NHS Purchasing Arrangements (Hansard, 14 May 1991)

§ The Parliamentary Under-Secretary of State, Department of Health (Baroness Hooper)
My Lords, major initiatives are already in progress on a national basis within the National Health Service supplies function to strengthen purchasing arrangements, to extend the use of electronic trading, to reduce stockholding and the number of warehouses, and to improve management information systems so as to better monitor progress in performance. All those measures can be expected to achieve substantial recurrent savings.

§ Lord Hunter of Newington
My Lords, I thank the Minister for that hopeful reply. Does she agree that in the past health authorities have been largely tied to their local supply services? Does she also agree that the department has exercised only limited oversight through the supplies organisation from the centre and that it has issued little guidance on the implications for the supplies organisation of the changes proposed in the White Paper, now reflected in the National Health Service and Community Care Act?

§ Baroness Hooper
My Lords, the department's policy in supplies purchasing is to improve value for money based on competitive procurement and to assist the competitiveness of suppliers. We consider that some things are best done at local level, otherwise it may be necessary to introduce district, regional or national levels. Nevertheless, we are taking steps to improve further the purchasing record, which we believe in any event is a good one. A new national purchasing unit is being set up to make better use of purchasing muscle in those cases in which a national approach is the most cost effective. Already the embryonic unit has achieved savings of over £80 million in the past two years; for example, in energy, syringes, needles, vaccines and paper products.

§ Lord Dean of Beswick
My Lords, can the Minister tell the House whether the hospitals which have opted out of the National Health Service or established themselves as trusts are expected to use the National Health Service supplies organisation or to go it alone? Does she agree that if they are expected to go it alone, it could create a multiplicity of demand which may well force prices up rather than down?

§ Baroness Hooper
My Lords, I believe that my original Answer replied to some extent to the point raised by the noble Lord. He must take into account the fact that about 200,000 different items have been identified as purchased through the national health system from at least 20,000 different suppliers. It is, therefore, very big business. The National Health Service trusts will be expected to show that they can obtain the best value for money. We believe that they will do so by using the existing and improved mechanisms of the National Health Service supplies unit.

§ Lord Ennals
My Lords, has the Minister studied the report of the National Audit Office which suggests that the new changes in the NHS could waste "massive amounts of money" if buying policies become more fragmented? It describes NHS disarray in terms of health authorities which operate without any real knowledge of their own or any other authorities' spending priorities.
Yesterday the Minister refused to comment on the report of the Universities Funding Council. Will she now be more forthcoming on the report of the National Audit Office?

§ Baroness Hooper
My Lords, I always try to be forthcoming when it is appropriate. I am certainly aware of the recent National Audit Office report on NHS supplies. The report acknowledged the 1476 significant improvements that have taken place in recent years within the NHS supplies function. It recommends that the National Health Service should press ahead with existing initiatives in relation to purchasing, storage, new technology and performance measurement. The action programme set in hand some months ago by the National Health Service Management Executive is specifically geared to achieve a continuing process of improvement which again is specifically geared to meet the supply needs of the newly reformed National Health Service.

§ Lord McColl of Dulwich
My Lords, does my noble friend agree that in the same way that monopolies can distort the market place so can monopsonists—the monopoly purchasers? They beat down prices so much that they may put many firms out of business. Does she further agree that the report referred to has gone over the top just a little?

§ Baroness Hooper
My Lords, it may be that in the view of my noble friend the National Audit Office report went over the top, although in terms of the main acknowledgements of what is being done and its recommendations we believe that it very much supports our efforts to streamline the supply arrangements for the National Health Service.

§ Lord Skelmersdale
My Lords, given that hospital trusts are very much and very firmly part of the National Health Service, will my noble friend confirm that there is no bar to them using the central purchasing services of the regional health authorities? Indeed, on the advice of the central department concerned with this matter, that can be done within the Minister's own department, can it not?

§ Baroness Hooper
My Lords, I am grateful to my noble friend for underlining that point. There is certainly no bar and National Health Service trusts will be encouraged, as will any other unit within the National Health Service, to purchase through the supplies purchasing arrangements. We believe that that gives the best value for money.

§ Lord Ennals
My Lords, does the Minister agree that the National Audit Office is a very responsible organisation which is most unlikely to go over the top? In a most recent Act did we not give more powers to the National Audit Office in order to supervise work in the National Health Service? Does she not think that it is a little early to start accusing the National Audit Office of going over the top?

§ Baroness Hooper
My Lords, that is precisely why I was delighted to acknowledge that the National Audit Office substantially supported what we are doing and what we intend to do.

Lord Morris
My Lords, in answer to a previous question my noble friend suggested that the size of the task, with 200,000 different products and 20,000 different sources, posed a considerable problem. It is the sort of problem that is handled every day by companies such as Booker McConnell Ltd., a wholesale purchaser and distributor. Will my noble 1477 friend consider very carefully privatising that particular operation because it is a classic commercial operation?

§ Baroness Hooper
My Lords, we believe that the streamlining that is being brought into effect will make the best use of supplies produced by the private sector. The regional arrangements are being carried out through the National Health Service with the support of the private sector in producing the goods that are being bought.