Health Bill [H.L.]

HL Deb 15 March 1999 vol 598 cc474-534

3.7 p. m.

Report received.

Clause 2 [Primary Care Trusts]:

The Parliamentary Under-Secretary of State, Department of Health (Baroness Hayman) moved Amendment No. 1:

Page 1, line 15, at end insert ("with a view, in particular, to their—

1. (a) providing or arranging for the provision of services under this Part of this Act,
2. (b) exercising functions in relation to the provision of general medical services under Part II of this Act, and
3. (c) providing services in accordance with section 28C arrangements. ").

The noble Baroness said: My Lords, at Second Reading and in Committee we debated at some length the proposition that the Bill should provide a clearer indication as to what primary care trusts will be established to do. The idea received widespread support, including from the Delegated Powers and Deregulation Committee. There was also some debate as to what would constitute an appropriate level of detail. The noble Lords, Lord Walton and Lord Skelmersdale, and the noble Baroness, Lady Gardner, reminded us of the problems inherent in setting out detailed lists. In the light of our debates, I offered to attempt to bring forward a suitably broad amendment that would address the concerns of the House.

The Government's approach in drafting this amendment has not been to set out a long and detailed list of functions and objectives. That approach is fraught with risks of omission and very real difficulties in relation to defining precisely what various specific objectives might mean as a matter of law, and risks of imposing through primary legislation too rigid a framework for the operation of PCTs which cannot be adapted in the light of the fact that, over time, specific objectives may well change.

Instead, therefore, Amendment No. 1 sets out the broad activities that primary care trusts will be established to undertake. I hope that noble Lords will feel that in so doing we have managed to come up with a provision that is less skeletal than the amendment tabled in Committee by my noble friend Lord Harris of Haringey and perhaps also less skeletal than the amendment that is currently before the House in the names of the noble Lord, Lord Clement-Jones, the noble Baroness, Lady Thomas of Walliswood, and the noble Earl, Lord Howe.

To paraphrase Amendment No. 1, it means that primary care trusts may commission or provide hospital and community health services and develop primary care by exercising some functions in relation to general medical services. We want primary care trusts, in particular, to be able to deploy cash-limited funds to improve general practice infrastructure and support practice staff costs; and provide personal medical and dental services under the National Health Service (Primary Care) Act 1997—for example, by employing GPs in the way that community trusts already do under that Act. I am assured that, as a matter of law, this will give us a comprehensive list of what a primary care trust will be.

The amendment provides that the Secretary of State will establish primary care trusts with a view, "in particular", to their undertaking these broad functions. Those words are important for two reasons. First, the listed functions give a clear indication of the main purposes for which primary care trusts will be established, but the list does not set out to be exhaustive. It permits the Secretary of State to establish a primary care trust with a view to exercising other health functions. This fits with existing arrangements whereby health authority functions under Part I are, in the main, not directly conferred by a statute but delegated by the directions of the Secretary of State. Primary care trust functions will be largely delegated from health authorities. Setting out a long list of primary care trust functions would run contrary to this basic structure of delegation which has been a feature of NHS legislation since 1946.

Secondly, the amendment does not mean that each primary care trust must perform all the listed functions. For example, matters such as whether a primary care trust will be able to provide services as opposed to merely commissioning them will be left to secondary legislation—in this case the establishment order and directions—as will any restrictions on what primary care trusts can commission and provide. Such flexibility is vital, and I believe that that was accepted by the noble Earl, Lord Howe, at Committee stage when he said that he understood the arguments with regard to flexibility. We want primary care trusts to develop in imaginative new ways; we do not want to lock the service, through primary legislation, into rigid ways of working. I believe that the way services are commissioned and provided should be allowed to evolve in the light of changing needs and developments in clinical practice and technology.

It may be helpful if at this stage I give the Government's response to the amendment standing in the name of the noble Lord, Lord Clement-Jones, which I believe has much the same general purpose as Amendment No. 1. However, there is a difference in that it refers to the responsibility of a primary care trust for promoting and improving the health of the local community. I understand why the noble Lord has framed his amendment in that way and I am sure that, as a general objective, it is not one from which we would want to demur, but perhaps I may explain why the Government have not gone down that particular route.

The functions listed in the amendment all concern the provision of services under the 1977 Act. The fundamental duty of the Secretary of State under that Act, as set out in Section 1, is to promote a comprehensive health service designed to secure improvement in the physical and mental health of people and in the prevention, diagnosis and treatment of illness. The Secretary of State's power to direct health authorities and primary care trusts to exercise his functions is limited to functions relating to the health service. There is, therefore, a definite link between primary care trust functions and the overall objectives of the health service.

Primary legislation does not explicitly require health authorities to exercise functions for these purposes. Such a requirement would be entirely superfluous as a matter of law. We have adopted a similar approach for primary care trusts in the Bill for exactly the same reason. That should not be taken to mean that primary care trusts will not play a critically important role in promoting the health of their local populations. We believe that they will.

Amendment No. 3 also refers to the responsibility of a primary care trust to work within the context of the health improvement programme. I confirm that that is indeed the Government's intention. However, the Bill already makes provision for that and there is no need to replicate this on the face of the Bill.

