Health and Social Care Bill — Committee (12th Day) (Continued)

House of Lords, 13 December 2011.

Baroness Murphy (Crossbench)

My Lords-

Baroness Anelay of St Johns (Conservative)

My Lords, I appreciate that this procedure is not common, but it is not novel. The noble Baroness, Lady Murphy, is seeking to contribute to the continued debate. May I suggest that Peers who are attempting to leave should do so by the other door, and preferably not by that door-I say to the noble Lord, Lord Borrie-so that she can stand and be heard by the House?

Baroness Murphy (Crossbench)

Thank you very much indeed. I just want to comment briefly on the amendments on licensing. Some of them are asking quite a lot of the licensing procedure, but there may be other mechanisms that achieve what they want to achieve. I am sympathetic as people's desire to add these conditions, but I think that it is important to see the licensing arrangements as part of the system, in conjunction with registration with the CQC. It enables Monitor to approve the compliance arrangements to achieve good governance and the information requirements needed to monitor that the organisations are delivering the right standard of care.

The threat of licence revocation enables Monitor to pick up at an early stage the problems of quality and finance which other people have spoken about. Obviously the providers will be very concerned to hold on to their licence, which seems to be a very powerful and potent tying-in of organisations to the ethos and objectives of the NHS. We must be very careful not to regard the licensing process as something within which to impose too many conditions, but as a basic framework that ties the licensees into the system. That is particularly important when organisations start to go wrong. We will discuss later how they are rescued from those predicaments. However, it seems to me that this creates a basic level playing field, and that it would be a mistake to use that process to do much more than tie everyone into the basic system. It sort of replaces the old authorisation process on compliance and quality that was operated by old Monitor, but it is a way of going forward as new organisations come into the NHS as providers of NHS services. I just wanted to add those comments because I think that these amendments might be adding a bit too much to the responsibilities of the licensee.

Earl Howe (Conservative)

My Lords, licence conditions will be the mechanism through which Monitor will be able to prevent potentially anti-competitive behaviour and enable service integration, where this is what commissioners want. Monitor would also use licence conditions to collect the information it would need to set prices, and to help identify at an early stage-at an early stage-if a provider was at risk of financial distress. If that was the case, it could work with the provider to address potential problems, as well as supporting commissioners to ensure continuity of services. I completely understand the concerns in that area.

First, I think that I need to make clear that all providers of NHS healthcare services will be subject to the requirement to hold a licence. This includes providers of primary medical services, which is the question posed in Amendment 279A. Furthermore, where a provider is providing services that carry a requirement to be registered with the Care Quality Commission, that registration will be a prerequisite to being granted a licence by Monitor. We all want to see close operational links between Monitor and the CQC. The Bill emphasises this by placing duties of co-operation on both organisations, not just in matters such as information sharing, but also in the development of the joint application mechanism for providers seeking registration from both bodies.

We are also clear that regulation must be proportionate, and impose the minimum of additional burdens on those being regulated, while still safeguarding the interests of patients and the public. To that end, the Bill makes provision for the Secretary of State to make regulations establishing an exemptions regime, so that licensing can be targeted towards those parts of the health service where there is the greatest need for regulation. While we are clear that there must be an exemptions regime, we also recognise the importance of making sure that we get the scope of it right. To that end, we are already committed to consulting fully next year on our proposals for the exemptions regulations. Noble Lords may also be aware that the Delegated Powers and Regulatory Reform Committee of your Lordships' House has recommended that the first set of exemption regulations should be subject to the affirmative resolution procedure. We agree, and both Houses will have the opportunity to debate them before they come into force.

The Bill provides for Monitor to attach conditions to licences. While the Bill sets a framework for the scope of those conditions in Clauses 95 to 97, we are clear that it will be for Monitor itself to develop the detail as the sector regulator. The intention is that the conditions will support Monitor in exercising its functions and that Monitor will be best placed to know how they should be framed to achieve that. Therefore, including large numbers of mandatory conditions on the face of the Bill, as some noble Lords have suggested in certain amendments-for example, Amendments 283, 285ZA and 287A-would undermine the Monitor's independence, which we do not think is desirable if it is to be a robust and vigorous sector regulator.

Nevertheless, I would like to reassure the Committee that there will be proper oversight of Monitor's proposals for conditions. My right honourable friend the Secretary of State will have the power to veto the first set of licence conditions. We are clear that Monitor must be able to operate freely and autonomously within the legislative framework established by the Bill. We have built in reasonable checks and balances through requirements for key products, such as the licensing criteria and conditions, to be subject to approval by the Secretary of State. Although I understand entirely the reasoning behind amendments tabled by noble Lords which would increase the level of the Secretary of State's involvement in provider regulation-for example, Amendments 281A, 282A and 282B-regrettably, I feel that these go a step too far in limiting Monitor's independence.

The noble Baroness, Lady Thornton, asked me quite a number of questions to which I feel I should write in response. In particular, however, she asked whether Monitor will have the role of resolving disputes and whether all disputes would go to court. The answer to both of those questions is no. The NHS standard contract already provides for contractual disputes to be resolved through arbitration and this will not change. Licence holders have to agree special conditions or modifications to conditions. If the provider disagrees and Monitor then wants to proceed, it must refer the matter to the Competition Commission for consideration.

My noble friend Lord Clement-Jones spoke to Amendment 281A. I want just to comment briefly on that. The amendment would increase the minimum length of notice period during which representations could be made following publication of a notice of proposed exemptions. I am grateful to my noble friend for that. The Bill is clear that the notice period should be not less than 28 days. It could therefore be much more than that, and our expectation in most cases is that it will be. But there will be times when the Secretary of State needs to act quickly, so being locked into a notice period of not less than 90 days could be detrimental to a particular provider or group of providers.

My noble friend Lady Williams spoke to two amendments, Amendments 287EA and 287EB, where the purpose is to ensure that licence conditions on providers of NHS services restrict the income they can earn from private patients and the number of private patients they treat, as well as that funds provided for NHS care are not used to subsidise private treatment offered by foundation trusts, with various conditions attached. I understand my noble friend's concern about this. However, the amendments would be impractical, and in particular for licence holders who are not NHS bodies they would be highly undesirable. Foundation trusts' principal purpose-we will come to this in a later group of amendments, when we discuss the private patient income cap-is to provide goods and services for the NHS in England. It means that they must earn most of their income, over 50 per cent, from NHS services. We are tabling a government amendment to make it clear that the majority of every foundation trust's income will continue to be from NHS service provision. Foundation trusts must comply with their principal purpose or they will be breaking the law. They could be at risk of successful legal challenge if they fail to meet their principal purpose. We are tabling a second government amendment to require foundation trusts to show in their annual reports how income earned from private activities has impacted on the provision of NHS services. Using NHS income to subsidise private patient work would lead to foundation trusts breaching the NHS constitution. The Government also gave a commitment that foundation trusts will have to produce separate accounts for their NHS and private-funded work.

Finally, I want to mention briefly the amendments that will fall to me to move in relation to licensing: Amendments 280A, 281B, 284A to 284C, 285A, 286B, 287C and 287D, and 288A to 288F. These are without exception minor tidying-up amendments to improve the drafting or clarify meaning, and I hope that the Committee will accept them when they are moved. I hope, too, that the Committee feels reassured by my explanation of how we envisage licensing to operate and that the noble Baroness will be able to withdraw her amendment.

Baroness Finlay of Llandaff (Crossbench)

My Lords, can the Minister provide clarification on the questions I asked? First, who is going to define what is expected of primary care services in terms of how they are integrated? If that does not form part of their licensing, who will define the minimum standard across the country? Secondly, in Amendment 282ZC I set out that:

"A criterion for a person or organisation to be granted a licence must be that that person or organisation demonstrates a commitment to education, training and research".

I would be grateful if the Minister could explain the situation when someone may well be good enough to provide clinical services but shows absolutely no commitment to any aspect of education and training, even for the development of their own staff, or to any of the research developments that might be happening in their field. I would include in this physiotherapy and occupational therapy assistance, such as people putting appliances into homes and those providing supportive care-assistance services in health, but not the secondary and tertiary-care specialised services which are covered very adequately by all the criteria from the royal colleges. It is about the minimum standard.

My third question relates to indemnity: do the Government feel that it is acceptable for a provider to be licensed without having to demonstrate that it has adequate indemnity?

Earl Howe (Conservative)

My Lords, I apologise to the noble Baroness if I skirted over the considerable number of questions she asked, and if it would be helpful to her I will write her a letter on all of them. Perhaps I may cover two at this point. As regards her Amendment 282ZC, our expectation is that Monitor's licensing criteria will be light-touch and broadly drawn, to encompass a wide range of providers. The amendment she has tabled does not lend itself to that approach. Much as I understand the importance of this particular issue, requiring any and every licence applicant to meet a definition of,

"commitment to education, training and research",

that Monitor has developed does not fit with the principles of proportionate and targeted regulation. But I will write to her with further reasoning on that.

As regards the noble Baroness's Amendment 282ZB, which is about indemnity, if she will forgive me, again I think that I will have to write to her.

Lord Clement-Jones (Liberal Democrat)

I have another amendment on which the Minister might find a lacuna-Amendment 287A, which deals with the Nolan principles.

Earl Howe (Conservative)

Will my noble friend allow me to write to him on that?

Lord Clement-Jones (Liberal Democrat)

I assumed that he would make that undertaking.

Baroness Thornton (Labour)

I am glad that the noble Lord, Lord Clement-Jones, asked that, because I was waiting to hear what the answer would be. I look forward to the noble Earl's response. I fear that the noble Earl will be spending the whole of the weekend writing letters to all of us about these matters.

I am not going to say very much about this. This has been a divided debate, but many of the questions asked have been similar. The noble Baroness, Lady Williams, was quite right to raise the issue of requirements. She and her noble friend Lord Clement-Jones were right to raise the issue of transparency, which is very important here.

I am not sure that we on these Benches would agree that the checks and balances are the right ones. At this stage, we will wait for the letters from the noble Earl. I will also read his remarks again in Hansard. We may return to discuss this matter again. I beg leave to withdraw the amendment.

Amendment 260EB withdrawn.

Clause 58 agreed.

Schedule 8 : Monitor

Amendment 260EC

Moved by Baroness Thornton

260EC: Schedule 8, page 361, line 15, at end insert-

"( ) The chair and the chief executive must be separate roles, and cannot be held by the same person."

Baroness Thornton (Labour)

We turn now to the very important matter of Monitor and accountability. I see that many noble Lords have amendments in this group, many of them echoing each other. The reason for that is that, given the powerful role that Monitor is to have-whether it will have this role under the regime proposed by the Minister or the alternative architecture proposed by myself earlier today-we think that accountability is very important indeed.

We propose two improvements to Monitor's governance. We believe that its functions should be exercised in the public interest and therefore that it should meet in public, as the NHS Commissioning Board will. We should also no longer have a combined chair and chief executive post. I hardly need say to the House that this arrangement is totally against established good practice in the public or private sector. I rest that issue there and look forward to the noble Earl's response.

When foundation trusts were set up, the idea was that they could earn freedoms from traditional NHS management and also bring an element of democratic accountability and community ownership. It must be said that much of this has not materialised. Some foundation trusts up north have made an effort to engage locally with the people they serve. Some have adopted a business model rather than a community ownership model. I am sure that all noble Lords are members of their foundation trusts-I hope that they are and that they take part when asked to do so. The target to push up membership numbers in the trusts seems to have been forgotten.

Being successful in becoming a foundation trust shows that a fairly high barrier was overcome but that represents only the position at one point in time. As with the share market, things can go up or down. Some big-name foundation trusts have had their bad patches. A few, surprising names have been at the edge of intervention. If you compare the list of foundation trusts flagged as being in difficulty by Monitor with the list of ratings from Dr Foster or, in its time, the ratings from the Healthcare Commission, there seems to be no pattern at all. Indeed, a double-excellent foundation trust came close to de-authorisation.

Every large, complex organisation can get into trouble. Past success is no guarantee of future performance nor is it necessarily even a good predictor. That is why we argue that the oversight of foundation trusts by Monitor should continue and its intervention powers should remain. We have long argued for shifting the balance of power and we fully support the idea of earned autonomy with the regulator as an independent judge. But if it is earned it can also be taken back. We shall see what transpires when one foundation trust is obviously unable to present a viable business plan. What will happen to its future?

Monitor has to continue in the role we gave it as the authoriser of foundation trusts as they earn their limited independence. In recent times, it toned down the role it took as the promoter of foundation trusts and as a trade body as a step too far. We argue that Monitor as a regulator should be neutral not a cheerleader. We can accept the principle that it is wrong to favour any type of organisation for arbitrary or political reasons, as is set out in the operating framework. We do not accept the convoluted and ultimately meaningless formulation contained in the Bill. Monitor should retain its intervention powers. We accept the case for autonomy and community ownership but in the final analysis we see foundation trusts as still part of the NHS and so, in the end, subject to the powers of the Secretary of State.

We accept that the governors should be a strong element in foundation trust governance but, as the Bill accepts, they need support and development in that role. Most foundation trusts will say that governor effectiveness takes at least five years but governors, no matter how effective under normal circumstances, may be completely ineffective in times of overwhelming crisis. It is then that the Secretary of State must have the power to intervene to ensure the overall functioning of the NHS and to protect the interests of patients and their communities. A major change here is that the Bill extends the concept of financial regulation to non-foundation trust providers-that is, the private sector. As I have said before, we can see the logic in that.

I am going to skip ahead and do what I said earlier in the Bill: you do every other page of your brief and see whether anybody notices. We have already had a lot of debates about these issues.

Finally, we come to reservations about the interaction between the licensing regime and the use of standard contracts. Actually, we have also discussed that so I will not ask those questions again. We have recently seen missives from the Department of Health and from Monitor exploring the ideas around regulation. It is slightly amazing that these are all coming out now, as helpful as they may be. The general idea, as we have said before about the Bill, is that you should consult on the legislation, allow Parliament its scrutiny role and then implement it. However, as we know, the Bill exhibits the principle of reverse engineering. When its progress was paused to allow consultation, the Government continued to roll out the implementation and the Bill is catching up with that now. We scrutinise the Bill alongside its implementation and the secondary legislation is written up in the form of documents coming out of the Department of Health.

I turn to our amendments in this group. Amendment 260EC provides that the chair and chief executive of Monitor cannot be the same person, Amendment 260GA provides that Monitor must meet in public and Amendment 267D would apply the mandate to Monitor. We think that Amendment 267D might be improved on and might even be better located in Clause 20 on the mandate itself, but the point of it is to raise the idea that the Secretary of State may be given a greater power of direction of Monitor and ultimately boost its accountability. I beg to move.

Lord Clement-Jones (Liberal Democrat)

My Lords, I would like to continue the train of thought started by the noble Baroness, Lady Thornton, about the specifics relating to Monitor. I shall speak to Amendments 260F, 260G, 260H, 269A, 294BA, 294BB and 294BC.

First, I may not have got Amendments 260F and 260G, relating to the first chief executive of Monitor, completely right, because Monitor is already in existence, but in principle the chief executive of Monitor should surely be appointed by the Secretary of State in the same way in which the chairman and chief executive of the national Commissioning Board are. As we go through this debate, it will become increasingly obvious that Monitor's role is as important as that of the NHS Commissioning Board, so I would have thought that having an appointments system on all fours with the board would be imperative. Then again, we come to the question of the provision of information to the Secretary of State. Amendment 260H mirrors the powers possessed by the Secretary of State in relation to the NHS Commissioning Board. It seems sensible that that should be in place as well.

Harking back to our debate on competition and the application of EU competition law, we come on to a rather different issue. This is an interesting place for these amendments to be put. In Clause 118 it is the Competition Commission that deals with the determination of methods of setting prices under the national tariff if there is a disagreement-the Competition Commission has that referred to it by Monitor. For all the reasons that we explored in the debate on the first set of amendments today, it is inappropriate, in my view and in the view of many others, for the Competition Commission to be so heavily involved in matters relating to the NHS. Substituting the Secretary of State for the commission seems to be sensible.

The objection is sometimes raised that we need an independent body in order to set the method. That is a fair point but it is an objection to the Secretary of State doing this entirely on his own, whereas an independent panel appointed by the Secretary of State could do the job equally well. That would ensure that there was some arm's-length relationship with the Secretary of State in these circumstances. It is quite unnecessary for the Competition Commission to do what is going to be an extremely unfamiliar job for it in assessing the methodology of setting the national tariff-far better that others who will become familiar with it should undertake that task as advisers, consultants or whatever to the Secretary of State. All these amendments make good sense.

I move finally to Amendment 269A. The regulations under Clause 61 are very important. The noble Baroness, Lady Thornton, referred to them in her first speech today. Understandably there is considerable debate and discussion about whether it is desirable for Monitor to exercise functions in relation to adult social care. However, we are not being asked at this stage to make a decision about it. If we were being asked to decide whether Monitor should exercise those functions, it is important that we have the debate in this House, indeed in both Houses. That is why this amendment sets out that it should be decided by the affirmative procedure, which would be an entirely proper way of dealing with it and would be on the Floor of this House. In all these cases they seem to be tightening-up provisions that recognise the importance of certain regulations and of Monitor and that the role of the Competition Commission throughout this Bill is inappropriate.

Lord Warner (Labour)

I thought there was going to be an intervention from my left. I was not going to intervene in the debate on this group. I am sorry if I missed something by missing the debate on the first group of amendments. I have some concerns about the dual role of Monitor as the arbiter of foundation trust status and the raft of new duties that it will undertake as an economic regulator. Let me make it clear that I have no problem whatever with the role of Monitor as the economic regulator and the functions that go with that. However, I want to share with the Minister and the House some of the previous Government's thinking on whether Monitor could combine being the economic regulator and the arbiter on the passage to foundation trust status. The situation, if anything, is more difficult now. We finally concluded that we could not make Monitor the economic regulator until we were much, much further along the path of completing the job of trusts becoming foundation trusts because there were potential conflicts of interests, which we will come to later.

I raise this issue at this point because there are accountability issues here as well. I can see the very strong arguments-and I have every sympathy with the Government on this-for setting up an economic regulator and the Secretary of State not dipping in and out of those functions. If you are going to have a regulator, let it be independent and leave it to get on with the job. I am very comfortable with that. My concern is that we are already going to be loading a very large number of functions on to this economic regulator, and to expect it to carry on, even with Chinese walls, as the arbiter on foundation trust status is a big ask, given that most of the promising candidates for foundation trust status have already jumped over the bar and we are getting down to the ones that have been finding it rather difficult to jump over the bar. That could be because the Government have set themselves the target of 2016. We set ourselves targets of 2008 and 2012, and quite a lot of trusts have still got nowhere near jumping over the bar, so I certainly would not bet the farm on them all having cleared the hurdles by 2016.

Monitor, in its role as the arbiter on foundation trusts, needs to keep a very close eye on those that have cleared the bar and to intervene when it needs to. The Secretary of State is actually embroiled in that process. The cases have to be cleared by the Department of Health and the Secretary of State before they go on to Monitor. That is a long-established process. The Secretary of State is going to become involved to some extent if trusts lose their foundation trust status; they go back into the pool in a sense.

We are now dealing with a situation that is much more difficult financially and much more challenging than it was under the previous Government. We are trying to get Monitor to do an even more difficult job with the most difficult trusts in an extremely difficult climate and to take on the job of being an economic regulator. There are real issues about whether that can be done and about separating out the areas where the Secretary of State has a legitimate role. It is legitimate for the Secretary of State to have a presence in the build-up to a foundation trust application and when a trust loses that status. However, that set of issues is separate from the accountability issue when Monitor performs the role of an economic regulator. Will the Minister share with us some thinking about how those separate functions will be handled in the real world that we will face over the next three to five years?

Baroness Williams of Crosby (Liberal Democrat)

My Lords, I wish to address my Amendments 274AA, 274C, 274D and 274E in this group. I shall speak as briefly as I can. I share many of the concerns expressed by the noble Lord, Lord Warner, on whether we are overloading Monitor with too many requirements to make judgments, to intervene and to be responsible to enable any single body to function, however brilliantly led it might be.

This amendment is about the conflict of goals on the part of Monitor. I believe that it is a very important amendment, although it looks modest enough. The Bill states that if Monitor has a conflict of objectives-or, more clearly, a conflict of duties-that will in essence be resolved by the head of Monitor making a statement about the nature of that conflict and the ways in which it could be resolved and then turning it back to the perpetrators to solve the problem as best they can. Those conflicts are substantial. We should make it clear that they are fundamental to the whole argument that we have been having, including in the brilliant previous debate because, first and foremost, the general and primary objective of Monitor is supposed to be the promotion of patient health and patient care. That is fundamental. We heard in the very eloquent speech of the noble Baroness, Lady Meacher, how she thinks Monitor has changed its philosophy of life within the NHS and has become much more concerned with patient care and patient protection than with the pursuit of competition primarily for its own sake. That is a very important step forward in our understanding of the Bill.

However, it still leaves open the possibility of a conflict arising between the duties of Monitor. I have just mentioned the first of those duties-the care and concern about patients who are dependent on the health service. The second duty continues to be a concern with anti-competitive policy, and the third is concerned with integration and collaboration, about which there has been a great deal of discussion and many amendments in this House. The Bill gives us very little guidance on any conflict over which of those duties should be given priority over the others. It says that a conflict of duties or a conflict between responsibilities is to be resolved in this rather heavy-handed way of a statement being made about the nature of the conflict and how it might be resolved, which is then distributed to all those concerned. However, there is no resolution of the conflict. It remains part of what one might describe as an ongoing negotiation that some day might resolve itself in one direction or another. It has interesting parallels with yesterday's events. However, Amendment 274E sets out very clearly that we believe that ultimately that conflict should be resolved by the Secretary of State. We accept all the intervening proposals in the Bill at present-that statements should be made, that the conflict should be defined, and that it should then be passed on to those involved to try to find a solution. If, at the end of the day, no solution is found, it is absolutely crucial, in our view, that this becomes the responsibility of the Secretary of State as the ultimate goal of any accountability or responsibility within the service itself.

In this House I think we have got much closer to recognising how significant this final duty over a range of issues is. The Secretary of State is open to accountability to Parliament and to the general public, the people of England, so we say in Amendment 274E that if no solution can be found, there should ultimately be a reference back to the Secretary of State, who then has to make this ultimate decision. We have deliberately framed it to say that he is the ultimate decider, not one of those deciders on the way, although Monitor certainly has a role in resolving the conflict.

Since the future health service will in part be defined by what is seen to be the most significant of those duties, I think the Minister and most of us in this House believe that that central duty has to be responsibility to the patient and to the care and protection of the patient. I urge us to give this very serious consideration, because it is part of the pyramid that was set out in the brilliant speeches in an earlier debate by the noble Baroness, Lady Thornton, by my noble friend Lord Clement-Jones, and by my noble friend Lord Newton of Braintree, who has now had to leave us. I therefore propose the amendment in that spirit. It puts into a microcosm the concept of where the most responsible and urgent duties on Monitor lie.

Earl Howe (Conservative)

My Lords, I think that this has been a very useful debate. The Bill provides a more autonomous NHS, and it does so in order to deliver high-quality services and value for money. Monitor, as sector regulator, would establish clear standards and rules to protect patients' interests in the provision of NHS services. Monitor would be required to lay its annual report and accounts before Parliament and have the accounts audited by the Comptroller and Auditor-General. It would also need to comply with other rules and guidance that cover central government public bodies, including the seven general principles of public life, the Treasury's guidance document, Managing Public Money, and rules on corporate governance. Monitor would also have to respond in writing to parliamentary committees and any advice from HealthWatch England. The Secretary of State would oversee Monitor's performance of its functions to ensure that those functions were performed well. The Secretary of State would not have control over Monitor's day-to-day decisions, but would hold Monitor to account for discharging its duties. That point is extremely relevant in the context of a number of amendments in this group. The Secretary of State would appoint the chair of Monitor and other non-executive directors and would have to give consent to the appointment of the chief executive. I hope that point answers Amendments 260F and 260G.

Baroness Thornton (Labour)

We are yet again in the territory of Monitor setting its own rules and implementing them, and of the Secretary of State's role. The Minister has just said that the Secretary of State will, as it were, monitor Monitor. Can he please describe to us how exactly he will do that?

Earl Howe (Conservative)

My Lords, I will come on to that in a moment. The Secretary of State would also have specific powers of veto; for example, over the first set of licence conditions and, in individual cases, of provider unsustainability, where he considered that Monitor was failing in its functions to support commissioners in securing continuity of services. In addition, he would be able to request information from Monitor regarding the exercise of its functions as and when he considered it necessary. I hope that this therefore allays the concerns of noble Lords who put their names to Amendment 260H.

However, Monitor needs to be free from day-to-day political and other inappropriate interference in order for it to be able to act in the best interests of patients. In order to maintain the integrity of its relationship with Secretary of State, Monitor must be able to take independent decisions on the exercise of its functions, such as calculating prices, setting and enforcing licence conditions and resolving conflicts of interests. Making such decisions subject to approval would be inconsistent with this approach, and would conflate responsibilities. In particular, it would undermine the Secretary of State's ability to hold Monitor to account. There would also be significant risk of decisions being politicised inappropriately. By contrast, independence in such decisions would increase transparency and help ensure that providers were treated fairly.

I understand the motives of noble Lords who added their names to Amendments 274AA, 274C, 274D and 247E, relating to the Secretary of State's involvement in resolving conflicts of interest. The Government agree that where they occur, conflicts must be resolved, but giving the Secretary of State a role in decision-making would undermine his ability to hold Monitor to account. The Secretary of State would be obliged to keep under review Monitor's performance in discharging its duties. He would be able to direct Monitor, where it had failed or was at risk of failing significantly, to carry out its functions. In extremis, he could arrange for a third party to perform those functions or perform functions himself. I hope that those points answer the question of noble Baroness, Lady Thornton.

The Bill also ensures transparency and fairness, through requirements on Monitor to consult widely when discharging functions and appeal mechanisms for the major decisions it makes. Here, I am addressing Amendments 294BA, 294BB, 294BC. In this way, our proposals strike a balance between maintaining sufficient independence and ensuring that the Secretary of State has sufficient ability to hold Monitor to account for the performance of its functions. I believe there is consensus that we need to ensure that this balance is correct.

My noble friend Lord Clement-Jones asked why it should be the Competition Commission that decides on challenges to Monitor's proposals on licence modifications, pricing methodologies or whatever. I am grateful to him for that question. It is fundamental to our proposals that Monitor would be an independent regulator and that the appropriate role for the Secretary of State is to oversee Monitor's performance against its duties, and to intervene where he considered that Monitor was significantly failing in any of its functions. However, it is vital that the legislation provides appropriate checks and balances on Monitor without undermining its day-to-day independence from political control. That is why we proposed that Monitor must consult on the licence conditions that it proposes to impose on providers and on its draft methodology for pricing. Providers and, in the case of pricing, providers and commissioners should be able to object to Monitor's proposals, and where a sufficient percentage objected, there should be a mechanism for independent and impartial adjudication. That is the role we propose for the Competition Commission. It would act as adjudicator on disputed licence modifications and on disputes over the pricing methodology. The basis for this adjudication would be Monitor's overarching duty to protect and promote patients' interests.

Baroness Thornton (Labour)

Did the Government consider any bodies other than the Competition Commission as being appropriate to fulfil this role? If so, which were they and why were they not thought to be appropriate? This is a rather heavy-duty form of monitoring Monitor.

Baroness Williams of Crosby (Liberal Democrat)

I am puzzled by why the Government do not see the Competition Commission's overseeing of this area of Monitor's responsibilities as not being neutral. Would not a body such as the Office of Fair Trading be more appropriate? It has a reputation not only of being more neutral but of having shown in the past particular sensitivity and understanding of health as a service provided to the people of England.

Earl Howe (Conservative)

I think it is a question of specialist expertise. I do not regard it as heavy-handed to have the Competition Commission acting in this role-which, we hope, would not be a role that it would need to perform with any regularity. It is an established body. It would apply a public interest test rather than a competition test, which is important. One has to question whether the Office of Fair Trading is the right body. I will of course reflect on my noble friend's suggestion, but we believe that the Competition Commission is a good fit in this sense. If the Secretary of State were to play the role of adjudicator, that would be very detrimental. The result would effectively be the politicisation of Monitor's decisions. As I said earlier, that in itself would undermine the Secretary of State's role in holding Monitor to account for the outcomes that it achieves.

