National Health Service: Role of the Private Sector

HL Deb 09 June 1993 vol 546 cc963-1004

5 p.m.

Baroness Jay of Paddington rose to call attention to the increased role of the private sector in the National Health Service; and to move for Papers.

The noble Baroness said: My Lords, my purpose this evening is to suggest that the NHS is under threat, that the growing role of the private sector in the health service is being driven by powerful political and ideological forces which must eventually undermine the fundamental principles on which that service has been built for the past 45 years.

My fear is that the Treasury's determination to cut public expenditure, combined with the opportunistic activities of private health care providers, will inexorably lead to a redefinition of what the health service is all about. A growth of private sector involvement in the financing and management of our hospitals, our GP surgeries and our community services must, I suggest, produce a mixed economy in health care where there is a tiered structure of provisions and little democratic accountability. No doubt when the noble Baroness speaks, she will deny that the basic tenets of the health service to provide universal health care free at the point of delivery are in danger. I am perfectly sure that she will be sincere in that denial. But my concern is that, pressurised by the Treasury and by their 1992 manifesto promise to ensure a year by year increase in the levels of real resources committed to the NHS, health Ministers are rushing to square the circle by attracting private money, without really considering what the long-term impact of commercialisation may be.

I should like to take a few minutes to remind your Lordships just how quickly the current enthusiasm for private financing in the health service has accelerated. Last month, the noble Baroness, Lady Cumberlege, said in reply to a question from my noble friend Lord Dean of Beswick that: this is not a new idea. We have been working with the private sector for … years".—[Ojficial Report, 13/5/93; col. 1365.] But I would suggest that what is happening now is of a different order from anything we have seen before.

In the last Autumn Statement, the then Chancellor of the Exchequer gave the Treasury imprimatur to schemes to secure a greater level of private sector investment in public sector projects. On 21st April this year, the specific rules which govern the use of private finance in the NHS were relaxed. Hospital trusts and health authorities can now authorise up to 10 million to contract privately funded and managed projects. The previous limit was £¼ million. At the same time, it was announced that one of the Department of Health junior Ministers in another place would be formally responsible for "private health and income generation in the NHS".

The political momentum has continued apace, with the Secretary of State for Health making a significant speech to the CBI on 26th May, entitled "Private Finance and the NHS". In it, she looked forward enthusiastically to private sector financing of community care; to expanding private sector involvement in local health clinics; and to privately owned and operated "recovery hotels" for people who had just had operations.

At the same time as the political machine is driving forward down this particular road, the ideological, intellectual right has stepped in to provide theoretical justification for what might otherwise be seen as a pragmatic exercise in the face of cuts. The honourable Member for Fareham in another place, who was previously the director of the Centre for Policy Studies, has just written an influential pamphlet, published by the Social Market Foundation. It develops the theme, "Opportunities for Private Funding in the NHS". He lists six different areas of action which include ambitious ideas: building and operating a medical unit, operating a complete hospital, providing full scale primary and community care.

In her CBI speech, the Secretary of State commended the pamphlet as "an important paper". The author has clearly provided Ministers with what I would describe as a glibly attractive case for radical change in the health service. The Secretary of State also said on the same occasion that, as a spending Minister when the Treasury opens a door, you move smartly through it". I am sure that this is often true, but not when the open door leads into the trap of increasing privatisation in an essential public service.

My alarmed reaction to these rapid developments is not based on dogma but it is based on principle. As I said before, Ministers have said that there is nothing new, they are simply extending and making more flexible a useful practice. It is true that this practice has been going on since 1983 when some subsidiary services and support services, such as cleaning and catering in hospitals were, in the jargon, "market tested", and sometimes privately contracted out. Most of us have come, somewhat reluctantly, I have to say, to accept that arrangement. We have also accepted the important role of private nursing homes for the elderly used by the NHS. A strong case has been made for leasing some major items of medical equipment from the private sector. It may well be common sense for the NHS to raise credit in the money market if this can be appropriately accounted for and directly invested in the service.

None of those activities by themselves provides a threat to the underlying principles of the NHS. But if private companies raise capital to build and develop health services for themselves there is a real danger that their priorities will be commercial, not concerned with providing equitably for the health needs of a population. If private companies build and run hospitals and health centres, they are private organisations whose performance and accountability may be difficult to question. We have already seen some examples of that in the recent past.

Perhaps we may examine briefly some possible scenarios which those developments could produce. It has been suggested that the public expenditure review may recommend that hotel charges are made for hospital stays and that there may be charges for visits to GPs' surgeries. So, if hospitals are to be like hotels, why not let an experienced hotel company run them? Let us say that Trust House Forte acquire the contract; soon they, together with the local NHS trust boards, are offering the kinds of attractive packages for which they are famous: winter breaks, for example, at the new Westminster and Chelsea Hotel —a luxury room with breakfast and dinner plus surgery on one's varicose veins.

Similarly, we hear that major retailers may be brought in to provide health service premises. One can see the attractions—a bright new health centre next door to the coffee shop in Tesco's car park, or just past the sweater counter at Marks and Spencer. But can we really believe that any of those extremely successful commercial companies will not be interested primarily in their profits and their market position rather than the comprehensive social priorities which guide the NHS today?

Who will use and be able to choose the commercially run services? Are they really going to be available to everyone at the point of need? I heard an interesting interview the other day with the Secretary of State for Transport discussing how road tolls for new motorways could be financed. He talked about a dual licence system in which motorists who wanted to use the motorways could pay a premium, others would be second-class drivers, driving on second-class roads. I really do not think that it is too fanciful to imagine an adaptation of that kind of arrangement developing in the health service. For example, one could buy a first-class voucher for a four star hospital room or a limited number of visits to the local GP's private clinic. Or, on the other hand, if one is poor or chronically sick, one would probably find oneself getting a progressively depressed, resource starved, exclusively public service. The lock-up surgeries which were so violently criticised in Sir Bernard Tomlinson's recent report on health care in London will, in that case, go on being a feature of inner city health care well into the next century.

General access to health care is bound to be reduced. History has shown time and again that whenever any kind of charges are introduced, whether for prescriptions, eye tests, or dentistry, demand—probably from those who are most in need—falls rapidly away.

My fears are not just about access but are also about accountability. We may, in a few years' time, have privately organised health providers working with undemocratically selected independent NHS trusts. To whom will they be ultimately responsible? Where will the public accountability lie? Where are the national safeguards to protect financial probity and standards of service?

We have already seen some disturbing results of dubious entrepreneurship between health authorities and the private sector in the West Midlands and Wessex regional health authorities. Those have only now been exposed, years after they took place, by the Public Accounts Committee and the National Audit Office. My worry is about what happens when independent local trusts are contracting services from commercial organisations, when no public funds are involved. Who will be the watchdogs then? Surely the NHS does not want to be exposed to the same kind of embarrassment and ridicule as has hit the Prison Service as a result of the activities of Group 4. But a privately run hospital or GP service must be the same in kind as a privately run prison or escort service. There is little scope for quality control or public accountability.

Ministers talk about increased private sector involvement as a way—perhaps the only way—of bringing new money into the health service. But before the Department of Health succumbs to Treasury pressure and Ministers accuse those in the Labour Party of being unrealistic in insisting that the NHS is funded from increased public sources, I hope that Ministers will look again at the UK's international record on health expenditure and compare our rather appalling figures with those of other countries, which, we are constantly told, have suffered the same recent economic misfortunes as ourselves. Incidentally, it is disturbing to see that in Answers to recent parliamentary Questions, both in this House and in another place, Ministers have said that comparative data is not available. International comparisons are indeed published. Given all the caveats about comparative statistics, they make alarming reading. The Compendium of Health Statistics published by the Office of Health Economics states: Health care expenditure in the UK remains one of the smallest among industrialised countries both in relation to population and to national wealth … allowing for currency fluctuations the UK figure of £582 per person suggests British spending is i below the EC average". It is also worth looking at the figures of our European neighbours, both in terms of the totals of expenditure and the breakdown between public and private funding. In this country, if we accept that 6 per cent. of GNP goes on health care, the public contribution to that is 87 per cent. In Belgium, 7.2 per cent. goes on health care, 89 per cent. from the public sector; in the Netherlands 8.3 per cent. of GNP goes on health care, 73 per cent. from the public sector; and in Sweden 8.8 per cent. of GNP goes on health care, 90 per cent. of it from the public sector.

The question that we have to address is how much as a nation we can afford to spend on health care and whether we are willing to spend it. There can and should be ways of devising an increase in public funds for health. Handing over key functions to the private sector is not acceptable to those of us who are committed to a free and comprehensive service. It is privatisation by the back door.

The public are beginning to recognise the situation. A poll published last weekend showed that 74 per cent. of those questioned were suspicious of the Government's intentions towards the NHS; and 62 per cent. believed that the Government planned to create a two-tier system in which the better off paid for treatment and only a safety net was provided for everyone else. Interestingly, 71 per cent. of those questioned would be prepared to pay higher taxes to maintain the NHS in its present form. Another recent MORI poll showed that public concern over the health service has jumped very sharply in the past month and is now regarded as an issue of concern for one-third of Conservative voters.

None of this is surprising, when the media are full of speculation about charges and changes, and conservative commentators say, as Charles Moore does, writing in the Spectator on 29th May: In 50 years or so people will look on the NHS rather as they look on council housing today—as a necessary, if badly run, piece of public benevolence which serves only a minority and from which it is best to be emancipated". My Lords, that is precisely what I fear.

Surely health Ministers must listen to public anxieties, and must not respond to the siren voices of Right-Wing theorists or surrender to the sharpest blows of the spending axe, both of which demand an even greater reliance on the private sector. I urge the Government to think again about jeopardising the principles of the most trusted public service in the country. My Lords, I beg to move for Papers.

5.15 p.m.

Lord Crickhowell

My Lords, it is six years since I last spoke in a debate on the health service, when I was still in the House of Commons. I am tempted to do so tonight only because of the mounting sense of incredulity that I have experienced as I have listened to the criticisms that have been voiced in recent months about the possibility of extending the contribution of the private sector to the National Health Service. Certainly all my fears were reinforced by the speech that I have just heard. They were reinforced, not in the sense that the noble Baroness intended—namely, to make me think that the health service was at risk—but in that there is a great deal of thoughtless nonsense being talked on this subject.

During my time as Secretary of State for Wales with responsibility for the health service in Wales, there was a lot of talk about cuts. Between 1979 and 1987 the amount of money spent on the health service in Wales increased by about one-third. By the time I left the department (in 1987) we had more doctors, nurses and professional employees than ever before. There were well over 4,000 more nurses. They were being paid 30 per cent. more, after allowing for inflation, and we were treating something like 24 per cent. more patients. During the same period we carried out the most massive programme of capital building in the history of the health service. Spending in Wales over half a billion pounds, we completed five general hospitals in those years and started one, as well as a number of smaller hospitals and specialist services. But despite those substantial increases in expenditure, we never had enough. I found, as indeed, Aneurin Bevan had found within months of setting up the National Health Service, that demand always exceeds supply. The extraordinary advances in medical science help to ensure that that is so. When I took up my responsibilities, hip replacements (to take just one example) were comparatively rare. By the time that I left, very large numbers of those operations were being carried out.

During the early 1980s—I suppose at a time when the noble Baroness suggested we were taking rash steps towards privatisation by contracting out cleaning services—I decided to go rather further. I was engaged on providing what I believe today to be probably the most comprehensive service of renal dialysis anywhere in Europe. One of the things we did was to decide to market test the provision of subsidiary renal dialysis units. The first two National Health Service hospitals that we market tested were in Carmarthen and Bangor. We of course allowed those hospitals to tender themselves, but we tested them in the open market. As a result of that competitive tendering exercise we appointed two international companies to provide the service for us. One I recall was American. I cannot remember where the other one came from. They were both major companies, providing similar services elsewhere.

