Health and Social Care Bill

Public Bill Committee, 23 January 2001.

Standing Committee E

Health and Social Care Bill

John Denham (Labour, Southampton, Itchen)

On a point of order, Mr. Maxton. It may be helpful to you and the Committee if I say something about the Government amendments that were tabled last night and others that will be tabled later today. The Government need to table a number of technical amendments to clauses that we shall be debating on Thursday. I regret that they should have been tabled so late in the day.

I shall be writing to right hon. and hon. Members today, setting out the nature of the amendments and explaining their purpose. I shall also endeavour to produce by 7 pm a consolidated version of the Bill, so that Committee members can see the amended version. If, on considering the amendments, right hon. and hon. Members wish to propose that the Sub-Committee should meet to consider extended sittings within the timetable, we would certainly consider it.

Philip Hammond (Conservative, Runnymede and Weybridge)

Further to that point of order, Mr. Maxton. The Minister has outlined a problem that the Committee will face on Thursday. The difficulty is that the Opposition may wish to table amendments to the Government amendments once we have seen them. Would it be possible for you to say whether, in such exceptional circumstances, you would be willing to call starred amendments on Thursday amending the Government amendments that will be tabled later today?

John Maxton (Labour, Glasgow Cathcart)

On that last point, it would be a matter that I should have to consider at the time. Obviously, I would not rule it out at this stage. Clause 16 Intervention orders

Clause 16 - Intervention orders

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I beg to move amendment No. 31, in page 11, line 38, after `run', insert

`or that the body has practised discrimination by reason of age,'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to discuss the following amendments: No. 22, in page 3, line 5, at end insert—

`provided that they have not been found to have practised any form of discrimination by age.'.

No 24, in page 6, line 33, at end insert—

`provided that the matters referred to in paragraphs (a) and (b) above shall include the measures taken by the authority to avoid discrimination by reason of age.'.

No. 27, in page 7, line 30, after `persons', insert `of all ages'.

No. 28, in page 8, line 24, at end insert—

`(f) to ascertain whether the trust has practised any form of discrimination by reason of age.'.