The noble Lord, Lord Warner, referred to conflicts in the role of Monitor in overseeing foundation trusts. We are quite open about the fact that there is a risk of conflict of interest here. That is why it is essential that the Bill sets out a robust way for conflicts to be resolved. In a later debate, we can discuss that at greater length. I listened with interest to the speech of my noble friend Lady Williams, and I will of course reflect further on everything she said, as I always do. I think I have covered the main issues raised by the amendments in this group.

Baroness Thornton (Labour)

I think that almost the first sentence I uttered in this debate was: will Monitor meet in public; and what do the Government intend to do about joint chairmanship and chief executiveship? If the Minister answered those questions, I did not hear him and I apologise.

Earl Howe (Conservative)

The answer is yes.

Lord Clement-Jones (Liberal Democrat)

The Minister said that he thought that the amendments tabled by my noble friend Lady Williams-Amendment 274AB, et cetera-would undermine the role of the Secretary of State and his ability to call Monitor to account. That seems a very far-fetched way to describe an attitude to conflict-resolution. The Secretary of State, particularly under Amendment 274E, is asked to resolve conflict. This is an addition. There is no other way, as far as I can see, of resolving conflict. A key issue, which has also been raised by the noble Lord, Lord Warner, in this debate, has been the multiplicity of roles of Monitor. Therefore, there is a strong need to resolve such conflicts.

I ask the Minister to consider further whether that is really detracting from the Secretary of State's ability to monitor Monitor-in the words of the noble Baroness. We need a mechanism to resolve conflict. Faute de mieux, this seems to be the best one.

Earl Howe (Conservative)

My Lords, I hear what my noble friend says, but the fact is that the amendments he refers to would reduce Monitor's independence from political interference. We are clear that we do not want political interference in Monitor's activities. The intent of the amendment is clearly to give the Secretary of State increased accountability for the decisions around Monitor's functions. We believe that Monitor will be an effective regulator and able to deal with conflicts of interest. Clause 63 requires Monitor to resolve conflicts between its functions. If a failure to resolve conflicts between functions was significant, then the Secretary of State already has the power to intervene under Clause 67. Therefore, there is an intervention mechanism but we suggest that it should only be triggered in the circumstances to which I have referred.

Lord Walton of Detchant (Crossbench)

Will the Minister say whether, if Monitor is to meet in public, it will have reserve powers to allow it to go in camera if for any reason it may be required to consider highly sensitive personal information, which ought to preserve confidentiality in respect to the individuals concerned? It is crucial that such a power should be available to it.

Earl Howe (Conservative)

The answer is yes, although we do not expect that Monitor would ever have occasion to see named patient records.

Baroness Thornton (Labour)

My Lords, I think this has been an extremely useful debate. I can see why this Government may not trust their Secretary of State to hold Monitor to account. However, I am concerned about the idea that because we-and I do not just mean Members on this side of the House-are anxious that accountability rests in the right place in the Bill, that must therefore translate into political influence or micromanaging. I do not think that is at all the case here. Therefore, we do have an issue still to explore regarding the accountability of Monitor.

I also think we need to explore whether the Competition Commission is the right place for a public interest test to rest. The noble Baroness, Lady Williams, may have made a useful suggestion about which other bodies could possibly undertake that function. Again, we find that this quango is determining its own rules and then implementing them. That is not a satisfactory situation. However, I did take hope from the fact the Minister said yes to the question of whether the chair and chief executive of Monitor would not continue to be the same person, and that Monitor should meet in public. Is the Minister accepting Amendments 260EC and 260GA, or is that the statement of principle with a government amendment coming forward at a later stage or, indeed, a letter from the Minister, clarifying the issue? Otherwise, I beg leave to withdraw the amendment.

Earl Howe (Conservative)

I was accepting that particular principle, but I will follow it up in writing.

Amendment 260EC withdrawn.

Amendments 260F to 260H not moved.

Schedule 8 agreed.

Clause 59 : General duties

Amendment 261 not moved.

Amendments 261A and 261B had been withdrawn from the Marshalled List.

Amendments 262 to 264 not moved.

Amendment 264A had been withdrawn from the Marshalled List.

Amendments 265 to 265A not moved.

Amendment 265B had been withdrawn from the Marshalled List.

Amendment 265C not moved.

Amendment 266

Moved by Lord Warner

266: Clause 59, page 87, line 21, at end insert "and in discharging this duty will conduct and publish within one year of Royal Assent a review of the anti-competitive barriers that restrict NHS patients from benefiting from new or existing organisations providing new or extended NHS services that defined quality standards, together with their proposals for removing these barriers"

Lord Warner (Labour)

My Lords, this amendment is in my name and that of the noble Lord, Lord Patel. I begin by briefly making clear my position on competition, which underpins this amendment. I am sorry that I had to miss the discussion on the first group of amendments. However, my position on competition is no different from what it was when I was the NHS reform Minister in the Blair Government, but it is somewhat different from that of the current Front Bench, as will become clear.

I start from a position of being opposed to monopolies, whether they are in the public or private sectors, and I consider that such research evidence as is available-such as that by Dr Zack Cooper at the LSE-supports the view that competition-

Baroness Murphy (Crossbench)

I apologise. I think that the group we should be addressing begins with an amendment in my name. Unfortunately, I withdrew that amendment last week but it has continued to appear in the Marshalled List, for which I apologise. I believe that we should be moving on to the next amendment in that group.

Viscount Ullswater (Conservative)

Perhaps I may clarify matters for the Committee. The group that we are now discussing begins with Amendment 265ZA, tabled by the noble Baroness, Lady Finlay, but which she did not move. However, the amendments in the group following that one were called in their place.

Lord Clement-Jones (Liberal Democrat)

My Lords, we seem to have skipped a whole group, but for what purpose? I was planning to move Amendment 267ZF. Has there been some discussion between the usual channels?

Viscount Ullswater (Conservative)

We are on the group beginning with Amendment 265ZA, which was not moved. The next two amendments in the group were also not moved. I then called Amendment 266, tabled by the noble Lord, Lord Warner, which he is now addressing.

Lord Clement-Jones (Liberal Democrat)

My Lords, I think that that is inadvertent. We seem to have missed a whole group of amendments.

Baroness Thornton (Labour)

Perhaps I may help. I think that the thing to do is to deal with this group of amendments and the noble Lord can then move his amendment. We will then take the group of amendments that we should have been taking out of turn. Am I right in that? I think that that is the best thing to do.

Lord Clement-Jones (Liberal Democrat)

I am grateful to the noble Baroness.

Lord Warner (Labour)

Is the Committee happy for me to continue? I consider that research evidence as is available, such as that carried out by Dr Zack Cooper at the LSE, shows the benefits of competition and supports the view that competition, when used sensibly, improves services for patients and can indeed save lives. It is perfectly possible to support both competition and integration; they are not mutually incompatible. I shall not pursue the evidence base for my views today. However, I should like to clarify briefly the circumstances in which we should be supporting the use of competition in the NHS in the best interests of patients and why it is important to tackle barriers to entry to the NHS market. It is important to recognise that we already have an NHS market in which many NHS providers do indeed compete for patients against other NHS providers. The Bill does not suddenly inject competition into the NHS but merely tries to impose some better rules and a system for regulating that competition.

There are basically three sets of circumstances in which competition could-not should-be used. The first is that, as a matter of principle, all NHS providers should be subject to market testing periodically. The second is when there is clear provider failure and it seems sensible to test the market to establish the best set of arrangements for replacing the failed incumbent. The third is where there is a set of circumstances when the NHS itself-the commissioners in practice-wish to change significantly the way in which services are provided and it is not apparent that the current incumbents can adjust quickly to the patient's needs. The first set of circumstances has often caused a great deal of angst in the discussion of competition. I certainly do not start from that position. I believe that it is the second and third areas that I have described where we need to examine whether there are real barriers to entry by new providers, irrespective of whether those providers come from elsewhere in the NHS-from the private sector, social enterprise or the voluntary organisations.

Amendment 266 is concerned to establish much more clearly than now what the barriers to NHS market entry are. We know from the work of the collaboration and competition panel that primary care trusts have behaved in anti-competitive ways and have frustrated the best interests of patients. We know from the experience of the East Surrey nurses when they tried to set up a social enterprise how frustrated they were at changing themselves from NHS employees into a social enterprise so that they could compete for NHS business. We know that across the voluntary sector, voluntary organisations have been frustrated over their attempts to compete for NHS services over a long period of time. We also know that many private providers of services find the tendering processes for providing NHS services prolonged and excessively expensive and that they are too often frustrated by shifting political opinions about the desirability of competition.

I could go on with examples of the way in which the NHS has effectively shut the door to new entrants. Some of the most recent examples are the ways in which many primary care trusts divested themselves of their provider services without any proper system of market testing when it was clear that many of those services were extremely inefficient. We need to take the NHS out of its comfort zone in a future where it faces a huge set of demographic and financial challenges. Keeping it in the NHS family is no longer acceptable or in the public interest. We need an independent, authoritative and robust analysis of the barriers to entry to the NHS market so that we can consider what action should be taken to remove those barriers. Amendment 266 proposes that Monitor does this within a year of Royal Assent. I believe that Monitor would welcome being given this assignment but I would be more than willing to consider alternatives if the Government thought, for example, that the Office of Fair Trading was a more appropriate organisation to do the job. It is important that we get this job done as speedily as possible. I also support Amendments 278 and 287 to which the noble Lord, Lord Patel, will be speaking and to which I have added my name.

Baroness Williams of Crosby (Liberal Democrat)

My Lords, I am very grateful that Amendment 265C has somehow managed to escape from the tsunami of amendments so that I can bring it to the Committee's attention very briefly. It is again an amendment that seeks to make sure that when competition is allowed or encouraged-the noble Lord, Lord Warner, has spoken on these lines himself-it should be because it clearly improves the quality of health and the quality of provision within society as a whole. The purpose of Amendment 265C is to make it clear that competition is welcome when it improves the quality of the service; it narrows inequalities; it ensures, in particular, that there should be a better outcome as a result of that competition; and it is, therefore, a relatively qualifying condition to permitting competition to flourish.

We have heard a number of very well informed speeches in the House, not least from the noble Baroness, Lady Meacher, to the effect that in some situations competition can clearly encourage innovation, can improve new approaches and can help in providing the NHS a way forward to deal with the huge problems that we all recognise exist. However, in large part we are also very worried about the idea of competition as the ruling principle of the health services in this country, and we heard a very moving set of evidence from the noble Lord, Lord Owen, and the noble Baroness, Lady Thornton, about the devastation that unrestrained competition can exercise on a health service.

However, having spent 10 years of my life in the United States, I absolutely corroborate that. I know far too many people, one or two of whom are National Health Service refugees to this country, of outstanding talent, who are not in a category where they can afford the huge prices that are charged for complex and chronic conditions in the United States. How do we achieve this difficult balance so as to have competition that improves the quality of the health service but does not bring about the devastation of a great many human beings because they simply cannot afford the cost of complex operations or looking after the chronically ill? The situation of the chronically ill in the United States is pathetic in very many cases.

Therefore, this amendment and several others in this group would enable us to walk this delicate line in a way that permits competition, but competition that is in the interests of the patients of the health service and not competition that could devastate the health service in itself.

Lord Clement-Jones (Liberal Democrat)

My Lords, I wish to speak to Amendment 287B. In his speech at the outset of today's debate, the Minister said that there were four areas where he was considering amendments to Part 3, which deals with Monitor. If memory serves, he said there were areas where the Bill had not been completely amended to conform to the Future Forum report. This is a particular example of that.

Clause 96, the supplementary conditions, says it is possible for Monitor to include conditions that require,

"the licence holder to do, or not to do, specified things or things of a specified description ... within such period as may be specified in order to prevent anti-competitive behaviour in the provision of health care services for the purposes of the NHS".

Of course, that mirrors the duties of Monitor as set out in Clause 59, which says:

"Monitor must exercise its functions with a view to preventing anti-competitive behaviour"-

so far, so good. However, Monitor also has a duty to,

"exercise its functions with a view to enabling health care services provided for the purposes of the NHS to be provided in an integrated way where it considers that this would"

improve quality and so on. There is no mirror of that particular duty in the supplementary conditions in Clause 96, which is why this amendment adds the following wording:

"or for the purposes of encouraging the integration of services in the interest of people who use such services".

A number of other examples are the subjects of amendments as well and will no doubt come up in the course of the Bill. It seems to me that the equal and opposite to the anti-competitive duty of Monitor, which is enshrined in the ability to set conditions and so on, is not mirrored in the integration of services, and this is an extremely good example of that. I very much hope that the Minister will be able to indicate that it is simply an oversight and it should be included in the Bill.

Baroness Murphy (Crossbench)

My Lords, I wanted to come in on this matter of anti-competitive practices and the role of Monitor in it. I apologise to the Committee if some of these matters have already been covered, but I was unable to be here this morning. However, this seems like an opportunity to speak, as we are discussing Monitor's role in anti-competitive practice.

I am concerned that we have not yet talked about the quite serious anti-competitive practice that exists in the NHS today, and how damaging it is. As we know, the independent co-operation and competition panel has highlighted a range of tactics that are very common at the moment in the NHS and which go seriously against patients' interests. We have not sufficiently considered these when we are looking at competition. We tend to think of competition in relation to the independent sector versus the NHS in approaching the provision of services, but in fact it is this anti-competitive practice within the NHS which is so damaging. An example of this is the protection of certain local services against providers for elective operations, and so on.

I can think of an example in my own backyard, at Barts and The London-and this is a very real case. For years and years Barts used the mainstream orthopaedic services to provide local podiatry services, at a very high cost and very anti-competitively against the local community services, which had very skilled podiatrists who were able to do foot operations very cheaply and simply with a much smaller waiting list. Those sorts of anti-competitive practices are rife throughout the NHS, and are against patients' best interests. It is utterly crucial that this role to reduce as much anti-competitive practice as possible should be watched by Monitor, but we want it to be co-ordinated with its role on integration-there is absolutely no reason why the two things cannot go side by side.

I am sure that we will come on to mergers and acquisitions, but the recent protection of patients and the public-for example, against the merger of two mental health trusts, Norfolk and Waveney, and Suffolk-seems to me to be extremely good judgment about what is likely to be in patients' best interests. We should remember these matters of anti-competitive practice that are, as I say, rife in the NHS, and we really need to do quite a lot to stamp them out. I hope that the role of Monitor in working on these practices in patients' best interests will be strongly supported.

Baroness Finlay of Llandaff (Crossbench)

My Lords, the noble Lord, Lord Warner, was most helpful in setting out the criteria with which one would want to look at competition, and emphasising the importance of competition. But there is another area of competition, which is the one that really drives up quality of care: the inherent competitiveness of different clinicians and different clinical services, their desire to have better clinical outcomes than others, and the pressure that they will put on themselves within their own team to achieve better clinical outcomes.

I apologise to the House if I contributed in any way to the confusion over the numbering of the amendments as they have arisen. I would like to address the ones that come after Amendment 266, which will be Amendments 268B and 267C. Amendment 267C was tabled because of the large number of patients with complex clinical conditions.

It is very easy, when we are thinking about tariffs and services, to look almost at discrete nuggets of care diagnosis and so on. Indeed, Monitor has a requirement in the Bill to seek appropriate advice to effectively discharge its functions in,

"the prevention, diagnosis or treatment of illness, or ... the protection or improvement of public health".

The amendment related to the management of a wide range of complex conditions has been tabled because in complex conditions many situations overlap and cannot be discretely targeted together, nor can they necessarily be unpacked one from another because of their impact on each other. That requires integration of clinical services.

Baroness Northover (Liberal Democrat)

The noble Baroness might be aware that Amendment 267C has leapfrogged from the group with Amendment 264 to the group after this. She may wish to address that amendment when we come to that group.

Baroness Finlay of Llandaff (Crossbench)

I thank the noble Baroness. I am most grateful. That message had not reached me, although I may be a little deaf. I shall simply confine my remarks to the amendment in this group about Monitor reporting annually to the Secretary of State on how it discharges its duty to promote integration. I do not think that the comments that I made previously are annulled. They are relevant because, unless we have integrated services-however much they may be seen to be in competition with each other over different aspects-and attempt to have a seamless provision of care, at the end of the day it will be the patients who fall through the gaps.

Earlier today, we heard a lot about Monitor being light touch, not having a series of minimum criteria and being able to use its discretion in how it grants licences of all sorts. But I have a concern that there has to be a means by which the way in which Monitor functions is transparent and available to public scrutiny. That is why I have suggested that an annual report to the Secretary of State would allow such scrutiny to occur, particularly as regards promoting integration.

Lord Beecham (Labour)

My Lords, in the first instance, I shall speak to Amendments 267ZDA and 269 in the names of my noble friend Lady Thornton and myself. Amendment 267ZDA refers to the need for integration. Indeed, there are a series of amendments on integration, with which I will try to deal as a group. Amendment 267ZDA gives an interpretation of integration which would,

"mean that health-related and social care services are provided in such a manner that individuals will experience services ... as being independent of organisational barriers"-

which I suppose is the very definition of integration-and which offers patients,

"the most appropriate involvement in their care choices ... which reduce ... the need for separate assessments; and ... which result in a care plan for the individual which covers all aspects of their care".

Surely that aspiration would be shared by the Committee and widely within both the health and social care professions. It would seem to make sense to incorporate it in the Bill. However, Amendment 269 simply makes clear that it is unnecessary for a provision in the Bill to repeat a definition of anti-competitive behaviour since that already exists in existing legislation, although that is not a hugely important point.

In relation to other amendments in terms of integration, we certainly support Amendment 268B, which would provide the duty for Monitor to report annually as to how it has promoted integration. Amendment 274B seeks a requirement to publish a statement if conflicts between its functions arise which are likely to have a significant impact on integration of services. Amendments 278 and 278B impose requirements on the national Commissioning Board and clinical commissioning groups to extend the right of patients to make choices in respect of the integration of healthcare and to ensure the integration of services where that is in the public interest. Again, the aim is to drive the integration agenda. Then, as an overarching provision, Monitor would have under Amendment 278C the power to investigate whether the Commissioning Board and clinical commissioning groups are complying with those requirements. All of these seem to be perfectly sensible amendments to provide the right structure and one which Monitor could effectively supervise.

Still on the integration agenda, there are later amendments-Amendments 286A, 287 and 287B-which impact on integration. Amendment 286A allows a modification of Monitor's powers to encourage integration, if that is in the interest of patients, as it usually will be, presumably. The amendments provide for modifications to licence conditions-again in the interest of integrated healthcare-to ensure that standing conditions of licences include requirements relating to or encouraging the integration of healthcare services. All that makes a sensible package to drive an important part of the underlying concept of the Bill and the too-long-deferred integration of services.

The other amendments in this group essentially relate to the issues of collaboration or competition. Here, it is slightly unfortunate that the noble Baroness, Lady Finlay-I am sorry, the noble Baroness, Lady Hollins-did not move Amendment 265ZA, which stresses that Monitor must exercise its functions with a view to promoting collaboration and preventing competitive behaviour. I think that is the other side of the coin that the noble Baroness, Lady Murphy, put on the table previously when she was complaining, perhaps rightly, about anti-competitive practices within the NHS. A more positive way of looking at that agenda is to say that NHS bodies should collaborate on the provision of services, rather than take a negative stance. That is, I suppose, a necessary fallback position, but the prime objective must be to ensure collaboration within and across health service provision and-having regard to what has just been indicated in relation to integration-with social services as well. That is probably the right approach.

Other amendments in this group relating to competition raise some other issues. For example, under Amendment 265C, there is a suggestion that Monitor's duty to prevent anti-competitive behaviour should be qualified by requiring it to aim to improve the quality of services and outcomes and the efficacy of provision and reduce inequalities. These are listed separately; I take it that all of them-rather than any alternative-are intended to be part of Monitor's duty. If the Minister were minded to accept the thrust of that argument, he would do so in that sense.

Again, there is the provision under Amendment 266, tabled by my noble friend Lord Warner, for Monitor to conduct and publish a review of anti-competitive barriers and their impacts within a year of Royal Assent. There may well be some sense in that, particularly in regard to the way in which he moved the amendment. There are similar duties on Monitor to look at impact assessments under Amendment 275. Government Amendment 278D, to be moved by the Minister later, refers to non-disclosure of the "business interests" of parties. Does that extend to the interests of, say, trusts or voluntary sector providers? Does "business" relate to their activities or would it be confined to commercial providers? It seems to me that it would be invidious if only one part of the provider sector had the protection of confidentiality; it should be applicable to all or none. There is of course no issue with the amendment that requires individual circumstances not to be subject to disclosure.

I have a question about Amendment 278J, which requires the Competition Commission to review the "occurrence" rather than the "development" of competition in the provision of healthcare services. It is not clear to me what the significance of the word "occurrence" is. This is not a government amendment and I do not know whether those who originally tabled it want to clarify the position. I understand the amendment if it requires the Competition Commission to review the impact of competition in the provision of healthcare services, but I do not know how the occurrence of competition would be reviewed. It does not actually make much sense to use the word in this context.

The thrust of most of these amendments makes sense and sets out a sensible role for Monitor. In what would have been the next group but for the leapfrogging, we will come on to look at the issue of conflicts, and I am sure that there will be some further discussion about that. However, I hope that the Minister will feel able broadly to support the amendments in this group and recognise that they should contribute to meeting the shared objectives that have emerged from today's debate.

Lord Whitty (Labour)

My Lords, I apologise for not being here at the beginning of the consideration of this group because for once the Committee is making faster progress than I thought, but I have tabled two amendments that relate back to the issue of anti-competitive behaviour, so I will be following on from my remarks about the first of the amendments today. I seek greater clarity from the Minister. Given that Monitor has responsibility for preventing anti-competitive behaviour-in other words, not just the encouragement of competition but also the policing of it-what happens when someone complains to Monitor? In effect, Monitor has been given the same powers as the OFT and other economic regulators in other sectors and, as my noble friend Lord Beecham has just said, is subject to some oversight by the Competition Commission, which has duties in this respect.

Let me give two examples of what in other sectors would be seen as anti-competitive behaviour. One is where two providers in an area get together to divvy up what they know the commissioning body wants and provide a package that is acceptable to the commissioning group. A third provider would like to get in on the action. It is probably qualified, so that is not a hurdle. If that provider then complains to Monitor, is Monitor able to say, "This may appear to be a bit anti-competitive, but actually it is in the interests of patients"? I assume, from all the Minister has said and from what is set out in the document about the role of Monitor, that it means it can say that. But is that the end of the story? Can there be an appeal against Monitor to the courts or, if it is systematic, to the Competition Commission review role?

There is also the opposite scenario: competition laws relate to monopsony and oligopsony as well as to monopoly and oligopoly, so if a number of commissioning groups get together and decide that they will buy collectively from particular providing groups but not from others, is that also grounds for appeal to Monitor? If Monitor nevertheless decides that that is in the interests of patients, is there a further recourse? I was worried earlier today that there might be further recourse and that, despite all the assurances that have been given, Monitor is not actually the final regulator on what is in the patients' interests, because it is supposed to act in accordance with or reflect the general rules, including EU rules, on competition and procurement.

This situation is going to arise because, with the Government's encouragement, there will be more providers than those which get commissioned. A failed or disappointed provider must know how the system is supposed to work so that Monitor can look at it and be judged on it. With other economic regulators there is a form of appeal in this respect, to the Competition Commission. It is not used very frequently, but when we are trying to bed in a new system it may well be used more frequently by disappointed and failed competitors. If that is not to happen, it has to be clear in this Bill-and if not in this Bill then by ministerial decree and in regulations-that once Monitor decides something is in the interest of patients that is the end of the story. Otherwise, I cannot see the system working without constant appeals and second guessing.

Lord Walton of Detchant (Crossbench)

My Lords, I shall be brief in speaking to these amendments. I wholly agree with the principle outlined by the noble Lord, Lord Warner. There are many circumstances in which competition, properly controlled, will benefit the National Health Service and will benefit our community. But, like the noble Baroness, Lady Williams, I too, having worked in the United States, would be deeply concerned if competition were allowed to run riot. Years ago, I saw the affect of this. For instance, in the Massachusetts General Hospital, where I worked many years ago, the president of the hospital told me that they were required to debate and negotiate with no fewer than 47 different insurance companies in order to obtain coverage for the patients whom they treated.

Yet in the United States you still find, in certain communities, perfectly acceptable patterns of community care which are in many ways excellent, not least the Kaiser Permanente plan in California. I also visited an excellent clinic and associated hospital providing a substantial range of primary, secondary and tertiary care to a very wide community in Marshfield, Wisconsin. The Marshfield clinic serves a very large community in that state. All the people in the community pay an annual subscription in return for which they get a full range of primary, secondary and tertiary care of a very high standard. There are islands of excellence.

So far as competition in this country is concerned, I have always believed that the cap imposed upon foundation trusts in relation to private patients was unfair. It was imposed at a particular moment in time and based upon income derived by those individual trusts in a preceding period, and was grossly uneven. I have always favoured a partnership between the public and private sectors. In such hospitals and foundation trusts I believe there is a great advantage to allowing them to have more income from private patient beds: it not only generates income for the National Health Service, it also persuades many consultants to become geographically whole-time, looking after their public and private patients in the same hospital and not having to spend time, as many have in the past, travelling to private hospitals.

I believe in competition and in the public-private mix. But in pursuing that type of programme, it is absolutely crucial that Monitor has the authority to prevent any foundation trust from overstepping the mark and increasing its private provision to the extent that it will harm the services that it gives to NHS patients. I would love to have an assurance from the Minister that Monitor will be able to fulfil the function of controlling excesses which could damage the National Health Service if private provision went too far.

Lord Patel (Crossbench)

My Lords, briefly, we are getting a bit confused between the amendment of the noble Lord, Lord Warner, which I support and is about anti-competitive behaviour, and people talking against competition. The amendment is quite clear. It asks Monitor, within a year, to identify barriers to quality care that are anti-competitive. The noble Baroness, Lady Murphy, gave one example and there are others, such as optometry services, which can, if given the opportunity to expand, not only provide good diagnostic services but also treat some minor ailments that do not need referral to hospital. Our amendment is about anti-competitive behaviour. It is not about competition.

Earl Howe (Conservative)

My Lords, there are some extremely helpful amendments in this group. Indeed, there has been a great deal of valuable debate both inside and outside the Chamber on the roles of competition and integration in the health service. I am grateful for much of what the noble Lord, Lord Warner, said in his introductory speech.

The Government have been clear that both competition and integration can be important tools for commissioners to drive up the quality of services for patients. We have also been clear that it will be for commissioners to decide where and how these tools should be used-not Monitor. There will be "no one size fits all" or a model prescribed by government.

To help ensure that both competition and integration are effective, Part 3 of the Bill seeks to establish appropriate powers for Monitor. Where there is competition, Monitor will have powers to ensure that it operates effectively in the interests of patients and to safeguard against anti-competitive conduct that can work against those interests. The Future Forum concluded that Monitor, as a sector-specific regulator with knowledge and expertise in health services, would be best placed to achieve this. Let me remind the Committee that this is if there is competition. In some circumstances, I freely concede that commissioners may decide that the best way to achieve high-quality services for patients is not to have competition.

On Amendment 265C, I hope that noble Lords will agree that it is the right approach to require Monitor's focus to be on considering the interests of patients. That will allow Monitor the scope to take account of a broad range of factors. This approach also provides continuity with the requirements of the existing system rules, the Principles and Rules for Co-operation and Competition, which we have committed to retaining and giving a firmer statutory underpinning through Monitor's sectoral powers. Those powers are the setting and enforcement of licence conditions for providers and the overseeing of commissioning regulations set by the Secretary of State. Along with the concurrent powers to apply the Competition Act with the Office of Fair Trading, they will provide necessary safeguards to ensure that the interests of patients are protected.

To pick up on the sorts of circumstances cited by the noble Lord, Lord Whitty, that would include, for example, safeguarding against providers exchanging information to agree lower levels of service quality than they would otherwise supply if they were in competition; or a commissioner removing a well-performing provider from the choices available to patients, or seeking to direct patient referrals to one provider and not another on non-clinical grounds.