Clause 21(3), on page 16 of the Bill, places a duty on the primary care trusts, NHS trusts and local authorities to participate in the preparation, or review, of plans. Clause 21(7)(b), at the top of page 17, provides that in exercising their functions primary care trusts must have regard to any plan in relation to which they have participated. I should point out that the powers of direction over primary care trusts contained in Clause 7 are also relevant here. Both the Secretary of State and health authorities will be able to give specific directions to primary care trusts to ensure that they play their part in achieving national priorities and in developing and delivering the local health improvement programme.

There is a reference in Amendment No. 3 to a PCT being a body corporate. Paragraph 3 of Schedule 5A—Schedule 1 to the Bill—already provides that every primary care trust shall be a body corporate and I believe that there is no need to repeat that in Clause 2.

I hope that the House will forgive me for explaining in some detail the thinking behind the amendment. I recognise that this is a matter of particular interest. We have tried to take on board the clear view expressed in Committee that there should be a statement of purpose on the face of the Bill and set out reasons why we believe that such a statement should be couched in the terms proposed in the government amendment rather than in those proposed in the alternative formulation. I beg to move.

3.15 p. m.

Lord Skelmersdale

My Lords, as one of those who on Second Reading and in Committee asked the Government to define their terms in relation to primary healthcare trusts, I am delighted to see this amendment on the Marshalled List. It may be that I am slightly slow or slightly deafer than usual this afternoon. I should be grateful if the noble Baroness would explain to what Section 28C, referred to in paragraph (c) of Amendment No. 1, applies. Clearly the reference must be to the 1977 Act, but I am not sure what the relevance is to the duties and intentions of the PCTs.

Baroness Gardner of Parkes

My Lords, perhaps I may ask the noble Baroness to elaborate on the expression, "body corporate". I ask that because, as a dental practitioner, at one time I owned a body corporate. Body corporates in the dental sense were designed to enable people who were not dentists to run dental practices. Indeed, I noticed from the press recently that Boots had acquired a body corporate and would now be running dental practices, so such bodies still exist. Is there any possibility under this Act that the body corporate could be taken over by people other than professionals, who would then run these health services? Could the whole of the health service be handed over to a body corporate?

I understand the body corporate to be a limited company. Perhaps the noble Baroness could tell me whether that is correct. If it is, is it subject to company law? Is it some other kind of body corporate? It is not a mutual. I should like to know the legal technicalities with regard to the body corporate to which the noble Baroness referred.

Lord Walton of Detchant

My Lords, having spoken in Committee against lists, which it seemed to me could never be sufficiently exclusive, or sufficiently inclusive to meet all potential developments, I welcome the amendment, which seems to me to be sufficiently broad to take account of future developments. In particular, I welcome the inclusion of the words "in particular" in the amendment, which means that subsequently, should it prove necessary, other functions could be added by regulation to those specified in the amendment. I believe that this is an admirable solution to a difficult problem and I congratulate the Government on it.

Earl Howe

My Lords, I thank the Government for bringing forward this amendment and for responding so constructively to what I sensed was a very widely held view during the Bill's earlier stages that there needed to be an explicit definition or statement of purpose for a primary care trust spelt out in the legislation. My only regret is that the amendment has a slightly circular feel, at least as regards paragraphs (a) and (b). To be told that a primary care trust will be concerned with the provision of services under Part I of the Act is reminiscent of the party of the first part being known in a contract as the party of the first party. I had hoped that a slightly more explicit framework could be inserted without undermining the important principle of flexibility to which the Minister alluded and which the Government understandably want to maintain.

However, the Government's amendment is considerably better than what we had before—which was nothing. Lest I sound too grudging, which I have no wish to do, one of the most significant words is "and" at the end of paragraph (b). I realise that the functions listed are not mandatory for every PCT but the word "and" seems symbolic of the comprehensiveness of a PCT's functions, certainly at level 4, and the linkage between its broader commissioning and providing role and its role as a provider of personal medical and dental services under Section 28(1) of the 1997 Act. Incidentally, that answers my noble friend Lord Skelmersdale. I hope that I have not over-interpreted the significance of the word "and".

I welcome the amendment and, in light of the Minister's comments, I do not intend to preach the alternative to which I added my name or that which I tabled in Committee--the wording of which was lifted straight out of the Government's White Paper. The issue is not as simple or as straightforward as it might appear and I am grateful to the Minister for her willingness to take on board the main point of principle which causes concern to so many of us.

Baroness Thomas of Walliswood

My Lords, ours is almost a composite amendment, incorporating a sentence derived from an amendment tabled in Committee by the noble Earl, Lord Howe, but omitting all the lists that other noble Lords so understandably disliked. Our language is also taken directly from bits of paper and guidance supplied by the department. It occurred to us that it would be better partly to link an amendment on purposes back to the 1977 Act, but I did not find myself competent at that, so we proceeded with the amendment that we first thought of instead.

I listened with interest to the Minister's remarks about the Government's amendment but confess to some disappointment that it does not set itself in the context of the Bill as well as of the 1977 Act. On the other hand, it is extremely welcome that the Minister has fulfilled her indication in Committee by bringing forward a comprehensive amendment. Persons who understand legal language will understand the amendment easily but others will be puzzled and will need legal advice. I regret that it has not been possible to link the amendment with the 1977 Act in the simple way that we proposed. However, in view of the Minister's excellent amendment, it is extremely unlikely that we will contest that point again.