No. 35, in page 56, line 13, at end insert—

```discrimination'' includes any form of direct or indirect discrimination. Direct discrimination shall be taken to occur when one person is treated less favourably than another. Indirect discrimination shall be taken to occur where an apparently neutral provision, criterion or practice would put persons of a particular age at a particular disadvantage compared with other persons.'.

New clause 4—Age discrimination—

`. It shall be unlawful for any body to which this Act applies to refuse or delay any treatment or procedure, or to provide a less favourable standard of care, in respect of any person by reason of his age.'.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

As this is my first contribution to the Committee's deliberations, Mr. Maxton, may I welcome you to the Chair and say how pleased I am to be a member of a Committee dealing with such an important subject?

The amendments deal with a crucial aspect of that subject—age discrimination in the national health service. I suspect that all members of the Committee will have received letters of complaint from constituents telling of their personal experiences of the NHS, and that many of those letters will have advanced the argument that, at least in part, age was a determinant of their access to treatment.

Last year, in its on-going campaign to highlight age discrimination, Age Concern published a report documenting the testaments of those who had experienced age discrimination. It also gave statistical evidence to demonstrate that it is not only the public who believe that age discrimination and age-based rationing exists within parts of the NHS but that it is the view also of general practitioners. The amendments seek to provide a definition of age discrimination and to provide that the criteria for making age-based decisions in the health service are taken into account by the Secretary of State in respect of some of his funding decisions.

I was prompted to table the amendment by a letter from a constituent, who wrote to me following her mother's experience of what can only be described as less than satisfactory treatment, which left her in a poor condition. Her ward was not cleaned, and I am afraid to say that the attitude of the staff was all too often unsatisfactory. Assumptions were made that contributed to the unsatisfactory care that she received.

Age Concern would want me to draw to the Committee's attention specific examples that demonstrate a growing concern about age being used as a basis for making decisions within the health service. I believe that the Department of Health some little while ago published research showing that 70 per cent. of renal care units used age as a basis for making decisions on access to their services, which is a questionable practice. Similarly, until recently, breast cancer screening was not available to women over the age of 65. It is hardly surprising that the prevalence of death due to cancer among people in that age group was so much higher; they would have benefited from the screening programme. The NHS plan includes a commitment to deal with that.

Philip Hammond (Conservative, Runnymede and Weybridge)

It is an important subject, but the clause deals with the Secretary of State's ability to exercise draconian intervention powers. The hon. Gentleman seems suggest that the practices that he refers to are widespread. Under the amendment, the logical conclusion is that the Secretary of State would intervene on a massive scale in the running of a large number of health authorities and trusts. Do the Liberal Democrats want that to happen?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I shall make two points in response to the hon. Gentleman. The first is technical. The amendments do not deal only with the intervention powers under clause 16. The group under consideration includes new clause 4, which provides a definition, and amendments to other clauses. For example, clause 7 deals with other aspects of the implementation of the measure.

On the basis of the growing evidence brought to the attention of the House by Age Concern, Help the Aged and many other charities, the Secretary of State should intervene more aggressively. We know that the Government's long awaited NHS framework for older people has still to be published. Ministers have assured us from the Dispatch Box on numerous occasions that the document will include statements on age discrimination and a policy of zero tolerance. However, none of that places specific requirements in legislation. We tabled the amendments in order to initiate a debate, to probe the Government's intentions and to establish whether the Government are persuaded that providing a legislative basis for equality of treatment in the NHS is the way forward.

I have referred to access to cancer treatment and renal care. Another problem is access to clot-busting drugs, because many of the units that provide those drugs base their decisions on age. When clinicians make decisions about access to treatment, they should set aside the patient's date of birth and make an assessment of that person's clinical needs and whether the proposed treatment will produce a beneficial outcome. They should not base their decisions solely on the patient's age. However, it seems to happen time and again.

I shall put one more piece of evidence before the Committee. In October and November last year, the community health councils published Casualty Watch figures. Those figures are interesting, because they are snapshots of specific days and attempt to show how casualty units perform on, for example, waiting time on trolleys before admission into the hospital and treatment.

The figures include data on people's ages. Analysis of the results—albeit from only October and November rather than from a more comprehensive survey, but the figures still cover 16,000 cases—made it evident that there was a significant difference in the length of wait for people aged 20 and 80, for example. There was a 65 per cent. increase in waiting time the older one was. That is unacceptable and questionable practice. It was suggested that the reason was that older people who went to accident and emergency departments might have a more complex range of needs, and so might have to wait longer so that various facilities could be set up for their appropriate diagnosis and treatment. I do not accept the idea that that should lead to a longer wait for such individuals.

In a case last year, about which I am still waiting for a substantive response from the Department, two constituents reported their mother's experience to me. She is a dementia sufferer and is in a care home. She was taken to an accident and emergency department after a fall, and her children reported that the level of understanding and appreciation of the needs of someone with dementia was inadequate. The nature of her condition was not understood, and neither was her resultant need for early attention. My constituents' mother was caused great distress and was discharged before treatment was provided, which was unacceptable.

The amendments are an attempt to add provisions to the Bill for, or at least to force the Government to acknowledge further, an important issue of great concern to many of our constituents, which is that age considerations are an unacceptable factor in treatment and care in the national health service. Too often, they underpin aspects of practice and attitude towards our elders in the NHS. One has only to consider the work of Help the Aged and its campaign for dignity on the ward to be aware of the relevant pressures. The Bill provides an opportunity—and it is about time—for such matters to be put on a firmer footing.

I return to the question asked by the hon. Member for Runnymede and Weybridge (Mr. Hammond). If the evidence before us today and supplied to the Department from numerous individual cases and non-governmental organisations can be confirmed—I believe that it is reputable and creditable—the Government need to act and to be challenging. They must ensure that they do not simply have policy, but the legal back-up for it to ensure zero tolerance of age discrimination in the NHS.

Philip Hammond (Conservative, Runnymede and Weybridge)

If we all learned something from our first sitting—it was the first sitting of a Committee that I have served on under the new arrangements—it was that we must be fairly self-disciplined and ration our time. I shall therefore be brief in responding to what the hon. Member for Sutton and Cheam (Mr. Burstow) said about the amendments.

We shall consider clauses 16, 2 and 3 this morning. Together, they deal with the Secretary of State's powers to intervene in the running of health authorities and trusts. That is literally true for clause 16, which will allow him to take control and to position his placemen to assume control. More invidiously, clauses 2 and 3 will allow him to use the power of the purse to ensure that his will is done to the farthest corners of his empire. The clauses give the lie to the Government assertion that the Bill is decentralising. The Bill gives huge powers to the Secretary of State, and these three clauses in particular embody that transfer of power.

Peter Brand (Liberal Democrat, Isle of Wight)

Is there not a slight discrepancy between what the hon. Gentleman is saying, and what the hon. Member for Woodspring (Dr. Fox) said last week, when he made the Secretary of State personally responsible for not having discrimination towards the dead? Is the hon. Gentleman now suggesting that the Secretary of State should not be responsible for discrimination towards the living?

Philip Hammond (Conservative, Runnymede and Weybridge)

We have some difficulty with the Government's handling of the matters. They seem to want to take personal responsibility for all the good news, and no responsibility at all for the bad news. It is a two-way process. Power and credit flow to the Secretary of State when the news is good, but it is always someone else's problem when the news is bad.

The key issue at stake when considering the amendments is the Secretary of State's power to intervene. The Government's proposed traffic-light grading system, a note on which the Minister circulated to the Committee at the end of last week, is not in the Bill, but underlies the debate.

The clauses will, ultimately, determine a significant proportion of the resources that go to hospitals, and will have a resulting impact on the distribution and delivery of care. Without wishing to appear confrontational over the matter, it is typical of the Liberal Democrats that they have tried to hijack a debate on these important clauses in order to stage a debate that is quite out of context in relation to what we are considering. Although I acknowledge that it is an important debate in its own right, it is an artificial device to have a debate on a subject that this part of the Bill does not deal with directly.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Is the hon. Gentleman telling the Committee that he never seeks to use an artificial device to construct a debate on something that is nothing to do with the Bill?

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall take that one on the chin. However, what I may have done in the past, under the old regime, may no longer be appropriate. It is clear that, to avoid the situation that arose on Thursday, when important clauses did not get any scrutiny at all, we must be disciplined about how we use the time available. Whether or not we agree with what the Government have imposed upon the House, we must work within those parameters until such time as the rules are changed. I hope that the hon. Gentleman will not find me guilty of dissembling on matters that are not directly relevant to the clauses under consideration.

I have already raised with the hon. Member for Sutton and Cheam the extent to which he envisages the Secretary of State using the powers under clause 16. I do not intend to do so during the debate, but I will ask the Minister later to give the Committee a much clearer idea of the extent to which the Government expect the Secretary of State will use the powers. They are draconian, and they must be seen as reserve powers. I am afraid that the amendment tabled by the hon. Member for Sutton and Cheam would—unintentionally, I am sure—have the effect of giving the Secretary of State huge control over the day-to-day running of the health service, by making many trusts subject to intervention orders.

I am also concerned about amendment No. 35, tabled by the hon. Member for Sutton and Cheam. He goes so far as to define indirect discrimination. We have had such debates before, in Standing Committees on various Bills, and I thought that our consensus was that we objected to, and wanted to eradicate from the national health service, unjustified discrimination on grounds of age—discrimination based on the patient's age and unrelated to the clinical condition. The definition used by the hon. Member for Sutton and Cheam in amendment No. 35 would make it impermissible to take into account a clinical indicator that, in practice, would be found in older people disproportionately in relation to the general population. That flies in the face of what I have always thought to be the consensus among Conservatives and Liberal Democrats, that a patient's clinical status should determine the treatment.

I am not a clinician, but it is self-evident that many clinical decisions will be based on criteria that de facto mean that older people may be deemed unsuitable for treatment. That would not be because of their age per se, but because of their clinical condition. The amendment would put health service managements that allowed clinicians to proceed on that basis at risk of having their functions taken over by the Secretary of State, by the draconian powers under clause 16. The central tenet of our argument is that the health service should be run on the basis of clinical, not political, judgment. The hon. Member for Sutton and Cheam is, with the best motives, trying to superimpose a political judgment on doctors' clinical judgment. The definition in amendment No. 35 would enshrine that judgment. Yet the hon. Gentleman and the hon. Member for Isle of Wight (Dr. Brand) have been as quick as any to criticise the Government when they have appeared to place political priorities before clinical ones, and as diligent as any in arguing that clinical priorities must prevail in determining where and how treatment is administered.

The points that arise from these amendments need to be aired and the overall issue raised by the hon. Gentleman is important, but it is something of a distraction from what will be an important debate on clauses 16, 2 and 3. However, it has served a useful purpose, by highlighting how the Secretary of State's powers could be used. The hon. Gentleman would impose a set of criteria that would not be strictly clinical. They would be political—with a small ``p''.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The hon. Gentleman says that I want to construct a set of criteria. In fact, amendment No. 35 deals with

an apparently neutral provision, criterion or practice.

We are dealing with existing NHS criteria and practices. We are not trying to substitute criteria for clinical judgment.

Philip Hammond (Conservative, Runnymede and Weybridge)

Amendment No. 35 defines indirect discrimination as happening

where an apparently neutral provision...would put persons of a particular age at a particular disadvantage compared with other persons.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

That changes the sense.

Philip Hammond (Conservative, Runnymede and Weybridge)

If the hon. Gentleman wants me to read it in full, it defines it as happening

where an apparently neutral provision, criterion or practice would put persons of a particular age at a particular disadvantage compared with other persons.

I do not think that that particularly changes the sense. The point—and I do not speak as a doctor, but perhaps the hon. Member for Isle of Wight will confirm this—is that some legitimate clinical criteria will put older persons at a disadvantage, if one sees things in that way. It is a fact of life that certain conditions are more prevalent in the elderly. I am not suggesting that the hon. Gentleman is attempting to turn the system of priorities on its head—perhaps amendment No. 35 contains careless wording—and I am sure that he is not seeking to prohibit any clinical criterion that suggests that elderly people are less likely to benefit from a medical treatment than someone who is younger, fitter and healthier.

The amendments show just how the Secretary of State could use the powers under the clause to shut down trusts or health authorities that, in the language of the Government's publications, were ``failing''. It is clear from the debate and from reading the Bill that the definition of ``failing'' will be failing to do the Secretary of State's bidding. The Secretary of State sets criteria and if a trust or health authority does not diligently pursue those criteria—however wacky they may be—they will be judged as ``failing''. Perhaps when we come to clauses 2 and 3 we can look at some examples of Government targets that undermine and distort clinical priorities in the health service.

The danger is that the Secretary of State will be allowed to set criteria which lack sound clinical bases, and then to intervene in trusts and health authorities that refuse to be pressured into following a course of action that, in the clinical judgment of their staff, is not in the interests of their patients. That ability, that power, that potential, to distort further clinical priorities through the operation of clauses 16, 2 and 3 is the essential issue of the debate.

John Denham (Labour, Southampton, Itchen)

I shall deal as swiftly as possible with a number of issues that have been raised.

The hon. Member for Sutton and Cheam said that the amendment was intended to probe the Government. Let me put on record a number of statements as to the Government's attitude towards age discrimination. The NHS plan, which was launched last July, carries an unequivocal statement that age discrimination in the NHS will not be tolerated. In November, we signalled our commitment by appointing Professor Ian Philp as national director for older people's health and social care. He has made it clear that his main responsibility is to ensure that people as they grow older have the same access to health services as anyone else—access that is based on clinical need and in respect of social care on assessed need.

The prior assumption that the greater the age of the patient, the less beneficial the treatment is simply not acceptable. Age should never be a determinant in decisions about access to investigation and treatment. However, that does not mean that everyone needs precisely the same type or level of health or social care, or that those needs should always be met in the same way. Patients of different ages sometimes receive different approaches in their treatments, for which there may be good reasons. For example, when an older person presents at an accident and emergency department with a fracture, it would be quite natural to expect a broader assessment of the person's health and needs than might be the case with a younger person presenting with a simple fracture, as the injury may reflect a wide range of other factors such as a failure to take medication, poor eyesight, dementia, physical frailty or instability. Those examples show how difficult it is to legislate a fundamental principal in the simple way that the hon. Member for Sutton and Cheam has suggested.

I shall give a recent example. During the winter, general practitioners and practice nurses successfully delivered the largest and fastest immunisation campaign in the history of the NHS—the flu campaign—which was created for those over 65 and vulnerable groups.

It is almost certain that the amendments and new clause would have prevented the Government from targeting the flu campaign at the over-65s, as that would have been regarded as direct discrimination. No one could argue that some incredible change in the link between biological age and vulnerability takes place on one's 65th birthday to make the flu jab much more effective than it would have been on the previous day. However, in a practical health service, a limit at 65 made a great deal of sense as a way to target a group of people that we wanted to have the flu jab. One could base a limit purely on a clinical judgment of vulnerability, but that would almost certainly be caught by indirect discrimination, as one would be taking an approach from which, again, older people would largely benefit. That example does not prove that it would always be impossible to have legislation on age discrimination, but it suggests how complex and difficult it would be to get it right.

The Government's preference is to move ahead with a range of measures to tackle age discrimination that will be implemented through management, high standards of practice and inspections by organisations such as the Commission for Health Improvement. The development of the national service framework for older people is a key part of that, and we are working hard on its publication. The CHI will, as part of its clinical governance review programme, monitor implementation of all aspects of the NSF, including fair access to services.

With the investment in training and leadership in NHS staff and the measures in, for example, the performance assessment framework, the NSF will help to overcome—more effectively than a narrow legislative route would—problems of cultural attitudes of poor training and bad management practice. Such problems lie behind many of the individual arguments that have been made.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister is expressing the Government's concern about discrimination against older people. Does he accept that one of the biggest problems faced by older people in our hospitals is the phenomenon of bed blocking and the reduction in the number of places in nursing and residential care homes? If that is a factor, will he tell us why the Department of Health website was abruptly changed before Christmas from saying that the final draft standards for residential care homes for the elderly would be published before Christmas, to saying that they would be published in the spring?

John Denham (Labour, Southampton, Itchen)

The reasons for introducing delays in some of the target dates on care standards were set out in a speech made by the Minister of State, Department of Health, my hon. Friend the Member for Barrow and Furness (Mr. Hutton), who is responsible for social care matters. I shall be happy to give the hon. Gentleman a copy of that speech, which I believe was made to a conference of independent health and social care providers. It was a public Department of Health statement.

Philip Hammond (Conservative, Runnymede and Weybridge)

It was not in the House.

John Denham (Labour, Southampton, Itchen)

The Government cannot do everything through statements to Parliament, but there was clearly no intention to conceal the matter. I am fairly sure that a Department of Health press release was issued to accompany the speech, so charges of secrecy will not stick.

I agree that the massive loss of beds in the NHS under the previous Government has put huge pressure on our hospitals. It is undoubtedly a reason for the great difficulties. It is also a reason for our unprecedented investment in the NHS, which will enable us to increase bed numbers and make better provision in the community.

Lorna Fitzsimons (Labour, Rochdale)

Does my hon. Friend the Minister acknowledge that the reduction in the number of beds in some of our constituencies was aided and abetted by the Liberal Democrats?

John Denham (Labour, Southampton, Itchen)

I am absolutely certain that my hon. Friend is correct.

Philip Hammond (Conservative, Runnymede and Weybridge)

I will not attempt to score a point on that feeble attempt to deflect my previous intervention about the loss of care home beds. The Minister made a serious point in saying that he believed that a statement by the Minister of State, Department of Health, the hon. Member for Barrow and Furness, was covered in Department of Health press releases. He might be interested to know that my office asked the Department of Health press office whether it would be possible for Opposition Front-Bench Members to be on the mailing list for its press releases, and the answer was no. Will he see whether he can arrange for the Opposition Front-Bench health team, and, indeed, the Liberal Democrat health spokesman, to receive Department of Health press releases as a matter of routine?

John Denham (Labour, Southampton, Itchen)

I shall certainly look into that matter.

Now that I have dealt with the new clause, perhaps it will reassure the hon. Member for Sutton and Cheam—although not, therefore, the hon. Member for Runnymede and Weybridge—to learn that clause 16 and, to a degree, the related clauses, would allow appropriate action to be taken if an NHS organisation was clearly practising age discrimination, was acting outside the policy statement in the NHS plan or failing to uphold the national service framework. I shall not, unless the Committee presses me to do so, deal with each amendment individually.

I do not consider it necessary to amend clause 16 or the other relevant clauses in the way suggested to ensure that effective action is possible. That is not to say that the powers of intervention under clause 16 are the only or first measures that one would want to take if there was evidence of age discrimination. For example, if a trust was shown to be a red-light trust, and intervention from the regional office had increased, an action plan to deal with the problem might be produced. If the problem were solved, there would be no need to progress further. The wide-ranging powers under clause 16 would be the culmination of a series of other measures for tackling a problem.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The Minister referred to the Commission for Health Improvement. Is it appropriate for that body's remit to include—preferably enshrined in law, for which this Bill could provide a vehicle—a brief to deal with age discrimination and age-based rationing in the NHS?

John Denham (Labour, Southampton, Itchen)

We discussed that issue in relation to the Health Bill in 1999. The hon. Gentleman will recall that we preferred not to draw up a long shopping list, which would no doubt grow longer over the years, of prescribed issues for examination by the Commission for Health Improvement. That remains our view.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

This has been a useful brief debate. I hope that it will be viewed as a template for debates on other amendments.

The amendments were intended to probe the Government's attitude. I regret the fact that the Government are not prepared to embrace the spirit of our amendments and—on the assumption that they are deficient in some way—table their own versions. I should correct one of my opening remarks. I said that 70 per cent. of dialysis and renal units denied access to treatment on the basis of age. That is incorrect. The right statistic is that as many as two thirds of kidney patients over 70 have been refused dialysis or transplants.

We said during the passage of the Health Act 1999 that CHI should have a specific role in the context that we are discussing. While there is clear legislation about discrimination based on gender, race or disability, we still lack a similar legislative framework to govern discrimination based on age. The Liberal Democrat view is that we need such a framework and the Bill presents an opportunity to establish one, at least in the context of services provided by the NHS. We want to substitute clinical judgment for decisions based on age. The evidence is that, too often, decisions are based on age. The amendments would address that.

We may want to return to this matter later, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move amendment No. 62, in page 11, line 42, at end insert—

`, but no such order under this section shall be made unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 41, in page 11, line 42, at end insert—

`(1A) In making such an order the Secretary of State shall place a report in the Libraries of both Houses of Parliament detailing his reasons and the measures he proposes to take.'.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am glad that we are coming to the second debate just 40 minutes into our deliberations. I heard what the hon. Member for Sutton and Cheam said. If that was intended to be a nod in the direction of approval of the timetabling system, he should calculate that, at the current rate of progress and assuming we have stand part debates on each of the six clauses that we are scheduled to deal with, we will need 10 hours and 45 minutes to finish the business before us. I hope that hon. Members do not start to congratulate themselves too early on our rate of progress.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I should not allow myself to be goaded by the hon. Gentleman. Given that he spoke at great length on just a few amendments at the first sitting of the Committee, his attempt to lecture others about speaking at great length is somewhat unfortunate.

Philip Hammond (Conservative, Runnymede and Weybridge)

I was merely passing comment on what the hon. Gentleman said. All terms used are relative, and the hon. Gentleman has served with me on enough Committees to know that I did not go on at length last Thursday. I was a model of brevity. The hon. Member for Isle of Wight has had to leave his place, but I look forward to him emulating my example.

I welcome my hon. Friend the Member for New Forest, West (Mr. Swayne) to the Opposition Front Bench, to which he was appointed this morning by my right hon. Friend the Leader of the Opposition. We welcome him to the team, and look forward to his contribution.