However, it is not the case that every arrangement in the provision of healthcare that had the effect of restricting competition would necessarily be anti-competitive. I made that point in one of our earlier debates. I look particularly in the direction of the noble Lord, Lord Whitty, in saying that Monitor's core duty means that patients' interests will always come first. For example, in some cases limiting competition by concentrating specialist services in regional centres or in providing services through a clinical network may deliver overriding benefits to patients and would not, therefore, be anti-competitive. Similarly, where an integrated service raises competition concerns, and equally where services offering more choice and control raise concerns over integration, Monitor will always come back to its core duty-to ask itself the question, "What is it that benefits patients the most?".

The Government appreciate the clear consensus for further integration and more joined-up services. Integrated care pathways can enable increased collaboration between hospitals and clinicians, between public and independent sector services and between health and social care providers. The Bill seeks to encourage and enable that. In addition to powers relating to competition, Monitor has an overarching duty to enable integration where this would improve services or reduce inequalities for patients.

Monitor will have a range of functions at its disposal to achieve this-for example, supporting the NHS Commissioning Board in identifying and spreading good practice in the development of reimbursement systems. Here I am particularly addressing Amendments 286A, 287 and 287B. Monitor would also be able to use its licensing conditions to enable integration, subject to the making of regulations provided for in Clause 95(2)(h)-for example, to reflect principle 4 of the existing Principles and Rules for Co-operation and Competition and require providers to exchange information with commissioners and other providers to ensure that the patient experience is of a seamless health service, regardless of organisational boundaries.

I am also sympathetic to the intention of Amendment 274B as I agree that it is important that Monitor is transparent in managing conflicts effectively, including where there may be decisions to take on matters of integration. However, I believe that the requirements already set out in the Bill are comprehensive. This is because resolving a conflict that has a significant impact on the integration of services would also have a significant impact on patients or persons who provide healthcare services.

I turn to the specific issues on the reviews that the Bill proposes are undertaken by the Competition Commission of competition in the provision of NHS services and the exercise of Monitor's functions. I have listened carefully to the various arguments and concerns that have been put forward about this proposal and, as I have intimated previously, I will reflect further on the points that have been made on these reviews, with a view to bringing forward proposals on Report.

I turn to Amendment 266, which is where we began. I do not take exception to the idea put forward by the noble Lord, Lord Warner, at least in principle, but Monitor would have the power to carry out the kind of review that the noble Lord suggests that it should. I am not sure that it would be helpful to compel it to use its resources in exactly the way that he proposes. The particular issue here is the timing. It might be helpful for any such review to be later, once the reformed system is more established.

Amendment 267ZDA provides a definition of integration, referring to services being independent of organisational barriers. I am sympathetic to what it is trying to achieve but I am not sure that the proposed definition, which focuses largely on structures and processes, fully captures integration seen from the point of view of the patients. We see integration as a means of improving patient outcomes rather than-to return to an earlier theme-an end in itself. We do not want to be prescriptive about how commissioners decide to integrate services.

Amendment 269, which the noble Lord also proposed, would remove the provision that Monitor should exercise its functions with a view to preventing anticompetitive behaviour in the provision of NHS services. It is important that Monitor plays this role to protect patients' interests against collusion and so on. However, if these amendments were accepted, Monitor would still have its concurrent powers with the OFT but would not be required to use its other functions, such as licensing, to tackle abuses or distortions, and that would be retrograde.

The noble Baroness, Lady Finlay, in her Amendment 268B also brought us to the subject of integration. Monitor will enable integration, as I have already said. It will be for commissioners to drive that. Monitor would have to publish an annual report on how it had discharged its functions and Schedule 8 gives the Secretary of State the power to ask Monitor for specific reports. This could include how Monitor was discharging its duty to enable integration.

Amendment 267ZDA again is one that I am sympathetic to but I come back to the criticism that I made earlier that it is rather structure and process orientated. While I am with the noble Lord in spirit perhaps he would like to think again about how that amendment might be worded. He asked me about confidentiality and business interests in the government amendments-these would indeed apply to all providers whatever their sector and whether an individual or an organisation.

The noble Lord, Lord Whitty, asked whether an aggrieved provider could appeal beyond Monitor. The answer is no. What the noble Lord has described would be an issue of procurement and not competition law. Commissioners, as long as they work within guidance and regulations, can decide when, how and if to use competition, including whether to restrict the number of providers to maintain service quality and sustainability.

Finally, I turn to the amendments that it falls to me to speak to in this group. Both of them are minor and technical; their purpose is to tidy up the Bill and I hope that they will be agreed when moved.

Lord Warner (Labour)

I want to briefly respond to what the noble Earl said about Amendment 266, particularly in the light of the points that the noble Baroness, Lady Murphy, made about a good deal of anti-competitive behaviour being already quite well entrenched in the NHS. Simply waiting longer to get it even more entrenched before Monitor has a go at the issue of the barriers for new entrants to the NHS market simply gives the signal to the NHS that it can go on as it has been going on. It seems to me that it is important to give a signal that there is a new show in town and that the issue of the barriers to entry, particularly in the light of the report by the Co-operation and Competition Panel, are going to be addressed. I am not sure that waiting longer for the new systems to settle down is going to be in the best interest of the NHS or Monitor and I wonder if he might think a bit more about this and perhaps we could have a further discussion.

Earl Howe (Conservative)

My Lords, the noble Lord makes a telling point. I took on board entirely what the noble Baroness, Lady Murphy, said in her contribution. I will of course reflect further in the light of what the noble Lord has just said.

Lord Warner (Labour)

I beg your pardon. I am rather dozy this afternoon on this group of amendments. I beg leave to withdraw the amendment.

Amendment 266 withdrawn.

Amendment 266A had been withdrawn from the Marshalled List.

Amendment 267 not moved.

Amendments 267ZA to 267ZD had been withdrawn from the Marshalled List.

Amendment 267ZDA not moved.

Amendment 267ZDB

Moved by Baroness Finlay of Llandaff

267ZDB: Clause 59, page 88, line 6, at end insert-

"(c) local authorities carry out their duties in providing social care for children in their area, and to the smooth transfer of their caring responsibility when a child moves into adult social care services."

Baroness Finlay of Llandaff (Crossbench)

My Lords, this group of amendments concerns children, particularly their social care. We have laid these amendments because we could find nothing in the Bill that mentions this. Children's services will be commissioned potentially by six different groups. The Commissioning Board at national and at sub-national level, particularly through health visitors, will be responsible for the public health of children under five-until 2015 when that will transfer to local authorities-and also for primary care. That is often the first point of contact for problems in children which require a great deal of social care intervention integrated with healthcare provision. Public Health England is responsible for public health campaigns and health protection. The clinical commissioning groups will again be involved potentially at two levels; supra-locally and locally. The sixth area is the local authorities with the healthy child programmes for those aged five to 18, school nurses and child health for the nought to five year-olds after 2015, which is when the health visitors transfer.

However, all these different aspects of healthcare interrelate very closely with children's social care. There are concerns over accountability, how the services will keep track of complex provision and who will be responsible for children's health and welfare, particularly as regards obese children and those who have been bereaved. There is concern about children's reaction to grief and the impact that this has on social behaviours, and how the public health services which deal with the prevention of childhood obesity can be evaluated and held to account.

Health visitors are the eyes and ears of the child aspects of primary care. However, there is concern about how they will relate to the primary care and accident and emergency sectors and social workers when they transfer to local authorities. How will the information on the at-risk register be transferred and how will access to primary care records be speeded up? Will the IT systems be compatible to enable effective information transfer between child and adult services, particularly when children who have multiple social problems reach an age when they will be transferred to adult services? There is particular concern about children with severe learning difficulties and developmental delays who require a great deal of social care input. They cannot be their own advocates and are extremely dependent on others. Therefore, it is important that the relevant information is successfully transferred. We know from previous tragic child abuse cases that information which has to be moved from one sector to another often gets lost, drops through the gaps and children suffer as a result.

There must be a smooth transition from one carer to another, particularly where children's and adult social services are provided by different providers. It is important that adult social services should be satisfied that the children's social services have done their job properly and thoroughly because if they have not, the patient will suffer and adult social services may be faced with an unfair cost incurred as a result of a deficiency in the services provided by the children's social services.

Our amendments do not propose a radical solution to the problem. We are fairly confident that the Government will not accept them as they will not want further major complications in what is already a very complicated Bill. They are simply designed to provide that at some time in the future Monitor will be given the power to check that all providers of children's social care are doing their job properly, and that when they transfer a child to adult social care there is a smooth and sensitive transfer of responsibility and a complete transfer of information so that there are no gaps through which these children can fall.

We look forward to hearing what the Government's solution is to this problem. We rather hope that the Minister might offer us some discussions outside the Committee to try to address some of the real problems that arise when children, including those aged nought to five, transfer from children's services into adult services, given the gaps in information provision which can occur at the transition point. I beg to move.

Lord Beecham (Labour)

My Lords, it saddens me to say that 41 years ago I became Opposition spokesman on the Newcastle City Council health committee. Within two years, we had the Seebohm report and a change of structure, leading to the creation of a social services committee that embraced both children's and adult social care and replaced two committees-the old health committee and the old children's committee. That seemed to me then and, frankly, it seems to me now to have been the right approach, because I do not think that you can sensibly divide children's and adults' social services. We do not have that system now. My personal view-which is not necessarily the view of the Opposition-is that it may be time to look again at that division. To an extent, the group of amendments that the noble Baroness has moved seeks to secure that objective.

As a consequence of the way in which amendments are ordered, the actual order of the amendments in this group is not quite logical. I suppose one should start with Amendment 269B, which would give Monitor functions relating to children's social care services. Earlier, we touched on the possibility of Monitor having a role in respect of adult care services. Presumably, one would look at both services coming under their auspices, or neither, rather than keeping a division. Amendment 269B sets out the basic role for Monitor in this context. I note that proposed new subsection (2) would include within the functions,

"inspection of, and reporting on, the potential impact of children's social care services in a particular area on the potential need for adult social care in that area".

I am tempted to say "and vice versa", because so often problems of parents and adults impinge on the needs of the children, and that would make perhaps a more rational disposition of functions.

The other two amendments in this group are, in effect, consequential, and sensibly would require local authorities to ensure a smooth transfer and, as Amendment 270AA puts it, "a careful handover" for children moving into adult social care. All of those seem to me very sensible suggestions. Nevertheless, it is probably better to look at the whole context of where social services fall within the remit of the Bill.

I imagine that there will have been some discussions between this department and the Department for Education, although the way in which Whitehall and, for that matter, local government tend to work, it is not necessarily the case that the relevant organisations come together to discuss these issues. It may be, therefore, that the Minister would wish to consult colleagues in other departments before giving a measured response. Perhaps this matter might be best brought back at Report, because it raises significant issues. As I have indicated, I have felt for some time that the division of responsibilities at the moment is not terribly sensible, with children's social services being, arguably, at best a sort of fifth wheel on an education coach. At the very least, that matter ought to be re-examined. Perhaps it is too late in the day for it to be part of this Bill, but at some point, I think, this issue certainly needs to be referred to. I congratulate the noble Baroness and the noble Lord, Lord Northbourne, on having put down this amendment, which gives us an opportunity at least to ventilate concerns about this issue.

Earl Howe (Conservative)

My Lords, I understand and well appreciate the concern of the noble Baroness to ensure a high standard of children's social care services and, in particular, a smooth transfer for young people moving from children's to adult social care services. I would, of course, be very happy to speak to her and indeed the noble Lord, Lord Northbourne, about this issue away from the Committee, if they consider that to be an appropriate way forward.

On the specific amendments that we are looking at, I really do not think that Monitor is the right organisation to ensure that local authorities are carrying out their responsibilities on these issues, or to act as a regulator of children's social care services. I am confident that existing arrangements for the regulation and inspection of children's social care are sufficient and robust. Joint working is important and I hope that the noble Baroness will be reassured that the relevant inspectorates are already working together to improve the arrangements for joint inspection, which will address the very important issue of child to adult transition that she has raised.

Children's social care is regulated and inspected by Her Majesty's Chief Inspector of Education, Children's Services and Skills-Ofsted. Its inspection remit covers all local authority social services functions relating to children-that means services for children in need, safeguarding children, children in care and care leavers, as well as adoption and adoption support services. Local authority adoption and fostering functions must be inspected by Ofsted at a minimum of every three years. Ofsted can of course make unannounced inspections.

We are already working to improve these arrangements. Ofsted consulted over the summer on local authority child protection inspection arrangements that will be more child-centred and less bureaucratic. This new type of inspection will begin in May next year. In addition, all relevant inspectorates have agreed in principle to Professor Eileen Munro's ideal model of joint inspection, which looks at the contribution all services make towards protecting children. Noble Lords may recall that Professor Munro last year conducted a thorough review of child protection arrangements for the Government. The Care Quality Commission is one of the inspectorates working with Ofsted to establish what those services will look like and when they will begin.

For children with special educational needs and disabilities, the recent Green Paper proposes a new education, health and care plan, covering support from birth to 25. The new plan will include a much clearer focus on the long-term outcomes for children and young people including independent living and employment. This should improve outcomes for young people with special educational needs and disabilities as they make the transition from school into employment or training.

I hope that the noble Baroness will appreciate that work in this area is ongoing. I sympathise with the tenor of all she said, but if she is content to wait for a discussion following these Committee proceedings, I hope that she will, in the mean time, withdraw the amendment.

Baroness Finlay of Llandaff (Crossbench)

I am grateful to the noble Earl for his response. It is those transitional points that we have been particularly concerned about. I will discuss this with the noble Lord, Lord Northbourne, and it would be helpful for us to have a short meeting. We are grateful for the fullness of the response from the Minister. I beg leave to withdraw the amendment.

Amendment 267ZDB withdrawn.

Amendment 267ZE had been withdrawn from the Marshalled List.

Amendment 267ZF

Moved by Lord Clement-Jones

267ZF: Clause 59, page 88, line 10, at end insert "and Monitor must obtain advice from Healthwatch England for enabling if effectively to discharge that function"

Lord Clement-Jones (Liberal Democrat)

My Lords, I am sure that this was well worth waiting for, but it could be the mouse that roared. We are back to other aspects of Clause 59 on the general duties of Monitor. This amendment and Amendment 267ZB simply aim to ensure that to discharge its functions Monitor has input from HealthWatch England. That is all about patient and public involvement. It seems to me and to my noble friends that Monitor should definitely insert such input into its deliberations. I cannot find in the rest of the Bill any other such duty on HealthWatch England, which after all will have an extraordinarily important role. Many noble Lords have welcomed the new enhanced role for patient and public involvement. I remember the demise of community health councils and the hard-fought debate that took place in about 2004-I cannot remember exactly when-and I very much welcome the new enhanced role for HealthWatch England. However, Monitor will need to be informed by it and I very much hope that the Government will take this on board. I beg to move.

Baroness Murphy (Crossbench)

I realise that I have another amendment in this group, and I would have saved the Committee a great deal of disquiet over the numbers if I had spoken to this one in the first place, so my apologies all round. This group of amendments is about how Monitor discharges its functions and what it takes into account. Mine is a probing amendment on whether we have the objectives for Monitor and their number right. Experience from other sectors suggests that if too many policy priorities are set, the regulator can become confused about its primary objectives, which can reduce its effectiveness. I wonder whether we have the clarity of Monitor's objectives right.

Monitor will find itself in the position of other regulators in having to devise policies, particularly on the tariff, to meet a wide range of objectives over and above its primary duties. The experience of Ofgem, in particular, suggests that the risk might grow over time as the Government seek solutions for new problems as and when they arise. Setting too many policy priorities carries the risk of confusing the regulator about its primary objectives. That might be inevitable, given the complexity of healthcare policy-making, but it means that the accountability of the regulator in discharging those various functions is critical.

For other major economic regulators, the Government have committed themselves to updating the objectives only once in a Parliament and ensuring that objectives are outcome-focused. Monitor's objectives, unusually, will be set in primary legislation. I wonder whether they would be better in secondary guidance, together with a clear process for agreeing changes with the Department of Health, to protect the regulator from political whim. Nevertheless, it has a number of primary duties in Clause 59. In Clause 62 it has to have regard to a number of other matters. Monitor might find it difficult to demonstrate that they are all taken into account when decisions are made, possibly making it open to legal challenge. I wonder whether it is possible to reduce the number of duties.

I have included just one or two as exemplars simply because I think that they duplicate existing duties. In Clause 62(b),

"the desirability of securing continuous improvement in the quality of health care services for the purpose of the NHS",

which is crucial, duplicates a primary duty in Clause 59(1)(b), so I think it could be removed. Clause 62(c), on,

"the desirability of securing continuous improvement in the efficiency with which health care services are provided for the purposes of the NHS",

duplicates a duty under Clause 59(1)(a). Surely that could be removed. These are minor, tidying amendments, but if we can clarify for Monitor what its objectives should be, that would be a help to the regulator.

Baroness Finlay of Llandaff (Crossbench)

My Lords, I half spoke previously to the need for Monitor to have regard to complex clinical conditions. I return to that and build on the comments that have just been made, particularly in relation to tariffs.

We are already beginning to see a degree of fragmentation through systems such as "choose and book". We heard on a previous day in Committee about the problems for patients with various complex conditions, who have to be sent back to their general practitioner to be able to access a different discipline in secondary care and how their care then becomes fragmented. If you are going to provide good integrated care and improve clinical outcomes, you need all the different systems of the patient to be addressed simultaneously-the psychological and welfare areas as well as the different physiological systems that might be affected by a range of pathologies.

I remind the House that it is much easier when people are not terribly ill. When they do become terribly ill, more and more systems fail and become involved: cardiac complications, overwhelming infection, renal failure and potential dialysis might all be involved, and if there has also been trauma with orthopaedics there might be a lot of complex psychological conditions relating to whatever has happened to the person. They all need to come together around that patient. The patient cannot be parcelled off from one service to another or people be brought in sequentially like small aliquots of opinion.

Therefore, in setting the tariff and establishing the way in which services are looked at and licensed, the point of the amendment is to make sure that the multiple complexity that arises, and that is very common in patients who are seen in high-dependency intensive care or even in the sick patients who are brought into accident and emergency, is taken into account and that the tariff does not oversimplify, and therefore inadvertently narrow down, the services available to the patient and result in worse, not better, clinical outcomes. Earlier today the Minister was very clear that the point of the Bill is to improve the quality of patient outcomes, to improve the efficiency and productivity of services and to provide better value for money, as well as to drive up the outcomes for patients. That is why we felt it was important that this was considered.

Lord Warner (Labour)

My Lords, I apologise that my enthusiasm for Amendment 274ZZB caused me to move it partially in an earlier group. The amendment in my name and that of the noble Baroness, Lady Pitkeathley, was put down because we regard it as a probing amendment to the end of Clause 62 that relates to matters that Monitor must have regard to in the exercise of its functions. Its purpose is to raise the issue of the financial stability and governance of adult social care providers in the light of the Southern Cross experience, and to seek the views of the Government on how they propose to use the new regulatory system in the Bill to protect the vulnerable users of adult social care services from providers whose financial structures are fundamentally unstable.

Let me say at the outset that I thought that the Department of Health managed quite well the difficult situation that Southern Cross presented. Few, if any, elderly people had their care seriously disrupted. 20/20 hindsight is a wonderful thing in public policy post-mortems. The truth is that across the political spectrum few were alert to the dangers of overleveraged providers of adult social care. However, we are now alert to the dangers of creative financing arrangements in this area, particularly those instituted by boards of management that do not hang around to face the consequences of their action but simply take the money and run.

It is clear that the way in which care providers are financed and their governance wraparound are matters for rigorous inquiry before they are allowed to contract for the provision of services to vulnerable people. In the case of adult social care, this relates not simply to elderly people whose adult social care is funded by the state but to self-payers. Most of these service providers have a mix of state and self-funders in their homes, with many of the self-funders in effect subsidising the state-funded residents in today's inadequately funded, state-financed, adult social care. That inadequate funding is itself going to cause some providers to withdraw from the market, and others to merge. It will also distort future investment decisions by those who wish to enter this market, because they will favour investments that concentrate on self-funders.

We face a period of turbulence and uncertainty in the adult social care provider market that makes the detailed working of the regulatory system even more important. That is particularly the case with the positive flood of findings of unsatisfactory care of elderly people in the NHS and adult social care environments. The question of how providers are financed and governed is an integral part of ensuring stable and quality care environments for vulnerable groups. A bright light needs to be shone on these areas in a new regulatory system. Can the Minister say how the Government are going to proceed on this issue and what role Monitor should play? Do the Government intend to move quickly to bring adult social care into Monitor's remit, or do they see some other approach being pursued? I recognise the heavy burden that is already being placed on Monitor and the range of things that it now has to do. However, I think that the Committee needs to know whether and when this will be transferred to Monitor or whether other mechanisms will be used. The purpose of this amendment is to find out the Government's intentions.

Lord Walton of Detchant (Crossbench)

My Lords, I support the amendment proposed by my noble friend Lady Finlay because this is an extremely important matter. When I was a consultant working as a neurologist in the NHS, if I had a patient who, for instance, had a peripheral neuropathy and turned out to be diabetic, I had no problem in referring him to a colleague within the same hospital for the care of his diabetes or to a colleague in the ophthalmology department for the care of his eyes. I am horrified to discover that in the recent past such individuals have been told to go back to their GP for yet another referral to a different consultant. This is an extraordinary situation. Can the Minister assure us that something in the Bill will stop this kind of nonsense occurring?

Baroness Pitkeathley (Labour)

My Lords, I speak in support of Amendment 274ZZB in my name and that of the noble Lord, Lord Warner. In the debate on Wednesday last, the noble Lord, Lord Warner, referred to health and social care as being in a symbiotic relationship. That is supposed to be recognised in the title of the Bill, but in fact we have had very few debates about that relationship, other than the fact that everybody says that integration is important and that patients do not understand why such integration has always proved so difficult. We agree that, as patients' needs are comprehensive-especially patients with long-term conditions-we need comprehensiveness in addressing those needs.

The other thing that we always agree about is that, to meet the Nicholson challenge, services have to be reconfigured so that more services are provided in the home and in the community, instead of in expensive hospitals. Today's King's Fund report reminds us of the difficulties that many London hospitals are currently facing, yet reconfiguration is still resisted, not least sometimes by MPs, who should know better.

Another thing on which there is usually agreement is that as social care is just as important to patients and their families as healthcare, it should be given the same status as healthcare. We may agree about that, yet social care plainly does not have that status, despite the commitment to care services of the Minister, his officials at the Department of Health and indeed the noble Earl himself. This amendment seeks to ensure that, no matter who the provider is, the provision of adult social care services is on a sound financial footing and with corporate governance that ensures proper oversight. That is surely necessary beyond question, given the recent Southern Cross debacle to which my noble friend has referred, with the prospect of more such disasters.

As we know, health and social care have always been organised and funded by different groups-one centrally and the other by local authorities. However, as my noble friend reminded the Committee in a debate last week, the majority of the money spent on adult social care by local authorities is in fact funded centrally and passed to local authorities, which commission the services. This amount of money is not sufficient, especially in view of the fact that rising demand has been well established, most recently by the Dilnot commission. It seems that the only way to get more money into the system in these hard times is, first, by showing that money spent on social care will save money in the long term and, secondly, by ensuring that the money is effectively, efficiently and safely spent. Involving Monitor in the way suggested in this probing amendment would go a long way to enabling us to do this better. I can do no better than quote from the noble Baroness, Lady Barker, when she said in our debate last Wednesday:

"The biggest single thing that will make the Bill work or not work is whether everyone in the NHS sees it as their responsibility to understand and work with social care".-[Official Report, 7/12/11; col. 759.]

Placing this responsibility on Monitor or otherwise advising the Committee how that responsibility will be exercised would be very important in helping us to achieve that aim.

Lord Nickson (Crossbench)

My Lords, I am afraid that I was not present at Second Reading but I am moved to support this amendment on a personal basis as my wife is in long-term social care in Scotland. It was a Southern Cross home that has now been taken over by Healthcare One. It would have been a comfort to me had I known that an organisation such as Monitor was supervising the very unhappy situation in Southern Cross, but I have to say that the communications from the local authority concerned in Scotland both with me and Southern Cross as it was in its death throes were absolutely first class in attempting to reassure and keep us in touch with what was happening. I am equally glad to say that all the information and everything coming now from Healthcare One is very reassuring and makes one full of confidence. It would have been reassuring had something like Monitor been in the background looking at this sort of situation well in advance. I support the amendment.

Lord Beecham (Labour)

My Lords, I am happy to endorse all the amendments in this group, with the exception of Amendment 270. I particularly endorse Amendment 274ZZB moved by my noble friend Lord Warner. He is 100 per cent right in this context. I have to say in confidence to the Committee that I do not always entirely agree with my noble friend, but he is exactly on the right lines today. The situation to which he referred clearly causes great concern. We heard from noble Lord, Lord Nickson, that fortunately matters turned out reasonably well in his case and that of his wife, but who is to say that that would always be the case? I hope that the Minister will feel able to take on board the suggestion made by my noble friend Lord Warner. As he said, it is a probing amendment but it is one that I hope will lead to an outcome that will guarantee that problems of the kind generated and disclosed in the Southern Cross affair will not arise again so that those in residential care and their carers and families will have greater confidence in the system-a confidence that must have been shaken by events in recent months.

Baroness Northover (Liberal Democrat)

My Lords, this is the group of amendments that we almost came to earlier this afternoon. I hope that noble Lords who thought that their issues would be in that last group have now gathered them together, as they are back in this group. The amendments cover a number of issues, including patient and public involvement in Monitor's work and the advice that it should take. The Government are clear that Monitor should involve patients and the public in its decisions and get appropriate clinical advice to enable it to carry out its functions. That is why in another place we introduced Clause 59(7), which creates a duty on patient and public involvement, and Clause 59(8), which creates a duty to obtain clinical advice. For Monitor to carry out effective patient involvement, it will almost certainly need help from people or organisations with expertise. Here I address in particular Amendment 267A, and Amendment 267B in the name of my noble friend Lord Clement Jones and others.

However, setting this out in the Bill could constrain Monitor's flexibility to decide how and when it sought such help. We do not want to create bureaucratic and potentially costly arrangements that would require Monitor to take such advice even when it was unnecessary. I hope that, over time, Monitor will develop expertise in how best to involve patients and the public in its decisions, reducing its dependence on professional advice in this area.

I understand the concern of my noble friend Lord Clement-Jones and others that HealthWatch should have a role here, and I reassure the House that it will. Clause 178 enables HealthWatch to give Monitor advice and provides that Monitor must respond in writing to any such advice. HealthWatch would be able to advise on Monitor's arrangements to secure appropriate patient and public involvement. However, there would be no need for HealthWatch to give such advice if it was satisfied with what Monitor was doing. We are clear that Monitor must be transparent and accountable in the way that it involves patients and the public. I reassure the noble Lord, Lord Kennedy of Southwark, and others, that the requirement in paragraph 21 of Schedule 8 for Monitor to prepare an annual report on how it has exercised its functions includes its duties under Clause 59(7).

The noble Baroness, Lady Finlay, spoke twice to Amendment 267C, which indeed concerns an extremely important issue and deserves to be spoken to twice. This is about the need for Monitor to take advice from people or organisations with experience and expertise in,

"the management of a wide range of complex clinical conditions",

as well as in the management of other conditions. She and the noble Lord, Lord Walton, emphasise that the system must be patient-centred-that is the goal of the Government-and, where appropriate, integrated. I assure them that if Monitor did not take advice as appropriate from such people or organisations, it would fall short of its statutory duties. However, as with people or organisations with expertise in patient involvement, including this in the Bill could constrain Monitor's flexibility to decide how and when it was appropriate to seek such help; for example, it would clearly need to seek such advice in setting prices for the treatment of the kind of complex conditions that noble Lords have made reference to, in order to do that in an effective way.

Amendment 270 is in the name of the noble Baroness, Lady Murphy, who of course has considerable knowledge and experience of how Monitor works, having recently completed four years as a member of its board. We are very grateful to her for contributing her knowledge and expertise to today's debate. We very much agree that Monitor's responsibilities must be clear, consistent and not excessive. Monitor has only one objective, which is:

"to protect and promote the interests of people who use health care services by promoting provision of health care services which ... is economic, efficient and effective, and ... maintains or improves the quality of the services".