As regards the patients, they probably never knew. The unit was contained inside the National Health Service hospital. It was not identified in any way as being a private sector provision. But the service was quite outstandingly good. It met all our hopes and aspirations. I asked myself the question early on: how was it that a private sector company charged, as the noble Baroness reminded us, with the job of making profits for its shareholders, could provide a more cost effective and efficient service inside a hospital than could the local health authority?

As I was going round that renal dialysis unit in Carmarthen, I asked the nurse. She said, "I'll give you just one example. It's the way you do things. The business of renal dialysis depends crucially on a piece of plastic in the apparatus. It does the filtering job. In a normal national health hospital it would be used once and thrown away. We have found that we can use those items 12 times and what is more, for probably the third, fourth, fifth and sixth times, you actually get a better performance than you did the first time you used it because you've got rid of the newness and the effects of the plastic in the apparatus. We've simply tested to optimise the effective use of that one piece of equipment." They are not very expensive but a very large number of them were being used. That is just one example of the way in which a private sector operator sets about running a service and does it comprehensively and efficiently.

Encouraged by those experiments I decided that we should go further. I remember telling the then Secretary of State for Health and Social Security, Norman Fowler, that we had been successful and hoped that we would press on aggressively down that road. Against that background, to be told that we are going too fast when it has taken six years to jump the limit from ¼£ million a project to £10 million seems to me to be a rather remarkable statement. I believe that we are going much too slowly. We ought to have been doing much more.

Let me take another example. I remember that we looked at a problem that we had in providing for cardiac operations in North Wales. We were about to construct a major cardiac unit in the hospital in Cardiff. Given the rural and scattered population of North Wales, it did not make sense to provide the same facility in a hospital in the north of the country. So we sent some of our cardiac patients to private sector hospitals which provided that service within the locality and they did the job excellently. That was a sensible and proper use of resources. So we made that start. We did not go rushing down that route for ideological reasons. We asked the private sector to tender for a comprehensive cardiac service in Cardiff and we rejected the proposals because we did not think that they met our standards.

I speak now in this debate with the wider experience of working for various organisations in both the public and the private sector. I am chairman of the National Rivers Authority. In that authority we are enthusiastically going down the road of market testing and going out to seek competitive tenders for the various operations that we conduct. We are not doing it because we are forced by the Government to do it. We already contract out a large number of our operations and we find that in many cases we can obtain a more efficient and cost-effective service if we go down that route.

I shall give another example. I am a director of Associated British Ports which used to be a public sector organisation. It used to employ 12,000 or 13,000 people in the docks. It now operates in rather more docks and employs 2,000 or 3,000 people. It subcontracts and contracts out most of the services provided in the docks. We do it because we believe that we obtain a more efficient service. We do not tell ourselves that we are not able to decide on priorities or that we cannot control the business or audit it—that was the suggestion that was made by the noble Baroness who introduced the debate. We control it and audit it rather efficiently and effectively.

I remember going recently to the container wharves at the Port of Tilbury where my company has just taken a joint interest. We have only just taken it, so we have not set up the arrangements. I asked the dock manager how he found contracting out the engineering services. There is nothing more important than the engineering services of a dock because if the lock gates do not open or the pumps do not work, the port ceases to operate. I was told that it had taken a huge load off him as port manager. He said, "We have extremely tight contracts which give big rewards for successful management and impose heavy penalties if one does not get it right. I go away and sleep at night. I concentrate on the job that I should be doing, which is assessing the management priorities of my port."

I have yet another example. Even now in the studios and workshops of the television industry much of the work that used to be done by the companies themselves is being privatized—in the private sector more and more companies now use that word; they talk about "privatising" particular operations because they get a most cost-effective service that way.

All my experience leads me to believe that that is a good route in order to obtain more resources and better value for money. The reality that we have to confront is that there will never be enough money to meet all the demands for health care. There will certainly never be enough money to meet all the demands that fall on government. Noble Lords who were in the Chamber earlier will have heard considerable demands made for more money to be spent on public transport in London. The sums talked about were in billions, not hundreds of millions. That goes right across the public service. It is not a problem that hits only Conservative governments. It has hit every Labour Government that ever existed too.

I believe that if we want to provide an efficient health service for our people we should go down that road; we should get in those extra resources; and we should benefit from the additional efficiency and cost-effectiveness that the arrangement will provide. I only wish that we would do it more aggressively and with greater enthusiasm than we have done over the past five or six years.

5.29 p.m.

Lord Kilmarnock

My Lords, I am sure that we are all grateful to the noble Baroness, Lady Jay, for introducing this important and timely topic. I hope to shed more light than heat upon it. First,un peu d'histoire. Over the years there has been a remarkable stability in central government expenditure on health as a percentage of GDP. In the period 1974 to 1979 under the Labour Government, it was on average just under 5 per cent. Under the Tory Government from 1980 to 1990 it was just over 5 per cent. Similarly, central government expenditure on health as a percentage of total government expenditure has varied remarkably little over the same period from 1974 to 1990. It was 12.75 per cent. in 1974 and 13.29 per cent in 1990, with a high point under the Conservatives of 14.45 per cent. in 1989. That blip was in the "loads o' money" boom period; otherwise the picture is again one of relative stability.

Turning to private health expenditure as a percentage of GDP, we have a different, but not dramatically different, picture. From 1973 to 1992 it rose gradually from 0.4 per cent. to an estimated 0.8 per cent. of GDP today. As a percentage of total health expenditure in the country it rose from 3.03 per cent. in 1973 to an estimated 6.85 per cent. in 1992. By either measure it has roughly doubled over the past 20 years but still remains a smallish percentage of the whole.

Therefore we have a fairly stable picture over a period of two decades giving us, in 1990, a total overall health expenditure—as the noble Baroness said—(public and private) of around 6 per cent. of GDP. That compares with 14 per cent. in the United States of America with 37 million citizens without cover—a problem that Mrs. Clinton is trying to address but God knows with what prospects of success. With that comparison in mind we should give at least two cheers, and possibly, I suggest, two-and-a-half, for our achievements to date, even at 25 per cent. below the EC average.

It must be about 10 years ago—the noble Lord, Lord Rea, recalls this and may refer to it—when we debated in this House a report by the Nuffield Provincial Hospitals Trust called Public/Private Mix for Health. It is a collection of essays by the leading health economists of the time, some of whom are still active. It is the only time that I can remember debating an entire book in your Lordships' House. I thought that I would refresh my memory of its contents and see what the main fears and concerns were a decade ago.

Cost containment, according to Professor Forsyth (one of the contributors) was a major preoccupation then as now—and against an even more harrowing background. By 1975 public authorities accounted for nearly 60 per cent. of GNP, and half of that went on the welfare state. Taxation did not keep pace with expenditure. Total state revenue rose from 42.7 per cent. in 1951 to 46.6 per cent. in 1975, but even so the PSBR had to rise from 2.2 per cent. in 1951 to 11.3 per cent. in 1975—an even higher figure than today—to accommodate expenditure.

That clearly could not go on, and it did not. In 1976 the IMF had to be called in and the Labour Government began the painful process of reducing public spending. After 1976 the target for real growth in the NHS was trimmed to 1.5 per cent. until 1982, when it was reduced to 0.5 per cent. by the Conservatives. But the out-turn, since that turn of the screw, has been consistently higher with an average of over 3 per cent. per year and a leap to 7 per cent. last year. Whatever the target, it is hard to cap health spending. The Red Book target of 1993–94 is only 0.6 per cent.—at least that is the figure I was given by the Library. Perhaps the noble Baroness can say whether or not it is correct. If so, it will be interesting to see how it turns out.

The debate in 1982 was somewhat different from today. The merits and demerits of insurance-based systems were under discussion. The attempt to exercise overall control of public and private sector beds through the Health Services Board had been dropped. There was a running argument as to whether the private sector should contribute to nurse and doctor training. It was recognised that the abolition of the private sector would infringe liberty, but it was thought that it should be regulated so as not to conflict with NHS aims. It was felt that it should be an additional resource rather than a shift from one sector to another. If it continued to grow, especially if encouraged to do so by tax concessions, it was thought that it should be made correspondingly more accountable. But the general feeling was that it should not be encouraged to expand too far. Rudolf Klein wrote, If the private sector continues to grow, the risk is that the overflow mechanism may turn into a waste-pipe; that the exit of the most articulate, politically resourceful customers of the state sector will drain away effective political support for it. This would suggest that there is a point at which the growth of the private sector would threaten the whole balance of health care in Britain, tilting it away from the social equity model to the market model". So in fact the argument was not really about a "mix", which was in the title of the collection of essays, but about a "balance". A 4 per cent. to 5 per cent. private sector share in total health expenditure was okay; anything more than that was a threat to the NHS.

I am sorry to go into so much history, but I felt that it was important as a background because I believe that the nature of the debate has changed since then. The private sector share has crept up to nearly 7 per cent. of all health expenditure—a little above Klein's ceiling but not a lot. The main change is the introduction of an internal market together with the purchaser-provider concept—probably the most original contribution to thinking on the public sector for the past 10 years. There is a move away from the polarisation between the social equity and market models towards a greater interpenetration of the two. The idea is to make the market work in the interests of social equity. Some noble Lords may, and evidently do, think that that is neither possible nor desirable. But I shall suggest otherwise.

I agree with the noble Baroness that the framework needs to be clear. The British electorate has voted repeatedly for the continuance of a tax-based system, free or largely free, at the point of use. No government have dared to move significantly from that position, and nor will they. There are economic advantages in maintaining the Government as a monopsony buyer. That brings a downward pressure to bear on costs and avoids both the American-style escalation and lack of cover.

Despite a new army of managers, administrative costs are much lower than in an insurance-based system. Of course we have national insurance but as we all know here—perhaps it is not so clear outside —that makes only a small contribution to the NHS. There could be a case for an earmarked health tax, as advocated by my noble friend Lord Owen, meaning that parties could go to the country with a specific pledge to add a penny to the health tax, to maintain the status quo, or reduce it and switch to private insurance. People could vote accordingly. There is some merit in that.

Yet even a change to a more transparent tax base would not change the basic parameters which I am sure will remain. Public finances in this country are in a state of near crisis, with the PSBR higher than anywhere other than Italy and Greece, and pushing up towards the level that brought in the IMF in 1976. The Treasury will look for savings. Cost containment will be paramount. That will be the pattern for the rest of the century and probably beyond. Therefore, if we want to preserve the many advantages of our system, which still has massive public support, we simply have to look at new types of delivery; we have no choice.

The Social Market Foundation, with which I am associated, and to which the noble Baroness, Lady Jay, referred, recently published a paper called The Opportunities for Private Funding in the NHS by David Willetts MP. That was followed by a seminar addressed by a colleague of the noble Baroness, Lady Cumberlege, Mr. Tom Sackville, who started from the base of the private finance initiative in the Chancellor's Autumn Statement, raising the level of expenditure below which trusts and HAs can make their own decisions about using private finance from £250,000 to £10 million, as the noble Baroness said.

Mr. Sackville also pledged, very significantly, that, The private sector capital input into joint ventures or contracted-out services will be additional to NHS allocations in every case". He agreed, It would always be difficult to rival the public sector in its ability to spread risk", but he went on to say that, The private sector often has a comparative advantage in managing risk". I believe that that is what the noble Lord, Lord Crickhowell, was saying. He gave the example of short-term contracts, with BUPA and others, to clear waiting lists and also longer contracts for long-stay accommodation.