We understand, although it is not evident from the Bill, that clause 16, together with clauses 2 and 3, proposes to create an elaborate grading system for health authorities and hospital trusts. That is controversial. The Secretary of State will be given significant powers under clauses 2 and 3, and can use the power to distribute money to ensure that hospitals and health authorities do what the Government want them to do.

Clause 16 is, I suppose, to be seen as the fall-back clause, to be brought into effect when the system put in place under clauses 2 and 3 has failed to deliver. It allows the Secretary of State to take direct control of health authorities or trusts, to sack the board, or individual members of it, and to replace members at will. It also allows him to delegate the functions of that health authority to a third party. There are serious concerns about the circumstances in which the clause might be used. A centralising power is being given to the Secretary of State. So far, there is no indication as to whether it is to be used sparingly, in the rarest and most exceptional cases, or whether the Secretary of State envisages using it more frequently.

In tabling the amendment, we seek to ensure that the power will be used only in the rarest of circumstances, when something in a health authority or a trust is clearly going badly wrong. In such circumstances, it would be necessary, under the amendment, for the prior approval of both Houses of Parliament to be given to the intervention order. That does not merely imply Parliament approving an intervention in a trust or health authority, it implies Parliament seeing in advance the terms of the intervention order, and approving them. It also implies the examination in advance of the Secretary of State's proposals for removing or replacing members of boards, and for farming out the responsibilities and duties of the authority or the trust. The arrangements proposed by the Secretary of State for monitoring the progress of the trust or health authority under the intervention order, and the proposed arrangements for that body earning its renewed autonomy and freedom of action, would also be subject to scrutiny and approval.

When the Minister addresses the Committee, we must ask him carefully to delimit the circumstances under which the Government intend to use the powers. As the powers appear in the Bill, they are extremely dangerous and potentially disruptive. I hope that the Minister will say that the powers under clause 16 will be limited to the most extreme cases. If that is the intention, I cannot see why a democratic Government would have difficulty bringing an extreme case of obvious need for intervention before both Houses of Parliament and arguing for an intervention order. It is a basic function of Parliament to scrutinise such draconian interventions, and arrangements are already in place for Parliament to scrutinise the governance of the NHS.

Government Back-Benchers must bear in mind the fact that the purpose of the clause is to hand over the management of failing NHS bodies to the private sector. That is padded out in a page and a half of verbiage, just as the concordat with the private sector that the Secretary of State signed amid great fanfares in the autumn was dressed up in a lot of verbiage about NHS doctors treating NHS patients in private sector hospitals, with the private sector merely providing the bricks and mortar and the equipment.

The meaningful clause in that concordat was the third of the three possibilities outlined—that NHS trusts were not merely empowered but fully authorised to purchase care from private sector providers if they believed that it was the most appropriate way to deliver services. We do not have a problem with that: it seems a sensible way of delivering the free-at-the-point-of-use health care that the NHS is committed to delivering. It is important, however, that Government Members are not distracted by the padding, the cotton wool and the warm friendly-sounding statements that we heard from the Secretary of State about preferring an NHS solution to the problem of failing trusts, and the waffle about green NHS organisations seconding staff to help those failing trusts.

The reality is that the traffic-light grading system that the Secretary of State proposes, whereby only 25 per cent. of the trusts and health authorities will be graded green, will introduce competition into the NHS—the competitiveness between hospitals and health authorities that the Minister and the Government said in debates on the Health Act 1999 they were committed to abolishing. What green NHS body, knowing that it was one of the 25 per cent. in the green category, would second its best staff to help another NHS body that was categorised as red? No green trust would do so. It would keep its key staff to ensure that it maintained its highly-coveted green status. That status is not merely an issue of prestige; it will also give green NHS bodies the freedom to use the available money as they wish.

Hilton Dawson (Labour, Lancaster and Wyre)

Is it not a failing that the Opposition are unable to take on board the Government's commitment to high standards and co-operation rather than competition?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman, as so often before, uses the words, but the Bill does not provide the mechanism to ensure that co-operation. I remind him that the note circulated by the Minister says that 25 per cent. of NHS bodies will be categorised as green. It will be a competitive process. If one trust is helped to improve and to become categorised as green, it will lessen another trust's own chance of falling within the green category.--[Interruption.] The hon. Gentleman can pull whatever face he likes. If we tell a group of people that only 25 per cent. of them will be eligible for the first prize, it is unlikely that they will find it sensible to devote a significant part of their energies to helping their competitors to be in that 25 per cent.

Lorna Fitzsimons (Labour, Rochdale)

Will the hon. Gentleman accept my experience of the hospitals in my health authority, which is that all the professionals were glad to get rid of the competition imposed by the Conservative Government? The whole ethos of the NHS based on co-operation beyond the boundaries of each hospital's physical environment.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Lady is making a case against the clause. Through the traffic light scheme, the Government are perniciously and artificially seeking to re-impose the competition that they said they wanted to end in the NHS. I do not believe that that will encourage NHS green organisations to second their staff to help those categorised as failing. I do not think that the Government believe it either. I think that they intend to look to outside bodies and private sector consultants and managers, as they have in education, to take over and reinforce the functions of failing NHS trusts. If that is wrong, and the Minister wants to say that the Government will not use the powers under the clause to appoint private sector management teams to run health authorities or trusts designated as failing, I shall be happy to give way.

John Denham (Labour, Southampton, Itchen)

I shall deal with the matter later.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister does not want to make that statement. Although the Secretary of State would understandably prefer an NHS solution—that does not mean that he believes that such a solution can be delivered—he has refused to rule out the possibility of private sector involvement using his powers on the running of NHS trusts under the clause.

The amendment proposes a departure from the way in which the NHS has been run. It would have significant consequences for the trusts and health authorities involved and would, I hope, be used rarely, such as when public scandal already surrounds the activities of a hospital, trust or health authority. In such extreme circumstances, it would be entirely appropriate and proper for Parliament to have the opportunity to scrutinise the proposed intervention order before it was made, and for it to be subject to the approval of both Houses of Parliament. That is what the amendment seeks to achieve.

Peter Brand (Liberal Democrat, Isle of Wight)

In my earlier contributions, I did not have an opportunity to declare my interests as a general practitioner contracted to the national health service, and as someone who sat on health authorities for many years until I was booted out by the previous Government on the ground that I worked for the NHS and knew something about it.

These interesting amendments show a difference in emphasis between the two Opposition parties. It is right for the Secretary of State to have intervention powers; Secretaries of State have always had such powers. Health authorities are not democratically accountable, except through the Secretary of State. Had the Government adopted our policy of putting health under a locally accountable structure—a local democracy—intervention would be totally exceptional and might need a positive resolution from the House of Commons. However, we are considering a health authority or trust acting as an agent of the Secretary of State in providing a service. If such a body fails to provide the service and is not amenable to a co-operative process of correcting that failure, it is right that powers of intervention should exist.

The Secretary of State should be accountable for taking the powers in question, but it would not be practical to withhold the powers until the decision had been debated in both Houses of Parliament. That would enable a rogue authority to run riot for three months, which would not be acceptable. The Secretary of State should be accountable for his or her decisions, but to bind such a decision to a debate in Parliament before it could be implemented would clearly be nonsense.

We have had some discussion of the traffic light system and league tables. I hope that we shall be able to return to that topic, which seems to me to sit better with the next group of amendments. Amendment No. 41 would not only strengthen democratic accountability, but would be practical. I should not want to deny the Secretary of State the power to sort out something that had gone seriously wrong.

Philip Hammond (Conservative, Runnymede and Weybridge)

Perhaps I have misinterpreted amendment No. 41, but it seems to me that it would achieve nothing. The order would in any case be made in a statutory instrument, subject to annulment, and would therefore be debatable after the event. Amendment No. 61 was intended to provide for debate before the action was taken.

Peter Brand (Liberal Democrat, Isle of Wight)

Exactly. We are realists. The hon. Gentleman clearly has no ambition ever to be Secretary of State for Health. He suggests that we should tie the hands of the Secretary of State to such an extent that he could not intervene unless both Houses were sitting. That is clearly nonsense.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman is contradicting himself. He said clearly at the beginning of his remarks that the Secretary of State already has substantial power to intervene, which is true. We are concerned about the additional and exceptional powers that clause 16 would grant him. There would be nothing to prevent the Secretary of State from using powers under other health legislation. Only the additional power under clause 16 would be subject to positive resolution.

Peter Brand (Liberal Democrat, Isle of Wight)

I have talked about paranoia before. I see the intervention powers as a tidying up of many little powers that already exist, and as meshing with the more overt, and perhaps clearer, way in which the Secretary of State can direct policy in the national health service. I see nothing wrong with that. My only concern is that the status of health authorities and trusts, the commissioning bodies and providing bodies will again be fudged. Perhaps some of the powers should be used by the Secretary of State only in conjunction with a commissioning body. Unless the commissioning is right, the trust cannot be expected to perform. There is a risk that the Secretary of State, acting from the centre, will interfere with mechanisms against the will or policy of the commissioner of the service. I hope that the Secretary of State will provide an assurance that powers will be taken against trusts only in conjunction and consultation with the health authorities responsible.

Desmond Swayne (Conservative, New Forest West)

I will take literally the strictures that my hon. Friend the Member for Runnymede and Weybridge gave the Committee earlier about being brief. I will not attempt to reiterate the case that he so ably made for the amendments, nor refer to the fact that the Liberal Democrat Members associated themselves with an agenda that increasingly allows the Secretary of State to manage all aspects of the health service. I shall, however, thank my hon. Friend for his kind words of welcome.

Hon. Members who have served with me on other Committees will know that I have never brought, or pretended to bring, any great wisdom to a Committee: I merely ask questions. I am unlikely to have been transformed by the announcement made this morning by my right hon. Friend the Leader of the Opposition.

My first question for the Minister is whether subsections (2) and (3) raise a rights issue. I note that the Secretary of State has given his imprimatur to the Bill under the Human Rights Act 1998, but a rights issue is raised nevertheless. I shrink from saying human rights: I have always thought it unnecessary, because all rights are human rights, to distinguish between the rights of men and the rights of orang-utans. Subsections (2) and (3) allow the Secretary of State to deprive the members of the board and officers of their livelihood and occupations. What right of appeal will they have?

Peter Brand (Liberal Democrat, Isle of Wight)

Is the hon. Gentleman suggesting that people serve on boards merely because it is a source of income? I thought that the remuneration was modest, in recognition only of the time that they had given.

Desmond Swayne (Conservative, New Forest West)

No, the Bill's provisions go rather wider. It speaks not only of members but of

those specified in the order.

That will affect people's livelihoods. Even if it does not, should someone be deprived of a position on the board merely on the fiat of the Secretary of State and without recourse to the other provisions of clause 16? Amendment No. 62 would allow scrutiny of the Secretary of State's decision by the highest tribunal of the land.

John Denham (Labour, Southampton, Itchen)

I congratulate my near neighbour, the hon. Member for New Forest, West, on his promotion. He has already shown that he will be an interesting and lively member of the Opposition Front Bench.

The hon. Member for Runnymede and Weybridge suggested that clause 16 was a draconian measure, but it is possible to envisage even more draconian measures. For instance, the Secretary of State could take to himself the power not merely to change the management of the trust but to dissolve it entirely. However, he cannot take that power because he was given it under the previous Administration when the trusts were set up. The power to dissolve trusts entirely is not subject to parliamentary control. The only requirement is for prior consultation, which can be dispensed with in urgent cases. The actions of the previous Government do not allow the hon. Gentleman to make a powerful case. However, it is reasonable to ask how the Government anticipate using those powers.

It would be useful to clarify the few minor points raised during the debate. Questions were asked about rights of employment. If a trust has new management, the employees of the trust will remain employees. Employment matters are for the trust to resolve as the employer. Different issues arise for board members. At the moment, the Secretary of State can dismiss non-executive directors of boards because they are not in an employment relationship with the trust or the health authority.

I struggled to understand the curious argument about introducing a competitive element back into the national health service. By awarding trusts green-light status, we will be rewarding with greater autonomy and greater freedom the best performing trusts, and setting the benchmark to which the rest of the NHS should aspire.

The hon. Member for Runnymede and Weybridge will have noted in the consultation paper circulated to the Committee and more widely that we believe that, initially, 25 per cent. of trusts will be in the green-light category. By indicating that the figure may not always be 25 per cent., we have built in flexibility, so that we do not have a rigid system in which some people have no incentive to improve and others who improve massively none the less cannot enjoy the greater rewards and the greater autonomy. We need that flexibility in the system, and have said that we will provide it. There is no bar to one successful health organisation co-operating with another that needs a helping hand with a problem.

Philip Hammond (Conservative, Runnymede and Weybridge)

In an ideal world, would all organisations be green-light accredited? Is that the Government's objective? As I read the document, it suggests that the majority will not have full autonomy, and that autonomy will be preserved for the privileged few. Should not the objective be autonomy for the vast majority?

John Denham (Labour, Southampton, Itchen)

The consultation document should be read to mean that the largest group of trusts--in the first instance, the yellow-traffic-light trusts--should be able to earn a greater degree of autonomy as they improve. The document has been worded to indicate that. As for the long term or, ideally, the medium term, I would be delighted if we were successful in our fundamental aim, which is to reduce the level of variation between the different parts of the health service by enabling the poor performers to improve.

All right hon. and hon. Members know that the best of the NHS is fantastically good. The biggest problem with the NHS is not that the best is fantastically good, but that the variation between one part of the service and another is too wide. The principle underlying the performance system is to provide at one and the same time greater freedom for those who are delivering services and are successful on the ground, and greater support and intervention for those failing to provide the quality of service that patients need. We have tailored the performance system to the problems we face at the moment, but the more successful we are, the more the performance system will change.

The hon. Member for Runnymede and Weybridge quite fairly asked me to explain the circumstances in which the Secretary of State would use the powers. Normally, the powers would be used when other measures of support and intervention have failed to bring about the necessary improvements. The NHS plan sets out a series of actions that do not require legislation and that are designed to improve the performance of failing NHS bodies. They include the NHS body agreeing a recovery plan with the Department of Health's regional office; closer monitoring of the body by the regional office to ensure that the recovery plan is implemented; the ability to introduce inspections by the Commission for Health Improvement on a two-year rather than a four-year basis; targeted assistance and support for the modernisation agency, including bringing in external expert clinicians or managers to re-design or turn around failing services.

Although the clause provides for the possibility of a massive or catastrophic failure that requires urgent or immediate action, the general intention is to provide a measure that can be taken if the other measures have failed to deliver. For example, if a trust's financial mismanagement continued despite repeated warnings and opportunities to take action, which it resisted, it would be right to have the power to intervene. If renal services were consistently bad, and all efforts to bring about change had failed, the measures in clause 16 would be appropriate.

The hon. Gentleman asked a question about private sector provision. One of our main renal centres, and about one fifth of satellite services, are currently provided by the private sector. We should not rule out using the private sector to try to deal with failing renal services. It can provide management skills under such circumstances.

The measures under clause 16 are to be taken as a last resort, or at the end of a series of other measures, except in the event of an immediate or catastrophic failure when urgent action must be taken. The hon. Member for Isle of Wight is right—adopting the affirmative resolution procedure would place the business managers of Parliament between the Secretary of State and the urgent action required to sort out a trust. Finding the time to get an affirmative resolution debated in both Houses is not easy, and if there were a serious threat to patients it would be wrong to waste time in such a manner.

The amendment tabled by the hon. Member for Isle of Wight does not introduce a statutory instrument procedure. It is difficult to imagine the circumstances in which the Secretary of State could take such action without it being a matter of public knowledge, and he would need to state clearly why he had done so. There is no need for a formal procedure for reporting.

The amendment moved by the hon. Member for Runnymede and Weybridge is unnecessary. The previous Administration introduced a wider and more draconian power to dissolve trusts entirely, and did so with no parliamentary safeguards at all.

Peter Brand (Liberal Democrat, Isle of Wight)

The importance of accountability is clearly recognised. I am, therefore, disappointed that we will have to rely on the grapevine and the odd press release when we want to know the reasons for the Secretary of State's actions. As the hon. Member for Runnymede and Weybridge said, those means of communication are not readily accessible to Opposition politicians. Would it not be much better for the body politic if the Committee were to accept amendment No. 41 and make it a formal requirement for the Secretary of State to publish the reasons for his actions?

John Denham (Labour, Southampton, Itchen)

It will not be necessary to find out about these matters on the grapevine. The Secretary of State will have to give reasons for his actions. I am not persuaded of the need for a formal reporting system, as suggested by the hon. Gentleman's amendment.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am confused now, because a few moments ago the Minister seemed to suggest that there would not be any statutory instrument procedure. Clause 16 provides for an order to be made, and Clause 61 states:

Any power under this Act to make any order or regulations shall (except in the case of an order under section 14(5)) be exercisable by statutory instrument.

My understanding has been that an order will be presented by statutory instrument, subject to the negative procedure. The amendment that I tabled is designed to change that provision, making the statutory instruments made under the Bill subject to the positive procedure. I have another point to make, but perhaps the Minister could reply to that one first.

John Denham (Labour, Southampton, Itchen)

I shall reflect on what I have said, and if I have been unclear, I will reply during the summing up. I was trying to point out to the hon. Member for Isle of Wight that, although he seemed to believe that his amendment related to a statutory instrument, it did not create a statutory instrument. In the case of the hon. Member for Runnymede and Weybridge, I was pointing out potential problems with adopting the affirmative procedure.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am sorry, but the Minister still has not clarified whether an order under the clause will be presented by means of a statutory instrument subject to the negative procedure.

John Denham (Labour, Southampton, Itchen)

The order is made under the 1977 Act because clause 16 will insert new sections into that Act. Subsection (2) amends the Act's provisions that govern orders, so that the order is not a statutory instrument.

Peter Brand (Liberal Democrat, Isle of Wight)

Even though we do not seek a statutory instrument, will the Minister accept that it is important to have a statutory means of communicating? We must ensure that Ministers give reasons that are readily accessible to Members of the House.

John Denham (Labour, Southampton, Itchen)

I am not convinced about that. We have considered the precedents set by the House in approving analogous legislation. For example, the powers of intervention that the Department for Education and Employment can use in failing local education authorities do not provide for a statutory system of reporting, as I understand them.

Peter Brand (Liberal Democrat, Isle of Wight)

May I draw the Minister's attention to our discussions on the Food Standards Agency? Such considerations were made, and the relevant Minister has to publish the reasons for intervention by statute.

John Denham (Labour, Southampton, Itchen)

I shall certainly reflect on that. I have given some thought to the matter since the amendments were tabled, and have concluded that it is sufficient to recognise that the Secretary of State will need to state clearly why he has taken action. I am not persuaded that a formal reporting system would add anything to the procedure, so it would be unnecessary.

Philip Hammond (Conservative, Runnymede and Weybridge)

As I said in my previous intervention, I had a substantive point. I ask the Minister to press his rewind button by about five minutes. During his attempt to outline the scope of the likely use of the clause, it was not apparent how many organisations in the NHS are likely to be red. The document that he has circulated makes it clear that the initial quota of green lights will be 25 per cent. We need to understand whether he expects the initial quota of red lights to be two, three, 10 or 1,000. What is the scale? Does he intend the quota of red lights to be 25 per cent?

Will the Minister also clarify a point that arises from his example of failure of renal services? Is it appropriate to place a trust in the red-light category owing to a failure in one of its services when its overall performance is good?

Peter Brand (Liberal Democrat, Isle of Wight)

Absolutely.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman says that that is absolutely appropriate, but let us move on. Would it be appropriate for the Secretary of State to intervene under clause 16 to shut down the trust's board of management owing to the failure of one service?

John Denham (Labour, Southampton, Itchen)

There are two points. First, I do not envisage using clause 16 at the first sign of failure in an organisation or service. I have tried to make it clear that it is a power to be used only after all other measures of intervention have failed. One must allow for an exception if failure is catastrophically widespread and action under clause 16 is necessary to protect patients' interests. In the case of renal services, the powers would be used only if the problem was apparent and recovery action had been demanded and taken, but had failed to tackle the problem. In practice, we will need to consider how to apply the powers, but that is our broad intention.

Peter Brand (Liberal Democrat, Isle of Wight)

Will the Minister give way?

John Denham (Labour, Southampton, Itchen)

Let me finish my reply to the hon. Member for Runnymede and Weybridge first. The hon. Gentleman's second question was about the number of organisations that should have red-light status. I doubt that as many as 25 per cent. of trusts would get that status. We are consulting with the service, through the document that was published last week, about the exact composition of the core list of measures,—the must-dos against which performance should be assessed—and the category and weighting of different measures in the wider performance assessment framework. It is wrong, at this stage, to try to predict exactly what the number of red-light trusts will be and I reinforce his earlier point that it is not a fixed figure that will always be there from one year until the next.

Mr. Hammond rose—

Dr. Brand rose—

John Denham (Labour, Southampton, Itchen)

I should make progress, but I give way to the hon. Member for the Isle of Wight.

Peter Brand (Liberal Democrat, Isle of Wight)

I am slightly concerned that the Secretary of State says that one particular failure may not lead to intervention. However, if there were a deliberate failure to provide a service—and I am going back to the points made by my hon. Friend the Member for Sutton and Cheam—where, for instance, a trust said that no-one over the age of 60 should be dialysed, or that it would not provide adequate services for people with HIV, even though all the other services were wonderful, hopefully the Secretary of State would consider exercising his powers of intervention.

John Denham (Labour, Southampton, Itchen)

We need to be careful about taking too many specific examples. In general, if a service was failing, but it could be put right immediately or put on the right track by measures short of those in clause 16, we would wish to do that. If a management failure showed complete unsuitability to do the job, although there might be a power in the Bill, perhaps the trust should deal with the problem through normal employment measures. Clause 16 is essentially to be used as an immediate response to major failure across a series of services. In effect, it completes the armoury of measures that can be taken when any services are shown to be failing.

Philip Hammond (Conservative, Runnymede and Weybridge)

This is terribly important to our understanding of how this will work. It is still not clear to me whether the criteria for red lighting are to be absolute or relative—whether there are to be fixed hurdles so that theoretically in an awful situation 50 per cent., 60 per cent. or 70 per cent. of NHS organisations could be red lighted because they failed to meet the Government's hurdles, or whether there is always to be only a bottom decile or whatever.