That is the overarching responsibility. Clause 62(b) and (c), which her amendment addresses, ensure that Monitor would not inadvertently impede the Secretary of State or the NHS Commissioning Board in carrying out their duties with a view to improving quality. However, although the Government believe that these various provisions are needed in Clause 62, we have sympathy with the points the noble Baroness has made about the need for clarity on Monitor's priorities, and will give this issue further thought.

I will say something briefly in response to the very important points raised by the noble Lord, Lord Warner, the noble Baroness, Lady Pitkeathley, and others, in Amendment 274ZZB. The Government are concerned to ensure that appropriate measures are in place to ensure those who are reliant on care services are properly protected from the adverse consequences of provider failure. I thank the noble Lord, Lord Warner, for what he said about how Southern Cross was handled, and I am glad that other noble Lords' experiences echo that. In October, we published a discussion document on the issue of market oversight in social care. Until we have considered the responses to this and the range of options, it would be premature to make isolated changes to the provision in this area, although I commend noble Lords for flagging up this very important issue.

Finally, I would like to address government Amendment 270A-

Lord Warner (Labour)

Perhaps I could ask the noble Baroness to go a little further. Does she envisage that after this consultation, the Government are going to require primary legislation to take effective action in this area, or are the Government confident that there are sufficient powers to enable them to deal with that, either by guidance or secondary legislation?

Baroness Northover (Liberal Democrat)

Perhaps the noble Lord is seeking for me to pre-empt what will emerge from the discussion document that I mentioned. It is extremely important that this is considered fully and carefully. Therefore, it would be inappropriate for me to pre-empt the conclusions of that-tempting though it might be.

Lord Warner (Labour)

Perhaps I could pursue this a little further. Is the Minister saying that the current legislation is insufficient and therefore the Government are consulting on what strengthening might be needed? Surely it is possible that this great and glorious machine, the Department of Health and its lawyers, can tell Ministers whether the current legislation is adequate to deal with this issue.

Baroness Northover (Liberal Democrat)

The noble Lord himself mentioned that things did not work out quite as badly as one might have expected. I know that my honourable friend Paul Burstow was working night and day to make sure that that was the case. However, I will resist the noble Lord's invitation to pre-empt the conclusions of those who are far more expert than I am on this matter.

Lord Warner (Labour)

I asked a very straightforward question. I am quite happy to pursue this through a Written Question. I just want to know whether the Government consider that the current primary legislation is adequate to deal with this particular issue. That seems to me a yes or no answer, but if the noble Baroness would prefer me to put down a Written Question, I am quite happy to do so.

Baroness Northover (Liberal Democrat)

I seem to have been inspired. We do not need primary legislation, it seems, we need regulations subject to the affirmative procedure. However, we are consulting on the best approach to using these. I am sure that that informs the noble Lord far better than my earlier answer, but I return to the point that it is extremely important that we get this right, because we certainly do not want to find ourselves in a situation where things are not as well protected as they were in this last instance.

I will now briefly address government Amendment 270A, which is a minor and technical amendment that makes clear that Monitor is concerned with services provided for the purposes of the NHS. On that basis, I hope that noble Lords will be happy to support it and content to withdraw their own amendments.

Lord Clement-Jones (Liberal Democrat)

My Lords, this is a slightly disparate group of amendments so I will certainly not try to respond on any other amendments apart from my own.

I am grateful to my noble friend the Minister for signposting where patient and public involvement come in, in Clause 59(7) and Clause 178, and her explanation that my amendment would "constrain Monitor's flexibility". I am always interested in the kinds of response that the department is able to come up with in these circumstances. After all, HealthWatch and the local healthwatch organisations are the creatures of this Bill and of the department, so it seems somewhat extraordinary that these are not specifically mentioned in Clause 59(7). I understand that in broad terms Monitor has the duty to,

"secure that people who use healthcare services, and other members of the public, are involved to an appropriate degree"-

that is a useful word as well-

"in decisions that Monitor makes about the exercise of its functions".

However, of course, "appropriate" is determined by Monitor. It is not an objective test in those circumstances.

Baroness Northover (Liberal Democrat)

I am sorry to interrupt my noble friend, but perhaps I did not make it clear enough that Clause 178 of the Bill allows HealthWatch England to give Monitor advice and provides that Monitor must respond to that.

Lord Clement-Jones (Liberal Democrat)

Yes, my Lords, absolutely. I read that with great interest following my noble friend's speech. However, of course it is still liable to be one-way traffic in terms of healthcare, HealthWatch being the demandeur, rather than being asked by Monitor to provide its advice at the very early stage. So it is not always possible for HealthWatch to know what is in train within the bowels of Monitor, if I may say so, and it will be up to HealthWatch to be extremely nimble in order to divine what is happening within the councils of Monitor, if I may put it that way.

I therefore take the Minister's reply to be a rather less than whole-hearted endorsement of the role of HealthWatch. That may not be the right interpretation, but it seems a bit strange to be a bit mealy mouthed about HealthWatch when it is actually being created by this Bill. However, I will wait as matters unfold. No doubt we will get to Clause 178 in due course, and I look forward to it. In the mean time, I beg leave to withdraw my amendment.

Amendment 267ZF withdrawn.

Amendments 267A to 268 not moved.

Amendment 268ZA had been withdrawn from the Marshalled List.

Amendments 268A and 268B not moved.

Clause 59 agreed.

Clause 60 : General duties: supplementary

Amendment 269 not moved.

Clause 60 agreed.

Clause 61 : Power to give Monitor functions relating to adult social care services

Amendment 269A not moved.

Clause 61 agreed.

Amendment 269B not moved.

Clause 62 : Matters to have regard to in exercise of functions

Amendment 270 not moved.

Amendment 270A

Moved by Earl Howe

270A: Clause 62, page 89, line 26, after "services" insert "provided"

Amendment 270A agreed.

Amendments 270AA and 270B not moved.

Amendment 271 to 274 had been withdrawn from the Marshalled List.

Amendments 274ZZZA to 274ZZB not moved.

Clause 62, as amended, agreed.

Clause 63 : Conflicts between functions

Amendment 274ZA

Moved by Lord Clement-Jones

274ZA: Clause 63, page 90, line 16, at end insert "with a paramount duty towards the safety of people who use health care services"

Lord Clement-Jones (Liberal Democrat)

My Lords, Monitor has a range of duties which could potentially conflict with each other. Of course, we have discussed that previously, and it is recognised in Clause 63 of the Bill.

In specialised care, it is sometimes desirable to limit the number of providers to ensure that patient volumes are sufficient to support clinical expertise and high quality, safe services, an approach which was promoted by the Bristol inquiry and enshrined in the Carter report on specialised commissioning in 2006. This is entirely consistent with Monitor's main duty under Clause 59(1), to

"protect and promote the interests of people who use health care services by promoting provision of health care services which is economic, efficient and effective, and maintains or improves the quality of the services".

However, in terms of one of Monitor's duties under Clause 59(3), to prevent anti-competitive behaviour, this could potentially be described as a restriction of competition. It is therefore important, I believe, to get a clear understanding that Monitor's paramount duty should be towards the safety of patients, or, to put this another way, towards their welfare. In other words, it is legitimate for competition to be restricted in the NHS where it is in the interests of patient safety.

This amendment is designed to seek clarification that Monitor's role in preventing anti-competitive behaviour will not debar the designation of providers of specialised services. I beg to move.

Baroness Finlay of Llandaff (Crossbench)

My Lords, I have an amendment in this group which really builds on the amendment already spoken to comprehensively and efficiently by the noble Lord, Lord Clement-Jones-that is, to not impose a burden on providers in the process.

One of the difficulties in any type of regulation or inspection is that it is very easy for those who are doing the inspection to require more and more data from a provider to support whatever they view as their outcome and their inspection processes. There is a real danger in here that sometimes the regulatory processes can develop a life of their own, and, quite inadvertently, become a burden on providers. We have already seen that occur with some of the current inspection processes in place, which seem to have collected an inordinate amount of data sometimes, but have missed out on real deficits in care.

It is a paramount duty towards the safety of people who use healthcare services, and built into that of course will be good clinical outcomes, because bad clinical outcomes will be unsafe in the process. However, it is also a suggestion-and this is therefore a probing amendment-that the regulatory burden on the providers must not be excessive. They must be able to deliver patient care without diverting resources away from it in order to meet requirements from a regulator.

Lord Davies of Stamford (Labour)

My Lords, I find it not entirely surprising that a number of us this afternoon have found it difficult to know at exactly what point we should be making the contribution that we wanted to make, because of course there is an immense overlap between the themes that all the clauses we have been reviewing today have brought forward.

All those clauses, and most of the amendments to them, necessarily derive from a single decision by the Government. This was the decision that they wanted to distance the Secretary of State from the operations of the health service and superimpose a set of bureaucracies and regulators that would in future take on the responsibility that the Secretary of State has had until now. That was a decision that has had, and will have, a lot of consequences.

Three consequences in particular are very unfortunate. The first is that there will inevitably be a lack of transparency. You may impose on Monitor the obligation to produce the annual report and occasional statements on the decisions it takes, and impose on clinical commissioning boards, foundation trusts and other bodies within the NHS an obligation to try to relate to the local public and have meetings and report to them and so on. However, you will never get the degree of close oversight that you can get in Parliament when the important decisions are taken by the Secretary of State in Parliament, where they are subject to a weekly or, when necessary, daily scrutiny. That does not apply to the functional decisions, which I will come to in a moment. That is the first inevitable cost of this proposal by the Government.

The second consequence is the cost to democracy. People will no longer feel that the health service is being delivered by their democracy, or is part of their democracy. It will increasingly be delivered by relatively remote and autonomous bureaucracies which will no doubt be staffed by the most high-minded people-a sort of platonic mandarinate who will certainly deliver the best they can for the human beings in their care. However, that is a very different concept from the democratically driven concept of the National Health Service on which a lot of us were brought up and which was, of course, the vision of Beveridge and Bevan.

The third consequence, to which I turn in specific detail, relates directly to the clause and amendments before us. Many contradictions and conflicts of interest will be created in the organisations and bureaucracy that take over the Secretary of State's role. Until now the Secretary of State has been responsible for taking those decisions that are properly political decisions in the true sense of the word. They involve priorities, value judgments, trade-offs and strategic decisions for the future, which have properly been decisions of the Secretary of State up to now. Many of them will now be taken by someone else, particularly Monitor, which will take over from the Secretary of State the job of making sure that the whole system works. I have no doubt that the Government hope that that will work out well, but I repeat that I think that the effort, the initiative, is misconceived.

Two types of conflict will inevitably be structurally hardwired into Monitor. There will be the functional conflicts to which I have already referred. Monitor has specific, specialised responsibility for licensing and overseeing foundation trusts and making sure that problems are ironed out. That is one particular sector on the provider side of the equation. It now has a whole lot of responsibility for everyone else on the provider side and for the supplier side. There are some inherent conflicts.

There are also philosophical conflicts. Monitor is being given very many criteria. Clause 59 sets out what probably most of us would write if we were asked to write the most important targets of the health service on the back of an envelope. However, there is no attempt to establish a hierarchy and there will be conflicts between them the whole time. In the short term at least there could be serious conflicts between increases in efficiency, for example in access and improvement in care, and in all the other virtuous objectives set out in that clause.

The noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Finlay, have brought forward their own solution. They say, "Well, let us take one criteria, make that the overriding criteria and then Monitor won't have a conflict any more". That is how I understand the logic of what they propose. Perhaps I may disagree for a moment with the noble Baroness, Lady Finlay. It is not right to say that she builds on the suggestion made by the noble Lord, Lord Clement-Jones, because her proposal comes under different criteria. The noble Lord thinks that the safety of the patient is the most important thing, and the noble Baroness thinks that it is not to place too great a burden on providers. Both are admirable considerations, but by definition they cannot both be the overriding determining consideration where there is otherwise a conflict between desirable objectives. That will occur the whole time. These two amendments highlight the problem created by the way that the Government have decided to approach the future of healthcare in this country.

I turn now to the Government's answer to the problem that I have set out. It is quite extraordinary. Clause 63(2) states:

"Monitor must act so as to secure that there is not, and could not reasonably be regarded as being, a conflict between",

its responsibilities, which in this case are foundation trusts, and the rest. How can Monitor possibly act as if there is not conflict if there is a conflict? You cannot just pretend that there is not conflict and think that that means that the conflict has disappeared. That does not work at all. The same thing applies to subsection (3), which states:

"Monitor must ignore the functions it has under sections 109 and 111 when exercising ... its functions under Chapter 2 ... and Chapter 4".

What exactly does that mean? It cannot be ignored. Of course, Clause 109 is about when a foundation trust runs into difficulty. When that happens the Government cannot wish away the fact that the foundation trust has a difficulty; they have a responsibility to resolve it. Perhaps they mean that there will be a department looking after the foundation trust's problems but that it will not be allowed to speak to the departments with the general responsibility that Monitor exercises across the rest of the health service.

If that is what the Government are saying, perhaps they should say it explicitly. But if they are going to set up two separate departments which will not be allowed to talk to each other-there is a kind of negative synergy in an organisation having two functions of that sort-why not have two separate organisations? What is the logic for having Monitor at all if it will have to operate in this extraordinary way? I have intervened because the Government need to tell us clearly, before we agree Clause 63 and accept this Bill into the legislation of this country, exactly how they propose to grapple with the serious problems that their decision has created. I do not think that we will accept in this House that their decisions can simply be wished or thought away.

Baroness Williams of Crosby (Liberal Democrat)

My Lords, I can address my Amendment 274ZB very quickly. I have to admit that it arises from a fog of misunderstanding. Frankly, I do not know what this subsection means. Under Clause 63(3), there can be a Monitor intervention in a situation where Sections 109 and 111, which address themselves to various aspects of foundation trusts, can be completely waived without any regard to the fact that they are looking at competition and pricing as regards profoundly sensitive subjects. I wish that I could say that I know what it means but I do not. Instead I have put down an amendment which simply proposes leaving out that subsection. If the Minister can enlighten me, perhaps I will put it back in again. At the moment, I simply do not know what I would be putting in or out. I apologise to the House for such absurd and detailed ignorance, to which I confess with great humility. But I hope that the Minister will be able to enlighten me because so far no one else has been able to do so.

Lord Beecham (Labour)

My Lords, at Second Reading I made a jocular reference to Monitor, recalling that it is also the name of a carnivorous reptile. Having regard to the range of duties and responsibilities that the Bill seeks to impose on Monitor and the number of organisations with which it will have to work-ranging from the Competition Commission, the Office of Fair Trading, the national Commissioning Board, clinical commissioning groups to foundation trusts-carnivorous seems to be the wrong word. Omnivorous would appear to be a better term for the job which the Government seek to give to this unaccountable body.

We certainly accept the need for an organisation-Monitor is no doubt the appropriate one-to be responsible for the rigorous financial regulation of all providers to the National Health Service. We approve the concept of a licensing scheme. Where we part company from the Government is that we do not accept that the handing over of economic regulation of the whole of the health service to an unaccountable quango-it is unaccountable-is the right course of action. We think that oversight of the whole system should remain vested in the Secretary of State, as opposed to the detailed regulation of individual parts of that system. Therefore, we think that there are two distinct roles.

We are particularly reluctant to envisage the wider scope that the Bill seeks to confer on Monitor in the light of what its chairman, the noble Lord, Lord Owen, who is not now in his place, reminded us morning. He was at pains to make it clear that there is an analogy between the health service and the utilities. He cited the railways, gas, water and electricity. The whole nation of course resounds with rejoicing from the users of the railways, and gas, electricity and water, who are thrilled with the services that they obtain and the prices that they have to pay. That, apparently, is the model which recommends itself to the chairman of Monitor.

Much has been said in some thoughtful, forceful and frankly brilliant expositions today by the noble Lords, Lord Clement-Jones and Lord Owen, the noble Baroness, Lady Meacher, and other noble Lords about the need to have a discrete function of dealing with the foundation trusts and the rest of Monitor's responsibilities. Some of that is encompassed within amendments, such as Amendment 274ZB, that are before us this evening. That seems to be right: in particular, if the fears of the noble Lord, Lord Owen, about the position of foundation trusts in relation to European competition law are to be realised, then it is all the more necessary for a continuing role for Monitor in relation to foundation trusts. We certainly see this not merely as a transitional provision, but one for the longer term.

There is a job for Monitor to do, but there is a clear risk of conflict for the organisation in the terms that the Bill now provides. They may be so conflicted as to require the attentions of the noble Lord, Lord Alderdice, if they have to resolve these potential conflicts of interest, and that would not be in anybody's interest. The Government really should think again about what they expect of Monitor and how it is to be rendered accountable, because there is clearly a widely shared view in the Committee and the House generally that the present prescription is simply not adequate for the purposes that the Government wish to see carried out.

Earl Howe (Conservative)

My Lords, Clause 63 sets out several provisions detailing how Monitor should deal with potential conflicts in relation to its general duties, and conflicts with regard to its functions. It would be helpful to cover each of these in turn. The noble Lord, Lord Davies of Stamford, will not be surprised to learn that I did not agree with much of what he said. We should not find it surprising, because it is not uncommon for bodies to have potential conflicts of interest. What matters is how they are dealt with, and the Bill sets out a robust framework for Monitor to operate effectively. In theory, there is a possibility that Monitor's general duties, as set out in Clauses 59 and 62, might conflict-if, for example, the most economic, efficient and effective provision did not deliver fair access because that access was limited to certain days and times or locations. If a conflict did arise, we are clear that it would need to be resolved effectively.

In order to be a successful independent regulator, Monitor would need to be able to resolve any conflicts that may arise. It would be closest to these conflicts, and it would be best able to weigh up the potential risks and benefits. Balancing competing priorities is just a reality of life, and resolving such conflicts is a key function that all public bodies need to carry out. When considering how to resolve conflicts, we believe that Monitor should do so in the manner it considers best, in line with its overarching duty to protect and promote patients' interests. I am not going to call patients "consumers", but in response to the noble Lord, Lord Beecham, who has tempted me, it was Alan Milburn who said in 2004, when he was Secretary of State for Health:

"In the business world success today depends on being flexible enough to innovate and responsive enough to meet consumer demands. Public services have to apply the same lessons".

I do not want to press that analogy too far, but we all know what we are talking about when we talk of patients as consumers who require the same kind of care in terms of centring priorities on their interests.

I want to reassure the Committee that when resolving any conflict, Monitor would have to take into account the need to maintain the safety of the people who use healthcare services. Indeed, Monitor would be able to take this and a range of other issues into account when resolving any conflict between its duties. However, Amendment 274ZA would go further. Its impact would be that, in resolving any conflicts between its general duties, Monitor would always act with a view to maximising safety-potentially at the expense of its other duties. This would be inappropriate: it could cut across the role of the CQC, not to mention potentially undermine the role of commissioners and the independence of clinicians. It could also undermine individual patient choice. I can elaborate on that if noble Lords would like me to.

Similarly, while I sympathise with the desire to ensure that providers do not face unnecessary burdens, there may be occasions where a conflict solution that imposes the least burden on providers is not the most effective. Amendment 274ZAA, in the name of the noble Baroness, Lady Finlay, would impose resolutions that prioritised the least burden on providers over all other considerations. I think that is a mistaken way to go. We believe that Monitor should be free to decide how best to resolve conflicts between its duties, and therefore I would encourage the noble Lords who tabled these amendments to withdraw them. Nevertheless, I will consider-as I indicated earlier-whether it would be appropriate for the Bill to rationalise within Clause 62 matters to which Monitor must have regard. This would help Monitor decide how to resolve any conflicts. Therefore, I hope noble Lords will appreciate that I am not impervious to their suggestions on this clause.

Let me turn now to potential conflicts between Monitor's functions. For clarity, Monitor's functions include those it has as sector regulator, which are: ensuring continued access to NHS services; setting and regulating prices; preventing anti-competitive behaviour and licensing providers of NHS services. In the short term, Monitor would also continue with specific oversight functions over foundation trusts. As with Monitor's duties, we need to ensure that any conflict between these functions is resolved effectively. Clause 63(2) requires Monitor to make arrangements to avoid potential conflicts of interest between its specific functions as foundation trust regulator and its broader functions as sector regulator, which are provided for in this Bill. I think we are all clear that we need to have appropriate arrangements within Monitor to mitigate and manage potential conflicts of interest between its functions. The Bill does not prescribe exactly what arrangements Monitor should make for this; it gives Monitor flexibility to determine the most effective arrangements, but we would expect that this would necessarily involve some separation of decision-making. This may need to be underpinned by informational separation and other working arrangements at operational level.

Lord Beecham (Labour)

Would such proposals by Monitor have to be approved by the Secretary of State or would it be left entirely to Monitor to decide without reference to the Secretary of State?

Earl Howe (Conservative)

My Lords, I think we will rely on Monitor to make its own arrangements and, as the Committee will appreciate, there are limits to how far it is sensible to prescribe in legislation what the arrangements should be. Nevertheless, picking up the noble Lord's prompt, I am sympathetic to the concerns that have been raised in this general area and I undertake to discuss the matter further with Monitor.

To create legal certainty, Clause 63(3) clarifies Monitor's arrangements to resolve conflicts further, so when preventing anti-competitive behaviour and setting and regulating prices, Monitor must ignore its transitional regulatory functions relating to foundation trusts. I hope that addresses Amendment 274ZB, tabled in the name of my noble friend Lady Williams. The meaning of this provision-

Lord Davies of Stamford (Labour)

My Lords, the noble Earl keeps on referring to Monitor's responsibilities towards foundation trusts as being transitional, but I recall that earlier today he accepted that in fact they would possibly continue beyond 2016, which is five years away. It hardly seems possible that he should be saying that at one moment and then at the next using the argument that since these responsibilities are only transitional, the conflict of interest will rapidly resolve itself.

Earl Howe (Conservative)

I refer the noble Lord to the remarks I made earlier. The provisions are partly transitional and partly not. It depends on which functions we are looking at.

I come back to the point I was making on the amendment tabled in the name of my noble friend. This provision says that in preventing anti-competitive behaviour that is against patients' interests or in setting prices, Monitor must ignore the transitional functions it has as the regulator of foundation trusts. If the subsection were left out as the amendment proposes-although I know that it is only a probing amendment-when undertaking its anti-competitive behaviour or pricing functions, Monitor could also consider its transitional intervention powers. That could result in Monitor treating struggling foundation trusts preferentially by, for example, not subjecting them to its anti-competitive powers. I hope that that is helpful to my noble friend.

My noble friend Lord Clement-Jones spoke about the designation of specialist centres and expressed his view that that should not conflict with the prohibitions on anti-competitive behaviour and that, in essence, patients' interests have to be paramount. I am with him on this and I would like to reassure him that patients' interests would be the paramount consideration for Monitor in resolving conflicts that arise in the exercise of its functions in this way. Monitor need not take issue with decisions to designate specialist centres where this would improve quality and protect patient safety, even if it reduced competition.

I hope that those remarks are helpful and that my noble friend will feel content to withdraw his amendment.

Lord Clement-Jones (Liberal Democrat)

My Lords, I thank my noble friend for that reply, which I have found very helpful. It was robust in one sense and has set out a robust framework in another. Although I was also interested in what the noble Lord, Lord Davies, had to say, in that it would tie us all in knots, I think that the Minister's exposition was clear in that it has set out a suitable conflict framework. Although I cannot speak for my noble friend Lady Williams, I thought that the Minister explained the necessity for Clause 63(3) very well. His reassurance on the aspect of patients' interests was extremely helpful as well, although of course it does not mean that the spectre of EU competition law does not still haunt us somewhat and that it will continue to be the subject of discussion, perhaps outside this Chamber. After all, that could override everything else if we are not careful.

I took considerable comfort from the Minister's undertaking to review Clause 62 as well, because that is quite a shopping list. If it could be clarified, that would be helpful. His general undertaking to the Committee on the conflict area was also very helpful. In the circumstances, I am happy to withdraw my amendment.

Baroness Finlay of Llandaff (Crossbench)

My Lords, I want to make a brief comment in response to the Minister's reply to my amendment in the group, Amendment 274ZAA. He said that he was minded to rationalise the items in Clause 63 and therefore I feel that I must put in a formal plea that research, education and training should not be deleted from the list in the process of rationalisation. Having said that, I shall not press my amendment.

Amendment 274ZA withdrawn.

Amendments 274ZAA to 274E not moved.

Clause 63 agreed.

Clause 64 agreed.

Clause 65 : Duty to carry out impact assessments

Amendment 275 not moved.

Clause 65 agreed.

Clause 66 : Information

Amendment 276 not moved.

Clause 66 agreed.

Clause 67 : Failure to perform functions

Amendment 277

Tabled by Lord Clement-Jones

277: Clause 67, page 93, line 20, leave out subsection (3)

Lord Clement-Jones (Liberal Democrat)

My Lords, we have gone on rather far. Amendment 276 has not been moved, but that amendment marked the beginning of a group which includes two amendments of mine. In that case, I shall move them when we come to them.

Amendment 277 not moved.

Clause 67 agreed.

Amendment 277A not moved.

Amendment 277B

Moved by Baroness Thornton

277B: Before Clause 68, insert the following new Clause-

"Duty as to continuous improvement

(1) Regulations must provide that commissioners have a duty to make arrangements to secure continuous improvement in the way in which their functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

(2) Such continuous improvement is to involve-

(a) consideration of costs,

(b) making the most of money spent, and

(c) making sure that services meet the needs of patients, communities and the priorities agreed in any Health and Wellbeing Strategy.

(3) For the purpose of deciding how to fulfill the duty, commissioners must consult the relevant Health and Wellbeing Boards, patients and public, as provided in the regulations.

(4) Commissioners must conduct reviews of the services commissioned in accordance with the regulations, and publish the results.

(5) In conducting a review a commissioner-

(a) shall aim to improve the way in which its commissioning of services is exercised, having regard to a combination of economy, efficiency and effectiveness, and

(b) shall have regard to any guidance issued by the Secretary of State under this section.

(6) Regulations may specify matters which commissioners must include in a review of a service under this section, and in particular may require a commissioner-

(a) to consider whether the current providers of the service were meeting all reasonable requirements;

(b) to consider the extent to which competition for the provision of the service may or may not be appropriate;

(c) to consider its objectives in relation to commissioning the service;

(d) to assess its performance as regards the commissioning of the current provider;

(e) to consider the outcome of consultation with relevant persons and bodies as specified in the regulations.

(7) Regulations may specify the circumstances for use of tenders as a result of a service review in order to sustain continuous improvement.

(8) These regulations may include-

(a) single tender actions,

(b) restricted tenders,

(c) open market tenders."

Baroness Thornton (Labour)

My Lords, we have yet again leapt to a larger group, and I know that the noble Lord, Lord Clement-Jones, will get his turn, although possibly not until after dinner. We have moved on to a large group of amendments that concern pricing and the setting of tariffs. Many other noble Lords have tabled amendments in this group, as indeed has the Minister. I do not intend to make a long speech, but I will address the issue of pricing.

On reading the Bill you would think that having a tariff in the sense of a complete list of NHS services with all the prices and currencies set out was just around the corner, but I suggest that that is a bit of a myth. Even well developed healthcare systems that are much more market-orientated than our NHS are still a long way from such a state; we are years or perhaps decades away from that condition. For a start, for many services there are no data-not just bad or incomplete data, but none. Getting the datasets defined, collecting the data, then making the analysis, road-testing and rollout will take time. The Minister might like to tell us just how large the team in the Department of Health working on this task is, because I have to say that I heard that it is small and getting smaller as the cuts bite. But, of course, there is always KPMG or McKinsey to step in. Apart from anything else, it seems that this Bill is intent on creating a lot of jobs for lawyers and now, we see, for accountants too.

We are in the midst of a major argument about how relevant different types of currency and tariff might be, with some suggesting that returning to block payments might be better, in the interest of integration, stability and cohesion. This has been stamped on by the operating framework but that does not mean that it will not happen. Using choice and the right financial incentives to drive change in the system is the new orthodoxy. Some are trying to find out how different currencies, uses of penalties and fines and even bonus payments can reward good outcomes and deter bad. This has now extended to how to incentivise integration. These are all problems for which we would like to have answers. We are years away from a system where all these levers are available in the way that the Bill likes to suggest that they are.