Baroness Hayman

I am grateful for the support for Amendment No. 1. We have done our best with it but I share some of the concerns expressed by the noble Earl, Lord Howe, and the noble Baroness, Lady Thomas of Walliswood. I doubt that it would win a plain English award, but I hope that it satisfies the average legislator more than the absence of any definition in the first place.

The noble Earl is absolutely right when he says that the use of the word "and" is significant. We expect that PCTs will exercise all three categories of function but they do not have to do so. Neither are these necessarily a comprehensive set, so that we may acknowledge developments may occur. He was also right in answering the noble Lord, Lord Skelmersdale, about Section 28(1) of the 1977 Act, which refers to the personal medical and dental services that can be provided. In doing so, PCTs will be put on the same footing as community trusts and be able to provide personal medical or dental services.

To answer the noble Baroness, Lady Gardner of Parkes, a body corporate is a body with a legal personality. It is able to exercise the same rights and be subject to the same liabilities as a natural person, subject to the statutory provisions that govern it. That is a significant area for primary care trusts and is the limitation. Primary care trusts are statutory bodies corporate in exactly the same way as NHS trusts and therefore subject to the requirements of the Bill. A PCT can only be set up by an establishment order under the Bill for the purposes in the amendment. Therefore, it could not be handed over to the private sector. That is the legal mechanism for creating those clearly NHS bodies.

On Question, amendment agreed to.

Earl Howe moved Amendment No. 2:

Page 1, line 17, at end insert ("and following a majority vote by the members of the Primary Care Group concerned after consultation with all health care professionals that would be covered by the Primary Care Trust. ").

The noble Earl said: My Lords, this is grouped with Amendments Nos. 4 and 5, to which I have added my name. The amendments address an extremely important issue debated in Committee—the basis on which the Secretary of State should decide whether or not to establish a primary care trust. As the Bill stands, a proposal to establish a PCT could be made by a community trust, health authority, primary care group or a combination of those—whereupon that proposal would go out to consultation locally. The result of that process would inform the Secretary of State's decision.

My concern, which is widely shared among doctors and other healthcare professionals, is that those arrangements do not provide any assurance that the views of key stakeholders—the primary care groups— will determine the Secretary of State's decision. The worry is that a PCT could be established following wide and thorough consultation but without the positive backing of those most affected by it.

Consultation is an expensive process and it would be a thoroughgoing waste of NHS resources for PCT proposals to be put out to consultation without approval by the relevant PCG having first been sought. Another issue is implementation. Unless doctors and health professionals represented on a PCG are fully committed to developing a primary care trust and have a real sense of ownership of what is proposed, it is hard to see how the group could succeed in practice.

In Committee the Minister sought to be reassuring on those points. I fully acknowledge that the amendments previously tabled, at least by these Benches, did not properly capture the aim that the approval process should be wide and inclusive. But when I read again the Minister's language in Hansard it was odd. She twice repeated the phraseology of the circular of the Department of Health which said: It is our assumption that the support of relevant primary care groups would be required". The Minister said: We intend to establish PCTs in a way that is sensitive to local views". She also said: The views of PCGs, local GPs and other professions will be key considerations for the Secretary of State". With great respect to the Minister—I know that she intends to be reassuring—I do not believe that those phrases go far enough. They appear rather guarded. It is because the words seem so carefully chosen that I feel even more strongly than I did before that something of a more prescriptive and definitive nature should appear on the face of the Bill. I believe the Minister when she says that the Government want measured change with progression to trust status being driven locally. However, there is a lurking worry that what ultimately determines the Secretary of State's decision may not be the feelings and views of health professionals but, rather, the views of others or (heaven forbid) the fulfilment of a political agenda. The Bill should not allow for that and, therefore, I beg to move.

3.30 p. m.

Lord Clement-Jones

My Lords, the noble Earl has spoken to a number of very important points that reflect many of the reasons for Amendment No. 5, which is very similar to his own. It is particularly important that progression from PCG to PCT status is clearly understood and that safeguards are built in. In a very recent circular relating to management costs, it is made clear to health authorities that it is only by devolving to PCTs in due course that they will achieve the operational cost reductions required of them by the Department of Health. There will be considerable pressure on health authorities to ensure that the fledgling PCGs under their tutelage move towards PCT status, at least to level three, because it is only by moving on that those health authorities will reduce their management costs. It is extremely important to ensure that health authorities are not able simply to insist that a PCG becomes a PCT without the full consent of that PCG.

Like the noble Earl, I recognise that the Minister sought to reassure the Committee. She said that the Government could not put a requirement for consent on the face of the Bill because of particular circumstances. For example, two PCGs and the majority of GPs might want to go into a PCT but for some reason one of the PCGs, by vote of its members, might not be able to consent. That appeared to those on these Benches to be an exceptional circumstance; hence we have reflected that in our amendment. After all, if there were exceptional circumstances preventing progress from PCG to PCT status we would not wish to oppose that.