John Denham (Labour, Southampton, Itchen)

The consultation document says that red organisations will be those that are failing to meet one or more of the core national targets or that demonstrate serious service failure. This document is out to consultation. It is possible to produce a core set of targets whereby unless three, five or seven targets have been met, the organisation will automatically be deemed to be red light. It is equally possible to have a situation where a failure to meet one target would not necessarily trigger red-light status. The point of consultation with the NHS is to invite views on the group of services to be linked to the measures and the way in which the red-light traffic light should be applied. I acknowledge that the hon. Gentleman has a fair point, but it is not one that we need to resolve now. It would be better to have input from the service.

John Maxton (Labour, Glasgow Cathcart)

Before I call the hon. Member for Runnymede and Weybridge, I should point out that some of the interventions were slightly long. I remind Committee members that although they are at liberty to speak in debates on amendments in the Committee as often as they wish, it might be better if they made speeches rather than interventions.

Philip Hammond (Conservative, Runnymede and Weybridge)

Thank you, Mr. Maxton. We are grateful to you for reminding us of our ability to speak more than once in Committee.

This has been an interesting debate. I understand that because of the Byzantine architecture of the Bill, the clause 61 provisions on order making will not apply to an order made under clause 16. I am disappointed that that means that there will be no opportunity for parliamentary scrutiny. Nor, indeed, as the hon. Member for Isle of Wight has pointed out, will there be a requirement for formal reporting of orders made by the Secretary of State. Whatever we may think about parliamentary approval before or after the event, we all think that Parliament should be informed of such orders. I am sure that hon. Members will want to return to that matter on Report.

Having listened to the exchanges between the hon. Member for Isle of Wight and the Minister, and to the Minister's closing remarks about the minimum requirements, failure to comply with which could put a trust or health authority into the red-light category, I fear that the model that the hon. Member for Isle of Wight has in mind is subjective and flexible in its approach to the quality of service provided by NHS organisations, whereas the Government propose a mechanistic procedure for measuring not whether trusts do a good job and provide good care, but whether they comply with targets set by the Government. Those could be quite artificial targets relating, for example, to changes in numbers on waiting lists.

I am grateful to the Minister for clarifying whether the red-light numbers will be based on an absolute hurdle or a proportion of the relevant total. I think that the answer was that a mixture of the two would be used. I do not envisage that the Minister would feel comfortable with the knowledge that 70 per cent. of NHS bodies were in the red-light category, although it is fairly clear from the draft list that has been submitted for consultation that if all the criteria were selected, and failure in one of them meant going into the red-light category, most NHS bodies would be there.

The Minister has perhaps deliberately misinterpreted my question about the involvement of the private sector. He gave the example of renal services and of course the private sector already has a substantial role in providing renal services to the NHS. I really wanted more to consider management and leadership of NHS trusts. Whom will the Secretary of State appoint, and to what bodies will he delegate the functions of health authorities or trusts that are subject to intervention orders? I hoped that he might come clean on the organisations that he had in mind to take over the powers of failing NHS bodies.

The Government need courage when they see a need to do things differently. When we believe that they are doing things right, we shall say so. We shall not attack them for doing what is common sense. There may be circumstances in which it is appropriate to bring in suitably qualified consultants or organisations to run failing organisations within the NHS. The essential characteristic of the NHS is to ensure universal access to health care, free at the point of need. The patients could not care less who provides or manages it, as long as they get it when they need it, and it is free at that time.

I hope that the Minister will be a little more open with the Committee about the Government's intentions. We shall need to return to this broad area of consideration on Report. Perhaps there are practical reasons for the Government to have made it clear that they would not agree to prior parliamentary approval, and we shall need to explore a mechanism for ensuring that Parliament is at least informed when orders are made. With that in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

12 noon

Philip Hammond (Conservative, Runnymede and Weybridge)

I want to raise a couple of technical points about how clause 16 will work. It is not clear to me how an intervention order will be brought to an end. Will it contain provisions showing what will have to be achieved before it is terminated? Will the relevant bodies revert to their former status, run by a trust board or health authority board? Will the persons or bodies with interim control be informed of clear targets that must be reached before autonomy is re-earned? How would the Minister deal with the perverse incentive that there would be for an outsider who was appointed to and remunerated for a job in a failing NHS body? Such a person—or body—would know that on completion of the task the remuneration would cease. What mechanism would ensure that the special measures under an intervention order would function as a convalescent ward, from which the patient would eventually emerge, rather than as a long-term asylum, from which there would be no hope of escape?

John Denham (Labour, Southampton, Itchen)

I have two points to make in reply to the hon. Gentleman. The duration or other details of an order would be matters for the Secretary of State, who would, I understand, have some discretion over how the order was laid. It could be time-limited or open-ended.

As to securing the prime object of the case, which is an important question, the trust would still exist as a legal entity and would be subject to all the same powers of intervention and support that we debated earlier and which I am sure we shall discuss under later clauses. The Secretary of State would maintain a built-in interest in the performance of the trust. That mechanism would enable the Secretary of State to monitor performance under the order and take whatever measures were necessary.

That is probably enough for now, but other issues that arise under clause 2 might provide elaboration on those points.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.

Clause 2 - Payments relating to past performance

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move amendment No. 65, in page 3, line 1, leave out `performed well against any' and insert `met the performance'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 66, in page 3, line 3, leave out from `functions' to end of line 5.

Philip Hammond (Conservative, Runnymede and Weybridge)

The clause relates essentially to the same ground that we have been covering: the financial powers that the Secretary of State will have as part of his armoury at the soft end of the spectrum, culminating in the clause 16 intervention powers. There is quite a lot to say about how the clause works, and I shall attempt to restrict my remarks to the narrow issue of the amendment. I hope that the Committee will have an opportunity for broader debate under clause stand part.

Amendments Nos. 65 and 66 would render more objective the process by which the Secretary of State would proceed, and inject an element of natural justice into the proceedings.

The wording of proposed subsection (3C)(b) is extraordinary. It allows the Secretary of State to give a further sum to health authorities if they perform well

against any criteria notified to them.

They do not have to perform in a defined way against such criteria; they do not have to achieve targets; they have merely to perform well. If they want to know whether or not they are performing well, they may be hampered by the words in parenthesis at the end of paragraph (b):

whether or not the method of measuring their performance against those criteria was also notified to them.

The Secretary of State will be handing out money to those who have performed well against a criterion without telling them how he intends to measure the quality of their performance. That would be the start of a rather dangerous and slippery slope.

The amendments seek to tighten that up a little. We shall consider later amendments Nos. 67 and 68, which would further limit the Secretary of State's wide powers of discretion and ensure that NHS bodies understood explicitly the targets that they were required to meet and how they would be assessed on their performance against those targets. They would also have the opportunity to appeal if they believed that they had been wrongly or unjustly assessed, which would ensure that the process was a little more transparent, objective and accountable than under the Bill.

There are two big flaws in the provision. It gives huge power to the Secretary of State to micromanage the NHS at every level, either directly or by the implicit threat of taking over functions or withholding money; and that will lead to the distortion of clinical priorities, because trusts and health authorities will be assessed not on the overall quality of their service, but on whether they meet Government targets. For the past three years we have accused the Government of distorting clinical priorities by forcing NHS trusts and health authorities to focus on doing the Government's bidding. In particular, the waiting lists initiative forces health authorities and trusts to devote resources to dealing with those suffering from minor complaints, who are merely numbers on the waiting list, rather than addressing those in greater clinical need.

The Government consistently deny that they have used financial means to put pressure on NHS management. The clause makes it explicit that NHS managers will in future be clearly told of the Government's political priorities and of the targets that they must meet, and that they will be financially penalised if those targets are not met by not being allocated money from the performance fund.

The consultant urologist at my local hospital wrote a letter to the chief executive, a copy of which was obligingly sent to me. The consultant referred to a specific case and, for obvious reasons, I shall not mention the patient's name. He wrote:

You were fully aware of three other patients of mine who were admitted for major cancer surgery (after a three months wait) only to be cancelled three times each, within thirty minutes of being called to the theatre.

He continues,

these are but three examples of a long-standing problem. One year ago I was put under pressure by the management to treat non-urgent long waiting patients instead of patients with cancer

such as Mr. X.

Anyone who is interested in the NHS—including the Minister—and who talks to doctors and nurses, will know that whatever Whitehall intended, the practical effect of the way in which the system has operated over the past three years has been that hospital managements, not for their aggrandisement nor their financial enhancement, but for the good of their trusts, and needing to access the funds that were available to them conditional upon their meeting waiting lists reduction targets, have manipulated waiting lists. They have moved people off waiting lists when they should remain on them. Derriford hospital cardiology department springs to mind. Clinicians have been forced to prioritise minor waiting list cases ahead of those with clinical priority. The Government Whip may wish to intervene on the matter of Derriford hospital, but I doubt it.

Clause 2 institutionalises that system in primary legislation, and that is a potentially dangerous trend. These amendments—and later ones—seek to introduce a safeguard. They would not undo completely the Government's efforts because that is not within the scope of our ambitions, but would introduce safeguards by requiring the Secretary of State to make the criteria by which he would judge a trust's performance clear, objective and public. People in the country, informed opinion, clinicians and the medical representative organisations would then be able to comment on whether the criteria that the Government seek to impose and would use in allocating money or intervening to take control of the management of trusts, are the right criteria to ensure the delivery of proper health care. For that reason, I commend amendments Nos. 65 and 66 to the Committee.

John Denham (Labour, Southampton, Itchen)

The hon. Member for Runnymede and Weybridge has every right to rehearse familiar arguments about the Government's approach to running the NHS and the emphasis that we have put on cutting waiting lists and waiting times. The NHS plan makes clear our plans to go further and cut waiting times in the years to come. We have also made clear that clinical need should take priority.

Philip Hammond (Conservative, Runnymede and Weybridge)

What about waiting lists?

John Denham (Labour, Southampton, Itchen)

Before the hon. Gentleman intervenes, he should recall that one of the things that he objects to most strongly is the notion of a maximum waiting time for an operation in the NHS. However, I remind him that the concept of an 18-month maximum waiting time in the NHS was introduced by the previous Administration.

Philip Hammond (Conservative, Runnymede and Weybridge)

My remarks today, and previously, have been directed at the waiting list initiative. We said at the time—and have said since—that it is more sensible to focus on waiting times rather than lists. The consultant urologist from whose letter I quoted was being asked to reduce numbers on a waiting list regardless of clinical priority.

John Denham (Labour, Southampton, Itchen)

I may have misunderstood the letter from the hon. Gentleman's constituent. I understood that his complaint was that long waiters were receiving priority treatment. I agree that clinical priority must win out, but I understood the letter to refer to long waiters rather than numbers on a waiting list.

I shall concentrate on the clause because the idea that it introduces sweeping new powers is not right. Under the Health Act 1999, the Secretary of State already has powers to pay additional funds to health authorities on the basis of past performance. Secretaries of State have always managed the NHS and have wide powers to direct NHS bodies on the carrying out of their functions. As we discussed during our first sitting, the Secretary of State already has wide discretion to determine how much each health authority receives.

Clause 2 seeks to bring extra flexibility to the way in which the Secretary of State can pay additional funds to health authorities, especially through the ability to make in-year payments against in-year criteria of health authorities' performances. I shall give an example, which I hope will be helpful and justifiable. As all members of the Committee know, there are no published waiting times for seeing a therapist. The implication of the NHS plan is that we will need to develop such indicators, as our current measures are limited solely to some consultant-based out-patient services. It is conceivable that the Department will work with the health service to develop useful, robust and well defined indicators of the time taken to see a therapist. Through the performance system, which I will say more about later, the Department might want to incentivise the achievement of improved waiting times to see therapists.

Under the amendment, if the detail of those measures were not in place when a health authority allocation was made, nothing about waiting times to see therapists could be included in performance measures for the year ahead. That could lead to a considerable delay in building waiting time performance for therapists into the allocation of health authority resources. The clause is worded in a way that will overcome the lack of flexibility in the system. I acknowledge that the wording may have caused concern, but it will be useful for me to state what the clause is meant to do and how it will set about it.

I want to give some background by talking about the performance system that underlines the Government's measures and the reasons for the clause. The clause will enable the Secretary of State to make additional payments to health authorities based on their performance during the year in which the payments are made. Current powers allow us to make additional payments to health authorities based only on their performance in previous years.

Clause 2 and clause 3, which is about supplementary payments to NHS trusts and primary care trusts, will be used to implement the new national health performance fund, which will be worth £500 million by 2003-04. Our prime purpose relates not to giving some people more money than others, but to the level of conditionality that applies to money dispersed through the performance fund. The fund will assess trusts as having red, yellow or green-light status. Each trust will receive its fair share of the performance fund with a different degree of conditionality. Green organisations will have access to their share of the fund as of right. Yellow health authorities, NHS trusts and primary care groups and trusts will be required to agree plans, signed by the regional office, setting out how they will use their share of the fund. Red organisations will have their share of the fund held by the new modernisation agency. They will receive their share of the fund, but it will come with strings attached and the agency will oversee spending.

Health authorities will be notified in advance of the objectives that they will need to meet or the criteria that will be used to assess whether they will receive additional payments, but the clause will mean that the Secretary of State can notify health authorities of the precise method of measuring their performance against those criteria after the start of the assessment period.

I do not want to mislead the Committee. Although I have talked about the performance fund and the allocation of fair shares, I should acknowledge that the clauses would allow the Secretary of State to make additional funds available if, for example, he chose to offer incentives for improvement in a particular area in a particular year. We have put much emphasis, in the plan, on people getting their fair share, but the provision would enable the Secretary of State to offer incentives in the form of additional funds for good performance by certain organisations. Equally, the flexibility of the clause allows some choice as to whether that would be assessed against absolute or relative performance criteria.

Philip Hammond (Conservative, Runnymede and Weybridge)

Will the Minister clarify whether that approach will be objective? Will performance of a given level—whether relative or absolute—measured against certain criteria, unlock certain amounts of money across the board, or is he proposing that the Secretary of State make a series of bilateral contracts with individual organisations?

John Denham (Labour, Southampton, Itchen)

The criteria would have to be objective. To use a hypothetical example, it would clearly be unacceptable for the Secretary of State to go to Darlington Memorial hospital trust and say, ``I was very impressed by the quality of the garden outside the chief executive's office. This is now a performance criterion for NHS trusts. Have another couple of million quid.'' It would not be acceptable for the Secretary of State to act in such an arbitrary way. Whether one is trying to set up the performance fund itself, or design a system for additional funds for good performance, it would have to be done using objective criteria. However, we cannot currently notify the criteria, or the system of measurement, in year. The amendments tabled by the hon. Gentleman would tie us to doing that at the point at which the allocations were made.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not sure whether I agree with the Minister's interpretation on that last point, but we will return to that. He talked about the unacceptability of the Secretary of State being able arbitrarily to intervene in the allocation of funds, and how they should be allocated on an objective basis. Does he recall the Secretary of State alluding, in Health Questions two weeks ago, to the issue of the transitional funding allocation to West Surrey health authority, which is in my constituency? The regional office recommended that a certain amount be paid, and the Secretary of State, or Ministers, overrode that decision and allocated a smaller sum. My interpretation of ``objective'', in the context of the Government allocating money, is that the word describes a process determined by officials against objective criteria. As soon as Ministers start overriding official advice and recommendations, I get very nervous.

John Denham (Labour, Southampton, Itchen)

The hon. Gentleman will be relieved to know that there are a great many situations in government where Ministers override official advice. It is part of being in government and being a Minister—we receive advice, consider it and weigh it carefully, but then take our own decisions as to whether that advice is correct and whether we should act on it. That applies, in a number of different ways, to the decisions that Ministers make about the allocation of resources. I sought to reassure the hon. Gentleman that we do not intend our approach to the matter to be purely arbitrary.

I had concluded my general remarks about the relationship between the clause and the performance fund.

Philip Hammond (Conservative, Runnymede and Weybridge)

Mindful of your earlier strictures, Mr. Maxton, I have thought carefully about whether this point is better made by way of an intervention or a second contribution. I do not understand the Minister's interpretation of the amendment as requiring that the criteria would be notified to health authorities and trusts at the time of the original allocation. I see nothing in the Bill or the amendment that would have that effect. It would be possible for the Secretary of State to notify additional criteria in year. However, it would be reasonable for him to notify, at the same time, the method that he proposed to use to measure performance against those criteria.

John Denham (Labour, Southampton, Itchen)

In the example that I gave, it would not necessarily be possible to identify the precise method of measurement at the same time as notifying the criteria. I was saying that although performance on therapist waiting times might be a helpful criterion, it might not be possible, for practical reasons, to give the precise measurement when the criterion was published; one might follow the other. The clause provides us with the necessary flexibility.

Philip Hammond (Conservative, Runnymede and Weybridge)

Does the Minister not agree that this might have a bizarre perverse effect? Any organisation being told that a criterion for financial reward will be reduction in waiting times to see a therapist, without being told what level of reduction is required to receive the reward, may allocate more resources than the Minister thinks appropriate in order to achieve an as yet unknown target.

John Denham (Labour, Southampton, Itchen)

We have to be sensible about this and remember that its purpose is for the Government to be able effectively to incentivise good performance in the national health service. It is difficult to envisage circumstances in which any Secretary of State would deliberately create a situation in which health authorities, or trusts had no idea what they were meant to do in order to achieve a particular result in the performance fund—whether that was additional money or green-light status. Although I see the point that the hon. Gentleman is making, nobody would sensibly use the power in that way. The problem at the moment is that the Secretary of State is unduly constrained.

Kali Mountford (Labour, Colne Valley)

I am grateful to my hon. Friend for giving way. Is it not better for the Government to intervene in order to incentivise and improve services, than merely to ensure that there were no schools closures, for instance, in Finchley or Huntingdon, as we were informed by the hon. Member for West Chelmsford (Mr. Burns) last week?

John Denham (Labour, Southampton, Itchen)

Indeed. My hon. Friend makes a good point. We were given an interesting insight into the nature of decision-making by the previous Government. That is not the way of this Administration. I do not believe, therefore, that the powers could sensibly be used in the way that the hon. Member for Runnymede and Weybridge has suggested. However, the inability to make in-year payments against in-performance is a restraint on the development of effective performance measures.

Philip Hammond (Conservative, Runnymede and Weybridge)

Is the Minister giving way?

John Denham (Labour, Southampton, Itchen)

I was going to give way to the hon. Member for Sutton and Cheam, but he is no longer in his place, so I shall give way to the hon. Gentleman.

Philip Hammond (Conservative, Runnymede and Weybridge)

I would not readily step into the shoes of a Liberal Democrat. Before the Minister makes further comments relating to the remarks made by my hon. Friend the Member for West Chelmsford last week, let me remind him of the increase in funding per capita to the NHS in the Durham health authority area compared with the increase per capita in funding for the NHS in the West Surrey health authority area since 1997. He may find something that rings a bell with the comments made by my hon. Friend last week.

John Denham (Labour, Southampton, Itchen)

The whole point of this, which we discussed last week, is that those allocations are an open process.

Philip Hammond (Conservative, Runnymede and Weybridge)

Not any more. That is the point.

John Denham (Labour, Southampton, Itchen)

I do not believe that that will change. One can see there is funding there through the funding formula. One can see the allocation that has been made to areas that have been identified as health action zones. One can see the allocations that have been made because of the indicator of deprivation. It is a process that anyone can see. Of course it will always be possible for people to say that they would not have taken that decision. That is partly what Government is about—taking decisions, saying how they have been made and justifying them in political debate. No-one can say, however, that it is a procedure that is shrouded in secrecy or lack of transparency.

Philip Hammond (Conservative, Runnymede and Weybridge)

I hear what the Minister said. He may argue that need in Durham is greater than in Surrey; but costs in Durham are no greater than in Surrey, as my right hon. Friend the Member for South-West Surrey (Mrs. Bottomley) reminds health Ministers at every available opportunity. A patient waiting for elective surgery in south-west Surrey is nine times more likely to have to wait more than 12 months than a patient in the Prime Minister's constituency. Before the Minister goes further in his chosen direction, he might want to think carefully about those issues.

I am mindful that we have raised the issues of transparency and accountability to the public and to Parliament on the one hand, and certainty and objectivity and clarity in the assessment system imposed on trusts on the other hand. The subject can be adequately aired later, during our debate on amendments Nos. 67 and 68. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Peter Brand (Liberal Democrat, Isle of Wight)

I beg to move amendment No. 40, in page 3, line 5, at end insert—

`(c) Subject to paragraph 5A(2) of Schedule 3 to the National Health Service and Community Care Act 1990, payments may be made to improve unsatisfactory performance against those criteria set out in paragraph (b) above'.

We had an interesting debate on the first group of amendments to clause 2, during which the Minister said that the performance fund was not necessarily an additional fund and that it depended on meeting performance criteria. I am worried that we are using the wrong incentive. A good performance incentive for health trusts or health authorities would be that their local communities should enjoy better health; the trusts and authorities should be seen to have delivered that performance, but they should be able to achieve it in whatever way they want. The incentive would be that a hands-off approach could be taken and the trust or health authority would be rewarded for delivering the goods.

As the hon. Member for Runnymede and Weybridge suggested, rewarding on strict criteria would distort the way in which health is delivered. However, those who do not achieve green-light status will know that they will lose money; and that would be extremely dispiriting, especially if the failure were not their fault. In certain circumstances, some health authorities and trusts cannot deliver the goods at the same cost as elsewhere. Perhaps they cannot attract staff. That happens in inner cities because of housing costs; but it can happen in rural areas because there is less chance of private practice for consultants, because better jobs are available elsewhere for those who want to go into higher-level nursing and because it is more difficult to attract good managers. Those trusts may have to rely on locums and others who are not so committed to the service, but those people are more expensive to employ because they can market their services through agencies. The trusts will end up with a service that costs more but delivers less.