I do not want to go into detail on the merits or otherwise of those various schemes. They are there as available policy options, as are all such ideas which emerge from the think tanks. I know that they will stick in the gullets of some people because of the introduction of a profit motive. That has been confirmed already this evening. I believe it needs a conceptual or philosophical debate, for which there is no time today. But into such a debate I would inject the following thoughts.

The charge of "privatisation", or "creeping" or "backdoor" privatisation—as the noble Baroness said —can be answered by saying that the public sector needs to decide what should be provided collectively, but does not have to run that provision itself. In last Sunday's Independent on Sunday Christopher Hulme wrote, A road built by a private contractor is not necessarily a private road". Next, profit rewards a private supplier say 10 per cent. return on capital; public services are paid for out of taxes and Government borrowing. If government borrowing rises, the cost of borrowing may be 10 per cent. interest. There is no essential difference in economic terms between profit and interest. It is at least arguable that the private sector may deliver some —not necessarily all—services more cost-effectively and in a more user-friendly way.

"What about the 'ethos'?", people may cry. The public sector ethos working in the public interest must be better than the private sector's self-interest. That will be the argument. It is a fascinating question and requires more debate. But if the game between rent-seeking public servants and profit-seeking private providers is played on a level playing field, the result may not be a foregone conclusion. One should never forget Shaw's aphorism that every profession is a conspiracy against the laity.

I am being provocative, and deliberately so. I am aware that there are also political questions which I have not touched on. Further private involvement in the National Health Service will mean a decrease in union power. That is a political question and there are no doubt others. My contention this evening is simply that unless we are prepared to confront these questions honestly and openly, we are not going to reach the best public-private mix for all our people.

5.41 p.m.

Lord Rea

My Lords, all noble Lords can understand why the Government are interested in encouraging more private sector involvement. First, there is the apparently laudable aim of shifting some of the burden from the taxpayer or the public sector borrowing requirement to the users of services at the time. As my noble friend said, at present some 87 per cent. (according to the OECD figures) of total health expenditure in this country is met from public funds. That may seem quite high but we are by no means the top of the league. Believe it or not, Luxembourg is at the top of the list, where 92 per cent. of all health expenditure comes from public funds. Among those with a lower proportion of public expenditure on health there are several countries where the public spend on health per head is actually higher than the total expenditure per head, both public and private, in this country, the United States being the leader, with only 42 per cent. of all expenditure on health care coming from public funds. Their expenditure from public funds on health per head works out, according to the 1989 figures given by the OECD, which are slightly out of date, at around 1,000 dollars per head out of a total spend of some 2,500 dollars per head. That compares with 900 dollars per head from all sources in this country. There is little doubt which country has the better health service. I agree with the noble Lord, Lord Kilmarnock—I do not envy the First Lady her task.

Less often publicly stated, although we have covered this ground, is the opportunity which private expenditure on health provides for investors to make a profit. Clearly no firm or individual will run a service if there is nothing in it for them. We on this side of the House in principle oppose profits made from other people's misfortune. I am aware that innovation and enterprise can be spurred by the pursuit of personal gain, but there are equally effective and more honourable incentives in the search for better health care. The health service itself could have discovered that plastic sheets used for renal dialysis can be re-used. It did not necessarily require the private sector to come up with that one. A properly-run health service could do that too with the right incentives.

I thought it might be useful to subdivide the ways in which the private sector is becoming increasingly involved in the National Health Service and health care in the United Kingdom. In the first place there is health care provided independently of the NHS—private medicine as such—where the patient pays the provider directly or through a private insurance scheme. This sector, while increasing fairly rapidly, as the noble Lord, Lord Kilmarnock, pointed out, has been levelling off, if not falling, in the past year or two. The rise in the cost of private health schemes is now running at more than twice the increase in the cost of the National Health Service. This, coupled with the recession, is making people and firms think twice before taking out private medical insurance. While it is held that an increasing independent private sector could save the National Health Service money, there are dangers. The noble Lord, Lord Kilmarnock, quoted a passage from Professor Rudolf Klein that I had also picked out to illustrate my point. I should like to remind noble Lords of the last sentence: This would suggest that there is a point at which the growth of the private sector would threaten the whole balance of health care in Britain, tilting it away from the social equity model to the market model". Read 10 years later, is that not rather prophetic, considering that the whole National Health Service is now being forced into a pseudo-market model?

Another way in which the private sector is being brought into the National Health Service is that mainly addressed by my noble friend's Motion—the purchase of private medical care by the National Health Service, using taxpayers' money. Two examples from my own practice, which I remind noble Lords is not a fund-holding practice, may illustrate this. There was a major push last year—and it is still being maintained to some extent—to reduce waiting lists of more than two years' duration. Several of my patients had relatively minor skin blemishes—one a tattoo—which they wanted removed by plastic surgery. They were offered, and accepted, surgery at a private clinic in Welbeck Street, at taxpayers' expense. This came out of the budget of the district health authority, which left less money for keeping wards open, many of which were closed during that same year.

Several other patients who were mentally unstable suffered breakdowns and required urgent admission under the Mental Health Act. There were no National Health Service beds available and they were admitted to a private mental hospital, Grovelands Priory Hospital, at a cost of some £3,000 per week. I gather from an article in the Observer a few months ago that other private psychiatric hospitals charge up to £5,000 a week—again, at taxpayers' expense. The number of National Health Service acute psychiatric beds had recently been reduced without regard to the higher than average needs of the locality—Camden—in which I practise. Grovelands Priory Hospital was still caring for National Health Service patients when I was last in contact with it recently. It is almost certain that looking after those patients in National Health Service hospitals would have cost less.

There is a third way in which the private sector can be involved—through the provision of capital. This has been discussed by more than one speaker. Trusts and health authorities can now borrow up to £10 million of finance from private sources. This will help to keep the PSBR down in the short run but the National Health Service still has to pay the interest. It is the taxpayer who pays it. Capital expenditure in the NHS should surely be regarded as different from its recurrent running costs. If the money were provided by public borrowing there would be more control of the assets. I believe that it will be found that, if private finance is used, private rather than public interest will tend to predominate, which is the point made by my noble friend.

In publishing The Health of the Nation the Government recognise that factors outside the Health Service play a major, if not the major, part in determining people's wellbeing and health. While the publication of that report was a major step forward by the Government, the document carefully avoided stating that a major determinant of health in the United Kingdom—or in any country for that matter —is the extent of deprivation experienced by sections of the population. Recent work has emphasised how important are early life experiences—particularly nutritional experiences, even in the womb—in the subsequent health of individuals. Those who are least well off or who come from the least well-off backgrounds, suffer the most serious illnesses in later adult life. Deprived communities and individuals need more medical care to compensate for that. They are the least able to pay for it. So the tilting of health care away from the social equity model to the market model is precisely what is not required to address the major public health problems of this country.

A final word about the market model. One of the problems of the internal market is that more administrators are required. The experience of everyone working in the National Health Service is that managers are now everywhere. There is now an army of administrators, as the noble Lord, Lord Kilmarnock, said. I wonder whether the noble Baroness can attempt to tell us when she winds up how these costs have changed during the years since the National Health Service and Community Care Act 1990 has been implemented.

Perhaps I may quote to her a passage from the debate which we had 10 years ago. It is from the speech of her noble friend Lord Trefgarne, who was replying to the debate. He said: it does seem that our administrative costs compare favourably with those of other countries. It would not be sensible to move to any alternative system which, while theoretically meaning less Government involvement, in practice led to more bureaucracy and more involvement in the detailed regulation of health services".—[Official Report, 27/4/83; cols. 998–91 I sometimes wonder whether the noble Baroness is not rather sad that those words were not listened to.

5.52 p.m.

Lord McColl of Dulwich

My Lords, I too would like to thank the noble Baroness for introducing this debate. I was not quite sure what the debate was going to be about. I had hoped that we would have something young, vigorous, enthusiastic and happy but, alas, we have just had the usual depressive, morbid propaganda. There is the undermining of the NHS. It is usually that the NHS is sinking fast. I have heard that for 30 years now but it seems to be still afloat. There was reference to creeping privatisation by the back door. Then, of course, there was the usual attack which we have just heard from the noble Lord, Lord Rea, about the army of administrators. I wish people really would stop attacking the civil servants and administrators. I do not believe that it is a fair thing to do considering that we spend less on administration than most other western countries as far as the health services are concerned.

Then, of course, we have had the usual international comparisons, which were highly selective. Why quote only Belgium, the Netherlands and Sweden? It is simply that they happen to fit what is being said. But if one actually considers the proportion of GNP put in by most western governments it is about 5 per cent. It is about 5 per cent. in this country and 5 per cent. in the United States. It is that percentage in many of the Western countries, but the difference is how much the private side contributes. It is 1 per cent. in this country but 7 per cent. in the United States and considerably more than our 1 per cent. in most of the western European countries. So there is a case to be made out for having a greater contribution from the private side.

Then we have had the usual criticism that we are going to have a two-tier system. Having worked for the past 40 years in the NHS, and having seen the private side as well, when I hear about a two-tier system I always ask the question: which tier are they saying is the better tier? As someone who is working in the NHS, I have been confused over the years by the very differing signals coming from the Labour Party about charging patients and about private practice and privatisation. Perhaps I may remind your Lordships that the Prime Minister, Clement Attlee, a year after the NHS was introduced, said in another place: We propose to make a charge of not more than Is. for each prescription under the National Health Service. The purpose is to reduce excessive and, in some cases, unnecessary resort to doctors and chemists, of which there is evidence which has for some time troubled my right hon. Friends the Minister of Health and the Secretary of State for Scotland". Here is the fascinating piece: The resultant saving will contribute about £10 million". In fact, it went up to £30 million, which is about 6 per cent. or 7 per cent. of the total expenditure of the NHS in those days and is, of course, considerably more than we raise from prescriptions, and so on, at the moment. He went on to say: although this [saving] is not the primary purpose of the charge". No, no, perish the thought!

I am confused about the influence which the Labour Party has had on private practice in this country. After all, it was the Labour Party which provided the greatest boost to private practice. I do not believe that that was their intention, but by trying to phase out the private pay-beds under the NHS, which amounted to 4,000 in 1974 and which was only 1 per cent. of the total number of beds, it galvanised the forces into a great increase in private practice. When some of the major trade unions took out block contracts to provide their members with private insurance that also had a tremendous impetus on the private side.

The other confusing signal was that the Secretary of State for Health herself was a private patient. So that confused the issue. However, to be fair, there was another Member of the other place who went into St. Thomas's Hospital at about the same time. Although she was an NHS patient, they very kindly put her into a separate room. Five minutes later she came out and told the sister that she must be "among the people" out in the ward. So she went out into the ward. She had not been there more than 10 minutes when the people in the ward rose up in rebellion and told the sister that if that woman did not get back into the single room they were all walking out.

To continue with the subject of cash and finance, who was it who introduced cash limits for the first time into the hospital service of the National Health Service? It was the Secretary of State in those days, David Ennals. He went on to begin to move resources out of London. That was the Resource Allocation Working Party. I believe that he was right so to do. But why now that these movements continue are they being opposed by the Labour Party? Is not that rather strange?

In 1985 I had the privilege to chair a government working party on the supply of artificial legs and wheelchairs. That was an amazing state of affairs. The civil servants were working with the monopoly suppliers of artificial legs and wheelchairs to provide a service which can only be described as somewhat "cosy". There was no competition and the key was that there was no export of those items. That is always a very good indicator of what a service is like. Why did they not export? Well, they had no need to export because they had "cost-plus" contracts going on for 30 years, with no system for controlling the costs and the "plus" very much in excess of the agreed percentage. The moment that we introduced some competition and tendering so that we could increase the number of companies supplying artificial legs and wheelchairs —the moment that we brought in some competition and a bit of privatisation—the service began to improve.

