Lord Marks at work here. We will be discussing the Minister’s very welcome amendment later, but it does not contain the second limb of this particular amendment. It would be useful if the Minister could address this in due course, whether under this group or in the later group, as I recognise the difficulty that my noble friend Lady Williams has also recognised, that this is not grouped with Amendment 299A and probably should be.

My Lords, I have amendments in this group and in light of the previous debate I do not want to repeat anything, except that the Minister stressed the importance of driving up quality and these amendments relate to what should be incorporated in a licence that Monitor gives a provider. Amendment 282ZB is replaced by Amendment 282ZC, which is about being a good employer. If you are going to drive up quality you have to make sure that your staff have education and training and understand research. However, it goes right the way through from every provider at every level, right up to specialist training. It is important that the education and training needs of those who are in the higher professional training bands are also accounted for. Monitor will have to work closely with Health Education England to provide an oversight of the numbers of education and training places available.

The background to this amendment is very compatible with Amendment 278BA tabled in the name of the noble Lord, Lord Ribeiro, who is not in his place but has already spoken to it. The amendment should not have any great implications on the levy and I note that the Government are already committed to undertaking extensive work to establish an appropriate NHS training levy. I suggest, however, that supervision and training of all staff at all levels is essential and I hope the Minister can confirm that licensing will go further than simply, as it states on the face of the Bill at the moment, having regard to education and training.

In Clause 93, Monitor is required to publish draft standards conditions for the licence requirement and Amendment 285ZA, in my name and that of my noble friend Lady Hollins, requires somebody to state what primary medical services are to do. If Monitor is not to do it, I respectfully ask the Minister who is. What is to be their availability? How will they work with pre- and post-hospital care? A reappraisal and revalidation will look at clinical standards but there are real difficulties if more goes out into the community. Who is going to see patients with complex conditions at home, how are the deficits in out-of-hours care to be driven up and who is responsible for what? It also requires a duty of collaboration, because if you do less in the hospital sector you need to increase your collaboration, not decrease it.

We have already debated the importance of staff being involved at local and national level to work for the benefit of the wider NHS. As background to this amendment, may I give a short example of why integration between primary and secondary care and social care is absolutely essential? Take a child who the nursery, perhaps, reports is behaving oddly. The general practitioner refers the child to paediatrics, they consult their developmental colleagues—speech and language therapists and psychologists—and an overall conclusion is that this child is neglected but also has some pathology, such as glue ear and delayed speech. The child comes from a home in which there are no books and no one is talking to him or her. For the GP and all other services to link there must be integrating care; that is why it is stressed in the context of this amendment.

The last amendment in this group in my name is Amendment 287AA, which relates to indemnity. Currently foundation trusts carry vicarious liability for clinical care provided by their staff and therefore need to cover claims arising from this work. The trust can seek a source of indemnity from providers other than the NHS Litigation Authority but does not have to and does not have to publish whether or not it does.

The Medical Defence Union has already questioned the indemnity of any qualified provider with the Department of Health and had a response outlining that the NHS standard contract requires providers to have indemnity with a specific requirement set by local commissioners. The levels would vary according to the circumstances of different providers. But that response misses the point. I am not suggesting that the Bill should set the level of indemnity, but we should ensure that all providers of care to NHS patients have indemnity in place so that patients do not go uncompensated. The indemnity should be adequate and appropriate and this cannot be done under separate rules or regulations. The concern is that if a contractor goes out of business for whatever reason and does not have appropriate ongoing indemnity, there will be no course of redress for patients who have been harmed by that individual contractor.

There is a real prospect that patients who are severely or negligently damaged by an individual who does not carry adequate indemnity would then be completely unable to gain compensation because the way that the Bill is written does not require there to be adequate indemnity for the service provided. The long-term nature of clinical indemnity claims means that the level of indemnity must be adequate to provide compensation, sometimes many years into the future when a claim is settled or because sometimes the harm done does not emerge for some years. An indemnity, therefore, has to be in place when a provider is no longer in existence.

I will not elaborate any further on this because it is a discussion I would be interested in having with the Minister outside the Chamber and I am aware that we are time-restricted for this group of amendments, but I hope that the Minister will be able to consider the importance of indemnity for those providers that contracts are placed with and even for those they may sub-contract to.

House resumed.

Sitting suspended.