The amendment would provide a mechanism so that if a trust failed to achieve the criteria, whether published or not—everyone, including the trust itself, would know when the trust was not achieving them—the Secretary of State could make available extra money to try to overcome that problem. That would help to improve performance, which is the purpose of the modernisation fund. The phrasing of the clause implies that any moneys disbursed would go only to those who succeeded.

That would be an enormous disincentive to the people who, for many reasons, which I have tried to suggest, find it difficult to achieve what is desired. If we were to use education as a comparison, what is proposed would be like announcing that all schools would receive the same amount, and brilliant schools would receive even more. We would never, in social terms, accept that. At least I hope that even a new Labour Government would not accept it. I do not think that we should make that mistake with the health service.

I should like some more explanation about the red-light system. I hate this red zoning business, Mr. Maxton. The previous Secretary of State, the right hon. Member for South-West Surrey (Mrs. Bottomley), said the other day that if she were in a red-light zone she would be very worried. I have a problem with the fact that the greenies get everything and the yellowies may get something, with a few strings, but it is not clear from the Bill that those in the twilight red zone receive anything, even with strings attached. It is right that strings should be attached, if people are not performing properly, but it is not right that funds should not be attached to the support that is provided.

The Secretary of State has said that there may be some additionality in the clause. That is right in the case of something that is innovative and exciting: a pilot project that needs to be worked through and may be more expensive to start with. However, I do not support the rewarding of success with extra money as opposed to extra freedom.

Philip Hammond (Conservative, Runnymede and Weybridge)

I want briefly to support the point that the hon. Member for Isle of Wight has raised. It is important and shows up a fundamental flaw in the Government's thinking about the working of the system. I look forward to hearing what the Minister will tell us about wanting to appeal to human nature in rewarding the successful, to create incentives, while recognising that we are not engaged in a game in which we pat health authorities or trusts on the head. We are concerned with the ability of people who depend on services to obtain proper treatment when they need it. The people with the misfortune to live in red-light trust areas may well ask how the system will benefit them.

The traffic-light system is likely to devastate staff morale, recruitment and retention. Let us imagine how a trust or health authority that had been designated red, as a failing body, would fare in the competition for scarce staff. How would it encourage its staff to remain, when perhaps the neighbouring green-light trust, free to undertake all kinds of go-go programmes with its earned autonomy, wanted to poach them? The Minister and other hon. Members have talked about co-operation between NHS bodies, which is fine when one is sitting in a Committee Room in Westminster, but we should get real. Out there in the real world NHS bodies poach staff from each other every day. That is how they operate. I am sure that in principle they would like to co-operate, but they are competing for resources, including staff.

The most telling criticisms that I have heard of the traffic-light system concern its likely impact on the ability of those at the bottom of the pile to sell themselves as organisations for which to work, and to present themselves to their unfortunate public as organisations by which one would want to be treated. As long as patients have no choice we need to consider carefully what message we send to someone whose doctor says, ``You need major surgery. The good news is that I can get you into hospital in six months. The bad news is that the hospital you are going to has just been classified by the Government as red and failing, but you have no choice.'' We need to think carefully about the messages that we send and their impact on patients and staff.

John Denham (Labour, Southampton, Itchen)

The hon. Member for Isle of Wight is clearly concerned about the position of poorly performing trusts that might require extra money to turn them around. It is worth focusing again on the purpose of the clause and on the wide range of powers that, as we discussed previously, are available to enable the Secretary of State to make payments. Legally, I probably overstated the case earlier, because the Secretary of State is allowed to take a wide range of factors into account in making allocations to each health authority. He has a wide discretion and may consider a range of factors, so I suppose that he does not always have to explain every detail of what he has done, although in practice that is what happened with health authority allocations in November.

The discretion that I have explained means that it is open to the Secretary of State to pay more to a poorly performing health authority—or indeed, given the relevance of clause 3 of the Bill, to poorly performing trusts—if he believes that those additional amounts would help to improve unsatisfactory performance. The ability to make additional payments to a poorly performing trust already exists, without any of the provisions that we are considering. Clause 2 would effectively amend the performance legislation under the Health Act 1999, which enabled the Secretary of State to make additional payments on the basis of past performance. It now enables such payments to be made on the basis of performance in-year.

A performance system that could, in-year, trigger an extra payment for the worst trust, would probably be perverse. It would not send the desired signals. The Secretary of State's discretion to make additional payments to poorly performing health authorities or trusts is best exercised separately, and not, as would apparently be attempted under the amendment, as part of the overall performance regime. Sufficient powers exist and no new ones are needed, so the amendment is not required.

As to the wider points that were made, I am confident that the fears about what will happen to red-light trusts are misplaced. One of my reasons derives from a different area of policy, and my experience as the parent of children who were both at a primary school that failed its Ofsted inspection. My son is still there and my daughter has moved on to secondary school. The system identifies a failing school and requires a response. My children's school was quickly turned around under the leadership of a new head teacher and provides a good education. It has just undergone its Ofsted inspection and I believe and hope, from what I hear, that it will emerge well.

In the health service we have already obtained clear indications that the identification of trusts that are not doing well—together with the support that they receive from what will now be known as the modernisation agency, and in particular the waiting list team and the national patients access team—can turn poor performance around rapidly. For example, last summer several trusts were identified as performing poorly with respect to out-patients. Most of them, with external support, improved very quickly. We have increasingly good support mechanisms available to help turn failing organisations around. Just as having a ``failing school'' label from Ofsted does not damn a school for ever, but enables it to turn around, so a red-light trust, because of the support that it will receive, will be able to address its problems much more quickly than if its failings were not identified and it were offered no support.

I realise that the debate is about Government policy, and not that of the Opposition, but everything that the hon. Member for Runnymede and Weybridge has said implies that central Government should have an approach characterised by disinterest, benign or otherwise, towards the variations in performance of health authorities and trusts. He implies that we should give up on any opportunity to support or intervene where patients are being failed. I agree that we cannot micro-manage the entire service from Whitehall, and that we should not attempt to do so. We will use the powers in the Bill to increase the autonomy of organisations that perform well. However, there must also be provisions for intervention and support for trusts that are failing. To reassure the hon. Member for Isle of Wight, the Secretary of State is already able to back up such support with additional resources if he judges that that is necessary and appropriate.

Peter Brand (Liberal Democrat, Isle of Wight)

I am interested in that response. What would the reaction have been if the previous Government had introduced not just Ofsted and league tables for schools, but financial rewards for those schools that received a good Ofsted report? Failing schools or trusts that are having difficulties may receive additional funds on an informal basis. However, the message to the public is quite different. Success is seen to be rewarded with extra money, while failing trusts appear to be sent to the back of the class.

There are two issues here. One is of public perception, and what it will mean to work in a trust with a green, yellow or red light. The other is that of how much money will be available in the performance fund, which will be additional, and therefore, presumably, not accessible to the red-lighted brigade, and how much money will be available in the modernisation fund.

The Secretary of State says that he already has powers, and that he will have increased powers when clause 3 comes into effect. Why, if that is the case, must we have the divisive clause 2? It is right to reward successful trusts by giving them more autonomy in running their business. We should abandon performance indicators that simply measure activity, and should measure quality of outcome instead. However, we still have to work on that.

I can imagine every hospital having a traffic-light system, and if a hospital is on green, it will have a large green light beaconing out at people, rather like the cone outside St. Mary's hospital, which is beloved of very few. However, unless an amendment such as the one that we have proposed is inserted in clause 2, the rewards will not just be greater autonomy and a plaque on the wall. The financial element will reinforce differences.

If we have a performance fund, let it be a true performance fund, and be accessible to people who need help to perform better. That would allow us to look at things in year. If, for example, two or three consultants retire, that would be a disaster for a trust. It would not meet its performance targets, because locums are so difficult to get. It would not be its fault if it were to fail, yet it would be penalised through having additional moneys withdrawn.

I urge the Minister to think again. I shall not press the amendment, but the Government should consider how the provision will come across not only to those working in the national health service but to the patients and communities who will be affected by it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move amendment No. 67, in page 3, line 5, at end insert—

`(3CC) The Secretary of State shall within 28 days of notifying objectives or criteria to Health Authorities publish details of them as—

(i) objectives to be met in performing their functions; and

(ii) criteria relevant to the satisfactory performance of their functions

together with details of the methods of measuring their performance against those objectives and criteria which he will use in assessing them for payments of further sums to them in accordance with subsection (3C) above.'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to discuss amendment No. 68, in page 3, line 5, at end insert—

`(3CC) The Secretary of State shall publish annually a report detailing, in respect of each Health Authority to which he has made payments under subsection (3C) above—

(a) the objectives notified to that Health Authority under (3C)(a) above; and

(b) the criteria notified to that Health Authority under paragraph (3C)(b) above; and

(c) the methods of measuring their performance which he has used in assessing them for payment of further sums in accordance with subsection (3C) above; and

(d) his assessment of their performance against the objectives notified in accordance with paragraph (3C)(a) above and the criteria notified in accordance with paragraph (3C)(b) above; and

(e) the further sums paid to them in accordance with subsection (3C) above.'.

Philip Hammond (Conservative, Runnymede and Weybridge)

Amendments Nos. 67 and 68 continue the theme of ensuring that the Secretary of State's actions in relation to clause 2 and 3 are as transparent as possible. Amendment No. 67 provides that the Secretary of State should, within 28 days of notifying objectives and criteria to health authorities, publish them and the methods that will be used to assess their performance against those criteria. I see nothing terribly radical about that, and I hope that the Minister will take the amendment in the spirit in which we present it. A series of amendments would be needed to make similar arrangements under clause 3, but the amendment sets out the principle, which is that the arrangements made between the Secretary of State and an NHS body should be open to public scrutiny when they are made.

Amendment No. 68 provides that the Secretary of State should publish an annual report setting out the objectives of the criteria notified to health authorities, together with the methods of measurement that he has notified to them, his assessment of their performance against those objectives and details of the further sums that have been paid to them.

It will probably be apparent to the Committee why we seek to go down that route. It is an over-used phrase, but we want to ensure a level playing field. We want all trusts to be treated equally and fairly and, whenever criteria and objectives are notified, we believe that other trusts should have the opportunity to ensure that they are similarly treated. We believe also that performance against those criteria or objectives should be spelled out after the event; that the financial rewards accruing to those who have performed well should be publicly known; and, we hope, that it bears a discernible relationship to the performance that has been achieved.

We are anxious that the objectives should be publicly scrutinised because the Government's record on setting objectives for the national health service has distorted proper clinical priorities. I have already given one example from my constituency. Another example, included in the consultation documents as one of the possible criteria for success, is of the two-week maximum waiting time from urgent referral by a general practitioner to the patient being seen by a hospital specialist for a patient with suspected cancer.

That is ideal for a service with no resource limits, because the time between referral by a GP and being seen by a specialist is a time of great stress for the patient. Unfortunately, the number of surgeons able to carry out cancer operations is limited. By setting an arbitrary two-week limit, the Government have massively skewed the use of the available human resources from treating cancer to getting patients with urgent referrals through the front door. The president of the Royal College of Surgeons said:

clinics are being snowed under with inappropriate referrals for breast cancer.

She pointed out that 90 per cent. of women with suspected breast cancer were found to be clear of the disease.

Dr. Joan Austoker, of the Cancer Research Campaign, said:

The two-week rule has completely backfired. It has led to a waste of resources, and a waste of specialists' time.

That means that it is not just a waste of money but a waste of the time of people who could be treating patients, operating on patients and saving lives.

I know from talking to the consultant neurologist in my own hospital that that is happening all over the place. In order to meet this two-week target, people are required to spend a greater proportion of their time telling patients the bad news that because a particular consultant now has to spend twice as much time in out-patient clinics, it will be twice as long before a patient already diagnosed as needing surgery can be operated on. That is a misallocation of resources. In setting criteria for access to this money, we are afraid that the Government will inadvertently—I am not suggesting that it is deliberate—create a misallocation of resources within the NHS that will ultimately be to the detriment of patients.

One of the suggested criteria in the consultation draft is the financial performance of the NHS trusts. The bare-faced cheek of it! A Government who pilloried the previous administration for setting financial targets and measuring financial achievement of NHS trusts and health authorities now propose the meeting of budgetary criteria as a condition for accessing money needed to deliver health services.

A memo issued by a health authority somewhere in England on 9 January says:

Recent developments in the unfolding financial position of the Health Authority, including an assumption that we will not receive the last three quarters of the Performance Fund, has led to our looking very critically at areas which are contributing to further financial risk within the Authority. An area of considerable concern is individual patient placement, where we have seen a significant rise in the number of placements made...We will, over the coming months, introduce tighter management processes and will be looking towards working with the Trusts and PCTs...in the management of individual placements.

In the meantime, however, there is an immediate need to ``stem the flow'' of individual placements and to this end the Health Authority is not prepared to authorise further placements until there is a reduction in the current number of patients placed.

That is going on in the health service in order to try to comply with Government-set targets, in this case to deal with an overspend of £2.5 million. Clause 2 will enshrine a body of Government targets, including quite possibly financial targets, that health authorities will have to meet to access the funds that they need to deliver services to the people living in their areas.

Peter Brand (Liberal Democrat, Isle of Wight)

I do not want to disabuse the hon. Member, but as a doctor I had to make decisions like that and I have seen letters like that in the 70s, 80s and 90s; it were ever thus. The real point is whether health authorities and trusts have the power to say publicly that their allocations are not adequate. It is an inescapable fact that it happens.

Philip Hammond (Conservative, Runnymede and Weybridge)

I thank the hon. Gentleman for making that point. I am mindful that there is only a minute and a half to lunchtime.

The purpose of the amendments is to ensure that these arrangements are placed in the public domain for all to see. That will mean there is a degree of transparency which we hope will inevitably lead to a degree of objectivity and avoidance of the worst distortions that have been created when trusts or health authorities seek to comply with essentially artificial criteria set by Government which become the basis of decisions that are very important to them, such as the allocation of funding.

I commend the amendments to the Committee. I consider that the Government have nothing to fear from them if they intend to proceed as the Minister outlined. In the interests of ensuring greater scrutiny, greater accountability, transparency and an element of objectivity in these arrangements, they will greatly improve the Bill.

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

Standing Committee E

Clause 2 - Payments relating to past performance

John Maxton (Labour, Glasgow Cathcart)

I remind the Committee that with this we are taking amendment No. 68, in page 3, line 5, at end insert—

`(3CC) The Secretary of State shall publish annually a report detailing, in respect of each Health Authority to which he has made payments under subsection (3C) above—

(a) the objectives notified to that Health Authority under (3C)(a) above; and

(b) the criteria notified to that Health Authority under paragraph (3C)(b) above; and

(c) the methods of measuring their performance which he has used in assessing them for payment of further sums in accordance with subsection (3C) above; and

(d) his assessment of their performance against the objectives notified in accordance with paragraph (3C)(a) above and the criteria notified in accordance with paragraph (3C)(b) above; and

(e) the further sums paid to them in accordance with subsection (3C) above.'

Perhaps it would be convenient for the Committee if I let right hon. and hon. Members know that I intend breaking for dinner at 7 pm and resuming at 8 pm. However, that is flexible and if it appears that we can finish today's business within a reasonable time scale—15 or 20 minutes—we will continue until we have finished.

John Denham (Labour, Southampton, Itchen)

Before lunch, the hon. Member for Runnymede and Weybridge (Mr. Hammond) made several points about the amendments, which are essentially concerned with the publication of information. He made further points about the two-week waits for cancer patients and the financial element in the performance assessment framework. We are moving the NHS on to a much sounder basis of performance assessment, as promised in our manifesto, so that all issues of interest to the patient are considered. We criticise the previous Administration because they focused on financial matters to the exclusion of clinical or patient issues.

Right hon. and hon. Members who have had an opportunity to look at the consultation document that we circulated last week will have seen the indicative spider diagrams at the back of that document. They illustrate how different types of performance can be taken into account in assessing health organisations. They show how health outcomes, health improvement, fair access to services, effective delivery of appropriate care, efficiency and the experiences of patients and carers can all be taken into account in judging the progress of individual organisations.

That is an important element in the performance framework that we are setting out for the NHS. We are consulting on the detail of that with the paper that was published last week. It is right that financial performance should be considered, but it should not be the only criterion. That is the big change that we have made, as compared with the previous Administration.

The introduction of the two-week cancer referral target was an important first step in improving the speed with which patients move through the system. I am sure that the hon. Gentleman will recognise that the national cancer plan, which was drawn up last autumn, took us much further forward. We are focusing on the whole process of treating cancer patients—not just on the point of referral, but on the point of treatment, and we are setting targets. That work—led by the national cancer director, who is a leading clinician, with the support of experts from across the field—has been widely welcomed in the health service as laying the basis for better cancer services in future. We have also taken that approach in other clinical areas.

We are laying down, year on year, an increasingly robust framework for performance assessment. It is true that, at the moment, we do not have all the information that we would like to be available for assessment, but every year more data is collected and published than ever before about the performance of the NHS and individual organisations. That is the background to the two amendments.

Amendment No. 67 would require the Secretary of State to publish details of the objectives, criteria and methods of measuring the performance of health authorities within 28 days of notifying them to health authorities. The amendment is unnecessary. First, health authorities are already informed of their objectives for each year in a letter that sets out the priorities for the year ahead, which is publicly available.

Secondly, anyone can request details of individual health authority objectives for the year. As I said earlier, the precise method of measuring health authority performance against some criteria may not be notified to health authorities at the same time as the criteria. I shall not repeat the arguments advanced in earlier debates.

Philip Hammond (Conservative, Runnymede and Weybridge)

Is the Minister saying that the Secretary of State will notify objectives or criteria to health authorities only at the time of the annual letter? Will there be no opportunity for him to issue additional criteria or objectives at a later date?

John Denham (Labour, Southampton, Itchen)

I am not saying that the only opportunity to indicate how performance may be measured is at the time of the allocation. The clause allows flexibility for in-year performance to be taken into account. Health authorities may need to be notified of the criteria to be taken into account, but in some circumstances it will not be possible for the exact measurement of those criteria to be made simultaneously or necessarily within the 28-day period in the amendment.

Philip Hammond (Conservative, Runnymede and Weybridge)

I accept what the Minister said, but a few minutes ago he said, in effect, that the amendment was redundant because health authorities would be notified of the criteria in writing. Is he saying that the Secretary of State will not issue supplementary criteria or objectives? The amendment was designed to take account of circumstances in which the Secretary of State, under the terms of the clause, may wish to issue supplementary, in-year criteria or objectives. Is the Minister ruling that out?

John Denham (Labour, Southampton, Itchen)

No, I cannot rule out that possibility. The hon. Gentleman is right to say that it might be necessary.

Amendment No. 68 would require the Secretary of State to publish annually details of the objective criteria and the method of measuring the performance of health authorities, his assessment of their performance and the further sums paid to them. We could not accept the previous amendment on the basis of policy and we reject this amendment because there is no need for it. The NHS plan set out proposals for the annual publication of the results of performance assessment; it forms the basis of the health authorities' objectives and the measurement of a variety of indicators. Publication will be the responsibility of the Commission for Health Improvement, in association with the Audit Commission. The Commission for Health Improvement will have a role in validating the traffic-light system to prevent the arbitrary allocation of individual trusts to a particular level in that system.

The performance assessment framework will show how each health authority and NHS trust performs during the year and present a comprehensive picture of its overall performance against its objectives for the year and against other indicators. Publication by the Commission for Health Improvement will show the public that the assessment results are genuine and independent. The amount that a health authority receives from the performance fund each year will be in the public domain and available on request.

Philip Hammond (Conservative, Runnymede and Weybridge)

If the amendment were accepted, there would be a single-source document stating the criteria set, the measurement methods, the Secretary of State's assessment and the payment made. It would thus be possible to compare health authorities and to judge how they performed against common criteria and objectives. The amendment would ensure that such information was readily available; there would be a level playing field and health authorities would have even-handed treatment.

John Denham (Labour, Southampton, Itchen)

The information necessary to assess the operation of the performance fund, the distribution of funds and the assessment of criteria will be in the public domain and enable that exercise to take place. The Government have no intention to deceive about the process and we are not convinced of the need to adopt the amendment. I believe that the information will be available. However, I will consider the points that the hon. Gentleman has made, to make sure that the assurances that I am giving him are correct.

Philip Hammond (Conservative, Runnymede and Weybridge)

On amendment No. 67, the Minister has accepted the possibility that the Secretary of State would wish to issue supplementary criteria, or objectives to a health authority. He said that the Government had no wish to conceal anything, but would it not be possible—in the absence of amendment No. 67—that people who had a business to know would not be aware of the criteria to which a health authority was working, if the Secretary of State had issued supplementary criteria, and they were not contained in a published letter? We are asking for an assurance that whenever new criteria or objectives are set, they immediately become public information, so that everyone understands what is driving a particular health authority.

John Denham (Labour, Southampton, Itchen)