There have been many pleas from many of the million people who work in the National Health Service that petty party politics should be taken out of the health service. They are not saying for one moment that they do not want to remain accountable to Parliament. No, but they do want the propaganda to stop. The classic example was "Jennifer's ear" in the last election when prominent politicians appeared with a little girl who was said to have a pain in the ear. That was claimed to be the fault of the Government because she was on a long waiting list, waiting to have grommets put in. Of course, the British people knew that there was something wrong with that because the British people know that the treatment for a child with a painful ear is not to have grommets put in but to have antibiotics to treat the infection. There is no waiting list for antibiotics, and the treatment can be given today. That sort of irritating propaganda really ought to stop.

I should like to make a strong plea that we take such propaganda out of the health service. After all, 7 million people are being treated in hospital and most of them are very pleased with the results. They simply do not believe the propaganda because it does not accord with their own experience. My plea that the propaganda should stop is made because the folks who are worried by it are elderly, defenceless people who, by and large, may not vote at all, but they sit at home listening to the radio and television and hearing all these dreadful stories about how terrible the health service is becoming, and they are becoming frightened. My plea is: please stop grinding the heel into the faces of those defenceless people.

6.2 p.m.

Lord Colwyn

My Lords, plans for bringing private finance into the NHS have been discussed for many years and, as we have heard from the noble Baroness, Lady Jay, to whom I am very grateful for the initiation of the debate this afternoon, the Treasury has changed direction since the 1992 Autumn Statement and is now keen to encourage joint ventures with the private sector.

The current crisis in health care is faced by the NHS and by other healthcare systems throughout the world. It is a crisis caused by the common problems of rising population levels in a world threatened socially, economically, politically and environmentally. In Britain, as in other Western countries, the problem is specifically one of a mounting population of elderly, rather than the baby boom of the third world—but the effect is much the same. An increasing number of people are suffering ill health.

As I have said many times in this House, the solution is not necessarily one of throwing more money at the problem. An increase in funding usually means spending more on the same. But that is precisely the formula which is not working. There is a need for a more radical rethink—a rethink which I believe the Government's reforms of the NHS do start to address.

The real solution to the problem—the long-term solution —is, as any good doctor knows, to treat causes, not symptoms—that is, to practise prevention before intervention. That is absolutely routine in my own profession—that of dentistry. We have been practising prevention for many years and have been very effective in bringing down levels of dental disease throughout the country. Some 25 years ago, no fewer than 41 per cent. of adults between the ages of 45 and 54 in the UK had lost all their teeth. Today the equivalent figure has fallen to around 11 per cent. and is set to fall even further. Not only is this a reflection of the hard work of the dental profession—a record we can justifiably be proud of—but it is also evidence of the increasing demands and needs of patients. Dental science has progressed to the extent that it is no longer inevitable that we all end up with a full set of artificial teeth. However, the high quality technical work does often require expensive materials which are individually crafted for each individual patient. There are high labour costs.

While there would be widespread acclamation for the state if it were able to cover every individual for any and every item of health care, we know that this is impossible, involving funding beyond acceptable Treasury limits. We must seek to preserve current levels of expenditure on the NHS, but look to other methods for raising the extra resources. The British Dental Association has provided a responsible lead in this regard. In its response to Sir Kenneth Bloomfield's report, which outlines the options for altering the system of remuneration for dentists working within the NHS, it has proposed that for all adults and children, the examination and diagnosis should be entirely free—and surely this right if we wish to encourage regular attendance—and for those adults who are not currently exempt from charges, the cost of treatment would be a matter for the dentist and patient to agree.

In a speech to the General Dental Council on llth May, the Secretary of State stressed her commitment to a high quality dental service, one which is effective on both cost and clinical grounds", but no mention was made of that dental service being, or remaining within the NHS. I am looking forward to the publication either today or tomorrow of the Select Committee report on dental services.

Intervention is what modern western medicine is mostly all about. It is better described as "emergency" medicine. Almost by definition that means hi-tech, drug-based medicine —in other words, high-cost medicine. It is the perception which lies behind the criticism of the National Health Service or—as more accurately described the "National Sickness Service". A public service genuinely seeking to promote and maintain optimum health among its citizens—a genuine National Health Service—would espouse prevention as a first principle.

Prevention is largely a matter of public, and to some extent also professional, education over questions such as the link between food and health, exercise and health, relaxation and health, stress-management and health and the environment and health—questions, in other words, largely of diet and lifestyle. It is also a matter of teaching self-responsibility. People should be encouraged, through comprehensive and accurate information, to take responsibility for their own health, to understand a wide range of choices in health care, to be given access to those choices and to be shown how to take advantage of them.

This, I venture to suggest, is precisely what that element of the private sector which interests me as well as dentistry—the field of alternative and complementary medicine—is strongest on, and why it has so much to offer. Its growing appeal to more and more people suggests something important, something which no policy-maker should ignore: that a public national health service—the emphasis being on the positive promotion of health as opposed to sickness —should distinguish between health and medicine. It teaches that health is not synonymous with medicine, nor medicine with health. A genuine NHS should distance itself from medicine to some extent and instead adopt aspects of social and education policy. It may be the role of a genuine NHS, for example, to show people how to manage on less funding and still be healthy and happy.

Clearly there is public spending implied here, but my belief is that the savings as a result of such a policy would more than offset the cost. The amount of savings to the Exchequer are only possible to guess at this stage, but some estimates have put them at billions. In particular, there is likely to be a huge reduction in the massively high level of spending on drugs, many of them causing more harm than good.

Undervalued alternatives like EDTA chelation therapy for cardiovascular disease, which I have written to many of your Lordships about recently, would also save huge amounts. There are other examples that I could quote. That element of the private sector, at least, is not about making money, but rather making people well. It is about low-cost, low-profile health care. That is the only sensible option, probably the only realistic option, left in the world into which we seem to have already moved.

In conclusion, I remind noble Lords of my right honourable friend the Prime Minister's words at the 1991 Conservative Party conference: There will be no privatisation of health care, neither piecemeal, nor in part, nor as a whole, not today, not tomorrow, not ever while I am Prime Minister". I have difficulty in associating his statement with the changes in dentistry, but I shall look forward to hearing my noble friend's comments.

6.10 p.m.

Lord Dean of Beswick

I express my appreciation to my noble friend Lady Jay for giving your Lordships the opportunity to debate this subject. I noticed that the first speaker from the Conservative Benches did not afford the usual courtesies to the mover of the Motion. I hope that that was done by mistake and not deliberately. If he did that deliberately, he would be better served if he started to understand the courtesies of the House.

However the noble Lord gave us the benefit of his experience as chairman of a highly paid quango. He told us of the benefits of privatisation and how it could save money. Would he have put forward that argument if he was now Secretary of State for Defence? The maintenance of the engines of our Phantom strike force was contracted out by the Government against the wishes of the defence chiefs. That has resulted in a substantial part of the RAF's top strike force being grounded. The people doing the maintenance work on the engines were not just inadequate, they were so damned awful that they damaged the engines. That will mean that taxpayers will have to find a substantial sum of money to correct that damage. The contracting out was the result of political ideology. Privatisation is making this country's defence a gamble dependent upon price and political philosophy. I suspect that the Government are far too hooked on privatisation. They would do well to look a little more at the merits of each case.

I listened with interest to the noble Lord, Lord McColl, who spoke for about eight minutes. He made a political speech. He even went back 40 years and quoted Clem Attlee. I do not know what that has to do with the situation today. He then tried to advise everyone else not to become political. It may be his privilege as a distinguished doctor to give out such advice.

Lord McColl of Dulwich

My Lords—

Lord Dean of Beswick

My Lords, I am not giving way. I am sorry. We do not give way in these debates. The noble Lord got one thing wrong. He castigated, in his absence, my noble friend, Lord Ennals, for being the first man to start moving resources out of London. I believe that the noble Lord said that.

Lord McColl of Dulwich

My Lords, perhaps I may make it clear that I was not criticising the noble Lord, Lord Ennals. I was saying that he did the right thing and that I was surprised that he now criticises the Government for continuing what he started.

Lord Dean of Beswick

My Lords, my memory of what took place is different. The first Secretary of State after the Conservatives won the 1979 election was the noble Lord, Lord Jenkin of Roding. I seem to remember that he was taken to court for breaking the law by cutting resources in London. I believe that my explanation of what took place is more accurate. However, we are not discussing that matter.

Two Members of your Lordships' House have mentioned Mr. Willetts. We do not usually mention the names of Members of another place in your Lordships' House. However, one cannot get away from naming David Willetts MP because he is the architect of what is now happening. He produced a document. So I took the trouble to see what qualifications and credentials he has which enable him to pose as an expert on the privatisation of the NHS. He is the Member of Parliament for Havant. He served on the Social Security Select Committee. From 1978 to 1984 he was an official at the Treasury. From 1984 to 1986 he served as a member of the Prime Minister's Downing Street Policy Unit. He was also political adviser to Mr. Nigel Lawson, as he then was, when he was Chancellor of the Exchequer. I understand that when he was doing all that he had two little sweeteners going because the Government had placed him on two quangos. He was a member of a family practitioners' committee and also a member of the local district health authority. He was not doing too badly.

I do not know whether the Government placed Mr. Willetts on those committees as a Trojan horse to see what was going on. I understand that he is also listed as a consultant to a private health group. I have Hansard of another place dated 26th January this year. Mr. Willetts made a powerful speech on the NHS, but he forgot to mention that he had a pecuniary interest in what was being discussed. While it is not a hanging offence in another place, the normal courtesy is—although the interest is registered—to declare the interest openly when one speaks on a subject. Everyone then knows about it. His judgement may be found to be lacking on one or two things.

I happened to be in another place today when Mr. Norman Lamont made his statement. It was more of a factual than a political statement. There was a great ring of truth in what he said. We have had two debates in your Lordships' House in the past 12 months or so when another former distinguished Cabinet Minister, who I understand is not too well at the moment (the noble Lord, Lord Joseph) made a similar statement. He said that the country was in a mess at the time because, "We got it wrong". He meant that his own Government had got it wrong at the time. Norman Lamont said the same thing today from the Back Benches in another place.

Mr. Willetts was one of the advisers who advised the Government to go down the road that they have gone down. Does he have any credibility or qualifications which enable him to tell us what is best for the health service? I say he has none at all.

There are some interesting points from a report produced by Mr. Willetts. He gives some of the reasons for privatisation. He states: Many of the efficiency gains from bringing in private money and management come from escaping traditional NHS labour practices. Many of the firms involved would not wish to negotiate with NHS unions, nor accept conventional job demarcations. The political sensitivity surrounding private provision is much reduced if it is manifestly supplying an extra new facility". There are some highly paid people employed by the NHS. Thousands of people at the lowest end of the wage scale in this country are employed in the NHS, and those are the people who are Mr. Willetts' target.

The noble Lord, Lord Crickhowell, mentioned the uprating to £10 million of the sums health authorities are able to negotiate without going to the Treasury for approval. When I asked my Question a few weeks ago I was not opposed to that. The Minister will remember that in my supplementary question I was concerned about public accountability.