The language used by the Minister was in some ways more positive than that used in a letter dated 19th February from her colleague in another place. As the noble Earl pointed out, Mr. John Denham said: It is our assumption that the support of the relevant primary care group would be required". The noble Baroness said that the Government did not envisage circumstances in which proposals would go ahead without the support of PCGs. I appreciate that she was putting a gloss on that letter. However, the difference in the language of the letter is significant. All of the professionals to whom we on these Benches have spoken in connection with this amendment have said that clearly there is no point in going out to consultation on progress towards PCT status if the basic requirement of consent of the primary care group is not met. Therefore, this amendment seeks further reassurance from the Minister about the nature of the consultation. I hope very much that she will be able to give that reassurance today.

Baroness Carnegy of Lour

My Lords, my noble friend Lord Howe made a powerful case in moving Amendment No. 2. Almost everything he said has been repeated by the noble Lord, Lord Clement-Jones, in speaking to his amendment. I believe that this is a simple matter and should not be made too complicated. To move from a primary care group to a primary care trust is a very big step, particularly if the trust is to move to stage 4. It is a move that all the stakeholders must support if it is to work. The word "stakeholding" is absolutely meaningless if it does not mean that everyone has a stake. One cannot have a stake in something that one does not want. On those very simple grounds I believe that the Government must accept either this amendment or something very much like it. To reject the amendment would be extremely foolish.

Baroness Sharp of Guildford

My Lords, I rise to speak to Amendment No. 4. The amendment relates to a slightly different issue from the one raised by the noble Earl, Lord Howe, and by my noble friend Lord Clement-Jones. It relates to the wider process of consultation within the community over the establishment of primary care trusts. In Committee the Minister made clear that consultation about the setting up of primary care trusts would be mandatory. The question at issue was who should be consulted in that process. In particular we on these Benches were concerned that the consultation should involve both the wider medical community such as dentists, opticians, pharmacists and professionals allied to medicine, for example, physiotherapists, occupational therapists, speech therapists and so on, and lay members of the community represented by community health councils and the voluntary sector, including representatives of both carers and patients.

We had considerable discussion as to how far it was possible to prescribe who should be consulted by lists. The consensus, as on other issues, was that lists were too prescriptive and inflexible. The Minister echoed those thoughts. However, she assured us that the regulations to be made would specify wide consultation, including both the wider medical community, patient and carer groups and the voluntary sector. We made clear that we were not entirely happy with the response of the Minister. We have not yet seen the regulations. Can the Minister give an assurance that they will be laid before the House prior to this Bill going to the other place?

While we accept the dangers of being too prescriptive and inflexible, we maintain the core principle; namely, if primary care trusts are to work satisfactorily they must be owned by their local communities and wide consultation helps to create such a sense of ownership. In order to meet the wish of the Minister to have a more flexible and less prescriptive form of words we have redrafted our amendment. We now merely ask that it should be specified on the face of the Bill that key partners in the delivery of healthcare under the National Health Service should be consulted.

I reiterate that although the wording is more generalised, an issue of principle underlies the amendment. The Minister made clear at Committee stage the distinction between primary care groups which are to be led by GPs and practice nurses as commissioners of services and the primary care trusts which may be providers as well as commissioners of services. Unless specified on the face of the Bill, in moving from a stage 2 primary care group to a stage 3 primary care trust, there is a danger that consultation does not go wide enough and is too narrowly focused among the GPs and practice nurses who are involved already in running the group and subsequently the trust. By requiring consultation with key partners, and with the regulations specifying who those key partners shall be, we make sure that wide consultation takes place.

It is an important issue. Healthcare is more than just GPs' surgeries and hospitals. It involves all those we have sought previously to specify: the dentists and opticians; the physiotherapists and occupational therapists; chiropodists and social workers; universities and training institutes; and patients, carers and voluntary organisations. If those groups are to play a full part in this new community-based healthcare system that the Government are promoting—the primary care trust— then they must trust and work with it, and they must be consulted when those trusts are established.

Baroness Gardner of Parkes

My Lords, I support Amendment No. 2 moved by my noble friend Lord Howe. I support that part of Amendment No. 5 which makes almost the same provision as Amendment No. 2. I am less happy with the phrase in Amendment No. 5 "except in exceptional circumstances". That provides such a let-out that it negates the majority vote.

The only fault that I can find with the amendment moved by my noble friend Lord Howe is that it refers only to a majority. I believe that two-thirds should be in favour. There should be a definite process whereby people are able to register their feelings. My noble friend suggests a majority vote. It is generous to suggest simply a majority on the face of the Bill. We could have suggested a larger figure. However, we believe that those entering into a trust must be committed to it and want the best for the health service. Unless one has that provision, a small group of people on the primary care group with a lot of influence could overrule their less articulate colleagues and one could have people going into a primary care trust without being fully committed. I believe that Amendment No. 2 is a good amendment.

I found the speech of the noble Baroness, Lady Sharp of Guildford, on Amendment No. 4 very interesting. It is a chicken and egg situation. The noble Baroness referred to key partners. She did not mention pharmacists. One could go on and on; a list is never complete. But if one refers to key partners the question arises of how they will be defined. There is a problem therefore with Amendment No. 4. But I support Amendment No. 2 wholeheartedly.