Again, I am happy to reflect on that. The hon. Gentleman makes a reasonable point. There are good reasons to resist tying organisations down to specific timetables. The hon. Gentleman was wondering what circumstances one might have in mind, so let us take an example. Last year, the Government set an in-year objective of achieving a 60 per cent. immunisation target for the over 65s. That was not linked to any performance system—other than there was a service payment for GPs to carry it through. It is conceivable that the Government might have chosen a different means of incentivising that, perhaps through a payment to health authorities. That hypothetical example—which is not one that we have considered nor do we have plans to do so—would be a case of a criteria and target being set in year with the exact way of assessing performance being made public somewhat later.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The Minister's example of the immunisation programme is quite unfortunate as it took me the best part of two months to get a written answer about the extent to which that programme was successful. That reflects the concern of the hon. Member for Runnymede and Weybridge about getting information into the public domain at the earliest opportunity. Would the Minister consider ensuring specifically that community health councils and their successor bodies are notified of changes in year to objectives and criteria? Clearly, as the local agency for evaluating the performance of the NHS, from the patients' perspective, they need to know.

John Denham (Labour, Southampton, Itchen)

Those are perfectly fair points. I have tried to give reasons why the wording of the amendments would not be acceptable. Clearly a patients forum would need to know what is driving a trust or health authority, or setting its priorities. Our intention is that supplementary letters would be publicly available in the same way as the annual letter to the health authority is available. I will go back through the system to assure myself, the Committee and, if necessary, the House, that the information will be in the public domain. I am sure, however, that that would be the case under our normal proceedings.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the Minister for the tone of his response to these amendments. They are intended to allay concerns that the Secretary of State is acquiring considerable powers, which could be exercised to mean that, in time, a larger proportion of total health funding would be distributed on a discretionary basis, instead of through formulae. Although we complain about them, we accept that the calculations are done by officials and are neutral. We are attempting to ensure that the way in which the Secretary of State operates these funds is transparent, and that he is therefore accountable for his actions. Can the Minister reassure the Committee that it is his intention that all health authorities are set the same criteria and objectives? It will then be possible to see an objective or a criterion set, the performance of different health authorities in achieving it, and the payments that are then made to them.

Will the payments be flat rate—so that each authority that meets the objective gets £10,000—or related to the authority's weighted capitation payments under the formula? Will the payments reflect the broader needs of an area, or will they be at the Secretary of State's discretion? If it is the latter, I believe that there will be considerable concern about very large sums being dispensed on the basis of the achievement of objectives or criteria that may differ between health authorities. If the Minister can clear up those questions, we will have made a fair amount of progress.

John Denham (Labour, Southampton, Itchen)

Although I have some sympathy with what the hon. Gentleman is saying, it is important that we do not use the clause to attempt to rewrite the entire basis of the National Health Service Act 1977. As I said earlier—when I think the hon. Gentleman was briefly absent from the Room—the clause gives considerable discretion to the Secretary of State to consider a broad range of factors in deciding what allocations are made to health authorities. The clause relates specifically to the ability to make performance-related payments and, even more specifically, to making payments related to performance in any particular year.

The entire debate has been based on the premise that the criteria for measuring performance will be published, and we have discussed the timing of the exact measurement of those criteria. Therefore, it follows that there will be published criteria, but it would be irresponsible to go from this narrow provision to making fundamental statements about the whole system of laws surrounding health authority allocations. In the context of the clause, it is our intention that there would be published criteria for making awards.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the Minister. He has said that the same criteria are applicable to all health authorities, and that they are not separate criteria negotiated and agreed with different health authorities. Will he also answer my question about payments?

John Denham (Labour, Southampton, Itchen)

It would be possible under the clause for the Secretary of State to set specific objectives for individual health authorities. Under the current system, several health authorities receive additional funds through a competitive process to implement health improvement plans aimed at reducing coronary heart disease. The funding of those plans is dependent on achieving objectives. The clause might allow in-year performance to be taken into account for those individual health authorities. Thus, as part of this process, it must be possible to identify specific criteria for individual health authorities—and I assure the hon. Gentleman that it would be an open process.

Philip Hammond (Conservative, Runnymede and Weybridge)

I appreciate the Minister's tone in his earlier remarks. However, partly by what he said, and partly by what he avoided saying in relation to the payments, he has reinforced my worst fears that the intention of the clause is to enable the Secretary of State to approach health authorities and—under clause 3 trusts and primary care trusts—effectively negotiate bilateral deals with them relating to specific aspects that are relevant to them. That is not to say that specific aspects might not need to be covered in one trust and not in another, but I am sure that the Minister will appreciate the accountability anxieties involved in moving to a method of funding the NHS that essentially involves the Secretary of State in a series of bilateral contracts with NHS providers, negotiating deals with them. Perhaps, for example, two trusts might be set similar criteria but paid different amounts if they achieved them. Perhaps the two trusts might be set different criteria. Although that may make sense in some cases, in terms of a public accountability framework, a public spending programme and the demands of equity of access and treatment in services such as the NHS, it might be difficult for the Government to sustain in practice, and it gives me considerable cause for concern.

Hilton Dawson (Labour, Lancaster and Wyre)

I have some sympathy with the hon. Gentleman's amendment, but does he not agree that he would be on much surer ground with the line that he is trying to take if his party recognised poverty as a major cause of ill health in this country?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman makes a point that the funding formula recognises. As I said a few moments ago, we all recognise that the funding formula is not perfect, but at least it takes into account in a formulaic way different circumstances. What is now being proposed is that a part of the budget of health authorities and trusts will not be subject to such a formula, but will be subject to bilateral negotiations with the Secretary of State—because inevitably that is what it will boil down to—on achieving what may not necessarily be clinical criteria, but whatever criteria the Secretary of State wants to impose. That seems a rather retrograde step that I should have thought would give the hon. Member for Lancaster and Wyre (Mr. Dawson), as well as Opposition Members, some cause for concern.

I was hoping for an assurance from the Minister, because the tone of his earlier remarks suggested that the process would be across the board and that we would be discussing trusts having to reduce their waiting lists by 10 per cent., for example, in order to receive a payment of x. As a result of our debate so far, however, it is not clear whether the Secretary of State would be able to impose different values for x on every trust and that trusts would receive different sums of money by way of reward if they achieved those targets.

In the absence of a formula, such a system is open to abuse. We are making legislation not only for the present, but for the future, and I do not want a system to develop that gives politicians ever greater discretionary control over large areas of funding. At the moment we are dealing with relatively small amounts. However, let us consider personal social services spending, a subject on which the Minister asked me a question at the Dispatch Box a week or two ago, so he obviously knows a lot about it.

We have seen a dramatic growth in the proportion of total personal social services funding, which is funded through ring-fenced grants allocated by the Department of Health and bid for by social services authorities. Can the Minister confirm that it is not the Government's intention to place increasing amounts in funds allocated on the basis of performance and meeting criteria and objectives? Everything that I have heard from the Government suggests that that is part of their agenda. It may not be wrong, but it means that an increasing sum will be allocated on the basis of performance. We are merely seeking to ensure that the allocation mechanism is fair and not vulnerable to political manipulation—political with a capital ``p'' and with a small ``p''. We want the allocations to be fair and transparent, in what I might call—in an old-fashioned way—the best traditions of British public finances. I do not feel that the Minister has given us that reassurance.

I am, however, grateful to him for agreeing to consider the thinking behind the amendments. The wider concerns that I have expressed go beyond the amendments to the broader operation of the clause. Therefore, in anticipation of what the Minister has to say when he has had a chance to explore that thinking, and in the hope that we may discuss the matter further in the clause stand part debate, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall not try your patience, Mr. Maxton, by going over ground that we have covered previously. The clause develops the process of centralisation and the potential for micro-management of the service. We all know that he who pays the piper calls the tune. If the Secretary of State has large funds at his disposal—especially if they are to be dispensed in a discretionary fashion, which was the import of the previous debate—throughout the service there will be an ethic of doing what the Secretary of State wants. That may not always be the right thing to do in the view of the clinicians working within the service, and it may not reflect local priorities, which, at one stage, under the Secretary of State's predecessor, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), the Government were anxious to emphasise.

The clause will have two practical effects. First, it may distort clinical priorities, as health service managers focus their budgets on achieving the criteria that have been set. This morning, I quoted an example from a health authority in just such a situation. That will lead, in some cases, to the sickest patients not receiving the highest priority within the service, which in our view would always be wrong.

Secondly, the traffic-light system—the identification of a group of trusts as failing—will lead to a further decline in staff morale. In a minute, I will ask the Minister again, for the third time today, how many trusts he expects to be categorised as red. It is inconceivable that his Department does not have an idea of how many health authorities and trusts are likely to qualify as red in the initial appraisal. I have talked to people in health authorities who know jolly well that those authorities will qualify as red.

That will have an effect on staff morale and the recruitment of clinical staff, nurses and doctors. It may have an even bigger effect on the recruitment of management. Who would want to enter an organisation that is publicly recognised as failing? Typically, in private enterprise, when an organisation is in that position, one would expect people to be brought in to turn it round and to be paid at premium rates. Indeed, in the public sector, in the case of the dome, the Government discovered that it was necessary to pay people premium rates to sort it out when it all went wrong.

It might appear perverse to increase the salaries of managers in failing trusts as against those in successful trusts, but without that incentive it is unlikely that top-flight managers will be attracted to a much more difficult and potentially thankless task in a failing trust rather than staying in a successful green-light trust.

Although much has been written and talked about the likely location of the failing health authorities and trusts that will get the red light, they will not always be in areas of deprivation. It is likely that quite a lot of those trusts and health authorities will be in deprived areas, for the reasons that the hon. Member for Lancaster and Wyre outlined earlier, but it is also the case that on most of the criteria set out in the consultation document, my own health authority in west Surrey, which is not noted as a deprived area, would probably be classified red under the Government's current proposals. That is because of its serious financial problems and the consequent underperformance in many areas, as it attempted to achieve the financial targets that were imposed upon it.

Under the Government's proposals, health authorities and trusts will find themselves veering from one direction to the next as they attempt to meet the Government's criteria. Clinical lead times are relatively long, and I fear that the Government will change the criteria that they ask health authorities and trusts to follow with rather more frequency than might be ideal for the efficient operation of the service.

Let me ask the Minister some specific questions that have not been covered so far in the debate on clause 2. Can he confirm that the grading of health authorities and trusts into red, yellow and green categories will always be as a result of a Commission for Health Improvement evaluation that is carried out on a transparent basis, and not as a result of a discretionary decision by the Secretary of State? Will there be any appeal mechanism for a trust that believes it has been unfairly or inappropriately categorised to institute a review of its categorisation?

As our amendments Nos. 67 and 68 were rejected, will the Minister give us an assurance that, by one mechanism or another—the hon. Member for Sutton and Cheam (Mr. Burstow) suggested some form of statutory notification of the local oversight bodies and we have suggested a requirement to publish—the workings of this whole process will be open and available to public scrutiny at the time, so that the date of the information will be available? Finally, will he tell us how many health authorities and trusts the Government expect there to be in the first wave of red-light allocations? Will there be tens or hundreds? Clearly, it will not be hundreds of health authorities, as there are not hundreds of health authorities, but a clear indication of the numbers would be extremely helpful.

The Government told us that competition in the NHS was destructive, yet this model will promote competition between health bodies, encouraging them to vie with each other for the coveted green lights. It will not lead to a model of health service provision that is more focused on patients, but to one that is more focused on doing the Secretary of State's immediate bidding. It will not encourage NHS staff to feel comfortable in their surroundings, and despite the Minister's rhetoric, there are no provisions that will obviously encourage co-operation between NHS bodies. Indeed, it will have precisely the opposite effect.

In my view, the clauses under consideration today do not provide adequate accountability for the increasing sums that will be distributed by the Secretary of State on what appears to be a discretionary basis. While we accept the principle that some allocation of funding on the basis of performance is sensible, we should have grave concerns about the wording in the Bill and the absence of any proper checks and accountability mechanisms for the large sums of money that will be at his disposal.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I want briefly to pick up a couple of points that my hon. Friend the Member for Isle of Wight (Dr. Brand) touched upon and to develop one or two others that occurred to me as I listened to the debate. I should explain that my hon. Friend is in the Chamber taking part in the debate on the Shipman inquiry. While the performance management system is entirely right for a managed system such as the NHS to develop, we must be careful about the language that we choose to use within that system as it inevitably leads to a great deal of interest in looking for and emphasising failure.

I am not arguing that we should not seek to improve the performance of those who are not delivering the best health outcomes, but we should be aware that our actions can lead to a downward spiral in terms of lower motivation and ultimately, as my hon. Friend said earlier, to a lack of additional resources to address the reasons for the failure of performance. We must not proceed along a path that simply turns this into a question of how many authorities will be in the red-light zone, which in turn will be the headline in the next edition of the Daily Mail. The system should not just punish failure, but should drive up the quality of services. Some of the comments so far imply that our aim is to punish failure.

Philip Hammond (Conservative, Runnymede and Weybridge)

Any Government, of any colour, will have a political imperative to ensure that the number of green-light organisations rises while the number of red-light organisations falls. No Government will want to admit that during their tenure of office the number of red lights doubled and the number of green lights halved.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The hon. Gentleman's helpful intervention leads me on to my next point—I am not sure whether he managed to ask the Minister about this. What lies behind the idea that we need to have fixed proportions, at least initially, within the various colours of light: green, amber and red? It would be far better to base them on merit, rather than on an initial assumption. Given that the Department has already collected most of the data that forms the basis for the criteria and the objectives, has it run the criteria against the existing data? If so, will it at some point publish that information as I am sure that it could inform our deliberations, and it would certainly be helpful on Report and in the other place?

Finally, who will collect the data, how will it be analysed and who will present it? The Minister referred to the central role of the Commission for Health Improvement in the process. I felt that he was arguing that CHI would give the process a degree of transparency and independence from inappropriate ministerial interference. Can the Minister say a little more about the collection of the data? Will it inform the process and enable assessments to be made? Will CHI take that role or will the Department continue to collect the data, as it does now, through the regions and the NHS Executive?

It would be useful to have some clarity on that. If CHI is to collect the data, I hope that the Minister will give us some assurances that it will be under an obligation in the public interest to publish that information at the earliest opportunity.

I am concerned that some data that the Department of Health collects through surveys that it currently undertakes is not always published. Quite recently, in an answer to a parliamentary question that I had tabled seeking information about the loss of nursing home beds between October 1999 and October 2000, I was told that—[Interruption.]

John Maxton (Labour, Glasgow Cathcart)

Order. There is a Division in the House. I am concerned about the amount of time we lose for these Divisions, so with the consent of Members and providing the Clerk is back, we shall resume in less than the normal quarter of an hour.

Sitting suspended for a Division in the House.

On resuming—

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I was questioning whether the Government would be as transparent as they ought to be about the provision of information. I cited the example of an answer that I received yesterday, which is published in Hansard today, in which the Department declined to publish information from a survey of nursing homes covering the year October 1999 to October 2000, on the grounds that that was not part of the usual national collection of statistics. It said that, as a consequence, the survey was merely intended to help Ministers to form a judgment about the local performance of the national health service. For that strange reason, it was unwilling to publish the information—the words used were, ``it would be inappropriate''. Perhaps that is the sort of answer that we shall get on such issues in future.

Finally, there is tension in a system that is managed by criteria that are set at the centre, but that seeks to be flexible in relating to local circumstances. I am thinking of health improvement programmes in particular. To what extent will the Government try to ensure that local health authorities will be effective partners with local government and other stakeholders in the local health economy in delivering health improvement programmes that are fit for the purpose according to local circumstances? That is perhaps harder to achieve with national targets set at the centre: it is about trying to make the health improvement programme fit with what appears to be coming from the centre.

It would be useful if the Minister could say how that tension between local and national priorities will be resolved within the traffic-light performance management system. We certainly subscribe to the view that there is a need to have a performance system. We have some concerns about the linkage of resources to such a system, and in particular, about the impact on the morale of those who find themselves categorised in the red-light zone.

John Denham (Labour, Southampton, Itchen)

I shall not repeat our earlier debate, but reply to some of the specific points that have been raised.The performance system that we have been discussing today, although it goes much wider than clause 2 is not about identifying and stigmatising failure. Rather, it is very much about rewarding and identifying success. The consultation paper that we published last week outlines a series of measures of greater freedom and autonomy that would be enjoyed by the best performing health authorities and trusts. At the same time, the Department would have the power to identify, intervene in and support organisations that are failing. My personal belief is that a performance regime should include incentives to encourage people to do better and provide the necessary support for failing organisations. Clause 2 is intended to help to achieve that.

Philip Hammond (Conservative, Runnymede and Weybridge)

I should like to make sure that the Minister did not inadvertently mislead anybody when he talked about greater autonomy and greater freedom. I believe he means that organisations that are graded green will have the autonomy and freedom that all have at the moment and those who do not achieve that status will lose some of the freedom that they currently enjoy.

John Denham (Labour, Southampton, Itchen)

Clearly, the exercise of sending out the consultation document at the end of last week was just a waste of time, as the hon. Gentleman for Runnymede and Weybridge has not read it. It says that health organisations will have automatic access to discretionary capital funds without having to bid, greater freedom to decide on the local organisation of services, the ability to address the persistent failure of red-light organisations and lighter touch monitoring by the regional office. It refers to a series of other measures on which consultation is taking place, including ways of reducing progress monitoring and prescribed processes for service development, ways of introducing lighter touch routine monitoring, the ability to develop service strategies without regional office approvals and flexibility over land sales. It covers a whole series of measures which, compared with what is uniformly applied to all trusts today, would provide greater levels of freedom. Therefore, I stand by what I say.

Philip Hammond (Conservative, Runnymede and Weybridge)

For the sake of clarification, will the Minister make it clear to the Committee which level of traffic-light grading represents the current position, so that we can see which trusts and health authorities will lose some of their autonomy and freedom and which ones will gain?

John Denham (Labour, Southampton, Itchen)

Those that are categorised as green-light trusts will enjoy enhanced autonomy, but I do not wish to suggest that that is not possible for those that are showing progress as yellow-light trusts. We want to have incentives throughout the system.

The reason why we are consulting with the service on the document is clear. The process will be seen by the service as an attempt to identify the parts of the current management process that appear to be unnecessary hindrances, bureaucratic obstacles or time consuming exercises, which in well-run trusts could be done away with, in whole or in part, to achieve greater freedom. That is what the exercise is about.

I now refer to the specific issues that were raised. First, I was asked whether the grading and the allocation would be the result of a Commission for Health Improvement evaluation. In other words, would the Commission for Health Improvement categorise health organisations? That is not exactly what we intend. We intend that the trusts should be allocated into red, yellow or green categories by the regional office, against published criteria that have been set out and notified and that the Commission for Health Improvement should validate that process. It will require further work, however. We recognise the need for a double check in the system against favouritism, arbitrary decision making or simply wrong decision making. For that reason we would look to the Commission for Health to validate the process.

Philip Hammond (Conservative, Runnymede and Weybridge)

Will the Minister confirm that the Secretary of State will have no discretionary power to intervene in that process?

John Denham (Labour, Southampton, Itchen)

The Commission for Health Improvement is set up as an independent statutory body and the process of validation would be part of its role. The hon. Gentleman knows that, in legal terms, a regional office the embodiment of the Secretary of State. That is a minefield, but the intention is clearly for the process to be validated by the Commission for Health Improvement to ensure confidence in the operation of the system.

The second question was whether an organisation might appeal against its grading. We are open to considering the responses to the consultation document but we have not yet envisaged a formal appeal process. In our experience of the publication of performance assessment frameworks, when somebody appears to be performing particularly badly he or she almost always immediately rings up and says, ``Actually, the data that we sent and that you published was completely wrong; if you had used the right data we would have been okay.'' It is reasonable to expect that if a trust finds that it has been graded less well than it would have liked and that there are flaws in the published data, it will be able to discuss that with the regional office, but the emphasis is on dealing with an organisation's problems rather than engaging the service in a major formal appeals process.

The question of public scrutiny came up several times. The data that would be used, whether for the core objectives or the wider set of objectives in the performance assessment framework, will clearly be published data. The Department already publishes data through the performance assessment framework. The data being used for the assessment will therefore be in the public domain.

The hon. Member for Sutton and Cheam asked who would collect the data. The data are overwhelmingly information that is produced by the health service in exercising its normal management; as he knows, the health service generates far more data than is collected centrally and published. Data would be collected by the Department of Health but, as an additional safeguard, the responsibility for publication of the performance assessment framework data will be transferred from the Department to the Commission for Health Improvement so that the latter organisation has the opportunity to assure itself of the validity of the data being published. The existing route for the collection of the data is in practice the only sensible route and would continue to be used.

The final point raised by the hon. Member for Sutton and Cheam was about health improvement programmes. They are an important part of the planning process and we want health improvement programmes to reflect local as well as national priorities. In practice, many of the indicators that we have suggested for the performance assessment framework deal with the sorts of issues that one would expect to be the outcome measures of the health improvement programme. They do not necessarily specify how health improvement should be achieved but will look at the outcomes.

Philip Hammond (Conservative, Runnymede and Weybridge)

Once again, the Minister has sat down without answering the question that I have now asked four times: how many health authorities and trusts are expected to be graded red in the first wave?