An article on the front page of yesterday's Financial Times calls the NHS to account and highlights two cases which I raised in this Chamber. One is the scandal of the £63 million which went west in Wessex in deals between the regional health authority and the private sector. Mr. Willetts' constituency is right in the centre of the Wessex region. He has never said a word about the matter. He is not worried by the fact that £63 million has gone down the drain and it has been necessary to close beds, reduce operations and reduce other activities of the National Health Service in that region as a result. Therefore, where do we stand in relation to this question of looking after the public purse?

If the Government continue to go down the road of involving more private investment, so be it, if it is genuine and it works. However, if there is no control over those sums of money as mentioned in the Financial Times yesterday, there will be a bonanza for fiddling. It should not be thought for one moment that the private sector is full of guardian angels and that it epitomises honesty. It is not. Noble Lords are probably aware that the Chief Executive of the National Health Service, Duncan Nichol, has asked the Audit Commission to investigate fraud in the National Health Service on the basis of what was uncovered in the West Midlands and in Wessex and is now emerging elsewhere. If it is known to be happening and the facts are now emerging the problem will be enormous.

When my colleague asked the Minister whether she could guarantee that there would be no more scandals like those in the Wessex and West Midlands regions, she had to say that she could not. She does not know. I know. Some of them are on the way. We know about thern already. It is the biggest scandal concerning waste in the operation of public finance by fiddlers, and in some cases deliberate lawbreakers, that we have seen in this country for a long time. It is a shame if Members of the Government are prepared to stand back and say that it is happening in the private sector and they can do nothing about it. If those people were in local government they would have been surcharged and brought before the courts.

I ask the Minister whether in any future measures involving private sector investment the Government can include penal clauses so that if people are found to be breaking the law deliberately, even if they are favoured sons of the government party who have been made chairmen, they will be subject to the processes of the law. No appointed person should be exempt, and some appointees are involved.

Having said that, I am extremely grateful to my noble friend for introducing the subject. I have to tell the House that the question of computer fraud which I mentioned will not go away because next month the Public Accounts Committee will publish its recommendations as to what should be done about what has happened.

6.24 p.m.

Lord Mancroft

My Lords, one of the good things about debates in your Lordships' House on subjects of this nature is that we can usually rise to a level of debate which is not found in another place. Like other speakers I am grateful to the noble Baroness for raising the subject so that we can debate it in the House today.

However, speeches like the one I have just heard give credence to the idea that there is no thinking about the health service on the Opposition Benches and that the Opposition have to put forward speakers who bring the debate to a political level. That is not helpful or constructive.

When she opened the debate so ably and usefully, the noble Baroness said that she hoped that the subject would be discussed without ideology or some of the hifalutin ideas which we are led to believe our political masters regard as important. She mentioned a report produced by a Right-Wing organisation—whose name I forget—which searches for a justification for privatisation or private sector involvement in the health service. I do not know whether there is any need for justification other than the pragmatism which the noble Baroness mentioned. I have no personal feelings about what my noble friend Lord McColl called creeping privatisation when he discussed the propaganda which surrounds the subject.

I believe that we need only two underlying principles when discussing the subject: quality of care and cost-effective treatment. I believe that private sector involvement in the health service can bring both. There are enormous benefits to be had from private expertise, management and quality of care.

There are huge benefits to be gained from the injection of private capital into the health service. Even after the raising of the limit of the amount which may be spent before Treasury permission must be sought to £10 million, as my noble friend Lord Crickhowell said, that is still peanuts, relatively speaking. The most important asset in health care is the building. Where can one find a building now for a quarter of a million pounds? The cost of the Chelsea and Westminster Hospital has been mentioned. I cannot remember the exact figure, but we are talking of millions of pounds. When starting out on providing proper health care, £10 million is still small fry. I should like to see the amount increased still further, even if we were to go one step at a time.

If I have any qualification to speak in today's debate it is that I have been involved in a relationship between a health authority and a private company. That was not in the same way as my noble friend Lord Crickhowell, but on the other side as a director of a private company which entered into a contractual arrangement with a health authority in the Midlands. That was an interesting experience. I am no longer involved, having been concerned only with the start-up period.

It was fascinating. The object of the exercise was to provide a 24-bed in-patient facility for the care of those suffering from drug and alcohol problems, which is a subject in which I have an interest. We started by offering a partnership deal to the health authority, in the same way as two doctors in a practice. We were told that that was not acceptable and that it had to be a share deal. We said that that was fine and we would have a share deal. We even offered the health authority a majority shareholding. That was fine. Then two weeks later the health authority came back and said that it could not do that either.

After 18 months of negotiation the health authority asked whether it could have partnership deal. We said that that was what we had offered 18 months ago, but we were happy to go along with it. Finally, amid great rejoicing, we signed a partnership deal with the health authority. Two weeks later the health authority rang us up and said that it had made a mistake and had been told by London that that was illegal and the health authority was not allowed to sign partnership deals. We said that it might not be legal for the health authority but it was legal for us to do so. We said that if the health authority liked to renegotiate the deal we should be delighted, and would it like the share deal we had suggested after we had offered the partnership which the health authority had originally turned down.

At the end of the day we succeeded in making a deal. We bought, built and opened a 24-bed facility, 15 per cent. under budget and within six months from the day of purchase to the day of opening. The health authority had not managed to achieve that before. The facility was popular, even though the local clinicians were not very keen because they saw us as being in competition. They said that the facility was not necessary because very few people attended what used to be called the "drunk tank" at the local general hospital and there was no great call for the service. We were full in three weeks and the facility has remained full ever since. That may have had something to do with the fact that we provided an infinitely better level of care at £169 a day whereas the health authority had provided a dreadful Victorian level of care at £220 a day.

The health authority contracted for eight out of 24 beds, which cost it about £400,000 per year. That is quite a lot of money but the authority was our partner and owned half of the facility. Therefore, it received half of the profit, which was £400,000 per year. In other words, the authority had its beds for free. I believe that that is quite a good deal. The patients thought it was quite a good deal and the parents, relatives, children and employers of the patients thought it was quite a good deal, as did the neighbouring health authorities. They queued up to buy beds from us.

There are benefits to be had. However, I am concerned about one aspect which the noble Baroness mentioned; that is, the ability of health authorities to monitor such projects. My experience of the health authority in the Midlands was that it had no ability to monitor. It was known what was in the contract because that was in black and white but when the officials of the authority came in, they had no ability to see whether or not they were getting what they were paying for. We had to say to them, "You paid for this", and show it to them. We discovered that the clinicians who were purchasing and responsible for managing existing facilities within the health authority were not qualified to do that. That is a cause for concern.

We discovered also that the managers who were running the health authority—and they had a budget of £180 million which is not a small budget by any standards—had no ability to manage even our small affairs. Their ability was zero in that regard. They were late for meetings and never had the paperwork together.

I tell your Lordships a fascinating story about that. Originally we decided to purchase the building together and three weeks before we purchased it the officials rang us and said, "Listen, we have spent under budget this year. We should be most grateful if you could let us buy the building. In that way, we could hide some of the money". We told them that if that is what they wanted to do, they should go ahead and do it. In many ways that was good because it meant that they continued to own the building. We asked the officials whether they would like to use their lawyers or our lawyers. They asked to use our lawyers because they said that they did not retain lawyers.

We asked our lawyers to take on the work. They rang us up and said, "Are we buying the building on behalf of the health authority?" We told them that they were. They then asked us to guarantee payment because on the last occasion that they had been retained by the health authority, it had not paid the bill. That is not satisfactory but that is the way in which the authority conducted its business. We taught it that that was not a good way in which to do business. It would be extremely beneficial for health authorities to learn that lesson.

There are huge problems as regards forming contractual relationships between private limited companies, which are governed by the Companies Act and the rules of the Inland Revenue, and an organisation which has never heard of the Companies Act, and not only has never met the Inland Revenue but also does not know how to read a balance sheet. Therefore, forming a marriage between those organisations is problematical. That is an area in which the Government could do some work.

My honourable friend Mr. Sackville outlined how he would like the Government to proceed, but I suggest that the health authorities need much more practical experience than the Government are planning to give. They need assistance as to what kind of deals should be done and how the contracts should be written, monitored and audited. I believe that the Department of Health should provide a small team to visit health authorities and teach the finance departments what they should look for and what kind of contractual arrangements they should have in mind. That would be extremely constructive.

We need to think about levels of profitability. It is unacceptable that private contractors should make ludicrous profits from their relationships with a health authority. We need to sit down in advance to consider what is an acceptable level of profit. When we did our deal in Nottingham I visited the Department of Health and I said, "I think this is what it will cost. This is the kind of deal that is envisaged. What do you think?" The department thought about it and wrote back to me saying that it thought that a 25 per cent. to 30 per cent. profit on turnover is acceptable. We then geared the project to that figure. We said that we would look at it again after a year and if we thought it was unacceptable we would change it. When starting out on such projects, there is a need to be open. One of the nice things about doing a deal with the health authority is that however incompetent it is, it will not rip you off. It is extremely pleasant for anybody operating in industry today to know that.

I believe that these ideas are good and could be developed. I believe that the Department of Health needs to look at removing the largest capital feature of the relationship—buildings—from the equation. I see no reason that health authorities could not lease or let their existing buildings to private providers. I do not know whether or not it would be a repairing lease; that is for them to work out. However, I believe that that would be a good idea because it is difficult for a company to say that it would like to do a deal with a health authority but it must spend £10 million to provide the building when it does not know whether or not there will be any business at the end of it. Therefore, there is no reason that health authorities should not allow private operators to operate within their existing buildings. I believe that removing the property side of the deal from the relationship would be helpful but, again, that is an area for negotiation.

The other area which needs to be looked at is the resistance of clinicians. The noble Lord, Lord Dean, mentioned working practices in his speech. We found that most of the employees who came from the health service to work for us had no concept of what work was about. At 5.30 they went home whether or not there was a patient to process; that was unacceptable. The chief nurse whom we employed came with a list of qualifications as long as your arm but lasted for only five minutes. She was not prepared for the rigours of the real commercial world. That was very sad.

The highest level of resistance we met was from a local clinician who fought us tooth and nail. The reason was that merely by opening our doors and welcoming in patients, we showed up the appalling quality of service which he provided. I have been aware of that feature of health service life for some time in that particular area of operation.

I believe that increased private sector involvement, if it is very carefully monitored and audited, must be good. We should do all that we can to encourage it. However, progress needs to be made slowly, although not slowly in financial terms. It needs to be watched much more carefully by the Department of Health. If the department expects health authorities to act in a more commercial manner—and it should expect that —then it too must learn to act in a more commercial manner.

Having said that, apart from two exceptions—accident and emergency and mainstream medical care —I believe that every other specialist area would, should and can benefit from private expertise. I hope that the Government will continue to encourage that.

6.38 p.m.

Viscount Bridgeman

My Lords, I have along-standing engagement and I ask your Lordships' indulgence if it is necessary for me to leave before the end of the debate. I thank the noble Baroness, Lady Jay, for initiating the debate on such a topical and important subject. I find that I am developing a theme to which my noble friend Lord Mancroft has just spoken.

I too must declare an interest as a director of a company in the private health care sector. A brief history of that company may be relevant to the debate. The company was originally concerned primarily with nursing agencies, which survived the onslaught against them by the Labour Government in the 1970s. In 1977 the company was acquired by the National Enterprise Board and, largely because private health care was not the flavour of the month with the then government, it was disposed of two years later. Fortunately the company prospered in its new home and in due course it became a publicly listed company.

Let us contrast the environment in 1977 with the position today. Under the purchaser/provider regime, the private sector has the freedom and opportunity to compete on a level playing field and to provide good medical services at affordable prices. That one company's activities currently provide an interesting snapshot of how it now relates to the National Health Service in any number of ways but primarily in four areas. First, there are the company's nursing agencies, where 25 per cent. of the company's nurses and carers provide supplemental staffing to the health service across the whole of the UK.