Lord Skelmersdale

My Lords, the noble Baroness has differentiated between Amendment No. 2 and the other two amendments. When I describe the NHS as a great juggernaut, it is by no means pejorative. I use the term almost as a mark of respect. It is difficult to stop a great juggernaut and to make it turn corners; in the case of the Queen Mary, for example, to veer slightly to the left or right; or in the case of this Government to veer straight ahead! But we shall leave that point for another time.

It is vital that all healthcare professionals should be consulted. That theme runs through Amendments Nos. 2, 4 and 5. What is different is that having conducted the consultation the primary care group should have a vote which should be settled on a majority. The Government are keen on democratisation. They seek to democratise this House; they seek to democratise local government arrangements; they have almost succeeded in democratising local government proceedings in Scotland and Wales, and of course in London. I see no reason therefore why they should not democratise the institutional change of primary care groups from stage 3 to the ultimate stage 4 of the primary care trust. Therefore I hope that the noble Baroness will have no difficulty in accepting the amendment.

3.45 p. m.

Baroness Cumberlege

My Lords, I strongly support my noble friend. The Minister will be well aware that if one is to achieve any change in the NHS, one has to take the key professionals with you. Traditionally, the way to do that has been to consult them fully. The noble Baroness will also be aware of some of the pitfalls of consultation. Those issuing consultation papers profess that they are sincere; that they are listening; and that they will be influenced by the outcome. But those who are being consulted sometimes suffer from consultation fatigue. As a result, they are wary, sometimes cynical, and think that the whole process is just another NHS tribal ritual—a sort of rite of passage before proposals come into being.

The amendment put forward by my noble friend gets over that problem. He seeks a majority vote. That is an excellent idea. It is clear; it is concise; and it rules out any ambivalence, any interpretation, of the consultation exercise that has taken place. I am aware that the Minister may not wholeheartedly support the amendment. However, perhaps I may probe further. There is a possibility that the amendment could be rejected. Will the noble Baroness tell us today what criteria will be exercised by the Government when they take on board the consultation? What evidence will they require to be assured that the majority is in favour? Can the Minister also say what processes will be in place during the course of consultation so that the Secretary of State can assess the views of the PCG about progress to trust status where that view differs from the health authority?

Baroness Fookes

My Lords, before the Minister replies I have a question, the answer to which may influence the way I vote on the amendments before us. Can we have an absolute assurance from the Minister that if as a result of the consultations she proposes there seems to be no enthusiasm, or perhaps even downright hostility, to moving to a trust, she will not then go ahead with making the order? It is a key point. I am slightly cynical as to whether we shall have such an assurance. In those circumstances, I prefer the certainty of Amendment No. 2.

Baroness Hayman

My Lords, we have had an interesting short debate following the extensive debates at Committee stage. We have discussed some of the same issues. Those issues do not relate to the ends that we wish to achieve but the effectiveness of the means of achieving them.

There are two issues. The first relates to the many difficulties in drawing up in primary legislation exactly who must be consulted before a primary care trust is established. Amendment No. 4 returns to that issue. The second issue is the relative weight which should be given to the views of local players and professionals, and those of the primary care groups and GPs in particular, to which Amendments Nos. 2 and 5 refer. I am grateful to those who drafted the amendments for trying to accommodate the "exceptional circumstances" issue, which I put forward as one of the reasons against including this in primary legislation. I am not sure whether that helps, because we then have an argument about what "exceptional circumstances" means, who interprets it and whether it is a meaningful phrase to put into primary legislation. I tried to reassure the House in earlier debates; I will try to reassure your Lordships again today and to clarify some of the issues.

One issue I should like to make clear at the beginning, which in earlier debates may have become slightly lost in our focusing on the technicalities, is that the Secretary of State for Health can establish a primary care trust only after consultation. The effect of the new Section 16A(4) and (5) inserted by Clause 2 is to impose a cast-iron duty on the Secretary of State to impose consultation requirements before a PCT is established. Our key aim has always been that the whole process leading up to the Secretary of State considering the establishment of a primary care trust is a local one, taking into account a wide range of local views on proposals generated locally. Consultation needs to be thorough and effective. I take the point that the noble Baroness, Lady Cumberlege, made: consultation should not be a ritual process to be gone through; it should be realistic and inclusive, with a significant number of interests being considered and balanced.

We recognise that developing and shaping the delivery of healthcare to meet the needs of the local population needs to involve the whole community. As a matter of government policy we will therefore be considering the interests of all relevant parties when making these regulations. I can give a clear assurance that we will, first, be consulting very widely and, secondly, be taking account of those views—the point to which the noble Baroness, Lady Fookes, referred.

On Amendments Nos. 2 and 5 I will reiterate a further assurance which I gave to the House. It is no part of the Government's agenda to impose primary care trusts on the service in the face of local opposition, nor to deliver GPs and other healthcare professionals, bound and gagged, into primary care trusts. The process will be locally driven, based on and sensitive to local needs. In response to the noble Lord, Lord Clement-Jones, I can say that it will not be driven by issues of management costs. There is an envelope to cover health authorities, PCGs and, in due course, PCTs. It is not a question of devolution to PCTs being driven by management costs; rather, the principle is that funding for management costs should be consistent with where the management function is being discharged. If they are taking on more management, the costs should shift to them for doing that; but it is a matter of redistribution and not of changing the existing package.