In mentioning the framework, we should point out that the re-emergence of price competition shows the need for some communication between the chief executive and the Secretary of State.

Who, then, sets the prices? The arguments are well balanced. My noble friend Lord Warner argues in his book that it should be the national Commissioning Board. He is not in his place at the moment, but I have read his book. However, the national Commissioning Board is in the ludicrous position of also being the commissioner of local services. Monitor may also be compromised, as it is aligned to providers. So we return to the role of the Secretary of State. In any event it must surely be for the Secretary of State to determine the strategic approach, namely the global uplift or reduction. Our priorities for a system as determined by the Secretary of State also need translating so that the incentives are aligned to the desired outcomes, something the NHS has not always been good at. If the Secretary of State determines the approach within the strategy, then we may need genuine independent input into the detailed work of pricing and tariff. At the very least, a full list of the proposed tariffs should be published along with all the data and the analysis, so that the big brains of people at organisations like the King's Fund and the Nuffield Foundation can tell everyone what is wrong.

Widespread consultation before any major change is a good idea, as is road testing changes before inflicting them and all the suffering of the unintended consequences that may arise. In the end, we think that the Secretary of State must make the strategic decisions in this crucial part of the economic architecture. It cannot be handed over to a quango.

The details of the amendments in my name and the name of my noble friend are as follows. Amendment 277B would insert a new clause which would place a duty on commissioners as to the continuous improvement in terms of cost, value for money and the needs of patients. It would also encourage co-operation with health and well-being boards, patients and the public. It would allow the Secretary of State to issue guidance, via regulations, including in relation to whether,

"competition for the provision of a service may or may not be appropriate",

and in relation to,

"the circumstances for use of tenders as a result of a service review".

Noble Lords who were here this morning-which now seems like a long time ago-may remember that, when I explained the overall purpose of our amendments to reconfigure Part 3 of the Bill, the setting of prices was part of that.

Amendments 288J and 289 are about setting a national tariff: they would make it matter of policy for the Secretary of State, and not a matter for Monitor. Amendment 291B would ensure that regulations relating to the national tariff must state how the prices and methods were determined and how any proposed changes to the national tariff,

"will be subject to proper evaluation and testing" ,

as well as dealing with evidence of consultation between the Secretary of State and Monitor. As the national tariff should not vary in relation to different descriptions of provider, Amendment 292ZC would deal with that issue and the issue of a preferred provider. Monitor should also have no powers over commissioners-in this instance, in relation to the tariff-as commissioners are regulated by the board. We oppose the question that Clauses 116 to 121 stand part of the Bill, because we believe that the Secretary of State should set the national tariff: if the Secretary of State were to set the national tariff, then those clauses would be unnecessary. Once more, as you can see, we are reducing the size of this part through our amendments.

Amendment 294LA would insert a provision that regulations must be laid to issue "guidance on the circumstances" in which there can be local modification of prices. That decision should not be for commissioners and the providers of healthcare services alone. Amendment 294LB would provide that any local modifications of prices would occur with the approval of both Monitor and the board. Amendment 294LC also concerns local modifications of prices: it would ensure that if they were approved, Monitor would have to notify the relevant health and well-being boards. Amendment 294MA deals with situations in which a provider fails to reach an agreement with a commissioner about local variation of prices: in such circumstances it would allow Monitor to authorise such changes only,

"with the consent of the Board".

Amendment 294MB would ensure that no modification of prices could happen,

"without the consent of the Secretary of State".

In the area of the setting of prices we are perfectly happy to acknowledge that this may not be a perfect set of amendments. But we think that the very important matter of who sets the prices, and where the accountabilities lie, needs to be discussed. I beg to move.

Lord Butler of Brockwell (Crossbench)

My Lords, I shall speak to Amendments 288H and 291A, in my name and the names of the noble Lords, Lord Newton of Braintree and Lord Turnberg. The amendments are related. Like other amendments in this group, they relate to the tariff-that is, the remuneration which a healthcare provider receives for a healthcare service. The amendments to which I am speaking are designed to facilitate the introduction of new treatments made possible by the development of new technology. When an innovative treatment requires a new procedure code or an updated healthcare resource group classification, a new code can take up to three years to be implemented and a new healthcare research group can take up to six years to develop. Meanwhile, NHS trusts cannot be remunerated for potentially useful and cost-effective improvements made possible by new technology.

In Germany, an intermediate step has been developed, under which providers can apply for an on-top payment while a new code is being developed. This is known in Germany as the NUB system, although I hope that noble Lords will not ask me to say what NUB stands for. These amendments provide for a similar "innovation tariff" to be provided in the United Kingdom, to allow for providers to be remunerated for an innovative procedure on a temporary basis while a new procedure code or healthcare research group is being developed.

These amendments are in line with the Government's Strategy for UK Life Sciences, which was published last week, but are not already covered by it. I hope therefore that the Minister will give sympathetic consideration to the introduction of arrangements of this sort to facilitate the introduction of health improvements made possible by new technology.

Baroness Gould of Potternewton (Labour)

My Lords, I shall speak to Amendment 292A. As it stands, Clause 114(11) will have a negative effect on the provision of sexual and reproductive health services. This arises from the transfer of sexual health commissioning, along with public health, to local authorities.

Clause 114 requires Monitor to publish "the national tariff", but an amendment put down by the Government in the other place inserted subsection (11), which specifically exempts public health services from the national tariff. As sexual health services are set to be a public health responsibility, it will mean that genito-urinary medicine and sexual and reproductive health services will be excluded.

Sexual health professionals are deeply concerned by the impact that the absence of a national tariff may have on the provision of sexual health services. There are a number of providers of sexual and reproductive health services in the community and many are funded by a payment-by-results tariff system, commissioned by PCTs. The Bill as it is now drafted makes it very unclear how those services can expect to be commissioned by local authorities. Without a national tariff, the expectation at best would be to have a local tariff implemented, based on a national tariff. At worst, providers will return to a system of block contracts.

The removal of the national tariff is particularly frustrating as it is happening in spite of the fact that services have for some time had a national tariff, and that extensive work has recently gone into developing integrated currencies and tariffs for GUM and sexual reproductive health by the London sexual health programme on behalf of the London PCTs. This work not only represents good value for commissioners but also encourages best practice and good public health interventions. It is likely that without a mandated national tariff, sexual and reproductive healthcare providers will return to a system of block contracts, which will threaten the open access nature of sexual health and contraceptive services, and potentially restrict those able to attend services according to their age and place of residence. The disadvantage of block contracts was identified by the department in its response to the HIV Select Committee report.

Patients often require or choose sexual health services away from where they reside, which a tariff system could accommodate by money following the patient. Money following the patient in turn improves quality and patient choice. A national tariff will help equal out payments so that they can reflect the level of service provided and type of treatment given. That reflects the aspirations set out in the White Paper, which said that:

"Money will follow the patient through transparent, comprehensive and stable payment systems across the NHS to promote high quality care, drive efficiency, and support patient choice".

Block contracts will simply guarantee providers an income and not incentivise innovation. A large proportion of sexual health service delivery focuses on the prevention of sexual ill health, be it STI or chlamydia screening, whereas block contracts will not encourage providers to develop effective health promotion because they will not be specifically reimbursed to do so. Further, the tariff will support the drive to integrate sexual health services and will protect high-quality community services in the same manner as for other NHS services. Any qualified provider will be introduced to community services from April 2012 and, in order to prevent price competition, will be restricted to services with national or locally set tariff prices.

In his letter responding to points raised on this issue at Second Reading, the Minister stated that the Government were aware that some areas of the country are exploring the use of tariffs for commissioning sexual health services based on clinical pathways of care-which are being tested by the Department of Health-and that the results will be published. However, my impression of that work is that currently it is based around a national tariff, not local ones. The response goes on to say that local government will be able to consider the use of tariffs as part of efforts to deliver high-quality sexual health services. The clause works against that assumption. The only way that high-quality sexual health services can be provided and protected is by there being a national tariff in GUM and sexual reproductive health services. If local authorities decided to commission sexual health services under block contract, they would undermine incentives to increase and improve on screening, testing and treatment.

I appreciate that aspects of public health may not require a national tariff, but in this instance one size does not fit all. Not to have a national tariff for sexual health will have a dramatic effect on the ability to provide the current level of service. I put down this probing amendment in the hope that the Minister might rethink the decision to include the clause and consider replacing it with one that provides flexibility in the determinant of the tariff. His reply will determine if I come back to this issue on Report.

Lord Clement-Jones (Liberal Democrat)

My Lords, I will speak to Amendment 292ZA, the question that Clauses 119 and 120 stand part, and Amendment 294M. I shall principally speak to Amendment 292ZA, which is designed to make sure that the national tariff recognises the varying costs associated with people who have experienced homelessness or have complex needs in respect of the full range of healthcare services.

The Bill commits Monitor to publishing a national tariff for services which are or may be provided for the purposes of the NHS. Within this, the Bill makes provision for this tariff to be varied to reflect certain circumstances in which it is provided. However, homeless charities believe that the Bill needs to go further and make provision for tariffs to be varied to reflect the level of complexity and disadvantage experienced by certain patient groups. People who have complex health needs can cost more to treat. Unless the tariff structure reflects this, there is a real danger that services will not wish to treat those patients for whom health outcomes can be harder to achieve-such as homeless people.

Why should this not be reflected in the Bill? There is evidence that health services can already be reluctant to work with homeless people because of the higher costs of treating them. Unless the higher costs of treating some patient groups are taken into account, there is a real danger that the new tariff system may discriminate against homeless people and others with complex needs. In the long term, this will also incur a far higher cost to the NHS and other public services. Failure to treat disadvantaged patients at a primary care level can result in higher rates of hospital admissions, greater demands on acute care and the wider costs of ongoing poor health such as worklessness.

Homeless people have some of the poorest health in our communities. People experiencing acute disadvantage can have complex health needs. As the Department of Health's Inclusion Health report stated, in order to meet the complex health needs of socially excluded groups, we need,

"a sophisticated, coordinated and flexible response from services. The costs of failure are great not only to the individual life chances of socially excluded clients, but also to the taxpayer, services and the communities who pick up the pieces".

Unfortunately, many mainstream services do not offer this and as a result are not accessible to disadvantaged patient groups.

Currently, some specialist homeless or vulnerable person's health services have negotiated their own tariff system so that they are not unduly penalised for treating complex patients. However, this can be difficult to negotiate and such services are not widespread. Unless there is provision for this and the new tariff system takes the wider factors that affect disadvantaged patients into account, services may be disincentivised from treating them. This will lead to poorer health outcomes and make it harder for the NHS to achieve a reduction in health inequalities.

My amendment builds on the commitment to improve the health of the poorest the fastest. The intention to reduce health inequalities through the reform of the NHS has been embedded in the reform process from the first White Paper in 2010. It was revisited by the NHS Future Forum, which flagged up a number of concerns about incentives against cherry-picking at the expense of more complex and expensive patients. In their response, the Government said that services,

"will be covered by a system of prices that accurately reflect clinical complexity".

My amendment would help to achieve that.

Amendment 292ZB is simply designed to make sure that when Monitor sets prices, and consults on whether to vary prices, it takes into account its duty to promote integration. That is the reason for the reference to Section 13M of the National Health Service Act 2006 and clinical commissioning groups' duties under Section 14Y of that Act.

On the question that Clauses 119 and 120 stand part, these were referred to in my speech at the beginning of the day-that now seems a long way away. This relates to the reference to the Competition Commission under Clauses 119 and 120. This is also to do with the reference to the method of reaching a price under the national tariff. The Minister dealt earlier with the issue of why an independent body had been chosen for that purpose but it could equally well be the OFT, which I believe would be less provocative and probably more apposite. That was certainly the view of my noble friend Lady Williams when she spoke to her amendment, and I very much hope that the Minister and the department will revisit that issue and see whether it is possible for the OFT to be the body that actually looks at the method of setting tariffs in those circumstances where there is disagreement. That would be a lot less provocative and less liable to introduce EU competition law, along with all the other matters that are involved.

I do not currently have Amendment 294M to hand, sadly, but no doubt I will shortly if I keep talking for slightly longer. It ensures that all providers licensed under chapter 3 and operating in relevant clinical commissioning groups are paid the same price for the provision of services. This is designed entirely to make sure that there is a level playing field within clinical commissioning groups' areas. I hope that it is the intention in the setting of national tariffs that they will be uniform and there will be no difference in tariff paid by one provider versus another within the same CCG area. With that, I think that I have completed all the amendments that I intended to speak to.

Baroness Finlay of Llandaff (Crossbench)

My Lords, I am tempted to say, "Follow that"; I certainly cannot. The reason why my Amendment 294BZA in this group is a probing amendment is that the wording in Clause 117(1)(a) talks about the,

"differences in the costs incurred in providing health care services for the purposes of the NHS to persons of different descriptions".

It seemed to be extremely elegant and important to have in the Bill a recognition of the wide variation in both physiology and pathology that different people will present with and that that should determine the tariff itself, not simply be part of the consultation.

I hope that the Minister will be able to provide some assurance that findings from the consultation may indeed provide the range. Is it correct that additional support to secure continued access to services could come through commissioners and providers or, if they cannot reach agreement, for providers alone to be able to apply to Monitor for a modification of the price determined in accordance with the national tariff? Is it correct that Monitor would have the ability to approve and/or set the level of the modification under certain circumstances, using a methodology agreed between Monitor and the NHS Commissioning Board, if a provider could not, at the tariff price, cover its cost with an efficient service? One of the difficulties that keep emerging as we discuss tariffs is the complexity of applying them in the enormously wide variety of clinical situations that will be dealt with across the whole of the health services.

Lord Davies of Stamford (Labour)

My Lords, I shall speak to-I had better read this out; I cannot possibly remember it-Amendment 294AZB in my name. This is a probing amendment, intended to smoke out the Government's real feelings about price competition in the health service market. There have been some conflicting signals on this, as we all know, with the general expectation that the Government intended to introduce a greater measure of price competition, and then a spectacular U-turn earlier this year, which the Government said was not a U-turn because they never intended to introduce price competition anyway. A whole lot of clauses were introduced into the Bill that had the effect of banning price competition in the NHS.

I was assured by the Minister only yesterday that the Government's true thinking on this is best set out in the document Protecting and Promoting Patients' Interests, and I am grateful to his officials for giving me a copy. I shall quote what it says on this subject in paragraph 35 under the heading "No price competition", which sounds very decisive:

"We have strengthened the Bill to ensure that where a national or local tariff is in place, providers and commissioners cannot undercut this".

That seems to be straightforward, coherent and, as I shall argue, completely wrong. Paragraph 36 says,

"Where competitive tendering is undertaken for services not covered by the tariff, bids would be evaluated in terms of best value (i.e. awarding contracts to those bidders who provide the best balance of quality and cost".

That seems to be incoherent and complete rubbish. Once you introduce the idea of a balance of quality and cost, you are into price competition. Every time you buy a car, you compare the quality and price of the cars on the market and come to a balance between quality and cost. Every time you go for a coffee and you choose between Costa and-what is the other one?-Starbucks, you are striking a balance between quality and cost. That is clearly incoherent and the result of very sloppy thinking.

Let us assume that that is just bad exposition or bad thinking on the part of the Government, and their real conviction is represented by the first quotation-they do not believe in price competition at all. Why is that a mistake? For two reasons: first, it involves a considerable potential loss of money from public funds. Surely if you can save money with no detriment to the purposes of the health service or the interests of patients, it should be the obligation of the Government to do that.

The second reason is a little more complicated: if you deny price competition a role in the system at all, you are denying the use of the mechanism for price determination. Competition is the only way in which you can really make sure that you understand how prices are put together. If you have a tariff that does not involve any price competition, you are basically into a form of cost-plus price determination, and anyone who knows anything about this-I know a little, having been Minister for Defence Procurement; sometimes we have to use cost-based pricing because there is no competition in the product that we need to acquire-knows that if you produce prices on that basis, you find that you can never exert any downward pressure on the prices that your suppliers are quoting to you. They will put in whatever they think is necessary for that activity and whatever costs they think they ought to put in. They will use the technique that they traditionally prefer to use for producing the goods or services that you are buying. You will never be able to second-guess that or look beyond it. It is an extraordinarily wasteful system of procurement and it is completely wrong.

We should have a commonsensical agreement that we should use price competition wherever we can where it does not do damage to other desirable objectives, particularly the objective of patient outcomes. I have endeavoured to produce an amendment-it is a purely probing amendment; I am sure that it is technically deficient, and I do not intend to take it any further in its present form-that establishes one way of doing that. It says that when commissioners wish to use price competition and they find that they get an offer of a price that is more favourable than the tariff price, they should be allowed to take it, subject to checking with Monitor to ensure that there is no damage to other purposes of the health service, to the interests of patients or to the structure and capacity of the health service. In health, there are often good reasons why you might not want to take the nearest offer, and I shall come to a couple of those in a moment, but, where there are no such reasons, surely the onus should be that you should take that offer and save the public money.

There are reasons why in health it may not always be sensible or in the interests of the health service or of patients to take the lowest offer, and I entirely accept that that may often arise. One is in the case where you are making a strategic investment in a new capability. We have had examples that have struck me in the course of these debates-for example, the new stroke systems in London and cardiac systems that cover London. I do not come from London but I believe that they have been a great success. That has consisted in ensuring that a quasi-monopoly has been given to perhaps half a dozen units that contain the best expertise and the best equipment that can be brought together for these purposes. That has been found to be the best solution for maximising patient outcomes or, to put it rather more straightforwardly, actually saving people's lives, which is clearly the priority. I totally accept that there may be decisions of that kind that need to be taken irrespective of cost. Indeed, I welcome that they should be taken irrespective of cost and I have provided in this amendment a mechanism for making clear that when that happens and there are arguments of that kind they can prevail and it can be quite clear and quite transparent why the decision has been taken.

The second reason is also rather specific to healthcare, although not exclusively so. One of the features of the economics of healthcare is that it has a very high operational gearing; in other words, a very high ratio of fixed costs to total costs. In any sector of the market where that prevails there is obviously a great temptation for people to bid opportunistically when they have spare capacity at a price that represents a return over their variable costs and some contribution to fixed costs though not necessarily a very great one. You may get some very cheap offers coming in from people who happen to have spare capacity at a particular moment. It may be dangerous to take those offers rather than ones from other suppliers, such as traditional NHS suppliers which are more expensive, because if you do that you will put those NHS suppliers out of business. By definition, if people are bidding at a price below their full costs but over their variable costs then they will not always be providing it on that basis. They will certainly not be investing in new capability or sustaining capability on that basis. One has to be very careful about predatory pricing in the health service. I totally recognise that, and it would be a very good reason for saying, "We do not want to take this particular offer because if we do we shall put out of business capacity we need over the long term that can only be sustained long term at a higher price".

I am very open and sensitive to the reasons for not taking the lowest price in many individual cases, but it seems to me that the Government have got this thing completely the wrong way round. The default option should be to take the cheapest price. We should be saving money. We should be exerting downward pressure on cost. We should be encouraging people to come up with new, cheaper and more efficient ways of doing things consistent with the quality that we require. It goes without saying that quality should be absolute and should be determined for every diagnostic related group, every service and health service procedure. For each of these we should have a clearly defined specification of quality and we should not go below that for reasons of price. Where we can get that quality cheaper and we do not do structural damage to the service it seems to me completely crazy not to go in that direction. I am sorry that the Government carried out the U-turn in February and I hope they may now turn back again.

Lord Warner (Labour)

My Lords, I have some sympathy with some of the remarks made by my noble friend Lord Davies of Stamford in the sense that a blanket ban on price competition seems rather misguided in the situation the NHS faces. To give one example, under the last Government the price we paid for spot purchasing from the private sector when there were peaks of demand in the NHS was often much cheaper than had previously been the case and could, on occasion, be below a tariff price for some of the services. That was in the interests of the NHS and patients. A blanket ban does not seem to me to be the most sensible way forward.

I want to speak to Amendment 291C which should have been in this group. Assiduous readers of the groupings list will see that there are two commas after Amendment 291B. Between those two commas should have been Amendment 291C and the Whips' Office has confirmed to me that was indeed the intention, so I wish to speak to the missing amendment and I also wish to speak to Amendments 294AA and 294BA which were included in the list.

Amendment 291C adds to Clause 141 some principles that should be applied to the construction of the national tariff. We have already had one debate about the tariff and how the national Commissioning Board might be encouraged to move the tariff away from its dependence on pricing episodes of care, which tend to favour acute hospitals, to a greater emphasis on periods of care that are more appropriate to the high volume of NHS patients with long-term conditions. I withdrew my earlier amendments on this issue but discussed the issue much further with outside interests and experts to see whether there was anything we could usefully do to further this particular cause. I think the Minister was not unsympathetic to some of the ideas in the earlier amendment.

These discussions have persuaded me that there is widespread support for trying to move the tariff currencies and pricing in the direction of periods of care but also a belief that this will take quite a long time and it involves a good deal of new data collection and analysis. In the mean time, people seemed to be saying that there was some merit in being clear about what should be the underpinning key principles for developing the national tariff in the future. I have had a shot at encapsulating these key principles-drawing very much on work by the NHS Confederation and I am extremely grateful for the help and advice it gave me-so that principles of this kind could be placed in the Bill to guide those who will be taking forward the difficult but important work of shaping the national tariff. I hope the Minister will be able to agree that we should try to have some guiding principles on the tariff in the Bill even if he does not like my particular wording because this is an important issue. We need to use this legislation to try to shape an important piece of work that will stretch over quite a few years to develop a new national tariff.

Amendments 294AA and 294BAA are technical amendments that reflect concerns expressed to my noble friend Lord Darzi and me by representatives of specialist medical interests about the current wording in Clause 116 on consultation on proposals for the national tariff and Clause 128 on the responses to those consultations. Amendment 294AA is intended to ensure that the relevant specialist groups are consulted on proposals for the tariff. It does not seek to specify the particular groups-that would be left to Monitor in the light of what the particular proposals were, affecting particular specialties. The amendment simply seeks to require that specialist clinical groups are consulted when tariff proposals are made so that they are involved and can bring to bear their expertise on the tariff-setting processes that can be involved with particular quite highly specialised sets of services. Amendment 294BAA merely seeks to ensure that when there are objections to a tariff proposal, assessing the weight of opinion for or against should be restricted to specialist licence holders undertaking work of comparable complexity. This is really to ensure that any objections are raised by the people undertaking work of a similar complexity defined in the original proposals for tariffs. I know that specialist opinion will be much reassured if the Minister could look favourably on these two amendments.

Baroness Murphy (Crossbench)

My Lords, I would like to make a few remarks about tariff and price setting and echo the words of the noble Lord, Lord Warner, who reminded us that there are two equally important mechanisms: tariff development, which is the responsibility of the national Commissioning Board; and price setting, which is the responsibility of Monitor. It is critical that Monitor retains the responsibility to set prices. That enables it to uphold its responsibilities for sustainability and balance the interests of commissioners and providers in the patients' best interest. Independence in price setting is utterly critical. We have seen previously that not having independence from the executive arm in the NHS has been a disadvantage in getting the right prices which reflect the complexity of the issue concerned. I take the point made by the noble Baroness, Lady Thornton, that the development of tariffs is a very complex matter. It is work in progress but the work never stops. That has been the case in all countries that have developed tariffs and will be for the foreseeable future. We need flexibility when designing tariffs.

I say to the noble Lord, Lord Davies, that we have seen how catastrophic simple price competition has been internationally in driving down quality of service. Indeed, we have seen that in this country, too. Price competition was not helpful. In order to drive down prices and get better value, you need to start designing the tariff around best practice. This was mentioned by the noble Lord, Lord Warner. You need to design a pathway of care based on what should ideally happen to a patient, deliver the clinical pathway, cost that out and get the best practice in place. If that amounts to less than the set price, which it often does, that is the way that you can start to drive down costs while improving quality. A tremendous amount of superb work has been done in a group of mental health trusts looking at best practice tariffs for episodes of care. If we can get that work ongoing in a group of people who are dedicated to designing better tariffs, we will be able to improve price competition by designing the tariff correctly while not striving to be competitive on price alone.

Lord Davies of Stamford (Labour)

I am very grateful to the noble Baroness for giving way. I made clear in my remarks that I believe one should start by specifying quality-that would include her point about best practice-and then allow the market to bid against that. Where potential suppliers, whether NHS or otherwise, can come in below the existing price-call it the tariff price or what you will-that will be a spur to everybody else to consider whether they can deliver that quality-I stress "that quality"-better, more effectively and more cheaply. That mechanism will be totally absent in the National Health Service if the Bill is not changed in the way that I have suggested or something equivalent.

Baroness Murphy (Crossbench)

I take the noble Lord's point. I think it is possible to introduce the mechanisms that he would like to see through the existing mechanisms in the Bill on tariff design. Those mechanisms would also address the points made by the noble Lord, Lord Butler, about the need to develop an additional payment for certain kinds of innovation tariff. The possibilities for designing tariffs are wide. We do not need to be rigid about this. I do not know how much needs to be written on the face of the Bill. It seems to me that we need to get that separate in our minds from the actual price setting which is more the role of the independent regulator, having got the design of the tariff correct. Therefore, I would like to see Monitor retain its role as a price setting regulator but I wholeheartedly agree that a lot of creative work needs to be done on the tariff to get it right for integrated care packages and proper best practice design.

Baroness Hollins (Crossbench)

My Lords, I would like to add to what my noble friend Lady Murphy has said by commenting on a couple of amendments in this group which concern the need for the tariff to be able to reflect and adapt to the requirements of people with complex needs. I am thinking particularly about people with learning disabilities who may need additional time to be devoted to them because of their conceptual or communication difficulties, or other disabled people who may require reasonable adjustments to be made in order for them to use a service. I think also of people with mental health problems using hospital services such as maternity services. The provision of maternity care is hugely complicated by the presence of people with an enduring mental illness. The need for the tariff accurately to reflect and encompass these needs poses quite a challenge.

Baroness Tonge (Liberal Democrat)

My Lords, I rise to ask a question rather than to make comments. I am rather confused about how tariffs work. I am thinking particularly of sexual and reproductive health services. Therefore, I support Amendment 292A tabled by the noble Baroness, Lady Gould.

Sexual and reproductive health services are currently provided by general practitioners and clinics directly commissioned by primary care trusts. They can be family planning clinics, youth counselling clinics or genitourinary medicine clinics. Under the new system, GPs will presumably carry on providing sexual and reproductive health services and abortion counselling services, although I am unclear exactly how they will be remunerated in the future. Those GP services are very variable. Some GPs provide a superb service while others provide a very bad one. Some do not provide certain services at all so it is common for patients to go to clinics in their area which have been provided by the primary care trust.

Under the new health service, local authorities will commission and provide sexual and reproductive health services and abortion counselling services as well as HIV prevention services, but not the treatment, although I do not want to go into that now. They will be responsible for those sexual and reproductive health services. However, I am puzzled by the following matter. Currently, if a patient does not like their GP or finds that the GP does not provide the service they want, they can go to a local clinic. However, because of political or religious arguments within a local authority it may have made those services a very low priority, or perhaps does not provide them at all. It seems to me that there is nothing to compel local authorities to provide certain public health services. If a patient cannot get the relevant services from a GP or does not like them, and cannot go a local clinic because one is not available, can they go to a clinic in another local authority where they are not resident? This could be a problem for many patients all over the country, particularly young people who tend to go to different areas for their services where perhaps they are not known or the doctor does not know them. So I am very concerned.

Could the Minister please say how these services will be affected if no national tariff is set on public health services? How do we know that local authorities will not only provide services for sexual and reproductive health but accept people from other local authorities for treatment? It is a very important question for many people in this country.

Earl Howe (Conservative)

My Lords, I think that this debate has clearly demonstrated the importance of having a robust pricing system in the NHS. At a minimum, it must deliver sustainable reimbursement for efficient providers and promote value for taxpayers' money. In addition, it must support the role of commissioners in securing continuous improvement for patients by strengthening incentives for providers to improve quality and efficiency.