Secondly, the company has contracts with a number of health authorities and helps them to cope with the large number of mentally ill patients who are in the community as a result of the Mental Health Acts. Treatment is provided in a specialist unit of a hospital owned by the company which serves a wide geographic area in which it would be uneconomic for individual health authorities to establish their own units.

Thirdly, the company runs a National Health Service rehabilitation unit under contract. Here again, the workload spans several health authorities.

Lastly, there is a doctors' deputising service in centres of population in the Midlands and the North of England. It is probably true to say that, without the services of that and similar private-sector companies, the family general practitioner service in cities such as Liverpool and Manchester would not be able to function. I hope that that is not an unrepresentative example of one company's involvement with the National Health Service.

I should like to make one further point. I was talking recently in a totally private capacity to the chief executive of a large NHS hospital which was contemplating the development of a private wing with private-sector funding. How, I asked, did that go down with those concerned and particularly with the health service unions? He said, "Oh, everybody is happy. More patients will get treated because the consultants will not waste so much of their time poisoning their fellow humans with carbon monoxide in traffic jams between two or more hospitals and the hospital will make money out of it". He particularly mentioned that the ancillary staff and their unions appreciate that, at the very least, they are better off working for a profitable rather than an unprofitable employer—and that hospital is not yet a trust. However, perhaps my friend was having an easier ride compared with some of his colleagues. But, nevertheless, it is an interesting example of the very welcome attitude of the unions in such cases.

We live in an exciting and challenging time for both sectors of the health care industry. Let us not try to score points by questioning who needs whom more. It is just clear for all to see that the public and private sectors can derive great benefit from each other. The gainer is quite simply health care in this country. Now that the purchaser-provider system is becoming ever more widespread, the simple criterion for private health involvement is the product, what it offers and what it will cost. The challenge and opportunity are there for both sectors. All my observations lead me to the conclusion that the challenge is being accepted with enthusiasm by both sectors.

6.42 p.m.

Viscount Addison

My Lords, I too should like to thank the noble Baroness for initiating the debate. My interest in the broader spectrum of health on this occasion stems from two facts. First, my grandfather, and the colossal strivings which he made as first Minister of Health; and, secondly, my involvement in complementary therapy, initially through my wife's training as a fully qualified aromatherapist and then a later involvement with the International Federation of Aromatherapists. Having been used by all and sundry as a "massage guinea pig", and having constantly tested my wife's obvious knowledge in anatomy and physiology and in the chemistry of oils, I feel that I have enough—to coin a phrase—"hands on knowledge" to speak.

It is becoming imperative that the broader band of both complementary medicine and therapy is controlled by government legislation. Neither the First Diploma Directive 89/48/EEC of April 1991 nor the Second Diploma Directive 92/51/EEC, due to be implemented in June 1994, appear to regulate occupations in the field about which I wish to speak.

I believe that there is a strong consensus that it is wrong to say, "Let's wait and see what comes out of Brussels". There is a need for the tightening up of ground rules in the quality of training offered in the various complementary therapies, as well as educating the general public in order to safeguard them against the hazards brought about by the ignorance of poorly trained therapists.

There are many aspects which require attention in the care sector. For instance, in aromatherapy, anyone can give the public a treatment after having received the minimum of training; in fact, he or she can actually start teaching the subject. Technical colleges, run by local authorities, are one of the offenders. Aromatherapy courses are offered which probably cover a few hours of an evening each week. Tuition is given for a fraction of the fee required at a registered aromatherapy school.

Those quickie courses do not include any knowledge whatever on anatomy and physiology, client care or the chemistry of oils. Students attending those establishments are taught some kind of massage and knowledge of a few oils. The students have no idea why the oils are beneficial. They are not taught the oils' constituents or properties so, therefore, they are also unaware of the toxicity of certain oils.

Aromatherapists who have gone to great lengths to get trained properly in a recognised school are finding themselves having to struggle to earn a living because they are continually in competition with someone who has done a quickie aromatherapy course, who then does the therapy on a part-time basis and is in a position to undercut anyone else. There are nurses who have been medically trained who have now taken up complementary therapy instead of orthodox medicine. They, too, are finding it very difficult to survive because of the commercial angle which is very rife at present.

Recently there has been grave concern about children accidentally ingesting the oils. Properly trained aromatherapists are made aware of the dramatic safety precautions required on labels and on the labelling of bottles, and of the use of child-proof tops and bottles. Here, marketing within certain companies is clearly at fault for not labelling oils more clearly.

Associations like the IFA can monitor their own members, but they have no control over the therapist who does not go through a recognised training route. The public are also at risk when, after reading a book on aromatherapy, they may obtain essential oils over the counter. The IFA receives hundreds of letters a week—written in by members of the public who have read some magazine or other and now want information on the oils. Both time and money are spent by the IFA (which is a charity organisation) on educating the public about contacting a registered IFA aromatherapist. Brochures containing those names are given out to the public. But the public are under the impression that they, too, can buy any of the oils and give themselves a do-it-yourself treatment.

The International Federation of Aromatherapists is the only organisation that has set up its own Education Council, Examination Board and examiners. A registered school must implement certain rules regarding the experience of their tutors and teach to the IFA syllabus. At the end of the course the student not only has to pass the in-house examination, but must also enter the IFA's own external examinations which have been in progress since March 1990—examinations which cover anatomy, physiology, massage, business and aromatherapy in all aspects of theory and practical—before being admitted as a full member of the IFA. Those external examinations are evidence that the student has been taught to the high standard required by the IFA. That then protects the student and, ultimately. the general public. Moreover, an insurance cover of £1 million is obligatory.

Because of the demand by the public in particular for aromatherapy, there has to be some legislative hacking from the Government in an effort to tighten up a complementary therapy which not only is in the interest of the public but which is also in the interest of the medical profession. I say that because it is now being used in hospitals, hospices and in intensive-care units.

In September, the nursing profession is introducing its own magazine based on information on a number of complementary therapies. It includes aromatherapy and details where to go for training. This, now, is another threat to the qualified aromatherapist. It is visualised that, naturally, the public would rather have aromatherapy treatment from a medically trained person rather than from a qualified aromatherapist who, incidentally, has probably gone through the same extensive training in anatomy and physiology as the medically trained therapist. So where does that leave the aromatherapist'? It will be another struggle for survival unless something is done to acknowledge the people who are prepared to go through a training worthy of legislation.

In summary, it seems that associations like the IFA leading the way by its demands for good training can control some schools and can make a difference to some extent. Yet, with legislative backing, more can be done. Not only will it support the properly trained qualified therapist, it will also serve the public with something that is evidently wanted; namely, complementary therapy. But most important is the fact that the safety of the public will be guarded, as well as their satisfaction. It is now evident that these complementary therapies can be used for most health problems without the side effects often brought about by some conventional medicine. At the same time they would release much of the burden weighing heavy on the massive shoulders of the health service

6.50 p.m.

Baroness Robson of Kiddington

My Lords, I, too, wish to thank the noble Baroness, Lady Jay of Paddington, for introducing this debate this afternoon. I believe it was the noble Lord, Lord Crickhowell, who said it was a coincidence that we should have two debates today which have called attention to the private sector contribution in our national life. The first debate concerned transport and roads and rail, and this debate concerns the National Health Service.

I find it easy to accept the fact that it makes sense to encourage the private sector to contribute to roads and railways. My only reservation is that I believe the Government have not raised an enormous amount of enthusiasm within the private sector for this kind of investment. I am also happy to accept that the private sector can make a contribution to the National Health Service.

The noble Lord, Lord McColl, accused us of always bellyaching about the National Health Service and of only talking about what is wrong with it. He said we never praise it. I must inform the noble Lord that in my view the NHS, which was introduced in 1948, was and remains one of our finest institutions. It has completely transformed the lives of people in this country. The National Health Service is considered by British people to be almost a right of citizenship. All of us in this House, as well as the majority of the public, are aware of the ever increasing demands that are being placed on the service due to technical advance and demographic change. The public are quite rightly worried about where the cash for those ever increasing demands will come from.

The Treasury is at the moment considering the introduction of further charges on, for example, prescriptions for exempt groups. That has created a fear in the public's mind that the principle of the NHS, which is that it should be free at the point of need, is being further eroded. The possible introduction of bed charges has added to that fear. Perhaps the Government should consider taking the public more into their confidence before these possible changes ppear in the press and create a natural fear among the public. Mrs. Bottomley's statement on the increased involvement of the private sector at a conference organised by the CBI on 26th May needs careful examination, despite her assurance that the NHS does not exist to make a profit and is "not for sale". She also said that, care had to be provided on the basis of clinical need, irrespective of the ability to pay". Private involvement in the NHS is not a new idea. That involvement already exists and has done so for years. In 1974 I was the chairman of the South-West Thames Regional Health Authority. That authority began to introduce private contracting. We had a fully staffed legal department. It did not take long for us to realise that we would be financially better off contracting private firms to carry out our legal work. There was also a works department at the regional health authority. That department was solely responsible for all new hospital design in the region. We began to dismantle that works department by introducing private firms of design consultants and thereby reducing our staff within the regional health authority. I believe we saved some money by doing that, but I doubt whether in the end we saved a great deal of money as we still needed to keep engineers and architects to oversee the design and construction of our hospitals to ensure that standards were maintained.

It is important to stress that when one contracts out to the private sector one still needs to monitor standards. As many noble Lords have mentioned, the private sector is already involved in the provision of kidney dialysis and the leasing of medical equipment as well as providing facilities for patients recovering from operations. The private sector also provides practically the majority of residential and nursing care. Facilities for residential and nursing care and for recovering from operations are all governed by a licensing system which can ensure a reasonable control of standards and the monitoring that must follow the licensing system. The fact that residential and nursing homes must be licensed gives a feeling of security. But what concerns all of us is how the NHS will deal with the contribution of private industry to the health service.

The noble Lord, Lord Dean of Beswick, mentioned the tragic waste of money at Wessex Health Authority, the West Midlands Health Authority and in the London Ambulance Service. According to the article in the Financial Times in those cases the entire health authority board were only informed of the contracts when they had already been signed. We must ensure that the non-executive directors on any health board or any trust board take complete responsibility for the actions of the health authority. It is not right to leave decisions to an executive administrator, however efficient he may be. The decision must be taken by the whole board. That is, after all, a responsibility that all company directors have to fulfil. The department must emphasise that point again and again to ensure that these tragedies do not recur.

I have said that it is possible because of the licensing system to maintain some kind of control over the provision of residential and nursing care. However, what worries me greatly about Mrs. Bottomley's statement is her forecast that the private provision of home help and other domestic care services might be entered into. That gives me great cause for concern because adequate control of standards will be difficult in such a dispersed service. Mrs. Bottomley made no suggestions on how supervision will be carried out. We all believe in community care but the increased emphasis on it is already causing problems because of a shortage of finance. We do not want any further problems with community care because of a lowering of standards in the service provided.

The other matter that Mrs. Bottomley very often omits to mention—it was not mentioned in the Tomlinson Report, Mrs. Bottomley did not mention anything about it in her address to the CBI and nothing is mentioned in her statement—is the enormous contribution made by the voluntary sector on both finance and provision of care. The organisations involved are non-profit making, and much greater support by the department of these bodies might be of enormous benefit to both patients and staff.