Returning to the basic issue, the views of primary care groups, local GPs and other professions, as well as those of the wider community and the NHS locally, will be key considerations for the Secretary of State in deciding whether or not to establish a primary care trust, and the support of the relevant primary care group will be a crucial consideration. We intend to establish PCTs in a way that is sensitive to local views and primary care groups are obviously key to that.

We have made it clear that it is our assumption that the support of the relevant primary care group will be required before a primary care trust is established. Let me make it clear once again that we want primary care trusts to be established with the support of local primary care groups, and we recognise the arguments that have been put forward about local ownership if they are to be a success. The House can therefore be reassured that the support of the PCG will be a critical factor in our decision.

So far there is not a great deal in the argument between those who support the amendments and myself, who has difficulty with them. Perhaps I may explain to the House what those difficulties are. In taking account of the views of one group of stakeholders, however important they are—and here we are talking about the PCGs—we should not allow for the possibility of automatically ignoring the views of others in the local community as though they had no weight at all. That is what Amendment No. 2 does. I believe that it would serve to demean the importance of the partners in the local NHS, such as community trusts and their staff, who will be very much affected by these proposals. As I said in Committee, it may be, though we hope that it will not, that complex and difficult situations—dare I say, exceptional circumstances?—arise which require careful and sensitive handling. Amendment No. 5 recognises that possibility

At Committee stage I gave one example; perhaps I may now give another. Let us consider the situation where almost exactly half of the local GPs within a PCG area are strongly in favour of a proposal to establish a primary care trust and half are lukewarm about it. The health authority, neighbouring PCGs, the local community trust and acute trust clinicians and managers, and local authority are all strongly supportive; and the Community Health Council and local patient and carer groups give unanimous support in favour of establishing a PCT. Surely the Secretary of State should not then be obliged by primary legislation to ignore those views. After all, the Government have always maintained that they want the establishment of primary care trusts to be locally driven. That means reflecting a broad spectrum of views.

I have given a hypothetical example in which almost exactly half of the GPs within a PCG area are strongly in favour and half are lukewarm, but that is not what these amendments provide for. They state that PCG members—that is, the PCG board—would be responsible for the veto. Local healthcare professionals, who in lay terms may be described as PCG members— that was the point behind the comments of the noble Baroness, Lady Gardner, regarding a bare majority or a clear majority—do not fall within that definition as a matter of law. Given that PCG boards may comprise, a minimum of nine members, these amendments effectively provide that five individuals on the PCG board, a majority of the board, could stand in the way of the establishment of a primary care trust despite overwhelming local support. That does not seem to me to be an appropriate way of dealing with a very difficult local circumstance.

I have a further difficulty with Amendment No. 5. It seems to me to be almost impossible to provide a satisfactory, objective definition of what constitutes "exceptional circumstances". I do not believe that it is feasible to capture all the circumstances which could be considered exceptional. I am not even clear whether the example I have just given would, in terms of statute, constitute exceptional circumstances. It is the sort of situation where the clear judgment of a Secretary of State would be needed regarding the best way forward in a difficult situation.

A further more technical point is that there is a problem in specifying a particular role for primary care groups on the face of the Bill. The pace at which PCGs progress to PCTs will vary, but there may be circumstances where, say, the whole of the health authority is covered by PCTs. People locally may want to re-configure primary care trusts; for example, by creating a new one. In those circumstances, the requirement to achieve primary care group agreement would not be relevant.

The difficulty with Amendment No. 4 is the use of the term "key partners. "As regards the definition, what, as a matter of law, does that proposition mean? Who are the key partners? Could they vary from one locality to another? How does one define them in primary legislation without getting into the recurrent list problem? Furthermore, I suggest that the Secretary of State must bear in mind a whole range of interests and should consider all relevant factors, not just those of the key partners, whoever they might be. There is a danger that in specifying "key partners" we are importing "two-tierism" into the Bill and enshrining in primary legislation a system between partners who matter, who are the key partners, and partners who do not matter, who are not on the face of the Bill. I do not believe that that is the most conducive approach to partnership working.

Finally, the way in which the Bill approaches the issue is based on clear precedent. The 1990 Act does not require the Secretary of State to have regard to particular interests when making regulations as to the consultation requirements which are to apply before an NHS trust is established. We are trying to mirror that situation here. I hope that I have persuaded your Lordships that there is no substantive disagreement as to the policy intentions but that there are some real and serious difficulties in spelling out those policy intentions on the face of the Bill.

I was asked about the criteria for the establishment of a primary care trust. I make it clear that top among them are likely to be a clear vision of the service and health benefits which establishing the trust may bring, an effective contribution to the local health improvement programme, effective arrangements for developing clinical standards and proper arrangements for monitoring activity. First and foremost, however, there must be broad local support for its establishment, including among the GPs affected.

I hope that in the light of those reassurances, our clear intention to have wide and meaningful consultation and our clear recognition that GPs and other primary care group professionals are crucial to the matter, the House will feel that it is not sensible to put such definitions on the face of the Bill.

Baroness Gardner of Parkes

My Lords, before the Minister sits down, will she explain one point? If there is no option for people to vote, does she mean that the Secretary of State will have the sole power to determine whether or not the primary care trusts are set up?