Perhaps I could address one aspect of the opening speech made by the noble Baroness, Lady Thornton. She spoke rather disparagingly, I thought, about the Secretary of State palming issues off on to quangos. Listening to the noble Baroness, the Committee may get the impression that it is this Government who have created quangos for the first time. I make no apology for being part of a Government who believe that arm's-length bodies can play a very valuable role in public services, especially when given the autonomy to deliver those services free of political micromanagement. The Government also believe that the number of such bodies has grown over recent years to an unsustainable level, and that is why the Bill abolishes a large number of them. So I gently urge the noble Baroness to stop complaining quite so much about quangos and remind herself that she was part of a Government who created a very large array of such bodies.

I begin by addressing the amendment tabled by the noble Baroness which proposes a delegated power for the Secretary of State to make regulations on commissioners regarding a duty as to continuous improvement. I am sure that we all agree with much of the apparent intention behind this amendment, first, that commissioners should act with a view to securing continuous improvement in the provision of services in terms of both quality and efficiency, and indeed in reducing inequalities; that is fundamental to their role. The second intention is that there is a role for regulations in ensuring that commissioning processes operate as means to this end; in other words, that tools such as service reviews, procurement and competition are used transparently and effectively to secure continuous improvement in the provision of services in the interests of patients. Our proposal is that such regulations would be made under Clause 71. They could be updated from time to time, subject to parliamentary resolution. While we would not disagree with some of the suggestions proposed under Amendment 277B-which, I recognise, has been carefully crafted-it may be a bit too detailed for the face of the Bill. In any event, we would want to consult publicly on these matters before putting firm proposals before Parliament.

The role of the pricing system is to underpin and enable continuous improvement-for example, by strengthening incentives for providers to adopt best-practice models of care, in line with commissioning priorities. The noble Baroness, Lady Murphy, was quite right in all that she said on that point. Furthermore, the payment by results programme, introduced by the previous Government, has gone a long way to strengthening pricing within the NHS. It has ensured that reimbursement better reflects the volume and complexity of patients treated, and it has helped to reduce transaction costs. However, a number of problems have been identified with this system over the last few years, including by the previous Administration. These problems have not yet been fully addressed, and we want to do so.

The problems are as follows. The methodology for setting prices is not transparent for either commissioners or providers. That makes the system unpredictable, and there is evidence of significant variations in the tariff from year to year. That undermines investment and innovation.

The scope of services covered by the tariff has not been increased in line with the published timetables. That has made commissioning decisions more difficult due to lack of understanding about potential costs. For example, it has made shifting care from hospital to community settings more difficult.

The quality of data used to set the tariff is unacceptably weak. There is a three-year time lag, and costs are based entirely on averages. The previous Government promised to improve the quality of data through sampling providers. Had they been re-elected, I am sure that they would have pursued that, but in fact they did not deliver on that commitment.

Finally, prices can be inaccurate, and sometimes they do not reflect the best variations in complexity. That results in perverse incentives for cherry-picking and risks underfunding treatment for complex patients.

It might be helpful if I explain to the Committee how the Bill seeks to improve on this system. Monitor, with its understanding of provider costs and structures, and the NHS Commissioning Board, with its understanding of patient needs and clinical best practice, are well placed to deliver a more effective pricing system; that is the vision. Prices would continue to be regulated through a national tariff, building on and improving the system of payment by results. We want this system to reflect best practice and extend the scope of the tariff where it is in the interests of patients.

Prices would be based on a published methodology, which would be subject to consultation and independently reviewed by the Competition Commission. Where services were not covered under the national tariff, there would be rules to govern these prices locally. The national tariff would be a fixed price, with any competition based on quality and choice, not price. I will come to the points raised by the noble Lord, Lord Davies, in a moment. There must, however, be provision to vary the tariff in defined circumstances. These flexibilities would not allow price competition, but would prevent cherry-picking, allow innovation, and secure continued access of essential NHS services. Put simply, these flexibilities would only be allowed where the effect is to improve the efficiency or quality of the services provided for the benefit of patients and the taxpayer. I hope that that is helpful.

I will now address some of the amendments in more detail. The noble Lord, Lord Butler, took us to the heart of the very important issue of innovation. I entirely agree with him that innovation is vital, and we expect Monitor and the Commissioning Board to incentivise innovation through the tariff-providing it was in the patients' best interests, as I have indicated. We recognise that, in some cases, innovative ideas, technologies, systems and processes have often taken an unnecessarily long time to become common practice across the whole of the NHS. I reassure the noble Lord that the national tariff would not act as a disincentive to innovation but would, in conjunction with other initiatives-such as those announced by the Prime Minister in his life sciences speech last week-look to create an environment where innovation in the NHS is commonplace.

The NHS Commissioning Board may also set out rules that allow commissioners and providers to agree to vary the way a service is specified in the national tariff, and subsequently the way the service is priced. This would prevent the tariff being a straitjacket-which, I think, is the fear of some noble Lords-so that it would support innovative service specification with an appropriate price. These variations would be published so that other providers could see what innovations were possible and what price they could receive for delivering such services. I hope that it is instructive for the noble Lord to note that Clause 117 explicitly establishes a requirement for Monitor and the NHS Commissioning Board to increase the scope of the tariff in the way that I have been describing.

The noble Baroness, Lady Gould, took us to the subject of sexual health. I thank her very much for setting out her concerns so eloquently. Public health is indeed an area that deserves our consideration, and I am sure that the noble Baroness would agree that we discussed this subject at some length in previous debates. However, let me be clear that the purpose of the national tariff is to facilitate the fair reimbursement to providers for NHS services only. It would be inappropriate for Monitor and the NHS Commissioning Board to impose public health tariffs on local authorities. I see no reason why Monitor and the NHS Commissioning Board could not provide expert advice to Public Health England or local authorities on implementing a current tariff or-

Baroness Gould of Potternewton (Labour)

The difference between sexual health and most of public health is that sexual health provision crosses local government boundaries, otherwise you will restrict any form of open access, which is absolutely essential in providing proper and effective treatment and care for people who need sexual health services. That has to be taken into account. Identifying sexual health provision just in terms of local government areas will make all the work that has been carried out over the past few years to provide better services disappear rapidly.

Earl Howe (Conservative)

My Lords, I appreciate those points and I was coming to some words of comfort for the noble Baroness. Not only could Monitor provide technical advice to Public Health England, provided that that was resourced and managed through the framework agreements and the memorandum of understanding between the two organisations, which would be a given, but Public Health England and local authorities could develop their own tariff, if that is what they wanted to do. I understand the noble Baroness's concern about the underfunding of sexual health services and that the mandate may not set out enough on that score. Her amendment is clearly a way of ensuring that public health services-particularly this type of service-have an agreed cost attached to them that cannot be varied by local authorities, unless they adhere to the rules around variation. I understand all that. However, what the noble Baroness proposes would significantly increase the remit of Monitor and the NHS Commissioning Board and cut across the roles of local authorities and Public Health England. I will, of course, reflect on what she said, but there are probably mechanisms to deliver the kinds of objectives that she is aiming for.

Also on the subject of sexual health services, my noble friend Lady Tonge made some important points. I completely agree with the importance of the issue she raised. It would probably be best if she allowed me to write to her in response.

My noble friend Lord Clement-Jones proposed in his Amendment 292ZA that Monitor should include variations to prices for individuals who experience disadvantage or who have complex needs. While I am sympathetic to his intention, this is already provided for in the broad provisions in Clauses 114(4) and 117(1). In addition, the inclusion of "must" rather than "may" would not provide Monitor with flexibility on when to specify variations and rules.

I move on to the amendment of the noble Lord, Lord Davies of Stamford, who argued the case for competition on price, and I listened with interest to what he had to say. Let me explain what we are seeking to achieve. Overall, we want a system of fixed prices, set locally or nationally, that would ensure that competition was based on quality and patient choice, not on price. Only in specific circumstances could the prices determined by the tariff be varied. These flexibilities would not allow price competition but would rather, as I have indicated, prevent cherry-picking, allow innovation and secure continued access to services. Put simply, the flexibilities would be allowed only where the effect was to improve the efficiency or quality of services provided.

The Government made amendments to the Bill in another place to make clear that the tariff would not be a maximum price. That is vital to avoid perverse incentives for providers to cut costs at the expense of quality. That is entirely different from the competitive tendering scenario to which the noble Lord, Lord Davies, referred. In that scenario, whereby services would be outside the tariff, it is quite reasonable to evaluate bids in terms of best value, not the cheapest price. Guidance published by the previous Government made that clear. I think that we are closer together than perhaps the noble Lord appreciates, but I am grateful to him for what he said. However, he will know that it was the firm view of the NHS Future Forum that competition should be based essentially on quality rather than on price alone. There is of course a danger that we have a race to the bottom if we go too far down that road.

My noble friend Lord Clement-Jones in his Amendment 294M made some telling points. While I am sympathetic to some of them, I can reassure him that agreements for local modification of tariff prices under Clause 122 are intended not to introduce price competition but to sustain the provision of essential services. For example, a local modification may be necessary to sustain provision of A&E or maternity services in a less populated area. It would be inappropriate to remunerate all providers of an essential service at a modified tariff rate without assessing their circumstances on an individual basis.

The noble Baroness, Lady Finlay, in her Amendment 294BZA proposed that it be explicit that Monitor, in establishing the national tariff, have regard to differences in costs of patients incurred by providers and differences between services provided. Clause 116 makes clear that when developing the draft tariff for consultation, both the NHS Commissioning Board and Monitor should have regard to the differences in costs of patients incurred by providers and differences between services provided. However, that amendment raises a valid point around whether Monitor should have regard to these differences when publishing, as well as when drawing up, the national tariff. I can tell the noble Baroness that this issue will be given consideration to determine whether further clarity is necessary in this area.

I now return to Amendment 292ZA, tabled by my noble friend Lord Clement-Jones. He raised the issue of cherry-picking, which we define as something that occurs when providers undertake only the more simple interventions for less complex patients but are paid an inflated price, based on higher average costs. I hope that my noble friend would agree with that definition. Under the proposals in the Bill, Monitor would ensure that the price paid to providers was accurate and reflective of the services delivered. A comprehensive tariff with more reflective prices will prevent cherry-picking. In particular, Monitor and the board would need to consider among other factors the impact of variations in the range of services provided by different providers and the differing needs of the patients treated. My noble friend again asked why the Competition Commission should be used, and again my answer is similar to the one I gave him earlier. The commission is an expert independent body with experience in considering matters such as this-unlike the OFT.

I now turn to Amendment 294AA, tabled by the noble Lord, Lord Warner. It would duplicate what is already stated in this clause, whereby Monitor must send a notice to other persons as it considers appropriate, which may include other clinical groups. Clause 59(8) makes explicit that Monitor must obtain appropriate clinical advice to enable it effectively to discharge its functions. Clause 116(1)(c) provides that Monitor must notify other appropriate persons of the proposed national tariff, which may include other clinical groups. Monitor must publish its consultation containing the draft tariff.

As regards Amendment 294BA, the share of supply percentage that triggers a reference to the Competition Commission will be considered in secondary legislation and agreed through the affirmative resolution procedure. The share of supply percentage would ensure that providers of a service made up of only a few providers would still be able to object to a proposed national tariff and therefore trigger a reference for independent adjudication.

Finally, on Amendment 291C. I listened with great interest to the noble Lord and am grateful to him raising the point. I agree that the principles of the tariff are extremely important. I am not sure that this is an issue to write into the Bill. I respectfully direct the noble Lord to paragraph 65 of our document Protecting and Promoting Patients' Interests, which details a set of guiding principles about how Monitor and the board could collaborate to develop the tariff.

I hope that I have covered most if not all the points that have been raised and that, with that explanation, the noble Baroness will feel able to withdraw her amendment.

Baroness Thornton (Labour)

My Lords, I do not want to stand between noble Lords and their dinner-and indeed, on this side of the House, yet more defrosting. I would like to be able to say that the Minister had given us some comfort in this debate, as he has in one or two of the others, but I am not sure that that is the case.

I did not moan about a quango. I have mentioned only two quangos today, but they are rather large and important ones. One of them will have a budget of £20 billion, and the whole House has agreed that it is concerned that accountability to the Secretary of State for those quangos is right. We have not quite settled that and have returned to that issue consistently, almost every day throughout discussion on the Bill, but that probably now needs to be left until the new year.

I supported my noble friend Lady Gould and the noble Baroness, Lady Tonge. The funding of sexual health services is one of those cases which will have potentially disastrous unintended consequences-in more ways than one, if one may put it that way. My noble friend is right to raise that, and we will support her fully if she decides that she wants to take it to the next stage of the Bill.

As ever, my noble friend Lord Davies gave an original flavour to the debate and raised some important and pertinent questions. I will read more carefully the Minister's answers. Ditto to my noble friend Lord Warner, whose amendments are very important. What underlay what my noble friend Lord Warner and the noble Lord, Lord Clement-James, said, was that this is not a quick job. This will take a long time and it is important that we get it right. We are not convinced that the national Commissioning Board and Monitor together will not create a very bureaucratic, slow way to set the tariff. We are not convinced that that is the way forward. We need to consider an independent voice and some other way to do that. We will probably continue that discussion at another time, and I beg leave to withdraw the amendment.

Amendment 227B withdrawn.

Clauses 68 and 69 agreed.

Clause 70: Competition functions: supplementary

Amendment 277C not moved.

Clause 70 agreed.

House resumed. Committee to begin again not before 8.35 pm.

Lord Owen (Crossbench)

My Lords, I wish to draw attention to Clause 72(1)(b), which refers to,

"a power to investigate on its own initiative whether the National Health Service Commissioning Board or a clinical commissioning group has failed to comply with a requirement imposed by virtue of section 71(1)(c)"-

which we discussed earlier, the provision to,

"not engage in anti-competitive behaviour which is against the interests of people who use such services".

I had understood that the decision not to have competition as one of the main functions of Monitor was a considered political decision, but the more one looks at Clause 71(1)(c), and now at Clause 72(1)(b), the more one realises that this has been got round, effectively, by ensuring that anti-competitiveness becomes a prime responsibility of Monitor.

There are a number of objections to this. The noble Lord, Lord Whitty, put his finger on it, that a good regulator does not also become a policeman in an anti sense to the people he is trying to regulate. There is a deep question as to whether you really want a situation where Monitor can be set against the National Health Service Commissioning Board and the commissioning groups. I am very doubtful that this is a sensible power to give to Monitor.

I know it is regulating the whole group, but if you look at the way Monitor is approaching its tasks, time and again it is going to be reliant on good will and an atmosphere of trust between Monitor, the NHS Commissioning Board and the commissioning groups, and now there is this question of anti-competitiveness. It is not as if nobody else is going to be looking at anti-competitive behaviour of the National Health Service Commissioning Board. The private sector wants to go into this whole area and will be looking very carefully at whether or not it is being given an even playing field. It will be taking, and threatening to take, the Commissioning Board to law-I am not even raising the issue of EU legislation, but just under British legislation.

I do not think it is fair to argue that there is unlimited freedom for the National Health Service Commissioning Board or the commissioning groups to operate in this area, particularly the board. You are really setting yourself up for a very difficult situation. Also, to do it "on its own initiative"-does that mean Monitor would not consult the board or a clinical commissioning group but just suddenly involve itself in an investigation? I would be grateful if the Minister could give some indication of how he sees this in practice.

Will some guidance be given not to develop an adversarial relationship? It is very easy for animosities to start coming in to this area. As I say, it is not as if it is free from legal challenge. Their actions can be challenged. However, for another NHS body to be able to question the judgment of the Commissioning Board that in this particular case it is best not to put something out to competitive tender, or to make a judgment when it has been done because somebody feels that it is anti-competitive, is a really dangerous power. In the wrong circumstances, where Monitor might be chaired by somebody who is getting into a bad relationship with the NHS Commissioning Board chairman, something not totally unknown in these areas, this is a tool which could be used in a destructive and adversarial fashion.

It would be very helpful, for future occasions, to hear from the Minister as to how he thinks this would actually work out in real life.

Earl Howe (Conservative)

The noble Lord, Lord Owen, has caught me napping, so to speak, because I was not expecting that intervention. I would be very happy to write to him to set it out, if he will allow.

Clause 72 agreed.

Clause 73 agreed.

Schedule 9 : Requirements under section 71: undertakings

Amendment 278D

Moved by Earl Howe

278D: Schedule 9, page 368, line 12, leave out from "contains" to the end of line 14 and insert "information which it is satisfied is-

(a) commercial information the disclosure of which would, or might, significantly harm the legitimate business interests of the person to whom it relates;

(b) information relating to the private affairs of an individual the disclosure of which would, or might, significantly harm that person's interests."

Amendment 278D agreed.

Schedule 9, as amended, agreed.

Clause 74 : Guidance

Amendments 278E and 278F not moved.

Clause 74 agreed.

Clause 75 : Mergers involving NHS foundation trusts

Amendment 278G

Moved by Lord Clement-Jones

278G: Clause 75, page 98, line 25, at end insert-

"( ) The cases referred to in subsections (2) and (3) shall be (in so far they would not otherwise be) "relevant merger situations" for the purposes of Part 3 of the Enterprise Act 2002."

Lord Clement-Jones (Liberal Democrat)

My Lords, I shall speak also to Amendment 278H. This is somewhat of a continuation of the debate that we had at the very beginning of the day, and comes back again to the application of EU competition law. However, it also has merit as an amendment which has its own rationale quite apart from avoiding the full rigour of EU competition law.

Under Part 3 of the Enterprise Act, which Clause 75 of the Bill applies to NHS foundation trusts, mergers are normally looked at by the OFT and the Competition Commission. They consider whether the merger would result in anticompetitive outcomes, governed by Sections 35 and 36 of the Act. However, the Secretary of State can intervene under Section 42 of the Act, where he considers that there is one or more relevant public interest consideration specified under Section 58 of the Act. Such considerations are then taken into account in deciding whether the merger should go ahead, even if there are no anticompetitive outcomes.

At the moment, the specified public interest considerations are, broadly, national security; free and accurate news presentation; media plurality and other media issues, which of course have been quite a hot topic of late; and, finally, the stability of the UK financial system. Financial stability was added in 2008 as a result of the banking crisis. It was inserted to avoid competition being the sole relevant issue to prompt intervention in bank mergers.

Competition in the NHS takes place in the context of high complexity, high levels of need and very serious consequences for failure for patients dependent on services if greater turbulence or churn in service providers results. Therefore, it is appropriate to add an additional public interest consideration to reflect these special circumstances. If protection of the public's money was deemed justification for additional public health intervention, protection of their health service warrants at least the same level of safeguard. This amendment seeks to ensure that competition is not the sole issue where health body mergers, including those involving NHS foundation trusts, are concerned, but that a new public interest consideration-the promotion of a comprehensive health service in England-can be taken into account by the Secretary of State when a merger is proposed.

Amendment 278G seeks to ensure that anticipated mergers, as well as completed mergers, involving NHS foundation trusts are subject to the provisions of Part 3 of the Enterprise Act 2002 in the same way as for other enterprises. Section 42 of the Act, "Intervention by Secretary of State in certain public interest cases", will apply to such mergers.

I tabled these amendments as the lesser of two evils. They are intended to mitigate the effects of EU competition law. They are also designed to make sure that foundation trust mergers are not subject to the full rigour of domestic competition law. There was a debate in the other place, which I think we are now allowed to call the House of Commons, on what was then Clause 71, as to whether the OFT or the Competition Commission should have any jurisdiction over mergers of foundation trusts. My honourable friend Mr Burstow explained that the OFT would have discretion not to review mergers where patient benefits outweighed any adverse effects on competition. But that is not explicit.

My honourable friend went on to provide an explanation of the impact of the clause for mergers involving NHS foundation trusts. The clause means that we would have a single regime for merger control which would avoid duplication of resources between Monitor and the OFT. It would also address the current situation whereby the Co-operation and Competition Panel formally assesses all mergers involving acute or foundation trusts where the turnover of the combined entity is more than £70 million.

None of that seems to be enshrined in the Bill. I do not know whether guidance is provided but this seems to be something that requires a considerable act of faith on the part of those looking at these prospective merger proposals. I very much hope that the Minister can give greater clarity than was provided in the House of Commons on this matter. In due course, I hope that the advice that he receives or commissions will also deal with the question as to whether it is safe to have provisions such as this applying directly the provisions of the Enterprise Act are going to be safe for the purposes of EU competition law application. I beg to move.

Lord Owen (Crossbench)

My Lords, I gave notice that I would raise this matter under whether the clause should stand part of the Bill but it is easier and more convenient to do it on this occasion. It is extremely important that this amendment is given serious study by the Government. I hope that either they will produce their own amendment or that the noble Lord, Lord Clement-Jones, will push this on Report to a vote.

Not to have such a provision is ridiculous, particularly in view of what we heard earlier from the noble Lord, Lord Newton, about how long it is taking to conduct mergers between trust hospitals in other areas. It is an ingenious way of doing it. I was trying to work out a way in which it could be done and rather failed. The wording that the noble Lord has come up with is very sensible and I hope that the Government will give it a fair wind. It is all part of the policy of trying to curb this uninhibited competition in every aspect of this Bill.

Baroness Greengross (Crossbench)

My Lords, I was recently privileged to be the lead commissioner for the Equality and Human Rights Commission on an inquiry, looking at the human rights of older people in their own homes in need of care and support. This inquiry was a very large one with a lot of evidence, involving 500,000 people in total in this country. We found that half of the people were very happy with the care they received. The other half-250,000 people-were rightly not happy with what had happened. There were awful instances of people being abandoned for 10 or 12 hours, having no social interaction or opportunity to talk or chat. They were left without care for many hours. These are very bad instances of poor care and I really believe that had the staff of the 250,000 people been trained properly in what the tool of human rights can achieve-and if their managers had understood that-a whole lot of these instances of very poor care would not have taken place.

My amendment is designed to ensure some clarity on the application of the Human Rights Act to domiciliary care services commissioned from private and third-sector organisations. This amendment would clarify that providing these services is a public function within the meaning of Section 6(3)(b) of the Human Rights Act 1998. It would bring domiciliary care in line with residential care; similarly, this amendment would confirm that health care services commissioned from private and third-sector organisations fall within the scope of the Human Rights Act. It would clarify the extent of the public sector equality duty because the definition of public function under the Human Rights Act also determines the definition of public function under Section 150(5) of the Equality Act 2010 for the purposes of the public sector equality duty. My amendment also uses wording which is consistent with Schedule 1 to the Health and Social Care Act 2008.

In 2008, Parliament introduced amendments to the Health and Social Care Bill-now the Act-to overturn previous case law and ensure that private and third-sector care homes were defined as carrying out a public function. We were delighted that that applied and that they therefore came under the scope of the Human Rights Act. This received cross-party support and was the result of a long campaign by the EHRC and also the Joint Committee on Human Rights. The campaign aimed to ensure that organisations receiving public money were subject to proper regulation.

We also know that a similar problem is likely to be the case in healthcare if the care is commissioned by the health service to private or third-sector organisations. It is very important to make this clear because the fact that private and third-sector providers operate at the moment outside the scope of the Human Rights Act undermines, or threatens to undermine, the pioneering work of the Department of Health itself in promoting its Dignity in Care campaign. Further, the Health Service Ombudsman has recently documented 10 investigations into NHS care. All of that demonstrates that we need clarity in order to get this right and make sure that people are protected. We must be certain that people are not subjected to breaches of human rights which no one can do much about in the present situation.

I have cut short what I was going to say because it is late, but I do want to say that support for this amendment will clarify beyond doubt the fact that a person commissioned to provide home-based social care or healthcare is, in providing that sort of service, performing a public function within the meaning of the Human Rights Act and the Equality Act. I hope that the Minister will find it possible to support the amendment.

Lord Low of Dalston (Crossbench)

My Lords, I have added my name to Amendment 295G, to which my noble friend Lady Greengross has just spoken, and I strongly support it. As she made clear, it would put an extremely important point beyond doubt. I want briefly to underline three key points.

First, it would remove a major ambiguity about the scope of human rights legislation in relation to health and social care, and with it persisting doubt about the rights of those in receipt of health and social care services. Despite the then Government's intention that responsibility under the Human Rights Act should follow the outsourcing of state functions, it was generally understood-this was confirmed in the case of YL against Birmingham City Council-that the Human Rights Act covered only residential care provided by local authorities. Private and voluntary organisations that provided care home services under a contract with a local authority were not considered to be performing public functions under the Human Rights Act because there was only a contractual relationship between the parties, and so were not covered. This loophole, as my noble friend Lady Greengross has explained, was closed by Section 145 of the Health and Social Care Act 2008, but only for residential care services. It did not apply to contracted-out social care services provided in people's homes. The purpose of the amendment is therefore to clarify that the Human Rights Act extends to services provided in people's homes when provided under contract to a public authority and would remove all ambiguity as to whether the Human Rights Act applies to such services when commissioned from private and voluntary organisations.

As my noble friend has explained, a similar issue arises in relation to health services, especially given the significant increase in the commissioning of NHS services from private and voluntary providers envisaged by the present Bill. Amendment 295G would also place beyond doubt that private and voluntary providers of healthcare services fall within the scope of the Human Rights Act and the public sector equality duty, putting them on a similar footing to providers of residential social care. The amendment would therefore make it clear that those who receive publicly funded health and home care services provided by the private and voluntary sector are guaranteed the same levels of protection and rights to redress as those who receive services provided directly by the state, placing them on the same statutory footing as those who receive residential care services commissioned from the private and voluntary sector.

This is not just a matter of academic importance-the removal of a minor technical anomaly. Quite apart from the fact that it puts beyond doubt that a significant swathe of health and social care provision is within the scope of the Human Rights Act, local authority provision of home care services has been on a downward trend for the past couple of decades, with the result that the state now directly provides only 16 per cent of publicly funded services. This means that 84 per cent of such services are provided by the private and voluntary sector. This figure was less than 5 per cent in 1993. Indeed, the proportion of care delivered by the private and voluntary sector has gone up from 56 per cent to 84 per cent in the last 10 years. This means that the possibility that people in receipt of health and social care services may be deprived of the protection of the Human Rights Act has moved from being an issue at the margins of the field of health and social care to being one of central-indeed, dominating-importance.

A second reason why this is an issue of overriding importance is that we now know that significant numbers of people are the victims of human rights violations on a daily basis. A seemingly endless sequence of reports-from the Health Service Ombudsman, the Care Quality Commission, the Patients Association and the Equality and Human Rights Commission-shows that the rights of older and disabled people in health and social care settings are regularly ignored or wilfully abused. According to the British Institute of Human Rights, these reports reveal how some of the most vulnerable people in our society are treated in inhuman and degrading ways, with neglect and carelessness, and how they experience,

"Lack of privacy, dignity and confidentiality",

are left without access to food and water, and are bullied and patronised. These incidents are not simply isolated or exceptional cases.

I welcome the statement in the Explanatory Notes to the Bill that contracted-out healthcare services are covered by the Human Rights Act, and the Minister's assurances in this regard would be equally welcome. But these do not have the force of law. Moreover, the Equality and Human Rights Commission does not believe that case law supports this view. Nor should we have to rely on an elderly or disabled service user having to incur the hazard and expense of going to court to vindicate their rights for us to clarify the law. At all events, it is not the same as having it in black and white in the Bill, so I very much hope that the Minister will respond sympathetically to this important amendment.

Baroness Williams of Crosby (Liberal Democrat)

My Lords, I strongly support the two very powerful and convincing speeches by the noble Baroness, Lady Greengross, and the noble Lord, Lord Low.

I add only a couple of points. First, it is extremely important for the integration of social care from local authorities with health service healthcare to have a similar regime of rules and standings applying to both. All of us in this House have said repeatedly how much we believe in the integration of these two attempts at providing proper care for older people, chronically ill people and disabled people. It is therefore important that we set a standard which is common between the two. That is the first reason why we should all strongly support the amendment that is before us.

The second reason, from my point of view, is that I very much like the phrases used in the amendment, which state in effect that this kind of service is a public service. It is, in a way, ennobled by the fact that it is a service to the public generally, regardless of whether it is provided by the voluntary, independent or NHS sector. That is also very important.