John Denham (Labour, Southampton, Itchen)

As I said in answering the hon. Gentleman's question when he first asked it, we have not set a figure for that—and, in response to the question from the hon. Member for Sutton and Cheam, nor have we run the data against the consultation document that we have put out.

Philip Hammond (Conservative, Runnymede and Weybridge)

Can the Minister explain why the Government have deemed it necessary to say that 25 per cent. will be graded green but not to make any estimate of the number that will be graded red?

John Denham (Labour, Southampton, Itchen)

In the spirit of rewarding success and best practice and performance, we judged that it would be useful initially to state the number of trusts that we thought would make green-light status. We have been anxious to avoid the idea that first we thought of a number of failing trusts and we are now going to find out which ones they are. It fits with our philosophy of running a system, which encourages success and best performance.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am sorry to press this point, but if the Committee is considering the way in which these arrangements will work, we have to understand whether we are talking about 20 per cent. or 0.5 per cent. Nothing that the Minister has said yet has indicated whether the red light is to be an exceptional measure for a seriously failing trust or whether it is to be a significant percentage of the total number of trusts and health authorities.

In my view, it is impossible properly to evaluate how the system will work in the absence of that information. Perhaps other members of the Committee feel the same. Can the Minister give us any indication as to the expected order of magnitude? Does the Minister expect red-light organisations to represent 1 per cent. or 20 per cent? Can he at least give an indication of the numbers?

John Denham (Labour, Southampton, Itchen)

No I cannot, for the reasons which I gave earlier. The traffic-light system, which we have been discussing, does not depend on clause 2 of the Bill. The discussion has been a useful platform for that discussion, but clause 2 is not required to implement the traffic-light system. It would be quite wrong to say in Committee, however helpful it might be to the hon. Gentleman, that we think that there will be a particular number of red-light trusts as it would affect the entire process.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister did so for green.

John Denham (Labour, Southampton, Itchen)

I have explained why we have not done it for green and I rest my argument. The hon. Gentleman will have to decide whether or not he agrees with me.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3 - Supplementary payments to NHS trusts and Primary Care Trusts

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move amendment No. 69, in page 3, line 15, at end insert—

`(5B) If the Secretary of State makes any payment under subsection (5A) above he shall publish details of such payment and the reasons he considered it appropriate to make such payment.'.

I jotted down in my notes that I would open by saying that I certainly did not intend to rehearse the same arguments again. In the light of our exchange over the past 90 seconds, I am tempted to revisit that thinking. It is incredible that the Minister is telling us that the Government have no idea at all on this issue, which is equally relevant and valid in the context of clause 3.

Most of the points that have been raised in the debate on clause 2, which deals with health authorities, apply equally to clause 3, which deals with NHS trusts and primary care trusts. The amendment, which requires the Secretary of State to publish details of payments that he makes and the reasons he considers them appropriate, once again seeks to put some transparency into the system. Under clause 2, the Secretary of State has the power to override the formula and give money to health authorities on criteria other than the funding formula, but in clause 3 the Secretary of State is allowed to bypass health authorities altogether and to pay money directly to trusts and primary care trusts. The issues that were raised in relation to health authorities therefore reassert themselves here and for trusts they are probably even greater.

The Secretary of State can make such payments subject to conditions. From reading the explanatory notes, it is clear that there might be specific conditions on how the money was to be used. The conditions might effectively passport the money going to a trust or a primary care trust to a specific purpose—perhaps to fund payments to members of staff.

In clause 3, the Secretary of State is taking powers to bypass the formula, bypass the health authority and even to bypass the trust or primary care trust by giving it money that could be subject to a specific requirement to use it for a single, designated purpose.

Michael Jabez Foster (Labour, Hastings and Rye)

What is the difference between that and Tory proposals to hand out even more cash directly to schools than have the present Government?

Philip Hammond (Conservative, Runnymede and Weybridge)

I am sure, Mr. Maxton, that you would not want me to elaborate on Conservative education policy, but the difference is that the Secretary of State has a specific power of direction to go behind the health authority, give the money to the trust and require it to be used for a particular purpose. I could launch a partisan discussion here, but I acknowledge that in certain circumstances everyone might agree that it was helpful for the Secretary of State to have that power. However, most right hon. and hon. Members would also agree, if they thought about it for a moment, that real problems of accountability arise in respect of the proper direction of substantial sums in an organisation as large as the NHS.

We cannot endorse a degree of micro-management that would allow the Secretary of State to make discretionary payments to individual PCTs for a specific purpose—£20,000, for example, to hire an extra person of a certain description in a certain PCT in Northumberland. That is a step too far. The Secretary of State should not have such power: in any case, he could not use it effectively. The rationale of devolved authority in an organisation on the scale of the NHS is that the central machinery cannot be sensitive to the needs of local organisations and structures. Parcelling out small sums of money from the centre is highly inefficient because the costs of going through the allocation process are relatively high in proportion to the amount involved.

Those are our main concerns about clause 3. I have aired the issues comprehensively. The amendment is designed not to correct all the deficiencies, which would wreck the Bill, but to add a measure of accountability and scrutiny by requiring the Secretary of State to publish details.

Peter Brand (Liberal Democrat, Isle of Wight)

I am uneasy about clause 3 for several reasons. Currently there is a partnership between commissioning health authorities and trusts that deliver, in the case of primary care trusts, through secondary commissioning. The relationship is usually positive under that scheme and it is clear who does what.

I am anxious about allowing the Secretary of State to fund trusts directly and bypass health authorities because it will undermine the process of co-operating locally to find the right way forward and lead to special pleading by the trust and the authority. It will leave the Secretary of State with directive powers to determine what happens in the locality. That may not be what the Government intend, but it is almost inevitable.

The hon. Member for Hastings and Rye (Mr. Foster) raised a relevant point in his intervention. I oppose the Conservative idea of bypassing local education authorities, because that denies the support that, for instance, village schools can get from their local education authority. However, at least the Conservatives have been honest about it by proposing to abolish a tier of administration and manage it directly, so saving costs. Essentially that is what their system would do. It is central management of schools, rather than devolution down to schools.

Philip Hammond (Conservative, Runnymede and Weybridge)

Would the hon. Gentleman also acknowledge that what is being proposed in the Conservative education policy is not that money should be allocated on a discretionary basis to individual schools, but that it should be allocated by virtue of performance?

Peter Brand (Liberal Democrat, Isle of Wight)

We are not discussing this matter in terms of education policy. However, there is a fascinating parallel in that there is a clear direction in the Government's enabling legislation towards directly managed trusts which are providers of services rather than commissioners of services. If that is the direction that the Government want to take, they will be wasting a lot of House of Commons time, as well taxpayers' money, by keeping both parallel systems going. It is important that the Minister makes it clear whether the provisions under clause 3 will be exceptional; whether pilots will be carried out, because of national interest and policy; or whether this will be a routine way of getting something delivered through a trust, bypassing health authorities. Given that that is unclear in the Bill and explanatory notes, it would be helpful if the Minister at least accepted amendment No. 69, because it would allow us to evaluate whether direct ministerial largesse in this instance was exceptional or would become routine.

John Denham (Labour, Southampton, Itchen)

It is probably helpful in responding to the amendment to talk about the scope of clause 3. It may be optimistic to think that we will avoid a stand part debate; that will be entirely in your hands, Mr. Maxton.

The provision will indeed enable direct payments to NHS trusts and PCTs. The power will be used for the direct improvement of the provider infrastructure in the trust, to enable provision of better services. This year, although we were not able to use that power, we have been able to make two allocations, of about £30 million each, to fund hospital cleaning. We have to accept that it was a direct initiative by central Government to bring about a rapid improvement in the quality of hospital cleaning. Members of the Committee will have to form their own opinion whether it is desirable that central Government should take an initiative in response to public concerns to bring about an improvement in hospital cleanliness outside, rather than simply leave everything to the local commissioning process. Our judgment is that that was the right initiative to take.

I must explain why, in order to do that, it would help to have clause 3 in the Bill. As has already been pointed out, at the moment payments to NHS trusts and PCTs as providers should be made only under the terms of a service agreement—in other words, in return for a service provided. Allocations go to health authorities or PCTs under the current arrangements for the commissioning of services. They are not appropriate for making payments to NHS providers—NHS trusts or PCTs—to reward staff performance, or necessary to improve facilities.

If we want to make money available direct to trusts to bring about higher standards of cleaning, we end up having to direct health authorities or PCTs as commissioners to make specific payments to trusts under a service level agreement. That is an onerous and laborious procedure. It involves the Department in determining the lead health authority or PCTs. It means aggregating amounts for NHS trusts accordingly, sending duplicate letters to health authorities, PCTs and NHS trusts informing them of their imminent funding, and adjusting health authority cash limits before making cash advances to health authorities and PCTs.

The point that needs to be understood is that, as we have shown this year on the money for hospital cleaning, it is perfectly possible for central Government and the Secretary of State to decide to undertake such an initiative. However, the legal route that has to be followed to get the money through the system to the place where the cleaning takes place is laborious. I believe that if we are making direct payments of that sort it is better to do it in a simpler way. Similar considerations might apply in the future to the performance fund that can be directed to trusts by the Secretary of State, through the health authority. We would be cutting out a fourfold duplication of effort and sometimes a considerable amount of elapsed time between central Government deciding to take an initiative and it actually arriving in the trust where the action is to be taken.

It is important to reassure the hon. Member for Isle of Wight and the Committee as a whole that we do not wish to undermine the role of commissioning. We created primary care trusts to strengthen the commissioning process. We have put in place, at national and regional levels, new arrangements for the commissioning of specialist services. Local commissioning decisions are now made more effectively by those who best understand local needs.

I recognise that there are occasions where it is reasonable and right for the Secretary of State to wish to bring about change at local level through direct funding to trusts. This provision provides us with the ability to do so. There will be differing views on whether that should be done, but my point is that the power is already in the commissioning arrangements to pass money directly. If one is going to take this approach, it is more efficient, effective and more transparent to do it in this way.

I can understand what the hon. Gentleman seeks to achieve. He wants to make sure that details of such payments are published and their purpose is apparent. There is a slight irony about this debate because, normally, the complaint from the Opposition is not that we secretly allocate money to the health service, but that we inadvertently announce it two or three times. To be accused of wanting to push money out to the health service and keep it a secret is a new experience. I do not think that there is any real danger of that happening.

Formal accounting procedures are already in place. We ask Parliament to vote the estimated expenditure of the NHS before the start of the financial year. We publish actual expenditure funded through allocations at the end of the year in the appropriation accounts of the Department. Financial accounts of NHS bodies are published after the financial year end and those include details of income and expenditure. Those arrangements provide a fair amount of information, but should that not be sufficient it is clear that this information will need to be provided on request, for example, in answer to a parliamentary question. I do not see the need to make this amendment.

Philip Hammond (Conservative, Runnymede and Weybridge)

Is the Minister giving the Committee an assurance that no such question will receive the answer that the data are not available, or collected centrally—a response with which all members of the Committee are familiar?

John Denham (Labour, Southampton, Itchen)

That situation clearly arises where there is a local activity on which central data are not collected. In this situation, it is the centre making money available to trusts; therefore the centre, by definition, has the necessary information and the question would have to be answered.

Philip Hammond (Conservative, Runnymede and Weybridge)

We have scored something of a modest success by getting the Minister to place on the record that there we will be able to ask a specific question about the allocation of money to trusts and get a specific answer through the parliamentary question route. That is a rather tortuous process, given the number of trusts and PCTs; none the less, it is some progress.

The point about the need for transparency has been made more than once. People need to know what is going on—not just Members of Parliament, but people in trusts and health authorities, so that they feel that they are treated equally. People in West Surrey health authority, for example, should feel they are treated in the same way as people in Durham health authority. The Minister, relatively unusually among his colleagues, represents a southern England seat and he may be familiar—[Interruption.]

John Denham (Labour, Southampton, Itchen)

Just looking over my shoulder it would appear that at least 50 per cent. of the Labour Members of the Committee represent southern constituencies.

Philip Hammond (Conservative, Runnymede and Weybridge)

When I used the phrase ``the Minister among his colleagues'', I was thinking of the hon. Gentleman's ministerial colleagues. Although he is not likely to share this with the Committee, he may have the experience in the inner councils of Government of having to represent a view—which may or may not be correct—which is widely held in southern England, that in health funding matters there is a tendency to skew funding away from southern England towards northern England. This morning, I gave the example that a patient waiting for elective surgery in my constituency is nine times more likely to be waiting for 12 months or more than a patient waiting for elective surgery in the Prime Minister's constituency. The statistics go on.

Ian Stewart (Labour, Eccles)

I would be happy to swap the heart problems suffered in my constituency with those in the hon. Gentleman's. Does he not realise that the only way to run a proper health service is to address the greatest need first?

Philip Hammond (Conservative, Runnymede and Weybridge)

Would the hon. Gentleman care to comment on the need of patients awaiting elective surgery in my constituency compared with the need of similar patients awaiting elective surgery in the Prime Minister's constituency? They are nine times more likely in my case to wait 12 months or more. That statistic is even more shocking than it appears on the surface, because in the West Surrey health authority area more than 50 per cent. of all elective surgery is carried out privately. Taking that consideration into account, and bearing in mind the costs faced by the authority, the shortfall of funding for West Surrey is even more shocking.

Ian Stewart (Labour, Eccles)

The hon. Gentleman does the Committee no service when he tries to give specific cases from his own constituency, having made nonsense general statements such as ``the north of the Country is better off than the south''. Of course each area has its serious problems. That is why the people of this country elected a Labour Government and will keep that Government in power. They will do so to ensure that provision is made on a strategic and fair basis.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman does the Committee a disservice by reducing the debate to this level. I was saying to the Minister—I am sure that in private he will confirm that he is aware that this happens—that, rightly or wrongly, many people in the south of England believe that health funding has been skewed away from their areas into other areas. If the hon. Member for Eccles (Mr. Stewart) looks at debates in the House of Commons over the past couple of years, he will see that Member after Member has asserted that belief.

Several hon. Members rose—

Philip Hammond (Conservative, Runnymede and Weybridge)

I will not take any more interventions. The purpose of my comments has been to reassert the reasoning behind this series of amendments which has sought to make information available about the basis on which money is distributed. To put it at its most neutral, the amendments encourage the Government to choose mechanisms that would reassure people that money is allocated on a proper, fair and equal basis. That would disperse any lingering suspicion that the money available for distribution under the mechanisms of clauses 2 and 3 could be distributed in a way that was not fair or even-handed.

I accept the Minister's assurance that he does not intend to cover up any of those matters. In due course, he may feel able to go further than he has today in reassuring the Committee about the availability of information in the public domain. However, our point has been made, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendment proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill.

Question agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4 - Public-private partnerships

Desmond Swayne (Conservative, New Forest West)

I beg to move amendment No. 72, in page 4, line 6, at end insert—

`(3A) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under this section at 31st March in that year.'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to discuss amendment No. 73, in page 4, line 27, at end add—

`(7AA) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under subsection (7A) above at 31st March in that year.'.

Desmond Swayne (Conservative, New Forest West)

I rise to speak to amendment No. 72, tabled under my name and that of my hon. Friend the Member for Woodspring (Dr. Fox). When I put my name to that amendment, I expected that my hon. Friend would move it. However, events have intervened. Labour Members who have unjustifiably accused me of verbosity will be reassured that I will, of necessity, be brief.

We support the principles of partnership and involvement with the private sector that underlie the clause—indeed, we have a measure of enthusiasm about them. That is my understanding, at least, but if I have got it wrong my hon. Friend the Member for Woodspring will correct me.

The Bill allows the Secretary of State to

form, or participate in forming, companies to provide

finance and guarantees to the bodies in question. Our amendments would create the requirement for the audit of the assets and liabilities that the Secretary of State will acquire or incur under the opportunities that arise for him in the provisions of clauses 4 and 5. That strikes me as perfectly sensible—pure common sense, entirely uncontroversial. Therefore, I have every expectation that the Minister will accept the amendments.

Members of the Committee will understand, however, that a concern underlies that requirement. The track record of Government investing in the private sector is long and inglorious. I will not try your patience, Mr. Maxton, or use the Committee's time to detail any of that history—the history of picking winners, for instance. I am sure that it would not prove controversial if I were to do so, however, because we are now governed by new Labour, which accepts the case that mistakes were made. Government Members would now take great care before putting in a Bill provisions that enabled such a process to begin again.

The amendments would require a quantifying of the liabilities that the Secretary of State incurs and the finance that he puts at risk when he invests in companies. They would require the Secretary of State to measure the liabilities into which he enters and to publish them annually, making public the contingent liabilities and off-balance sheet risks. That begs the question as to how one measures such contingent liabilities. In my former occupation in the Royal Bank of Scotland, I specialised entirely in developing technical solutions, finding algorithms and computerising them to calculate precisely the values of those contingent liabilities.

In the past, general practitioners have financed their own premises, borrowing commercially and obtaining reimbursement of the rental from the health authority by the cost rent, or notional rent schemes. That system encouraged general practitioners to work with health authorities to identify third-party developers to design, build and finance premises, and then let them to general practitioners and trusts at a market rent. The national health service does not want a lease longer than 15 to 20 years, however, and I would not blame it for that. Given the 10-year plan, it would be too much to expect the NHS to enter leases for more than 15 or 20 years. Indeed, many commercial undertakings would not wish to do so.

Peter Brand (Liberal Democrat, Isle of Wight)

Will the hon. Member explain why the Conservatives were so enthusiastic about the Government's private finance initiative projects, which tied the health service to contracts of some 60 years with a 30-year break clause?

Desmond Swayne (Conservative, New Forest West)

As the hon. Member says, no such contracts were entered into under the previous Conservative Government, precisely because of the terms and conditions that applied. Only as a result of those conditions being changed do we now have private finance initiative contracts.

The difficulty is that the cost of purchasing and developing the site cannot be amortised at a market rent set by the district valuer. The commercial developer of such sites therefore seeks to make the enterprise profitable. Consequently, if the NHS does not wish to renew the lease, the residual value of the site falls to him.

That is no problem in a constituency such as my own, where developers are queueing up to build on redundant primary, secondary, and—regrettably—intermediate care sites, which are largely privately owned. Recognising the residual value of a site after a development's natural life has expired is not a problem. There is, however, a problem in inner cities and rundown areas in other parts of the country, where initiatives such as this are most required so that modern and desirable premises for the NHS may be provided. Market rents are often too low to justify such a development in the first place, although since 1999 the district valuer has had some scope to deal with that problem. The difficulty arises because there may be no alternative use for the site if the NHS decides not to renew the lease. Therefore, the developer attempts to obtain a longer lease, or seek some guarantee with respect to the residual value of the site. The alternative is to seek agreement with a non-commercial NHS partner to purchase the land, or pay in part for the development itself, which would change the economics of the entire enterprise.

The economic reality is that in areas where the Department of Health wants new premises, but where there is no real demand for modern commercial property, the only way to develop the site is by underwriting some of the developer's costs. The advantage of that over the health authority simply commissioning and owning the project in the traditional way is not immediately clear. The private sector is able to accept the risk of managing a project. However, it is not good at or even willing to accept risks such as those that will be incurred as a consequence of developing new general practice premises in areas that are largely represented by Labour Members. To return to our previous discussion, Labour Members might justifiably say that they represent all areas, but I am sure that that imbalance will shortly be corrected in the months, if not weeks, to come.

If public borrowing is to be avoided, the Government will have to be prepared to enter into deals with the private sector that will have a significant potential cost, or contingent liability, in 15 or 20 years' time. When the leases expire and the residual value of the sites is not realised by the developer, the contingent liability, which the Secretary of State will have had to have underwritten in order to initiate the project, will fall due. It is only prudent to measure those liabilities as they are acquired and report on them every year to find out precisely what the Secretary of State is entering into as the years progress. That strikes me as entirely proper.

I have one or two other anxieties about the clause, largely as a consequence of an excellent document furnished by my right hon. Friend the Member for North-West Hampshire (Sir G. Young). However, as I would not want to divert the Committee's attention from these focused amendments, I shall leave those remarks to an even more focused debate on, if you are willing, Mr. Maxton, clause stand part.

John Denham (Labour, Southampton, Itchen)

As the hon. Gentleman, who has just made his first contribution from the Opposition Front Bench, has suggested that he would welcome a clause stand part debate, I shall keep my remarks narrow and relate them to the amendments.

The hon. Gentleman makes the simple proposition that the assets and liabilities arising from the clauses relating to public-private partnerships and income generation should be in the public domain. I assure him that they will be. The amendments are unnecessary. Any assets or liabilities, including contingent liabilities, will be disclosed in the relevant annual accounts. Any assets or liabilities held by the Secretary of State will be disclosed in the Department of Health's resource accounts, which will be published in compliance with the Government's resource accounting manual.

In the case of clause 4, for a health authority or PCT, or clause 5, for NHS trusts, any assets or liabilities would be disclosed in their annual accounts, which they are required to publish under the National Health Service Act 1977. In addition, any public-private partnership set up under the provisions as a limited company will be required to produce and publish annual accounts in compliance with the requirements of the Companies Act 1985. Those accounts will detail all assets, liabilities and recognisable contingent liabilities.

NHS and Department of Health bodies that want to set up companies to exploit intellectual property will have to comply with guidance set out in a financial framework, which will be published as official departmental guidance. Monitoring arrangements on intellectual property in the NHS that are already in place supplement existing accounting arrangements in the annual accounts of the bodies involved.

The purpose of the hon. Gentleman's amendment is achieved by existing arrangements for disclosure. Issues surround how the Secretary of State's liability might be limited through the use of limited liability companies for the proposed public-private sector partnership and how risk over the exploitation of intellectual property rights is managed in clause 5, but it might be better to return to those matters in more detail later.