Lord Skelmersdale

My Lords, before the Minister responds, perhaps I, too, may ask a brief question. In criticising the amendment tabled by my noble friend Lord Howe, she gave an example where everyone in a local community apart from the doctors, presumably the GPs, are in favour. Is she aware that under my noble friend's proposal in Amendment No. 2, there will be no doubt whatever that the majority vote of the members of a primary care group would go in the direction of forming a PCT?

Baroness Hayman

My Lords, we are debating a hypothetical issue of a hypothetical issue in saying that we do not know how a vote will go on the board of a primary care group. I take the noble Lord's point that it would not be a matter of the GPs having a direct vote because the amendment deals only with the board members of the primary care group.

As regards the question asked by the noble Baroness, Lady Gardner, it is correct that there would be no power of veto for a primary care group against the proposition that the Secretary of State, after extensive consultation and examination of the whole range of issues, can decide the most appropriate and best way of taking forward the health of the local community. There is a danger in trying to think through the implications of such legislation. In the hypothetical example of the noble Lord, Lord Skelmersdale, the primary care group board would support the proposal and I am not sure that that is absolutely clear. Certainly, the professionals on the PCG board could be out-voted by the lay members. I suggest that there is no magic formula in legislative provision which will guarantee that a proposal is soundly, locally based. There must be some room for judgment. That was recognised in the creation of NHS trusts. I hope that I have reassured the House that it will not be done in a cavalier manner and that we have real arrangements for wide-ranging and meaningful consultation before a primary care trust can be set up.

Lord Walton of Detchant

My Lords, before the Minister concludes, perhaps I may ask a question. I fully support the intentions underlying the amendments relating to consultation, but I am afraid that I have difficulty with each of them. Amendment No. 2 provides for "consultation with all health care professionals", but not for consultations with representatives of the local community, the community health council and others. I also accept the difficulty of defining "key partners" and "exceptional circumstances".

Clause 2(4) states: If any consultation requirements apply, they must be complied with". However, subsection (5) goes on to provide: In this section, 'consultation requirements' means requirements about consultation contained in regulations". Is it the case that such regulations would be subject to secondary legislation? Would they be placed before both Houses of Parliament for approval? If so, the Minister's confirmation would reassure me that this is a satisfactory way to go forward.

Baroness Hayman

My Lords, the noble Lord is correct in outlining the difficulties with the amendments and the rigidity of primary legislation. The regulations would be encompassed in secondary legislation, which would be subject to negative resolution. There would therefore be an opportunity for people to scrutinise what was being suggested.

There is no intention not to consult any of the people mentioned in today's debate. However, the difficulty lies in defining the people who are to be omitted and the exceptional circumstances. I hope we can clarify the consultation process in a way that the noble Lord finds reassuring.

It would be wrong to suggest to the House that we could obviate completely the need for the ability to use judgment at some point in potentially very difficult circumstances. I suggest that it is safer to have the element of judgment, even though the Secretary of State has some power, rather than to bind ourselves to the rigidities of statute law. That would allow decisions to be made which were sensible and best balanced in the interests of local communities.

Lord Renton

My Lords, in view of the remarks which the noble Lord has just made, I hope that it may be in order for me, even though it is Report stage, to ask the Minister why, instead of putting them in regulations at a later date, we cannot have the consultation requirements referred to in subsection (5) defined clearly in the Bill, which could be done on Third Reading.

Baroness Sharp of Guildford

My Lords, subsection (4) also causes some difficulty.

Noble Lords

Order, order!

Earl Howe

My Lords, this has been a fruitful debate and I am grateful to the Minister for the care that she has devoted to addressing my amendments. I listened extremely carefully to what she said.

Despite her obvious wish to be helpful and reassuring, I do not believe that she has quite gone far enough to meet the essence of the point which I sought to make. I understand the duty on the Secretary of State to consult. Perhaps I may say to the noble Lord, Lord Walton of Detchant, that, as we have heard from the Minister, that consultation process will be inclusive and wide-ranging. There is no doubt about that. Those who have a legitimate say in the process will be able to have that say. I do not dispute that for one moment.

But the result of a consultation is not binding, as we very well know. I could not help but notice again the use of the phrase by the Minister, "It is our assumption that the support of PCGs will be required". That is a strange, guarded phrase to use. I am reassured by the Minister saying that it is no part of the Government's agenda to deliver GPs bound and gagged into a PCT. But the example that she gave—and I believe it was her example rather than that of my noble friend Lord Skelmersdale—would do just that.

I should say in relation to my amendments that the members of the PCG are not just there to represent themselves. They are there to represent the whole range of healthcare professionals, voluntary groups and patients in the locality. In that sense, I agree with the noble Baroness; she is quite right in what she said. We do not doubt that GPs and PCGs will be key players and that the views of local professional groups will be key considerations in the decision-making process. But with great respect, that is not the same as ensuring that the actual initiation of the consultation process and the ultimate decision depends, one way or the other, on the support and endorsement of primary care groups.

The principle and policy behind the amendment are almost shared on the two Benches. The noble Baroness intimated that herself. There is an element of judgment to be made, but my contention is that that judgment should be made at PCG level. I was gratified by the degree of support that I received from around the House for the points that I was seeking to make. I believe that this is a sufficiently important issue on which I should seek the opinion of the House.

4.14 p. m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 120; Not-Contents, 117.