I happen to be chairman of the National Association of Leagues of Hospital Friends, which raises £31 million a year for the health service. That is not an enormous sum of money compared with what the health service absorbs, but it provides much-needed equipment for hospitals. Above all, an enormous number of voluntary hours are put in, not only by my organisation but by all the health care organisations. I hope sincerely that the Government will not disregard that in their reorganisation of the health service.

Of course we all recognise that the private sector has a role to play in providing choice in health care for those who can afford it. However, the provision of private health care must not result in a reduction in the health services available under the National Health Service. Our foremost concern is that access to health care services may be reduced through an increased role for the private sector. I am not satisfied that there are, as yet, enough safeguards, but it may be that the noble Baroness will be able to tell us that the safeguards are built in. As far as I know, there is no independent national body to oversee how the NHS operates or how changes impact upon patients and users of the service. That will be even more important the greater the contribution of the private sector.

7.2 p.m.

Lord Williams of Mostyn

My Lords, I thank the noble Baroness, Lady Jay, for giving us the opportunity to debate this subject. I have listened to your Lordships' contributions with great care. I cannot overlook in the beginning my old sparring partner the noble Lord, Lord Crickhowell. He has said on previous occasions that the inevitable consequence of anything that I say to your Lordships is to confirm him in his former views. I am happy to reassure him that he does exactly the same for me. If I may say so, I was touched by the care which the noble Lord, Lord Mancroft, applied to this matter, without bogus party dogma and with an interest which was informed and impressive.

In my view, what the noble Baroness, Lady Robson, lately said is right. There is a significant danger that this galloping privatisation, whipped on —urged on indeed—with vim and vigour by the noble Lord, Lord Crickhowell, will have deleterious effects. There is a chasm between us. We shall never agree because we differ fundamentally on a philosophic basis. If the noble Baroness, Lady Jay, had not been quite so wilful and headstrong and had listened to the advice of an older man—namely, myself—we could have had this debate next month. We would have achieved perfect symmetry. In mid-July it would have been the 45th anniversary of what I agree with the noble Baroness, Lady Robson, is one of the noblest achievements this country has brought about.

Nothing will be heard from us, I emphasise to the noble Lord, Lord McColl of Dulwich, which will run down the National Health Service. I entirely agree that people should not be frightened by bogeymen, nor should they be left fearful and afraid because of political uncertainties, which is how they presently are. We do not govern those political uncertainties. The noble achievement, it is worth repeating, is the provision of health services and care to those who need them on a national basis, accountable, admired, loved.

There are many of us here who know America and have a good deal of regard for part of its way of life; but the fear of being ill, of being old or of becoming infirm stalks that country even now, despite its wealth and advantages. That fear has been vanquished here and it has been vanquished here on one basis only: the construction and maintenance of the national health system. I do not wish to play with figures about which country on the continent of Europe provides one-half per cent. more of its gross annual product. The true comparison is what we have here, what we fought for and invested personal commitment in, not just money, as compared with what America lacks.

The worry that we have—and it is independent of party political achievement—is that fear is going to return that you will not be able to be old, infirm or ill because you will no longer have the benefits for which you thought you had contributed. It is deeper than that. Those who have no knowledge of this country and its meaning do not understand that it has different characteristics. It is still, despite its recent misfortunes, ordered, calm and peaceful compared with its neighbours. It is in that fortunate state because there is a consensus that some things must and should be provided by us all for us all and that there is still a moral perspective beyond that of selfishness, greed and private profit. That is why I said when I began that there is a gulf and a chasm between us which we shall not bridge: nor do I want to.

The Prime Minister has spoken of his desire to see a country more at ease with itself. This country is becoming uneasy. There is a deep malaise. Much of the fabric is disintegrating. Who can walk around this great capital without a sense of shame and anger that the physical fabric is falling apart and that public services are being devastated? I see a head being shaken in dissent. It must be a lone dissent among the people who inhabit this great city with the flotsam that lives in its streets.

I say, for your Lordships' consideration at least, that these things do not come about by chance or misfortune. We refuse to believe that nothing can be done. We decline to accept that these consequences have no human cause nor any human remedy. This present Government, so long as it remains, is distinguished by two characteristics. Those are, first, incompetence and, secondly, arrogance. I have done my best to work out in my own limited way which had done more harm to this country, and I simply have not been able to decide between them.

When I began, the noble Lord, Lord Colwyn, was not in his place. I wished to refer to his speech, since he has provided a useful quotation which I was about to seize on. Since Colwyn is not too far from Mostyn, perhaps he will forgive me. I am sure it is Colwyn Bay and not Old Colwyn, but I will use his quotation if I may. In the last century, those who ran companies on bogus prospectuses used to go to prison. Nowadays they seem to go to Northern Cyprus, but I put that on one side. If one floated a bogus prospectus, one went to prison. They did things differently then because, as we all know, the past is a foreign country. Perhaps I may follow behind the noble Lord, Lord Colwyn, with regard to the false prospectus, quotation for quotation, perfectly virginal and intact. The quotation is: There will be no privatisation of health care, neither piecemeal, nor in part, nor as a whole, not today, not tomorrow, not after the next election, not ever while I am Prime Minister". I quote John Major, October 1991. What a hostage to fortune: "Not while I am Prime Minister".

How that statement is capable of being reconciled with what the noble Lord, Lord Crickhowell urged, I cannot understand. His point is quite separate. I respect his approach; it is plain, and clearly expressed. We shall wait, silent, respectful and agog for the Minister to be able to explain it to us. I hope that there will not be too much smoke and mirrors but just a straightforward explanation. Alternatively perhaps we might even hear those little words, "We got it all wrong", or, "We have changed our minds".

Lord Crickhowell

My Lords, if the noble Lord will give ground, perhaps I may take this opportunity to say this. If I was discourteous to the noble Baroness who opened the debate, I apologise for that. However, I am quite unable to understand why anything that I said—I described having presided over the greatest improvement to the health service in the Principality that has ever taken place—was irreconcilable with the principles spelt out by the Prime Minister, with which I wholly agree. What is the conflict in providing those services with the aid of the private sector?

Lord Williams of Mostyn

My Lords, I listened to the peroration of the noble Lord, Lord Crickhowell. It was that we have been far too slow at privatisation; that we need to be much quicker at it; that we should have got on with it more quickly in the past. That is on one hand. On the other hand, I repeat the words: There will be no privatisation of health care, neither piecemeal, nor in part, nor as a whole, not today, not tomorrow". I do not find those principles reconcilable. I have not had the benefit of a substantial Jesuit education, my own having been Calvinistic Methodist. If the noble Lord, Lord Crickhowell, cannot understand the difference, I believe that the chasm remains.

The contention for which we stand is that the National Health Service is unique. It is the provider of treatment and care, in the community and in hospital, for surgery and for accident, and because the vast, overwhelming bulk of our fellow citizens prefer it that way. That is the truth. Whatever political allegiances people have, they revere the service that is provided. They wish to be able to trust in it. They feel affection and regard towards it.

I entirely agree with the observation of the noble Lord, Lord Mancroft, that one needs efficient management. One needs the efficient management which was referred to when considering contracting for artificial limbs or working out the difficult conclusion that a filter might be used more than once. But that is a defect of internal management. It is not a defect of the National Health Service in public control any more than one could say—I never would, of course, in your Lordships' House—that the failure of the Lloyd's insurance market means that no private organisation ought to conduct a private business in this country. That would be an absurd suggestion. Therefore I shall not make it.

What is worrying to us is the corruption of the National Health Service. It is a word that I choose with some care. It has become corrupt when we have a situation in which a hospital of the quality of Bart's can be spoken of by the Secretary of State for Health, in words which will come to haunt her, "I am not an arm of National Heritage". Harefield, with its personal commitment and investment of people, may well be axed on a superficial, careless, contemptuous review.

The corruption is this: that the National Health Service is increasingly being run by place men. They are not accountable. The chief characteristic which commends them to those who appoint them and direct them is malleability. Whatever our political views, we should not be content with that. A good many of the 127 speeches given yesterday and the day before—some of which, alas, I missed—were on the basis that our democratic controls were to be stripped from us. They are going, my Lords. They are eroding before our very eyes. It should not be a qualification for public life and public control in these important sectors that one is simply there to take one's riding instructions. That is a corruption which we shall live to regret.

The noble Lord, Lord Dean of Beswick, referred to the other corruption. Now is not the occasion to deal with it. We shall return to the issue when we have better ammunition and fully primed guns, and when notice has been given to those who may be criticised.

The fact is that this Government do not listen, do not read and are not capable of having an open mind. The impression abroad is that they have become stale and arrogant with too much power—that they are already terminally concussed after a year of existence. Confidence has gone away, as has my time. I must apologise to your Lordships. I should have listened to the Leader of the House more carefully and have realised that 14 minutes meant that 13 minutes had gone.

As I say, there is a chasm between us. We shall not resolve it. However, what is being done in many areas of the National Health Service is vandalism; it is barbarism; and come the next election this Government will have lived to regret it.

7.17 p.m.

Baroness Cumberlege

My Lords, I am grateful to the noble Baroness, Lady Jay, for initiating the debate because it gives me an opportunity not only to acknowledge the benefits which the NHS gains from its partnership with private enterprise but to lay some ghosts, some fears, concerning its fundamental values.

Like the noble Lord, Lord Kilmarnock, and the noble Baroness, Lady Robson of Kiddington, I should like to start with a little history and a look back with the noble Lord, Lord Williams of Mostyn, to the start of the NHS and the 1946 Act.

Re-reading the Act it is disappointing in that the people for whom the NHS was established scarcely merit a mention. It is more about doctors who at that time were fearful about the introduction of the new service. To win their support the Act ensured that GPs should remain as private contractors. So today "My doctor" is self-employed, not employed by the NHS. In that sense, the privatisation of GPs was written into the 1946 Act.

I make that point because it illustrates that pragmatic decisions have had to be made from the start which have tarnished the "white as driven snow" theory. Since its earliest days, there has been cross-party consensus that NHS charges for those who can afford to pay them have a limited, but useful, part in raising extra revenue. As my noble friend Lord McColl pointed out, the Labour Party still denounces that principle in opposition; although it has embraced it in Government.

The NHS is reliant on the drugs used for combating disease, the vaccines used for immunisation, and the equipment used in theatres, wards, X-ray departments, kidney dialysis and so on. Those are manufactured by the private sector. The NHS has never sought to enter the drug industry nor the manufacturing industry in a serious way.

I know that there was a time, and perhaps there still are instances, where long stay hospitals have had gardens and farms to produce food in order to create a therapeutic environment for patients. But the NHS feeds 7.5 million acutely ill people a year. It buys its food from the private sector.

The noble Baroness, Lady Robson of Kiddington, referred to the South West Thames region's capital programme. She is a former chairman of that region. We shall invest a huge amount—over £2 billion this year—in a hospital building programme. Although the design in the past may have been in-house, construction has always been largely undertaken by private contractors. Fortunately, the NHS has never fallen into the trap of having large direct labour departments like local government.

The point I wish to make is that the NHS has always been a mix of public service and private enterprise. The demarcation line between the two is one of tradition rather than one of logic. The noble Lord, Lord Kilmarnock, was absolutely right when he said that the NHS ethos is not eroded if the NHS does not supply every service.

The noble Baroness, Lady Jay, painted a fanciful picture of people paying for a better service within, the National Health Service, but it was a Labour Government who, in 1971, made payment; for amenity beds a policy.

When I started as a district chairman of the Brighton Health Authority I was surprised to find that for years much of the laundry had been done; by a private company. I was surprised, not because I did not think it was a good idea but because it was happening locally, long before it was national policy to test the market. To pick up the point of the noble Baroness, Lady Robson, it was a contract that was closely supervised and well managed.