Desmond Swayne (Conservative, New Forest West)

The Minister's comments offer a measure of reassurance. I assure him that our concern has been prompted by a desire to ensure that the Secretary of State is not ripped off. I am convinced that we have the best civil service in the world. It will, of course, advise the Secretary of State with all its expertise, but with all due respect, that expertise is not, or has not been in the past, commercial expertise. It is undoubtedly a jungle out there. The partners with which the NHS negotiates will seek precisely the guarantees that I described.

However, having heard what the Minister said about the way in which the contingent liabilities will be measured, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I beg to move amendment No. 23, in page 4, line 15, at end add—

`(6) For the purpose of subsection (1) above, the Secretary of State shall make regulations to establish and require systems of operation that safeguard patient interests, in particular to ensure adequate care standards, accountability and transparency.

(7) Before making any regulations under subsection (6) above, the Secretary of State shall consult such bodies who represent the interests of those likely to be affected by the regulations.'.

The amendment is designed to elicit assurances from the Government about how we can ensure, in the context of public-private partnerships, that patients' interests are safeguarded at all times. It would ensure that commercial interests were not put ahead of patient interests. The amendment would place a regulation-making power in the Bill, with a duty to consult prior to the publication of regulations about arrangements to ensure that there was transparency in dealings involving public-private partnerships in terms of how care standards are safeguarded and the information that is provided.

We are concerned that, beneath the cloak of commercial sensitivity or confidentiality, issues that are of public interest, that the public have a right to be informed about and that go to the heart of safeguarding patient interests will not be in the public domain. We therefore seek a mechanism that will enable the House further to scrutinise arrangements for monitoring and reporting on the operation of public-private partnerships set up under the clause.

The explanatory notes make it clear that the Government intend to use that power in the first instance to establish an organisation called NHS Local Investment Finance Trust—NHS LIFT—which is not about the construction of many lifts in health service buildings, but about investing in new primary care premises. Perhaps some will have lifts.

I hope that the Minister can answer some questions that seem relevant to the way in which the public-private partnerships that provide the premises might operate. First, can he tell us what the incentives will be for private companies to invest in under-doctored target areas? Secondly, are there any implications for the control of such premises through the involvement of private partners? Thirdly, will private companies that become involved in the arrangements have any say over how and what care is provided in establishments built through that mechanism?

I hope that the Minister can also say a little about whether the entities that will be created—the public-private partnerships—will in all cases work under a charging regime and the same employment and service conditions that pertain in the NHS. It appears that there is a question mark over whether that is the case, so we would like the Minister to give us some assurances on that.

The amendment is fundamentally about the need to ensure that there are procedures to allow the House to conduct scrutiny and to allow proper consultation by Ministers. There must be a system that ensures that patient interests are safeguarded when public-private partnerships bring in new money and that they cannot use commercial interests solely as a device to avoid public scrutiny.

John Denham (Labour, Southampton, Itchen)

I agree that the interests of the patient must always be paramount, but I am not convinced that the amendment is necessary to safeguard those interests, because the reality is that the existing obligations will apply where the Secretary of State or NHS bodies use this power. The power represents an additional way of improving facilities that are available to those who are providing NHS services and does not provide any excuse for ignoring patients' interests. All the current regulatory checks and financial and legal requirements that exist within the NHS will continue to apply. For example, the legal duty of quality of care on commissioners and providers applies, as will the guidance on clinical governance issued to the service. The role of the Commission for Health Improvement in looking after patients' interests will apply.

I can reassure the hon. Gentleman that the patients' interests will be paramount, and just because a public-private partnership is used to improve GP premises there is no reason to believe that that should lead to any diminution in the quality of patient care, any more than it would do if a purely private arrangement were entered into, or if those facilities were provided directly by a health authority through a health centre. The issue that the hon. Gentleman raises is a fair one, but because the checks and the obligations on the provision of services apply as they would in any other circumstance, there is no need to accept the amendment.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Can the Minister assure us that, so that those checks and obligations actually operate in the interests of the patient, there will be no need for those who act on behalf of patients to scrutinise the system at a local level? Does he believe that there will no need for them to have to navigate their way around the system to gather the various aspects of the information of the various checks that he was outlining?

John Denham (Labour, Southampton, Itchen)

The point is that services that are provided through new primary care facilities provided by NHS LIFT, and the issues that arise from the point of view of patient service, are exactly the same as if those premises had been directly provided by an NHS trust or a health authority or through a private arrangement made by the general practitioner: the patient is in the same position. Later, we will discuss a new system of patient scrutiny. That will be relevant, but only in the sense that we are looking to that to cover primary care in all its settings, including those that are provided here.

The hon. Gentlemen asked what incentives there are to invest in under-doctored areas. NHS LIFT will deliver good-quality primary care facilities because the nature of public-private partnership is that it can offer economies of scale and economies of financial skills. There will be an ability beyond that which an ordinary GP could normally handle to attract pharmacists and other health investors who want to become partners in the venture. It could be possible to raise additional capital to provide other facilities on a site such as flats or retail developments. There will be economies of operation for NHS LIFT, in that it would be able to tender for local authority or other personal social services facilities at the same time as providing health care properties. It might be able to offer other health care provision, such as minor injury units or intermediate or step-down care beds. Because of the involvements of the Department of Health and the NHS, we hope that it would be able to take advantage of the higher credit rating that the Department is able to bring to the company.

The acid test is that there is significant interest in the private sector in taking part in NHS LIFT. It is clear that it is the under-doctored and deprived areas in which we wish to invest, and there seems to be no shortage of potential private sector partners to take part in it.

The hon. Gentleman asked a number of questions, which hung around the idea that the nature of the services would be determined by the fact that this was a public-private partnership. I know that he does not agree with me, but it is important to stress, as we do with PFI, that this is an alternative route to making the provision; it is not an alternative provision. It is exactly the same with LIFT or any other use of this clause to develop a public-private partnership: it gives us an alternative means of achieving the same outcome for patients. We do not expect to cover all the investment that is necessary in primary care premises.

The hon. Member for New Forest, West referred to the existing arrangements for funding GP premises. Those will continue, but there are areas of the country where LIFT will not operate, certainly in the first instance, and where alternative routes which have been tried, tested and worked will continue.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The Minister began his response by saying that he was not convinced of the need for the amendment. I have not been convinced by his arguments as to why it is not necessary to place specific requirements in the Bill. We have not gone down the route of a detailed and prescriptive amendment, because that that would have invited him to advance arguments with which I am familiar in Committees. Nevertheless, we gave the Government the scope to advance the cause of patients' interests. We would like to take stock of what the Minister has said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

George Young (Conservative, North West Hampshire)

I am grateful to you, Mr. Maxton, for calling me and observing a semblance of rank in these matters.

It is ironic that clause 4 of the Bill embraces the private sector in comparison with a rather more narrowly drafted clause which is perhaps more notorious. Nothing shows the change that has taken place in the Labour party over the past 30 years more than the fact that we have clause 4 of this Bill, whereas the last time I served on a Standing Committee under a Labour Government nearly 25 years ago we had a Bill that phased out pay beds from NHS hospitals—``The private sector must not be allowed to infect the NHS and must therefore be driven out.'' It is interesting to contrast that philosophy with paragraph 11.2 of ``The NHS Plan'', which reads:

For decades there has been a stand-off between the NHS and the private sector providers of health care. This has to end.

Hear, hear to that. However, who is responsible for the stand-off?

On clause 4, there are a number of issues on which the Minister touched on which I should like to press him a little more. When the last Government were negotiating PFI deals, I had no idea that, sitting on the other side of the table, representing the hard-nosed bankers, was my hon. Friend the Member for New Forest West. How delightful it is to have him on one's side now. When the Minister explained what would have to be declared, he said that where the Secretary of State gave a guarantee, which he can do under proposed section 96C(2b), it would be declared in that year that it was made. Will he confirm that? The Secretary of State for the Environment, Transport and the Regions made a statement about the channel tunnel rail link which involved a Government guarantee. I think I am right in saying that, in those circumstances, that would score as public sector expenditure only if and when the guarantee was called. Will the Minister confirm that what he has said—that where the Secretary of State provides a guarantee, it will be declared at once—is consistent with the line that the Secretary of State for the Environment, Transport and the Regions took with the channel tunnel rail link?

Under proposed section 96C(1), the Secretary of State may form companies. Do the Government intend having a majority stake in any of those companies, or is it envisaged that they will have a minority stake, which would be the normal pattern?

Will the Minister clarify what appears in ``The NHS Plan''? Paragraph 4.11 refers to new local surgeries, which is what the clause is about. It states:

The NHS will enter into a new public-private partnership within a new equity stake company—Lift—to improve primary care premises.

It continues:

As a result of this NHS plan, up to £1,000 million will be invested in primary care facilities.

Does he really envisage that £1 billion will be spent through LIFT? If so, that is a substantial amount. If not, will he say what percentage of that £1 billion will come through LIFT, and whether that is on top of what was planned anyway, or is simply refinancing something that was to be provided in any event?

Will the Minister explain more about the decision-making process? If, as I envisage, the Government hold a minority stake and the private sector the majority stake, how can the Minister encourage investment in the more deprived parts of the country, which the private sector has not yet reached? What dialogue can the Minister engage in to encourage the drift of investment? Will the Secretary of State put on the table what is necessary to persuade the private sector to go there, or does the Minister envisage an alternative form of dialogue to achieve that?

I do not wish to prolong the debate. I welcome the clause and am trying to establish how it fits with section 96 of the NHS Act 1977. It does not fit at all, because section 96 has four subsections and the clause refers to section 96C. I understand that the only way to make sense of it is to refer to the unwieldy document before all members of the Committee. Out of interest, I examined section 97, which printed 20 lines of an Act, but crossed every single line out. I wonder what function was served by that exercise in bureaucracy. If the Minister can shed some light on the operation of the clause, I would welcome it even more enthusiastically than I have so far.

Desmond Swayne (Conservative, New Forest West)

It is a great pleasure and honour to follow my right hon. Friend and quite proper to have given way to his rank. I shall not repeat any questions that he asked more eloquently and intelligently than I could, but ask one additional question. Insofar as the clause enables the Secretary of State to be a participant in the formation of companies, how will it be affected by EU purchasing and procurement rules? I look forward to hearing the Minister's response.

My right hon. Friend the Member for North-West Hampshire provided me with a brief from the Democratic Health Network—an organisation of 80 members, the majority being local authorities, but primary care groups and trusts, community health councils and trade unions are also involved. It seems that clause 4 has not been universally welcomed. The brief points out:

This short clause allows for a radical change to the way in which NHS services and facilities are financed. If the provisions in the clause were exploited to their full extent, most of the NHS could be financed through PPP. It will affect service users, patients, employees and wider communities. It is likely to be challenged by those who believe that public private partnerships are a ``back door'' way of privatising the NHS and neither provide value for money nor are sufficiently accountable.

The brief goes on to state the deep concerns of many people about the clause. Of course, I do not share those concerns. The Conservatives support the principles behind the clause, but it would be remiss not to have drawn the Committee's attention to those concerns.

In some ways, sitting in Committee today has been a surreal experience—a feast without Banquo's ghost. This morning, we had the spectre of health authority boards being dismissed and replaced entirely by the private sector—a spectre that the Minister failed to dispel. This afternoon, provisions on new, exciting arrangements with the private sector are being spelled out in the clause, yet we have not heard a peep from Labour Members. Perhaps that is a consequence of the ruthless way in which those who participated in the Second Reading debate have been excluded from the Committee. I leave hon. Members to think about that.

Lorna Fitzsimons (Labour, Rochdale)

The hon. Gentleman knows that some of us spent most of our time in the corporate sector and have therefore no problem working, or identifying the excellence, within it.

Desmond Swayne (Conservative, New Forest West)

That begs the question, where was the hon. Lady on Second Reading? Others, who were not quite so involved with the corporate sector to which she so lovingly refers, made their feelings plain. It would have been interesting to hear those views reflected in the Committee. I am disappointed that a voice has had to be given to them by Opposition Members. Perhaps it is worth reflecting on that.

John Denham (Labour, Southampton, Itchen)

I shall deal directly with the series of questions raised by the right hon. Member for North-West Hampshire.

On when the guarantee would be declared, my understanding is that it would form a contingent liability and would be declared in the financial year in which it was made. However, I am not an expert in that area. I shall look further into whether it scores as public expenditure in that year or only the year in which the guarantee was actually caused. I shall write to the right hon. Gentleman and copy the letter to members of the Committee.

It is certainly our intention to take a minority stake in LIFT, as the Secretary of State, in partnership with Partnerships UK. We believe that LIFT will be able to produce £1 billion over the period that we have set out. That will make a major contribution towards the planned refurbishment of primary care premises and the development of new premises. It is our intention that the existing streams of funding will continue at the levels which are available, so this will not become a sole or exclusive route to the refurbishment of GP premises.

As for the ability to attract LIFT into the areas where it is needed, clearly the Secretary of State has a number of tools at his disposal, including the shareholding in the company and the NHS resources that could be put into, or that already exist, within areas. A planned approach to the refurbishment of a number of different premises enables us to bundle together a variety of different properties and development opportunities in one place in a way that most purely private sector companies would find difficult to achieve.

On section 97, I apologise if the document is hard to read, but as we discussed on the first day, my officials have made strenuous efforts to be as helpful as possible to the Committee in having a consolidated version of the legislation. I noted with interest the comments made by the hon. Member for New Forest, West on the Democratic Health Network. I should not mislead the Committee: we have done this primarily to get LIFT under way, but it is possible to envisage areas where significant capital investment would be required in the NHS and where a similar model could be used in the future.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5 - Income Generation

Desmond Swayne (Conservative, New Forest West)

I have some questions for the Minister on clause 5 which essentially gives the Secretary of State the same powers with respect to income generation. Will the hon. Gentleman spell out precisely the ways in which he sees that taking place? I should be interested in his analysis of the extent to which he expects the NHS to be able to export its management skills, certainly in the short term and in ways that he believes will be attractive to the private sector.

John Denham (Labour, Southampton, Itchen)

The hon. Gentleman asked about management skills. The primary intention of the clause is to enable the NHS and Department of Health bodies to exploit intellectual property in innovation generated by staff, essentially through the development of so-called spin-out companies, in the development of new pharmaceuticals, medical procedures or devices and so on. At the moment, we can achieve that only by licensing. In some situations it cannot be achieved, for example, where there is no obvious licensee or further development is necessary. In such cases, the spin-out company route is needed so that the new treatment can be brought in for the benefit of patients. A spin-out company will be formed by bringing in outside funding without further investment by the NHS or the Department of Health. The previous work done to develop innovation gives the NHS or the Department of Health body its shareholding.

Without going into detail, we must recognise that we need clear procedures for managing risk with spin-out companies. We intend that, in all proposals, approval of a business case by officials acting on behalf of the Secretary of State will be required. The proposal is very much in line with wider Government policies for the successful development and exploitation of intellectual property rights.

Desmond Swayne (Conservative, New Forest West)

Would the remarks made by the right hon. Friend the Secretary of State about the possibilities of marketing occupational health schemes to the private sector come under the aegis of the clause?

John Denham (Labour, Southampton, Itchen)

My understanding is that the development of NHS Plus, the organisation envisaged in the NHS plan to market occupational health services, would not require use of the powers, but I acknowledge that the provision goes wider than our specific aim of developing the exploitation of intellectual property rights. It might be used in several other ways to provide a flexible or different means of income generation.

Question put and agreed to.

Clause 5 ordered to stand part of the Bill.

Clause 6 - Terms and conditions of employment by health service bodies

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move amendment No. 70, in page 5, line 15, leave out `and any directions given' and insert `made'.

John Maxton (Labour, Glasgow Cathcart)

With this it will be convenient to take amendment No. 71, in page 5, line 40, leave out `and any directions given' and insert `made'.

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall address the amendments tightly. The wider issue involved is best dealt with in a short clause stand part debate. The amendments would remove the reference to directions so that the Secretary of State could make regulations, but not directions. My understanding—I am sure that the Minister will helpfully correct me if I am wrong—is that regulations under the provisions of the National Health Service (Primary Care) Act 1977 would require a statutory instrument to be laid. They could be debated in Parliament, whereas directions are given by the Secretary of State without the necessity of or possibility of any form of parliamentary scrutiny. The amendments would simply ensure that, where the Secretary of State interferes in matters such as the terms and conditions of employment used by primary health care trusts or health authorities, he does so in a way that is transparent and scrutinised by Parliament.

John Denham (Labour, Southampton, Itchen)

As the hon. Gentleman said, the amendments would remove the power to make directions in relation to employment practices but would leave intact the power to make regulations. The core issue is whether there are circumstances in which it would be appropriate or better to use directions rather than regulations.

We are talking about keeping both options open. To give an example, we are working with NHS staff organisations—that is the primary aim of the clause—to design a job evaluation system to ensure that a modernised NHS pay system respects the principles of equal pay for work of equal value. If the design is successful, and the scheme with all its elements is agreed, it will need to be implemented consistently throughout the NHS.

We could use regulations or directions to ensure that all NHS employers use the agreed job evaluation scheme, which is at the heart of the equal pay for equal value system. However, should problems arise over detailed interpretation in particular locations, we may need the flexibility to deal with the matter by direction. We would rather not have to publish enormously detailed regulations that covered every eventuality because we did not have the power to make directions in specific cases.

Governments have long recognised that in the health service there are times when regulations are appropriate and times when directives are appropriate and it is preferable for the Secretary of State to have the flexibility to choose between the two mechanisms, as necessary.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not entirely convinced by the Minister's argument. I can, of course, see the attractiveness to the Secretary of State of having the power to give directions, because they are not subject to scrutiny or indeed to publicity. However, I think it would be convenient to the Committee if I seek leave to withdraw the amendment and continue the substantive debate.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall attempt to be brief. The undisguised essence of this provision is to maintain a nationally directed pay system.

Hilton Dawson (Labour, Lancaster and Wyre)

Hear, hear.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman shouts, ``Hear, hear,'' from the Back Benches, rather confirming everything I believed and performing, as he often does, in the stereotype role in which my mind has cast him.

We have in the national health service a productive organisation. It is not merely a body that performs the public function of procuring access to health care and ensuring that it is available free at the point of need. It is also the virtual monopoly provider of health care—probably the single most important good that this economy produces. The NHS produces just under 6 per cent. of gross domestic product. It is a very large, productive enterprise, with 1 million employees.

The Government seem to believe that the best way to run such an enterprise is as a single structure. There is no example anywhere in the world of a productive organisation with 1 million employees producing the equivalent of nearly 6 per cent. of our GDP. Even organisations on a much smaller scale in the commercial world operate on a properly devolved basis. I will not bother to pursue the Secretary of State's assertion to me on Second Reading, recorded in Hansard, that the Chinese army ranked as such a productive organisation and should be considered as a good example. I invite the Minister to look that up.

Whether it is a good or bad thing to want to put in place a single national pay and conditions structure, it is likely to prove a futile exercise. The Government have embarked on a process of proposing paying cost of living supplements beyond the London weighting area. I represent an area just outside London and I will be a grateful recipient of some modest additional assistance towards the great challenge of recruiting and retaining NHS and other public sector staff in that area. I have already been on the receiving end of an outburst from NHS staff in Dorset who will be excluded from these arrangements, yet, as many hon. Members will know, housing in parts of Dorset—Poole, for example—is extremely expensive.

That is not a criticism of the Government's proposal, but simply an observation that, wherever one draws lines, artificially from Whitehall, one creates another problem. If the Minister decides tomorrow to include Dorset, the problem will be the next county—my geography of the south-west is not too hot.

Desmond Swayne (Conservative, New Forest West)

My constituency straddles that boundary and I have constituents living opposite each another in the same street who are affected differently because one is employed in Dorset and the other in Hampshire.

Philip Hammond (Conservative, Runnymede and Weybridge)

My hon. Friend emphasises our problem. If one takes a rational and sensible approach to the provider side of the national health service—not its function in ensuring equitable distribution of the availability and access to health that it is free at the point of need, but its more nuts and bolts function as a producer of health care—one must realise that its future lies in devolving more power from the centre and acknowledging the different conditions that obtain in different parts of the country. Self-evidently, a nurse living in Dorset will have higher living costs than a nurse living in rural Northumberland. Until the NHS can offer local structures and sufficient flexibility to take those factors into account, as every commercial organisation must do to survive, those recruitment and retention problems and the problems that NHS staff in relatively expensive areas on relatively modest salaries face will persist.

The Government are going precisely the wrong way in seeking regulation-making or direction-making powers to determine the way in which every health authority and every primary care trust and NHS trust in the country deals with its staff. There has to be scope for flexibility if we are to succeed in maintaining, retaining and recruiting the necessary work force in all parts of the country. It cannot be a coincidence that, reversing the trend of the 1950s and the 1960s, the trend in large commercial organisations in the past three decades has been to decentralise power and authority over such decisions and to recognise that production units must operate semi-autonomously. The proposal is a retrograde step and gives the lie to the proposition that this is a decentralising Bill.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

Will the hon. Gentleman acknowledge that, by advocating extra rewards and remuneration for people in high value areas, which are likely to be high value because they offer superior amenities to those in inner cities, he is promoting a course of action that would exacerbate the problems of inner cities in recruiting staff for the health service?

Philip Hammond (Conservative, Runnymede and Weybridge)

In fact, the inner-city areas often have the high property prices and the high cost of living that cause NHS staff such problems.

The rest of the debate is in Hansard.