The third point I briefly make is that it has implications which we have to face up to. There is no time to discuss this tonight. But if we actually want there to be a huge improvement in the relationship between the staff of health service and local authority care organisations, whether voluntary, private or NHS, and the elderly and vulnerable people whom we are talking about-and we do want that-then, as this quite clearly implies, the staff themselves must be treated well. It is no good having profoundly exploited, overused, overcriticised staff and expecting them to live up to the great principles of the Human Rights Act. To my mind the importance of this amendment is not just that it passes. It has clear implications for the training, education, support and attitude towards NHS staff, who too often are heavily criticised for what is a difficult yet often extraordinarily well conducted job. In that spirit I strongly support the amendment of the noble Baroness, Lady Greengross, and the noble Lord, Lord Low.

Lord Warner (Labour)

My Lords, I also support the amendment of the noble Baroness, Lady Greengross. I do so from the perspective of someone who as a special adviser was involved in the framing of the Human Rights Act in 1998. At that time, much of the thinking in the devising of that Act was on the basis that publicly funded services were pretty much synonymous with public delivery of those services. Much of the language around public functions and public authorities was based on that assumption. In fact, that was already out of date at that particular time. Since then, we have never really put this point beyond doubt in legislation. It is timely to do so now, when so many of the services in people's own homes are contracted out by public bodies to voluntary and private providers. It is a lacuna in the arrangements, despite some of the assurances given by Governments of both persuasions since the Human Rights Act 1998.

Baroness Wheeler (Labour)

I also support Amendment 295G from the noble Baroness, Lady Greengross, replacing the similar amendment from the noble Baroness and the noble Lord, Lord Low, both of whom have argued the case strongly and convincingly on this matter.

The importance of addressing current loopholes in the application of the Human Rights Act to publicly funded healthcare and home care services is underlined by the scale of the legal anomaly that the amendment seeks to address. As we have heard, almost 500,000 older people receive essential care in their own homes provided by the local authority. Some 84 per cent of them lack the protection of the Human Rights Act because their care is provided by private or third sector organisations, or independently by 150,000 self-employed personal assistants who care for people in their homes through the application of personal care budgets or direct payments.

The noble Baroness's own work in highlighting the inadequacy of at least 50 per cent of the home personal care received by older people as part of her recent inquiry underlined the prevalence of human rights abuses in home care settings. The report makes painful reading for all who want dignified and appropriate standards of care for older people in their homes. The stark reality is that, if their human rights are violated through inappropriate standards of care, they at present have no direct legal redress against their care providers.

Of course, we need to make the caveat that good practice is often exemplified by the private and voluntary sector. As a carer, the care provided by the private sector agency to the person I care for at home is of good quality and the care support workers are committed and dedicated professionals, despite long hours and low pay. Their care for the person that I care for is not covered by the Human Rights Act but would be if he were in residential care. That is a serious anomaly. I hope that the Minister will be able to reassure us that the Government recognise that this is a major problem and will take the opportunity presented in the Bill to address the matter. With an increasing number of people receiving home care from a private or voluntary sector organisation rather than directly from their local authority, there is a vital need for certainty around the application of the Human Rights Act to these care providers.

I was going to comment on four other amendments but none of them was spoken to so I will leave it at that.

Baroness Northover (Liberal Democrat)

My Lords, we have two diverse areas in this particular group. Clause 75 would consolidate the oversight of mergers involving NHS foundation trusts under the UK general merger control regime operated by the Office of Fair Trading's Competition Commission. That is the area addressed by my noble friend Lord Clement-Jones. We argue that the approach that we are taking here would have a number of benefits.

First, it would eliminate the risk of double jeopardy for NHS foundation trusts. Uncertainty currently exists as to when and where the Enterprise Act 2002 would apply to mergers of activities involving foundation trusts. As a result, under the current arrangements for review of mergers involving foundation trusts by the Co-operation and Competition Panel, there is always potential risk of duplication or double jeopardy by both the OFT and the Co-operation and Competition Panel. The Bill proposes to consolidate oversight of foundation trust mergers under the OFT. It would already seem likely that most mergers between foundation trusts would meet the relevant thresholds, eliminating the uncertainty with the current approach. We therefore sympathise with my noble friend Lord Clement-Jones's amendment but feel that it would not be required as foundation trusts would be captured.

Secondly, the OFT would provide effective, light-touch regulation regarding mergers. This gives confidence to providers that might be considering a merger and ensures that mergers go ahead where they are in patients' best interests and that the process is not unduly delayed by bureaucratic approvals or the risk of political interference. The evidence demonstrates that this approach does not result in excessive intervention, as the Enterprise Act sets a high threshold for looking at the merging of activities.

Thirdly, the approach would avoid the duplication of specialist resources between the OFT and Monitor, ensuring better value for money. Mergers are a specialist area. It therefore seems a far better use of resources to maintain the responsibility and expertise within the OFT and the Competition Commission rather than resource a further sector-specific body. However, we appreciate and sympathise with the argument put forward that Monitor, as the dedicated health regulator, will have a valuable contribution to make in the review of foundation trust mergers.

As part of any merger investigation, the OFT and the Competition Commission would engage with Monitor as the sector regulator in order better to understand the services involved. They would obtain Monitor's view on how a merger would affect services and whether it would bring benefits for patients. The OFT would need to consider whether the benefits of higher quality, a greater choice of goods or services and greater innovation outweighed the negative impacts of mergers. These views would then be considered in the analysis, along with other evidence. We want to work with noble Lords to see how we can ensure that Monitor's role regarding mergers is adequately reflected in the Bill.

My noble friend Lord Clement-Jones was asking about thresholds. The thresholds for merger reviews are set out in the Enterprise Act. On this basis, the OFT would not generally review mergers involving a turnover of less than £70 million. This contrasts with the approach of the Co-operation and Competition Panel, which operates at significantly lower thresholds.

As my noble friend Lord Howe said in an earlier part of this debate, the operation or otherwise of EU competition law is something that he will take back and consider further in the light of what my noble friend Lord Clement-Jones said. At this stage, therefore, I will not go into that area further, but I refer the noble Lord, Lord Owen, to those discussions and the fruits of those discussions.

We move on to a separate area raised by the noble Baroness, Lady Greengross, and supported by the noble Lord, Lord Low. The issue raised by Amendments 280 and 295G is one in which I know the Equality and Human Rights Commission is keenly interested, and the Government have carefully considered it in the preparation of the Bill. The issue has been raised with us not only by the EHRC but by the Joint Committee on Human Rights. Noble Lords are right: these are extremely important issues.

The department has set out publicly and in detail the reasons for its firm view that private providers are now, and will be in future, exercising public functions when they provide NHS or public health services. The effect of this is that they are bound by the relevant duties in the Human Rights Act and the Equality Act when they provide those services. As the noble Lord, Lord Low, pointed out, these reasons can be found at paragraphs 1534 to 1537 of the Explanatory Notes and in our response to the letter from the Joint Committee on Human Rights to the Secretary of State, which is available on its website.

In summary, our view is based on the following arguments. NHS and public health services will continue to be commissioned by statutory bodies subject to the framework in the 2006 Act. The nature of the services provided will be determined by those commissioning bodies in the exercise of their statutory functions, and is not affected by the status of the provider. The services provided pursuant to those arrangements will be funded by the Secretary of State, the NHS body or the local authority concerned. There will be no contract between the patient and the provider other than where direct payments are concerned. The relevant provisions of the 2006 Act will continue to make no distinction between private and NHS providers.

However, the question is raised of why it is not explicit in the Bill that private providers are exercising public functions. There are three good reasons why not. First, as I explained, the Government consider that the existing legal position is sufficiently clear from the case law and that all providers are now, and will be in future, covered by the Human Rights Act and the Equality Act. This was a long-held public position of the last Government as well and we discussed this in relation to the Equality Act, which the noble Baroness, Lady Thornton, will no doubt remember. Our view is that recent court judgments further support that position.

Secondly, we believe that this position is applied, or presumed to apply, in the NHS at present, and we would not wish to create doubt about the current legal system by introducing a specific provision. Our view was set out in the judicial review proceedings in relation to the transfer of NHS community health services to a social enterprise company, and was the basis for the withdrawal of the claim in those proceedings. Thirdly, the department would not wish to cast doubt on other areas beyond health where public services are provided by private bodies by making express reference in this area. Each time the outcome of a legal test is specified in the legislation it weakens the general applicability of that test. The duties that fall automatically on private providers of NHS services can be and are intended to be supported by mandatory standard terms in NHS commissioning contracts. These terms will assist private providers to meet the obligations imposed on them by legislation.

The noble Baroness raised the issue of social care matters, and when something is funded out of public money, it seems to me that the Equality Act would bear upon that. However, I take very much what she said about exceptions to this. To clarify this further, I would like to write to noble Lords on those issues. In the light of that, perhaps noble Lords would be willing not to press their amendments.

Lord Clement-Jones (Liberal Democrat)

My Lords, I thank the Minister for a totally convincing response. The trouble is that it was a response to an amendment that I did not put, although I could have. The amendment which was responded to would have eliminated the OFT from consideration of FT mergers. My amendment was about inserting an additional ground for consideration by the OFT or the Competition Commission, if it went as far as that, so that the public interest was taken into account, as it is in bank mergers nowadays.

I thought that the Minister's arguments about why the OFT should be involved were wholly convincing-eliminating double jeopardy with the Co-operation and Competition Panel, providing confidence to providers and so on. Mergers are a specialist area. I am sure that the OFT is great at merger consideration. I deliberately did not put down an amendment about the OFT being eliminated from FT mergers-that was the House of Commons amendment to which I referred in the course of my speech.

The noble Baroness's assertion that the OFT could ensure that patients' best interests are looked after is precisely my concern. If ordinary merger principles are followed in terms of the OFT looking at the merging of two foundation trusts, I do not believe that it is in law able to take a very close view of what genuinely is in the public interest in terms of provision of a comprehensive National Health Service. I am delighted that the noble Lord, Lord Owen, thought that that was ingenious. Certainly, it seemed to be the logical way to try to get some sense into these foundation trust mergers. Therefore, I very much hope that-

Baroness Northover (Liberal Democrat)

I do not wish to interrupt my noble friend's flow. If I have not covered all the areas that he wished to flag up, I will indeed write. However, I made the point that the OFT needed to consider the benefits and the negative sides of mergers in terms of how they would impact on patients. I hope that my noble friend was satisfied at least on that point, even if the leapfrogging and slipping of various amendments from the agenda this evening has tripped me up at this late hour.

Lord Clement-Jones (Liberal Democrat)

My Lords, we could all be tripped up at this late hour, as, indeed, I was earlier. However, it is a question of what it is possible for the body that is judging the merits of a merger in competition terms to take into account. The reason for including the public interest considerations in the amendment was that the OFT would be extremely limited in the patient considerations that it would be able to take into account. The noble Baroness was pretty sanguine about that. There is still further work to be done in that respect and further consideration needs to be given to the matter. It seems to me that, if nothing else, the question of whether one's local trust and local foundation hospital will survive as entities is of huge importance to local people and is something that needs to be judged properly with their benefit in mind when the time comes.

Unless I divine that my noble friend is going to give me further guidance or inspiration, I beg leave to withdraw the amendment.

Amendment 278G withdrawn.

Clause 75 agreed.

Amendment 278H not moved.

Clause 76 : Reviews by the Competition Commission

Amendments 278J and 278K not moved.

Clause 76 agreed.

Clause 77 agreed.

Clause 78 : Reviews under section 76: considerations relevant to publication

Amendment 278L

Moved by Earl Howe

278L: Clause 78, page 101, line 10, after "considers" insert "would or"

Amendment 278L agreed.

Clause 78, as amended, agreed.

Clause 79 agreed.

Clause 80 : Requirement for health service providers to be licensed

Amendment 279 had been withdrawn from the Marshalled List.

Amendment 279A not moved.

Clause 80 agreed.

Amendment 280 had been retabled as Amendment 295G.

Clause 81 agreed.

Clause 82 : Exemption regulations

Amendment 280A

Moved by Earl Howe

280A: Clause 82, page 102, line 16, leave out first "a" and insert "any"

Amendment 280A agreed.

Amendments 281and 281A not moved.

Amendment 281B

Moved by Earl Howe

281B: Clause 82, page 102, line 41, leave out subsection (8) and insert-

"( ) Where an exemption is granted the Secretary of State-

(a) if the exemption is granted to a prescribed person, must give notice of it to that person, and

(b) must publish the exemption."

Amendment 281B agreed.

Clause 82, as amended, agreed.

Clause 83 : Exemption regulations: supplementary

Amendment 282 not moved.

Clause 83 agreed.

Clause 84 agreed.

Clause 85 : Licensing criteria

Amendment 282ZA

Moved by Baroness Thornton

282ZA: Clause 85, page 104, line 11, at end insert-

"( ) Such criteria must include the requirement, at regular intervals, for all licensees to supply Monitor with financial information, in the interests of meeting standards of financial stability and probity."

Baroness Thornton (Labour)

My Lords, I start by congratulating noble Lords on making it through this day of debate. We are ending the day with this large group on failure, and the smaller group on pre-failure, tabled by my noble friend, in a moment or so.

In the NHS of 20 years ago, the trusts that got into problems were helped, although the help may have been brutal, with chief executives removed or moved on and nasty phone calls to trust chairs. The system gave powers of intervention from the Secretary of State through local strategic bodies, as they became. Financial help was grudgingly provided, usually for a recovery plan, sometimes delivered and sometimes not. The relationships were not defined by legal contract, and NHS contracts could not be enforced in the courts, so there was a system of arbitration within the NHS.

Those days have gone, and we now have an NHS as a network of many sub-organisations, some with linkages through real contracts. With FTs came the idea of a real contract, although in reality, of course, disputes are still sorted out long before reaching a court. We know that services, and even whole organisations, can fail as the impact of demographic, technological and behavioural changes shape our NHS. In reality, we have to deal with trusts that get into severe difficulties and may be technically insolvent, at which point a real organisation may not be allowed to trade. Then we have to accept that a whole trust might need to be shut down. Indeed, how should that be done? How should the continuity of services be maintained, how should the staff be dealt with, and how should the assets, most of which are owned by the state, be dealt with?

We know that this is the tail end of a bigger and important issue of reconfiguration. So how do we ensure that we can adapt services that show poor quality or that need to be delivered in different ways in different settings? Maybe, as with an increasing array of subspecialities, we have to accept regionalisation. Maybe we need network solutions. Is the market the way to do this? In other markets, innovations lead to changes in demand, and the organisations that cannot adapt close down. Is that what we want for our NHS?

Those who might be so inclined might like to wander through the delicate prose of Simon Burns MP in Committee in the Commons. He loves failure. The idea that you have competition is inextricably linked to having failure. It facilitates the market, brings in the innovators and drives out the inefficient. He believes that failure is a measure of market success, not failure.

It is true that in government we introduced a failure regime as we came to realise that, even after all the support and changes of management team, there may be organisations that are simply not viable. However, it is not so much that they were not viable; it is what that means, that continuing to support them is not giving value for the NHS, however much we adjust that value to include non-financial aspects. Indeed, we also wanted to bring out into the light the murky transactions used within the NHS to support organisations, through means such as brokerage loans. The tendency was for bad performers to be bailed out by the good-the opposite of a reforming system. The way NHS accounts were done also had to be changed to make this kind of smoke-and-mirrors accounting more open.

Issues around failure are more likely to operate at service level than at a whole-organisation level. To take a recent example, a well known and respected financial trust is having issues around its 18-week performance. Its general quality is good but it has signalled that it needs help, and it is indeed getting it from a Department of Health team. The question that we need to ask is: would this kind of support be available in the new world? Presumably, it would not; and even if it were, might that help be deemed anticompetitive? Would that good trust be allowed to fail? The link here to reconfiguration is inescapable.

We know and even admit in our rational moments that reconfiguration on a grand scale is what the Nicholson challenge is really about. The need to move services into community settings and to reduce dependency on the district generally hospital model is widely recognised. However, we also know that reconfiguration is beset with political problems. In the run-up to the election, about one-third of constituencies had some kind of campaign to keep open a hospital, a surgery or whatever. One felt sometimes that even if there was no threat, one was invented. We had Andrew Lansley and David Cameron claiming that they would prevent any closures. I think that the Government are learning the hard way that promises made in opposition, especially during election campaigns, may turn out to be millstones when the real burden of decision-making passes to them. The examples of broken promises will continue as reconfigurations gather apace.

This is the issue to which our suspicions should be addressed. Is it part of the rationale to put the blame for nasty politically damaging decisions on others? This abdication of responsibility is characterised by the way that Ministers are trying to give away the key roles of the Secretary of State. This is in part a failure of process but is also a failure of leadership. The leadership should be accountable for delivering answers and necessary changes within a reasonable timescale. If we get reconfiguration right, the failure regime would look less necessary. This is far better for patients than the trauma of seeing their local facilities under constant threat or even being closed down. There are examples of where this has been done, and done well-and we need more of them.

In Committee in the Commons, the Conservatives in particular appeared to believe that these unpopular local changes would be less likely under the Bill-if changes in organisations are branded as failures, then those MPs would be well clear of any responsibility. In fact, we have years of evidence because every reconfiguration has to go through a clinical and management review at an early stage-so we know what works and what does not. We could use that evidence, rely on a robust process and stop opportunist politics. However, we know that the market will not bring about these changes any time soon.

In our NHS, the best interests of patients are served by good information that allows early intervention to improve failing services. CQC inspections are also of value in raising the prospect that poor services will be detected early. If you rely on competition, how long does it take for the public to react to the information that a service is bad and for them to choose to go elsewhere, or for that to impact on the finances to the extent that the service is closed down? In our view, using choice and competition to detect and close poor services takes too long and the cost for patients is indeed too high. That is what this suite of amendments aims to tackle.

The amendment sets licensing criteria to ensure that private providers meet standards around financial stability and probity. We need to supply regular financial information for the good providers. This is, in other words, a sort of Southern Cross test. Amendment 249MBA brings into effect the remaining inactivated arrangements for trust special administration from the 2009 Act, as amendments to the 2006 Act. I remember those well. Amendment 353ZZA is a commencement provision for that. Amendment 295 states that health special administrators must exercise their functions to "protect the interests of patients". As to the Questions that Clauses 125 to 130 stand part of the Bill, this would create a regime for private companies that provide services to the NHS to have special procedures that augment the normal company provisions under the Insolvency Act. It arguably implies that we need stronger protection from the risk of private provider failure. It should be the commissioners to factor in the risk of using private providers and contract to ensure that arrangements are in place for contingencies. The licensing regime needs to be tough enough to prevent Southern Cross-type failure through active monitoring.

Risk pooling is what the NHS does. We do not need new risk pools, with the costs that they involve. That is why we think that the clauses should be deleted. Clauses 131 to 143 inclusive allow Monitor to set up the regime to provide special administration for both private and public providers to levy charges on providers and commissioners and to manage the finances of a risk pool.

We argue that none of that is required; it just adds extra complexity and cost. Clause 170 is about FTs and failure. The clause removes the ability to deauthorise a foundation trust. We argue that that power should be retained, along the recognition that some NHS provider trusts may need to be directly managed under the powers of the Secretary of State.

The new clause in Amendment 303ZA makes clear that the initial effort, in context of failure, should be remedial action rather than going straight for a failure regime. My noble friend has a similar idea behind his amendment. On Amendment 303ZB, the new clause is intended to reinforce and strengthen how reconfiguration is carried out. Under Amendment 303A to Section 65A of the 2006 Act, bodies to which trusts' special administration regimes apply should remain, so that the special administration regime applies to FTs and NHS trusts.

Again, we are shortening the Bill and making it simpler and probably taking out quite a lot of cost. I beg to move.

Baroness Finlay of Llandaff (Crossbench)

My Lords, I have several amendments in this group. I shall start with Amendment 294N, which is a probing amendment. As far as I have understood it, social enterprise bodies which are NHS bodies in all but name are coming into existence. They have evolved from PCTs under the transforming community services programme. They will be subject to special health administration arrangements. I ask the Government to confirm whether the social enterprises that come under the health special administration arrangements are coming under arrangements based on insolvency law and that, as such, that allows assets to be transferred outside the NHS and the redundancy payments are not guaranteed.

Amendment 295CA is intended to ensure that clinical commissioning groups are consulted before the Secretary of State makes regulations that allow Monitor to impose charges on commissioners. The charge imposed can include a levy to fund Monitor's functions that have to be invoked in the event of failures. Amendment 295CB is intended to ensure that when setting such a levy, Monitor takes into account the impact of the levy on the financial stability of the organisation, especially a financial trust that is already in distress or failing. Amendment 304A requires that the commissioners are considered when services of a failed financial trust are considered by Monitor and should be involved in the decision as to which should be continued, and that such services must include some continuation of education and training, because in planning for the future workforce, if a whole lot of posts were suddenly lost, it would destabilise the workforce planning. That is in addition to considerations such as the service provision and issues of equity and access. That becomes particularly important because if you do not have the staff with the appropriate training, you cannot, in the long term, provide the service anyway.

Amendment 304B is intended to ensure that commissioners are involved in the board's role in agreeing arrangements to secure continued access to NHS services will be achieved. Will that include the board's selecting which commissioner would become lead commissioner for the process during a failure?

Earl Howe (Conservative)

My Lords, this has been an excellent short debate on a large number of amendments, but focusing on a critical issue, which is what should happen to providers when they get into significant difficulty. While the debate has focused on the role of Monitor, it is the Government's firm view that commissioners should lead the process of ensuring there are services available to meet the needs of local communities.

The Government brought forward amendments in another place to improve our proposals for ensuring continuity of services. This included removing provisions to apply an insolvency-based approach to foundation trusts in the form of health special administration. If a provider of NHS services becomes unsustainable, there has to be a legal framework that provides effective safeguards to protect patients' and taxpayers' interests. We have therefore taken an evolutionary approach in developing proposals to ensure sustainable local services. The Bill sets out a clear framework to achieve this.

We will maintain the existing regime for foundation trusts but we will improve it significantly. First, we have removed the need to de-authorise a foundation trust. This is because the Government are committed to all NHS trusts becoming foundation trusts, so that all NHS providers have the freedom to innovate and drive sustainable improvements in quality and efficiency, and are accountable locally. I am aware that the noble Baroness, Lady Thornton, has tabled amendments which relate to the issue of de-authorisation and we will discuss those when we reach the appropriate clause.

Further, the Government will also ensure taxpayers' interests would be protected, by securing solutions that make best use of available NHS resources. We do not want patients to use, or taxpayers to subsidise, poor-quality, inefficient services or providers. Instead we will ensure an end to the culture of hidden bailouts. That is why Clauses 131 to 143 set out provisions for a transparent financing mechanism to fund continuity of services during a period of administration. In addition, I reassure noble Lords that the existing regime for NHS trusts, as distinct from foundation trusts, set out in the 2009 Act, would remain in place. Through a separate health special administration regime, legislation for the first time will also extend equivalent protection to patients who use NHS services provided by a company. Provisions set out in Clauses 125 to 130 would achieve this.

I turn to Amendment 282ZA. The Bill gives Monitor broad powers to collect financial information for the purposes of monitoring providers' financial stability. Monitor will be gathering a range of information, including financial, to enable it to undertake an ongoing assessment of risk. Monitor would also be able to intervene in order to support a provider to recover and to prevent failure where possible.

I understand that some noble Lords are concerned about the range of interventions available when a provider becomes distressed. Providers themselves can take a range of actions, including improving the management capability and expertise that they have. Commissioners are responsible for securing access to local services and they can use contractual levers to respond to poor performance and prevent provider failure. Monitor would intervene on a provider on the basis of a predefined distress test to prevent failure where possible. The CQC would monitor providers' compliance against patient safety and quality requirements.

This locally led approach is especially appropriate where there is a pressing need for services to be reconfigured to ensure sustainability. I am sure that noble Lords will agree that a reconfiguration is more likely to succeed if it is based on close partnership working between commissioners, providers, local authorities and their local communities.

Turning to Amendment 303ZA, I strongly agree with the principle of taking proactive steps to address service configurations that may become unsustainable. Indeed, our proposals are specifically designed to strengthen incentives on commissioners and providers to do this. However, I would not support a centralised approach, as envisaged by this amendment, which would move decisions right away from local communities. Our vision is that any changes to services should begin and end with what patients and local communities need. The key to successful service change is ensuring engagement with local communities and stakeholders in order to secure as broad support as possible for what can obviously be difficult decisions. I believe that our proposals will provide an effective and efficient framework that will protect patients' interests and place a clear responsibility on the provider to turn itself around, with access to support and regulatory interventions where they are needed most.

The noble Baroness, Lady Thornton, questioned the need for a risk pool. In our opinion, the risk pool is an important feature of the continuity of the NHS services framework. It provides a transparent funding mechanism for providers in administration in order to secure essential NHS services. The pool will be funded from risk-based levies on providers and charges on commissioners, and this mechanism will create important incentives on both providers and commissioners of NHS services. Providers of NHS services would be placed under financial incentives to take action to reduce the risk of becoming unsustainable. For example, providers could look to deliver their services in a more efficient configuration. Commissioners would be incentivised to commission services in a way that would reduce the impact on patients of a particular provider becoming unsustainable. This could be achieved, for example, by developing the market to ensure that there were alternative providers of NHS services where possible, and obviously where this would provide value for money.

In contrast, a centrally held fund would effectively be a tax on NHS allocations, and it would fail to strengthen incentives on providers and commissioners. Therefore, we believe that the benefits of a risk pool far outweigh any additional transaction costs.

It is also worth stating that Monitor would be required to run a public consultation on the methodology for the provider levy and publish an impact assessment. This would ensure that Monitor's proposals were effective and proportionate.

I turn to the amendments of the noble Baroness, Lady Finlay, and shall deal first with Amendment 294N. I should like to clarify for her that health special administration will apply only to companies that are subject to certain licensing conditions. Separately, trust special administration applies to NHS trusts and NHS foundation trusts. Therefore, there are two regimes. When a provider becomes unsustainable, the first concern should be the protection of patients. The amendment risks creating a class of company outside the scope of health special administration which would also not be covered by the trust special administration regime.

The noble Baroness also spoke to Amendment 295CA, and I listened with attention to her. I can now give a commitment that the department will run a full public consultation on the regulations that will provide commissioner charges. This consultation will allow all interested parties the opportunity to contribute to the policy development.

Amendment 295CB is unnecessary, as the Bill already requires Monitor to have regard to the impact that the provider levy will have on providers' financial sustainability through the duty on Monitor to undertake an impact assessment on anything that it proposes will be likely to have a significant impact on providers.

As regards Amendment 304A, I have already committed to considering education and training, and we will return on Report to clarify this issue.

Baroness Thornton (Labour)

Perhaps I may ask for clarification. The noble Earl refers to providers all the way through. Can we be completely clear that this means all providers -that is, private sector providers, NHS providers, social enterprises and charity providers of health services? Do all these levies and fines apply to them?

Earl Howe (Conservative)

My Lords, when I refer to providers of NHS services, I am referring to NHS providers and non-NHS providers. It is to be determined who will contribute to the levy. That is being worked through and I am sure that the noble Baroness will have noticed from the document that we published the other day that this work is ongoing. We will make further announcements about that in due course.

On Amendment 304B, I say that the board should consult the relevant commissioners but it must make the decision itself, which is what the Bill provides for. The noble Baroness, Lady Finlay, asked whether social enterprises will be within the scope of the health special administration regime. Social enterprises are companies so they will be within the scope of health special administration. It is right that they are not treated as NHS bodies as when assets are transferred from PCTs robust rules apply, as I have set out in detail in previous debates. She asked whether the NHS Commissioning Board would nominate a lead commissioner if a provider becomes unsustainable. The answer is yes.

I hope that noble Lords will find that series of explanations helpful and I ask the noble Baroness, Lady Thornton, to withdraw the amendment.

Baroness Finlay of Llandaff (Crossbench)

Before we finish this set of amendments, I want to mention a particular group. I am grateful to the noble Baroness, Lady Thornton, for her intervention, as I want to refer to charitable sector providers who are finding fundraising particularly difficult now. They are beginning to be hit by the downturn in the economy and the downturn in giving, and there is a real risk that some of the charitable sector providers will find themselves in difficulty. If a levy is imposed on them as well, in terms of their registration with Monitor, that may tip them over. My request is that, in looking at all this, there will be separate consideration of the charitable sector providers from other providers.

Earl Howe (Conservative)

I am grateful to the noble Baroness and will take that point away.