The involvement of the private sector in aspects of the work of the health service has brought enormous benefits to patients. The savings that have resulted from putting domestic, catering and laundry services out to tender have achieved a staggering £1 billion over the past 10 years, all of which has been ploughed back into patient services.

My noble friend Lord Crickhowell pointed out in his interesting speech that it was only a few years ago that hip replacements were unknown. In 1990–91, 44,500 of those operations were carried out, relieving many of the elderly people, who benefited, from severe pain and enabling them to lead active lives. But one of the problems until recently with that particular operation has been the waiting times for the operation. Three or four years ago, people believed that waiting times of over two years were a necessary evil, a price to be paid for treatment on the NHS. Last week I visited the Mersey region, where there has been an almost total elimination of waiting lists over one year, accompanied by a stringent monitoring of the time to see a specialist, with a maximum wait of 13 weeks. Other regions are catching up. These are very tangible achievements and we take pride in them. But the Government are not complacent. Where we can reduce these waits further by using resources more effectively, then that is what we must do. If we can save £1 billion on domestic services we must ask: Where can we find more savings elsewhere, to improve services still further and translate those savings into shorter waiting times and better patient care?

Again, while I was chairman of the Brighton Health Authority in the early 1980s, when hip replacement operations were getting behind we bought them from a private hospital, the King Edward VII at Midhurst, whose services were excellent. There was no question of NHS patients paying for the treatment, any more than if they had been treated in an NHS ward. No one that I can recall complained about being sent to a private hospital. On the contrary, they were relieved to have had their operation, because people are pragmatic. They want good efficient health care and they are not terribly worried from "whence cometh their help".

Despite the huge cumulative expenditure invested in the NHS outlined by the noble Lord, Lord Kilmarnock, we must continue to be pragmatic. Public expenditure is under review and however much those on the Opposition Benches would wish otherwise, the NHS cannot be immune from that task of reviewing its expenditure. Controlling borrowing is vital to sustain economic growth and we need that growth to provide resources for the NHS. For without wealth there is no welfare.

My noble friend Lord McColl pointed out that it was a Labour Government who placed a ceiling on NHS expenditure. None of us wants to return to the days when the IMF governed this country because the Labour Government could not balance their books. If we are to control expenditure, let us at least be in charge and set our own priorities.

The noble Baroness, Lady Jay, gave some interesting comparative international figures but I am sure she agrees that expenditure is no measure of the health of the country, nor the quality of services given. I very much agree with my noble friend Lord Crickhowell that the greatest disservice we can inflict on the NHS is stagnation and fossilisation of thoughts and ideas. The NHS must be a part of today's world. The speed of change in medical advance has to be matched by a readiness to change the services that back up medical treatment. The Government have found that change has been propelled by medical advance and social expectations rather than dogma. If the Government are accused of having as a dogma the elimination of waste and inefficiency, then that is a banner this Government are proud to parade. If this Government are accused of innovation, of freeing hospitals from bureaucracy under their new trust status, then that also is a banner that we will parade. If we are accused of trusting our own GPs as fund holders to arrange the best treatment for patients, we will also march behind that banner.

The Government are aware that the speed of change is fast. We are witnessing a development of three strands of health care: high-tech hospitals, lower-tech nursing homes and care in the community. Each has its place and each must be sustained and improved. I particularly commend to this House the good start that community care has made, the anticipation of so many organisations in healthy alliances and the strides being made in the Health of the Nation programme which is aimed to reduce preventable disease and to promote health.

My noble friend Lord Colwyn, in a powerful speech on dentistry, showed how dentistry has led the way in this respect. He also went on to talk about complementary medicine, as did my noble friend Lord Addison. This is an important aspect and both those speeches highlighted the importance of people taking responsibility for their own health. That is a view very much shared by this Government.

My noble friend Lord Crickhowell mentioned the highly successful and effective health scheme for renal dialysis which he introduced when he was Secretary of State for Wales. Six years ago those of us on the other side of Offa's Dyke looked not only with interest but with envy as the Welsh were able to expand their services, making the most of all their national resources. I am glad that his patience has been rewarded and that we are now able to follow where the Principality led.

My noble friend Lord Addison, in giving a very informative speech on the value of complementary medicines, recognised the part that they can play in the NHS. I am impressed how increasingly lay and professional people recognise that complementary medicines are a very useful alternative source to traditional medicines and we are now increasingly seeing GPs, and particularly GP fund holders, using those services, I believe with good effect.

The noble Baroness, Lady Robson of Kiddington, mentioned the huge contribution made by the voluntary and independent sector and I endorse very much her views. Our services would be much the poorer without them. But again, increasingly we are placing contracts with the voluntary sector and using their skills and expertise in new ways.

My noble friend Lord Bridgeman mentioned his experience of a private sector company which provided nursing agency, mental hospital, rehabilitation and a doctors' deputising service. I am grateful to my noble friend for sharing with us that experience of working with a private company providing a variety of services to the NHS. As I said earlier, the Government welcome the provision of such services from the private sector and accept that they can often play a significant role in enabling the service to provide a fuller comprehensive range of services.

The noble Lord, Lord Kilmarnock, urged us to strike a balance on the level of health care expenditure in the private sector. I was interested in the figures given by him on the percentage of the total health expenditure spent in the private sector. The Government, though, have no target figure or maximum percentage for which they are aiming. We are committed to purchasing health care services as cost-effectively as possible, whether from the public or the private suppliers.

The noble Baroness, Lady Jay, and my noble friend Lord Mancroft addressed the issue of quality of health care if provided by the private or independent sector. I can address the noble Baroness's fears. Purchasers will endeavour to let contracts only if the suppliers can provide a quality service and prove that they can give good value for money. I agree with my noble friend that the experience to date shows not only the good value for money but also the better quality of care that can be achieved.

My noble friend's personal experience was of great interest. He may be right that not all managers are sufficiently street-wise to deal with the private sector. That is why the Government are putting so much investment into management and administration—a point raised by the noble Lord, Lord Rea. The noble Lord asked me about the proportion of health service expenditure that goes on these areas. Of course we wish to keep it to a minimum; but we are very determined, in the multi-billion pound business that we are running, to have effective management, skilled in that particular field.

The noble Baronesses, Lady Jay and Lady Robson of Kiddington, and the noble Lord, Lord Dean of Beswick, were concerned about accountability and safeguards where the private sector is involved. The issues concerning, in particular, the West Midlands and Wessex regional health authorities have been very well rehearsed in this House. As the noble Lord is aware, the Government fully recognise the seriousness of the issues concerning the management structure and controls in both the Wessex and West Midlands authorities. Those concerns have been echoed in the Audit Commission reports in the public interest, and in the Public Accounts Committee hearings. The Government are determined that every action is taken to ensure that the problems do not occur elsewhere. But as noble Lords will be aware, it would be unrealistic for me on this occasion, as on others, to give a categorical undertaking that that situation will never ever happen again.

Even with its few shortcomings—and I would never profess that the National Health Service is perfect; it is too large an organisation for me to make any claim of that sort —I believe that we have a superb health service with an army of dedicated, committed people working in it. We are rightly very proud of it. Unlike the noble Lord, Lord Williams of Mostyn, I do not believe that the NHS is disintegrating or falling apart. On the contrary, I believe that it has been enormously strengthened by the reforms that have been introduced. I believe that it has a new lease of life.

The noble Lord quoted the Prime Minister. I cannot understand the noble Lord's ambivalence on the statement made by my noble friend the Prime Minister. Unlike the Labour Party, we have a very clear policy. But we also welcome new ideas and new thinking. We do not stagnate in old philosophies and old dogma. But our new thinking must be anchored to the timeless values of the NHS: a service available to all on the basis of clinical need, regardless of the ability to pay. That is written into our manifesto.

I agree with my noble friend Lord McColl that there is nothing so destructive, so unkind, or so demoralising to old and sick people as to raise a spectre of the NHS betraying its principles. Trying to put the Government down is fair sport, but causing grief to vulnerable people is totally unacceptable. No one denies the Labour party its place in the history of the NHS, but for 31 of the 45 years that the health service has existed it has been Conservative governments who have looked after it and who have pursued the policies which have enabled it to evolve and improve. If it was really believed that the Conservative Party wished to destroy the NHS, it could surely have achieved that after 31 years.

By being prepared to embrace change we have improved patient care and strengthened the NHS at a time when the external pressures on it are mounting. The health service needs a constructive debate about how to respond to those pressures, so that we can continue to preserve its fundamental values. Casting doubt on the Government's motives, or seeking to scare through the emotive use of the word "privatisation", has no part in that debate. I hope that we can cast aside ideology, ditch dogma, and concentrate on how to build an even better health service for this decade and beyond.

Lord Williams of Mostyn

Before the noble Baroness sits down, perhaps I may ask this question in the simplest of forms: Is it, or is it not, still government policy that there will be no privatisation of health care, piecemeal, in part or as a whole, not today, not tomorrow?

Baroness Cumberlege

My Lords, I believe I made it absolutely clear. We stand by what was written in our manifesto. We want a service that is available to all on the basis of clinical need, regardless of the ability to pay—

Lord Williams of Mostyn

My Lords, I must not trespass, but my question—

Noble Lords

Order!

Lord Williams of Mostyn

My Lords, my question was not that. My question was quite simple. It was the question of the noble Lord, Lord Colwyn, which I respectfully reinforced. It is a perfectly simple one. Is that declaration still government policy, or not?

Baroness Cumberlege

My Lords, of course it is. I have explained very clearly what we mean by privatisation. I can understand that the definition may riot be the same as that which the Labour Party wish to put on it. But our policy is absolutely clear and for a third time in this debate I shall state it. We will offer a service to all on the basis of clinical need regardless of the ability to pay.

7.36 p.m.

Baroness Jay of Paddington

My Lords, I should like to thank everybody who has taken part in this debate. I think that what has been demonstrated, not least by that last exchange, is how political an issue the National Health Service is. I do not think that we should duck that or run away from it. But perhaps it was something to do with the temperature outside today which led to some of the remarks about the contributions made by myself and other people.

I was surprised, for example, to hear the noble Lord, Lord Crickhowell, describe my contribution as thoughtless, and to hear the noble Lord, Lord McColl, say that I was a propagandist. Were they to look at some of the criticisms of the health service, about which they were so concerned, made, for example, by their noble friends Lord Mancroft and Lord Colwyn, they would find them at least as formidable as those made by speakers on this side of the House. Indeed, echoing my noble friend Lord Williams of Mostyn, I can say that I am a total supporter of the National Health Service. I want to see it succeed, and I am very glad to hear the reassurance that the Minister has just given us.

Of course, the old concepts of debate about whether the private sector has any role in the health service are irrelevant. Perhaps I may respectfully say to the noble Baroness that whatever problems the Labour Party caused in that respect, I do not think they can have caused them in 1971, when Sir Edward Heath was Prime Minister.

My argument was designed to suggest that we are now on the verge of a very new system. We are not concerned with an argument about the old priorities, but that the joint pressures of the public expenditure cuts, which the noble Baroness frankly recognised, and the pressures of the private health care sector will, as she says, take us fast in the direction which concerns me very much.

As the noble Lord, Lord Kilmarnock, said—and the point was emphasised again by my noble friend Lord Williams of Mostyn—there is a deep philosophical divide on this issue. I do not wish to see the National Health Service become simply a regulator of health care in this country. That is what we cannot accept. That is where the philosophy is different. It must be a provider; and its provision must be free at the point of need.

I accept the point made by my noble friend Lord Williams that we should debate this question again at the time of the anniversary of the health service. We should have the philosophical debate. I look forward to it. Meanwhile, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.