Baroness Thornton (Labour)

I thank noble Lords. I will take only a moment, but we will need to return to this. First, this was not looked at properly in the Commons and I can see that that is the case. Secondly, I recall that the chief executive David Nicholson disagrees. He said that he advocates de-authorisation. I believe that the pooling and the levy are bureaucratic and expensive and that the noble Earl does not understand that reconfigurations will not be led locally. I do not think that the Bill adequately approaches how we will manage reconfigurations. To be kind one has to say that the work is ongoing; I am not quite saying that the department and the Bill team are making this up as they go along, but it is definitely an area to which we will need to return on Report. I beg leave to withdraw the amendment.

Amendment 282ZA withdrawn.

Amendments 282ZB and 282ZC not moved.

Clauses 85 agreed.

Clauses 86 and 87 agreed.

Clause 88 : Revocation of Licence

Amendment 282A not moved.

Clause 88 agreed.

Clauses 89 to 92 agreed.

Clause 93 : Standard conditions

Amendments 282B to 284 not moved.

Amendments 284A to 284C

Moved by Earl Howe

284A: Clause 93, page 107, line 13, leave out "National Health Service Commissioning Board" and insert "NHS Commissioning Board Authority"

284B: Clause 93, page 107, line 14, leave out "clinical commissioning group" and insert "Primary Care Trust"

284C: Clause 93, page 107, line 15, leave out "and its Healthwatch England committee"

Amendments 284A to 284C agreed.

Amendments 285 and 285ZA not moved.

Amendment 285A

Moved by Earl Howe

285A: Clause 93, page 107, line 22, at end insert-

"( ) If, at the time Monitor discharges the function under subsection (7), the day specified by the Secretary of State for the purposes of section 14A of the National Health Service Act 2006 has passed or section 6 or 178 has come into force-

(a) in the case of section 14A of the National Health Service Act 2006, the reference in subsection (8)(c) to every Primary Care Trust is to be read as a reference to every clinical commissioning group;

(b) in the case of section 6, the reference in subsection (8)(b) to the NHS Commissioning Board Authority is to be read as a reference to the National Health Service Commissioning Board;

(c) in the case of section 178, the reference in subsection (8)(d) to the Care Quality Commission is to be read as including a reference to its HealthWatch England committee."

Amendment 285A agreed.

Clause 93, as amended, agreed.

Clause 94 : Special conditions

Amendment 286 not moved.

Clause 94 agreed.

Clause 95 : Limits on Monitor's functions to set or modify licence conditions

Amendments 286ZA and 286A not moved.

Amendment 286B

Moved by Earl Howe

286B: Clause 95, page 108, line 21, at end insert "provided for the purposes of the NHS"

Amendment 286B agreed.

Amendments 287 to 287ZB not moved.

Clause 95, as amended, agreed.

Clause 96 : Conditions: supplementary

Amendments 287A to 287BA not moved.

Amendments 287C and 287D

Moved by Earl Howe

287C: Clause 96, page 109, line 38, after "NHS" insert "in order to ensure the continued provision of one or more of the health care services that the licence holder provides for those purposes"

287D: Clause 96, page 109, line 40, at end insert "in order to ensure the continued provision of one or more of the health care services that the licence holder provides for those purposes"

Amendments 287C and 287D agreed.

Amendments 287E to 287EB not moved.

Clause 96, as amended, agreed.

Clause 97 : Conditions relating to the continuation of the provision of services etc.

Amendment 287F not moved.

Clause 97 agreed.

Clause 98 : Modification of standard conditions

Amendments 288 to 288ZB not moved.

Clause 98 agreed.

Clause 99 agreed.

Schedule 10 : References by Monitor to the Competition Commission

Amendments 288A to 288C

Moved by Earl Howe

288A: Schedule 10, page 372, line 26, after "are" insert "not"

288B: Schedule 10, page 373, line 26, after "considers" insert "would or"

288C: Schedule 10, page 373, line 29, after "considers" insert "would or"

Amendments 288A to 288C agreed.

Schedule 10, as amended, agreed.

Clause 100 agreed.

Clause 101 : Standard condition as to transparency of certain criteria

Amendment 288D

Moved by Earl Howe

288D: Clause 101, page 115, line 10, at end insert "or the conditions of a particular licence"

Amendment 288D agreed.

Clause 101, as amended, agreed.

Clause 102 agreed.

Clause 103 : Discretionary requirements

Amendment 288DZA not moved.

Clause 103 agreed.

Clause 104 : Enforcement undertakings

Amendment 288DA not moved.

Clause 104 agreed.

Clause 105 agreed.

Schedule 11 : Further provision about enforcement powers

Amendment 288E

Moved by Earl Howe

288E: Schedule 11, page 378, line 35, leave out from "contains" to the end of line 37 and insert "information which it is satisfied is-

(a) commercial information the disclosure of which would, or might, significantly harm the legitimate business interests of the person to whom it relates;

(b) information relating to the private affairs of an individual the disclosure of which would, or might, significantly harm that person's interests."

Amendment 288E agreed.

Schedule 11, as amended, agreed.

Clause 106 : Guidance as to use of enforcement powers

Amendment 288EA not moved.

Clause 106 agreed.

Clause 107 : Publication of enforcement action

Amendment 288F

Moved by Earl Howe

288F: Clause 107, page 118, line 5, leave out from "include" to the end of line 7 and insert "information which it is satisfied is-

(a) commercial information the disclosure of which would, or might, significantly harm the legitimate business interests of the person to whom it relates;

(b) information relating to the private affairs of an individual the disclosure of which would, or might, significantly harm that person's interests."

Amendment 288F agreed.

Clause 107, as amended, agreed.

Clause 108 agreed.

Clause 109 : Imposition of licence conditions on NHS foundation trusts

Amendments 288G and 288GA not moved.

Clause 109 agreed.

Clauses 110 to 112 agreed.

Clause 113 : Price payable by commissioners for NHS services

Amendment 288H not moved.

Clause 113 agreed.

Clause 114 : The national tariff

Amendments 288J to 291C not moved.

Amendment 292 had been withdrawn from the Marshalled List.

Amendments 292ZA to 292A not moved.

Clause 114 agreed.

Clause 115 : The national tariff: further provision

Amendments 293 and 294 not moved.

Amendment 294A

Moved by Earl Howe

294A: Clause 115, page 124, line 14, leave out subsection (4)

Amendment 294A agreed.

Amendment 294AZA not moved.

Amendment 294AZB

Tabled by Lord Davies of Stamford

294AZB: Clause 115, page 124, line 28, at end insert-

"(5A) Where the commissioner of a health service receives an offer from a service provider licenced under section 80 at a price below the price that is payable by virtue of this Chapter, the commissioner shall seek the agreement of Monitor before placing any order for this service.

(5B) Before acceding to a request from a commissioner in accordance with subsection (5A), Monitor shall satisfy itself that-

(a) the quality of the service to be provided will not be inferior to the same service provided by another supplier at the price payable by virtue of this Chapter, and

(b) there will be no consequent unacceptable impact on the structure or capabilities of the NHS.

(5C) Subject to the considerations under subsection (5B), Monitor shall not unreasonably withhold its consent."

Lord Davies of Stamford (Labour)

My Lords, I had intended to move this, and to take the opportunity to respond to one or two points that the Minister made on my proposal on competitive pricing, but in view of the lateness of the hour I will find another opportunity to pursue the argument with him.

Amendment 294AZB not moved.

Clause 115, as amended, agreed.

Clause 116 : Consultation on proposals for the national tariff

Amendment 294AA not moved.

Amendment 294B

Moved by Earl Howe

294B: Clause 116, page 125, line 26, leave out "guidance" and insert "such guidance as Monitor proposes to provide for in the national tariff"

Amendment 294B agreed.

Clause 116, as amended, agreed.

Clause 117 : Consultation: further provision

Amendment 294BZA not moved.

Clause 117 agreed.

Clause 118 : Responses to consultation

Amendments 294BA to 294BC not moved.

Clause 118 agreed.

Schedule 12 : Procedure on references undersection 118

Amendments 294C to 294H

Moved by Earl Howe

294C: Schedule 12, page 380, line 5, leave out from "each" to end of line 6 and insert "objector"

294D: Schedule 12, page 380, line 7, at end insert-

"( ) In this Schedule, "objector" means-

(a) in relation to a reference made where the condition in section 118(2)(a) is not met, each clinical commissioning group who objected to the proposed method to which the reference relates, and

(b) in relation to a reference made where the condition in section 118(2)(b) or (c) is not met, each licence holder who objected to that proposed method."

294E: Schedule 12, page 382, line 8, at end insert-

"( ) The Competition Commission must give notice to each objector who has made representations in accordance with paragraph 2 of the time and place at which an oral hearing is to be held."

294F: Schedule 12, page 382, line 22, leave out "entitled to give evidence at the hearing" and insert "present at the hearing and comes within sub-paragraph (5)"

294G: Schedule 12, page 382, line 24, leave out second "is not" and insert "cannot be"

294H: Schedule 12, page 382, line 26, leave out from "not" to ", and" in line 27 and insert "obliged to require the person to attend the hearing"

Amendments 294C to 294H agreed.

Schedule 12, as amended, agreed.

Clause 119 : Determination on reference undersection 118

Amendments 294J and 294K

Moved by Earl Howe

294J: Clause 119, page 128, line 4, after "by" insert "clinical commissioning groups or"

294K: Clause 119, page 128, line 38, after "such" insert "clinical commissioning groups or"

Amendments 294J and 294K agreed.

Clause 119, as amended, agreed.

Clause 120 agreed.

Clause 121 : Power to veto changes proposed under section 120

Amendment 294L

Moved by Earl Howe

294L: Clause 121, page 129, line 28, after "are" insert "not"

Amendment 294L agreed.

Clause 121, as amended, agreed.

Clause 122 : Local modifications of prices: agreements

Amendments 294LA to 294M not moved.

Clause 122 agreed.

Clause 123 : Local modifications of prices: applications

Amendments 294MA and 294MB not moved.

Clause 123 agreed.

Clause 124 agreed.

Amendment 294MBA not moved.

Clause 125 : Health special administration orders

Amendments 294N and 295 not moved.

Clause 125 agreed.

Clause 126 agreed.

Clause 127 : Health special administration regulations

Amendment 295A

Moved by Earl Howe

295A: Clause 127, page 134, line 46, at end insert "or (b)"

Amendment 295A agreed.

Clause 127, as amended, agreed.

Clauses 128 to 130 agreed.

Amendment 295AA

Moved by Lord Warner

295AA: After Clause 130, insert the following new Clause-

"Prior actions to health special administration orders

(1) Monitor shall produce annually a report to the National Commissioning Board setting out those trusts and their associated health economies where it considers that, on the evidence available, trusts are at serious risk of Monitor seeking a health special administration order unless urgent action is taken to review existing services and agree reconfiguration of those services to ensure their clinical and financial sustainability and this report shall be made available promptly to the Secretary of State, Parliament and the relevant clinical commissioning groups and health and wellbeing boards.

(2) It shall be the responsibility of the National Commissioning Board, in consultation with the relevant clinical commissioning groups and health and wellbeing boards, to establish a mechanism for producing a response to Monitor within six months of the annual report's publication on how the services in specified areas can be made clinically and financially sustainable and the extent to which these proposals are agreed by local organisations on behalf of the public.

(3) It shall be for Monitor to decide whether the Board's response is adequate to secure clinical and financial sustainability in particular areas and, after informing the Secretary of State, to publish its decisions on proposed changes and should the Secretary of State decline to accept Monitor's decision in a particular case he or she should inform Parliament with his or her reasons, together with his or her alternative proposals for securing clinical and financial sustainability in the particular health economy.

(4) It shall be open to Monitor, by agreement with the Secretary of State and the National Commissioning Board, to establish a panel of independent people with appropriate expertise to assist with securing local agreement on the reconfiguration of services required to secure clinical and financial sustainability."

Lord Warner (Labour)

My Lords, I rise to a rapt audience to move Amendment 295AA, which will really test the concentration powers of your Lordships' House. The amendment would insert a new clause on actions that could be taken to reconfigure services in the interests of sustainability before the Bill's failure regime kicks in. It follows on from the previous group of amendments spoken to, in particular, by my noble friend Lady Thornton.

I had one go at this issue at an earlier stage in our discussions and did not get very far. I have now discussed this issue further with a range of opinion inside and outside your Lordships' House. This amendment, which has the support of the noble Lord, Lord Patel, and the noble Baroness, Lady Murphy, is the product of a continuing interest in this issue. There is now widespread recognition across the NHS that there has to be a major reconfiguration of services to make them more fit for purpose, more clinically sustainable and more financially sustainable, given the financial and demographic challenges faced by the NHS for the foreseeable future. In a nutshell, specialist services need to be reconfigured on fewer sites, and many district general hospitals have to be reshaped on their sites with a different kind of health and healthcare campus and more social care services alongside them. Far more services need to be delivered in a community, rather than in a hospital, setting.

As was borne out in the discussion on the last group of amendments, the Government seem to be placing a great-and, I would say, undue-faith in local commissioners facing up to this reality and delivering the necessary changes. Meanwhile, MPs, including Cabinet Ministers, continue to march with placards in front of their local hospitals, opposing change and trying to protect their parliamentary majorities. They fear being "Kidderminstered" as majorities and the number of seats shrink. It will only get worse as 2015 approaches.

Much sensible opinion in the NHS simply does not believe that local areas and commissioners can deliver the scale of change required on an unaided basis. It fears that people will stand on the burning platform until failure engulfs them or a cheque arrives. The Government have said that the cheque is not going to arrive, so they are going to stand on the burning platform, as I see it, until the failure regime kicks in. Monitor does not want to be placed in a position where it is endlessly using the failure regime. It will want to intervene when the warning signs are there, rather than waiting for the special administration system to be required. Despite the Secretary of State's promises of robust decision-making on service reconfiguration, there is little experienced NHS opinion that believes that the elected political class will take the tough decisions fast enough and in sufficient numbers to produce a more orderly reconfiguration of NHS services.

I asked the Secretary of State following one of his robust public utterances at a conference whether he had actually told his Cabinet colleagues how robust he was going to be. The example of Chase Farm continues to affect NHS opinion and behaviour. People want a more reliable pre-failure regime that can be triggered in a timely way that does not totally rely on local commissioners to take action on their own and that imposes some discipline on the elected political class-if I may so describe them-to take decisions in a timely way. That is what Amendment 295AA attempts to do.

Subsection (1) requires Monitor to report annually to the national Commissioning Board those trusts and their associated health economies that are in real danger of clinical and financial unsustainability that will trigger the special administration regime. This report would put everybody from the Secretary of State to the local clinical commissioning groups on notice that action needs to be taken.

Under Subsection (2), it would then be for the national Commissioning Board to gather everybody together locally and agree a mechanism for producing a response within six months of service reconfigurations that would achieve financial and clinical sustainability.

Subsection (3) gives Monitor the decision on whether the solutions proposed are adequate, and if so, to inform the Secretary of State accordingly. The Secretary of State is not cut out of the loop. The Secretary of State could decline to accept Monitor's decision, but in doing so he or she would have to inform Parliament of their reasons for rejecting it and publish alternative proposals to secure,

"clinical and financial sustainability in the particular health economy"

concerned. To aid this process, subsection (4) enables Monitor,

"by agreement with the Secretary of State and the National Commissioning Board to establish a panel of independent people with expertise",

to help local area commissioning groups with the necessary reconfiguration of services.

No one under this amendment is cutting out the people at the local level and no one is cutting out the Secretary of State. We are just introducing a bit more discipline into this particular process, one in which it has proved very difficult to achieve change. I hope that the Minister will take this amendment in the spirit with which it is offered. It is there to respond to a widespread concern that we need a better and clearer pre-failure regime that can be used to bring about a more speedy reconfiguration of services in the interests of clinical and financial sustainability, but that also preserves local involvement with expert external facilitation and keeps the Secretary of State involved, albeit with disincentives to political deferment of decisions. The challenges that the NHS faces over the rest of this decade make this an issue that we should address urgently, and in my view we should have something on the face of the Bill to help the NHS engineer the reconfiguration of services that it will so badly need in the coming years. I beg to move.

Baroness Williams of Crosby (Liberal Democrat)

My Lords, at this late hour I will keep the Committee only for a moment or two. I congratulate the noble Lord, Lord Warner, on a courageous, statesmanlike and important amendment. We all believe that there have to be huge changes in the NHS, those of us who support it very strongly just as much as those who are critical of it. The noble Lord has thoughtfully tried to produce a machinery of government that will enable some of these extremely difficult decisions to be made. Perhaps I may say without, I hope, offending anybody, that there are echoes here of what happened to the Governments of Greece and Italy-flatly refusing to look at the realities, refusing to change, and ending up with effectively a total loss of trust in the democratic system. I believe that this amendment is an attempt to try to get away from that and to begin to mobilise a much larger section of the public for the changes that have to be made. That can be done only through open debate and the willingness of politicians to get up and express the need for change and their support for it, not by hiding away and doing the popular thing when that is almost certain to bring about the destruction of the remaining health services in any effective way.

I congratulate the noble Lord and say that he is brave to have done this, and to point out rather harshly that we all have to learn that we cannot at one and the same time take part in Chase Farm demonstrations and Chase Farm decisions. What that means is that, inescapably, the Secretary of State has to be at the centre of this operation, unpleasant though it is, because-as most of those who have been in Government know-either you have to take unpleasant decisions or you have to resign. What you cannot do is dodge the issue by saying, "It is nothing to do with me", because in the end that will not carry the public with you. It is the public we need to mobilise behind us.

Baroness Murphy (Crossbench)

My Lords, I have added my name to this amendment because it fills in the hole in this Bill that I am still worried about. Clauses 95 and 96 contain good ways of intervening early in individual failures on quality and the financial governance of providers that will enable Monitor to get in and do the business it needs to do with individuals, but what we have not got are the mechanisms that will allow Monitor to address at an early stage failures that can be seen coming up in a local health economy.

I have already experienced in the current regime how difficult it is for a regulator to get discussions going locally between trusts and local commissioners on how to address a local service failure. I well remember the whole of the Monitor board going down to the south-west-the trust will remain nameless-to address a failure of the local economy, to discuss it with the strategic health authority and to attempt to come to a conclusion and come up with a plan about how the local economy would solve the problem. The Minister has already mentioned bailouts. The solution was that the strategic health authority would give a bung, which it duly did and which sent the problem away. But in fact the problem did not go away because the local economy was still failing.

It is this early failure-where you can see that things are mounting up, that it is not going to work and that the sums are not going to add up-for which we need some mechanism. This is a clever scheme, but it may be too interventionist. It may be put into blocks which are too chunky to be inserted into the Bill as it is. But we need to address the problem of failure before it gets to the point of administration. As the noble Lord, Lord Warner, says, Monitor will not want to implement the failure regime and the administration regime until things have gone desperately awry. It should not implement the failure regime when the problem is an economy problem and not a trust problem. We need to have some reassurance that there will be some support for local people who are trying to tackle this in a meaningful way.

Lord Davies of Stamford (Labour)

My Lords, I do not want to hold up the House for too long, but I feel that someone should respond to my noble friend Lord Warner's amendment on behalf of what he rather dismissively described as the elected political class. I am proud to say that I was a member of that elected political class for 23 years, representing Grantham and Stamford. In the course of those 23 years I had to take action to save both Grantham hospital and Stamford Hospital, separately and at different times, when they were threatened with closure. I used all the methods which my noble friend is no doubt familiar with: meetings with Ministers, lining up local government support, petitions, threatening judicial reviews-even potentially funding a judicial review-and heading major marches. I remember leading over 9,000 people through the streets of Grantham and 5,000 through the streets of Stamford. We won in both cases. Grantham is still a very successful local district hospital and Stamford is a smaller hospital-what you might call a cottage hospital.

The point I wanted to make is this: I would have welcomed the sort of report from Monitor which my noble friend is suggesting. If one wants to save one's local hospital, and one wants to make sure that the right decisions are made about the health of one's constituents, one wants a warning as early as possible about the financial or clinical problems-or both-that may be arising. There are often all sorts of alternatives that one can find to closure. It is important for democratic confidence in the NHS that all the possibilities are thoroughly explored and everybody is content that the decision has not simply been taken behind closed doors and then announced to the public when there could have been some initiative that might have saved the day. On behalf of the-slightly dismissed-elected political class, I thoroughly support the amendment of my noble friend.

Earl Howe (Conservative)

My Lords, may I say to the noble Lord, Lord Warner, that I am very pleased that-

Baroness Thornton (Labour)

I have a very small piece of advice to give the Minister. I always think that it is best to give in and agree with my noble friend Lord Warner. I have almost always found that this is the best course of action. The noble Earl might recall that, when I was a Minister, on one of the occasions where I did not give in I certainly came a cropper. I urge the Minister to think very carefully and seriously about what my noble friend has had to say. It merits great attention and it merits being in the Bill.

Earl Howe (Conservative)

My Lords, before that intervention I was about to say that I was very pleased that the noble Lord, Lord Warner, had returned us to this issue, which I, like he, regard as extremely important. It is a thoughtful amendment and will certainly prompt further thought on my part after this debate.

I do not think that there is any difference between the noble Lord and myself in this respect. I am certainly all in favour of ensuring that wherever possible there is early intervention and proactive monitoring of organisations well in advance of failure so that failure can be averted. The main difference between us, if there is one, is that we believe that this process should be locally led and not led from the centre, which is how I read his amendment. I probably read it wrongly. When the noble Lord spoke to it, he indicated that nothing in it was intended to run counter to that locally led process. I take that on board.

Why are we so keen on a locally led process? The overall aims that we set out are to put patients, carers and local communities at the heart of the NHS, shifting decision-making as close as possible to individual patients and devolving power to professionals and providers, liberating them from top-down control. This amendment would appear to do the opposite and could lead to an increasing level of decisions being centralised and moved away from local communities and their democratic representatives. The more that one does that, the less likely one is to get local buy-in. In a patient-led NHS, if it is to be worthy of the name, any changes to services have to begin and end with what patients and local communities need.

Baroness Thornton (Labour)

Does not the experience of the last few years-we can name the hospitals concerned-show exactly the opposite of what the noble Earl is now saying to us, that this has to be locally led? We have to find some mechanism which allows decisions to be taken that does not dismiss or ignore local feelings. Of course people have to be involved in those decisions but, at the end of the day, we know about Chase Farm and several hospitals I could name. In north London, we know that we have too many hospitals. They have not been closed down because it is politically too difficult to do so. If the decision remains at local level, in north London we will still have too many hospitals. I have lots of MP friends who have campaigned to keep those hospitals in place, particularly before the last general election. It seems that what the noble Earl is outlining now will not work.

Earl Howe (Conservative)

Contrary to popular opinion, there have been cases of very successful and rapid reconfigurations of services. Of course, the ones that come to our attention are those that have taken a long time, such as Chase Farm. There is no better or worse example than that.

In reading this amendment, we should be cautious about any process that would significantly weaken both local commissioner autonomy and public engagement. We do not want to conflict with the statutory requirement for NHS bodies to ensure appropriate and proportionate involvement of patients and the public in service changes or reduce the ability for local authority scrutiny to bring effective democratic challenge to reconfiguration plans. I certainly do not think there is a case to reduce democratic accountability in this way.

I agree with the noble Lord that, where it is not possible to reach local agreement on a service change proposal, there should be mechanisms for independent review. We are retaining powers in the Bill for local authority scrutiny functions to be able to refer reconfiguration schemes. As part of the transition, we are also exploring how the NHS Commissioning Board and Monitor can work together to support commissioners and providers. As I have said, the key to successful service change is ensuring engagement with the local community and stakeholders so as to secure as broad support as possible in what can be very difficult decisions.

It might be asked, and I think that the noble Baroness implied this in her question, how reconfiguration will be triggered under the new system. As we envisage it, the trigger under the new system will be the same as under the current one. The trigger is often that commissioners and providers determine that the current configuration of services does not offer the highest quality care or that they do not meet with current and modern clinical practice. For example, it may be that part of the hospital estate is outdated. There may also be safety issues, especially if a trust has struggled to recruit particular clinical staff.

It is usually the dialogue between commissioners and providers that identifies that services are not currently optimal for patients and that a reconfiguration, rather than smaller-scale operational changes, is the most appropriate way to improve and modernise services. In those circumstances, commissioners will want to take an active lead in shaping how services are redesigned, working with their provider partners. I do not see that as necessarily a long drawn-out process or one that would happen at the last minute. Commissioners are in a very good place to assess these matters well in advance of stress becoming a significant problem. I believe that our proposals will enable local clinical commissioners to deliver sustainable services and allow intervention to prevent failure, where possible and with appropriate support and advice.

Mindful of the time, I hope that that is helpful. I undertake to engage with the noble Lord following this debate to see what more we might be able to do to reassure him. He presented a cogent case; I understand the arguments that he is putting and the reasons for them. I would like to end in the same place as him and provide the Committee with more certainty on these issues. I hope that with the assurance that my ear, as ever, is listening, he will be content for now to withdraw his amendment.

Lord Warner (Labour)

My Lords, I am grateful to everyone who has spoken in this debate for the support that the thrust of the amendment has received. I reassure the Minister that it is not the purpose of the amendment to exclude local commissioners or local people from involvement in reshaping their services. They would feature in the report to the national Commissioning Board mentioned in the amendment only if they were clearly not getting on with the job of making changes. If they were getting on with that job, fine-they would not feature in the report.

I think that we struggle with the situation that the noble Baroness, Lady Murphy, mentioned, that you cannot solve the problem of a particular hospital trust without looking at the problems around the much wider health economy. Often, the local clinical commissioning groups will struggle with the breadth of the economy that they have to consider.

I do not want to delay the House any further. I will certainly take up the Minister's offer of discussions and I would welcome any contributions from other noble Lords. We need to make progress on this issue before we complete the Bill's consideration in this House. Meanwhile, I beg leave to withdraw the amendment.

Amendment 295AA withdrawn.

Clause 131 : Duty to establish mechanisms for providing financial assistance

Amendment 295B

Moved by Earl Howe

295B: Clause 131, page 136, line 40, after "provider" insert "of health care services for the purposes of the NHS (referred to in this Chapter as "a provider")"

Amendment 295B agreed.

Clause 131, as amended, agreed.

Clauses 132 to 134 agreed.

Clause 135 : Power to impose charges on commissioners

Amendment 295C

Moved by Earl Howe

295C: Clause 135, page 139, line 44, at end insert "(but for this not to affect any other method of recovery)"

Amendment 295C agreed.

Amendment 295CA not moved.

Clause 135, as amended, agreed.

Clause 136 : Imposition of levy

Amendment 295CB not moved.

Clause 136 agreed.

Clause 137 agreed.

Clause 138 : Consultation

Amendments 295D to 295EA

Moved by Earl Howe

295D: Clause 138, page 141, line 6, leave out second "that" and insert "the current financial year"

295DA: Clause 138, page 141, line 19, after "each" insert "potentially liable"

295E: Clause 138, page 141, line 25, leave out "the rate of levy" and insert "those factors"

295EA: Clause 138, page 141, line 34, at end insert-

"( ) In this section and section 139 a "potentially liable provider" means a provider on whom Monitor is proposing to impose the levy for the coming financial year (regardless of the amount (if any) that the provider would be liable to pay as a result of the proposal)."

Amendments 295D to 295EA agreed.

Clause 138, as amended, agreed.

Clause 139 : Responses to consultation

Amendments 295EB to 295EG

Moved by Earl Howe

295EB: Clause 139, page 141, line 36, after "more" insert "potentially liable"

295EC: Clause 139, page 141, line 42, after "more" insert "potentially liable"

295ED: Clause 139, page 142, line 5, after first "the" insert "potentially liable"

295EE: Clause 139, page 142, line 7, after first "the" insert "potentially liable"

295EF: Clause 139, page 142, line 35, after first "the" insert "potentially liable"

295EG: Clause 139, page 142, line 38, after first "the" insert "potentially liable"

Amendments 295EB to 295EG agreed.

Clause 139, as amended, agreed.

Clause 140 : Amount payable

Amendment 295F

Moved by Earl Howe

295F: Clause 140, page 143, line 38, at end insert "(but this does not affect any other method of recovery)"

Amendment 295F agreed.

Clause 140, as amended, agreed.

Clauses 141 to 147 agreed.

Amendment 295G not moved.

House resumed.