Division No. 1
CONTENTS
Aberdare, L.	Carnegy of Lour, B.
Ailsa, M.	Carnock, L.
Alexander of Tunis, E.	Chesham, L.
Astor of Hever, L.	Clanwilliam, E.
Baker of Dorking, L.	Colwyn, L.
Belhaven and Stenton, L.	Cope of Berkeley, L.
Bell, L.	Courtown, E.
Bellwin, L.	Cox, B.
Belstead, L.	Craig of Radley, L.
Berners, B.	Crickhowell, L.
Biffen, L.	Cullen of Ashbourne, L.
Birdwood, L.	Cumberlege, B.
Blaker, L.	Davidson, V.
Blatch, B.	Dean of Harptree, L.
Bowness, L.	Denbigh, E.
Bridgeman, V.	Denham, L.
Brougham and Vaux, L.	Dixon-Smith, L.
Bruntisfield, L.	Dundonald, E.
Burnham, L. [Teller.]	Effingham, E.
Butterworth, L.	Ellenborough, L.
Byford, B.	Elles, B.
Cadman, L.	Elliott of Morpeth, L.
Caithness, E.	Foley, L.
Campbell of Alloway, L.	Fookes, B.

Gainford, L.	Moyne, L.
Gardner of Parkes, B.	Munster, E.
Geddes, L.	Naseby, L.
Glentoran, L.	Northesk, E.
Gray of Contin, L.	Nunburnholme, L.
Harding of Petherton, L.	Oppenheim-Barnes, B.
Harrowby, E.	Park of Monmouth, B.
Hayhoe, L.	Pearson of Rannoch, L.
Hemphill, L.	Pender, L.
Henley, L. [Teller.]	Peyton of Yeovil, L.
Higgins, L.	Pilkington of Oxenford, L.
Holderness, L.	Platt of Writtle, B.
HolmPatrick, L.	Rankeillour, L.
Hooper, B.	Rawlings, B.
Howe, E.	Rees, L.
HuntofWirral, L.	Renton, L.
Hylton-Foster, B.	Renwick, L.
Jopling, L.	Rowallan, L.
Lauderdale, E.	St. Davids, V.
Liverpool, E.	Seccombe, B.
Long, V.	Sharples, B.
Lucas of Chilworth, L.	Shaw of Northstead, L.
Luke, L.	Skelmersdale, L.
Lyell, L.	Soulsby of Swaffham Prior, L.
McCollofDulwich, L.	Stockton, E.
McConnell, L.	Strathcarron, L.
Mackay of Ardbrecknish, L.	Sudeley, L.
Mayhew of Twysden, L.	Swinfen, L.
Mersey, V.	Trefgarne, L.
Miller of Hendon, B.	Trumpington, B.
Milverton, L.	Vinson, L.
Monro of Langholm, L.	Vivian, L.
Monteagle of Brandon, L.	Waddington, L.
Montgomery of Alamein, V.	Wise, L.
Morris, L.	Wynford, L.
Mountevans, L.	Young, B.
NOT-CONTENTS
Acton, L.	Evans of Parkside, L.
Allenby of Megiddo, V.	Evans of Watford, L.
Alli, L.	Ewing of Kirkford, L.
Amos, B.	Falconer of Thoroton, L.
Annan, L.	Farrington of Ribbleton, B.
Archer of Sandwell, L.	Fitt, L.
Ashley of Stoke, L.	Glanusk, L.
Bach, L.	Goudie, B.
Barnett, L.	Gould of Potternewton, B.
Bassam of Brighton, L.	Gregson, L.
Berkeley, L.	Grenfell, L.
Blackstone, B.	Hardie, L.
Blease, L.	Hardy of Wath, L.
Blyth, L.	Harris of Haringey, L.
Brightman, L.	Haskel, L.
Brooke of Alverthorpe, L.	Hayman, B.
Brooks of Tremorfa, L.	Hilton of Eggardon, B.
Burlison, L.	Hogg of Cumbernauld, L.
Carew, L.	Hollis of Heigham, B.
Carmichael of Kelvingrove, L.	Howie of Troon, L.
Carter, L. [Teller.]	Hoyle, L.
Chorley, L.	Hughes of Woodside, L.
Christopher, L.	Hunt of Kings Heath, L.
Clarke of Hampstead, L.	Irvine of Lairg, L. [Lord Chancellor.]
Clinton-Davis, L.
Cocks of Hartcliffe, L.
Crawley, B.	Islwyn, L.
David, B	Janner of Braunstone, L.
Davies of Oldham, L.	Jay of Paddington, B. [Lord Privy Seal.]
Dean of Thornton-le-Fylde, B.
Desai, L.	Jeger, B.
Diamond, L.	Jenkins of Putney, L.
Dixon, L.	Laming, L.
Donoughue, L.	Lofthouse of Pontefract, L.
Dormand of Easington, L.	Lovell-Davis, L.
Dubs, L.	McCarthy, L.
Emerton, B.	McFarlane of Llandaff, B.

McIntosh of Haringey, L. [Teller.]	Sefton of Garston, L.
	Shannon, E.
Mackenzie of Framwellgate, L.	Shepherd, L.
Mason of Barnsley, L.	Shore of Stepney, L.
Merlyn-Rees, L.	Simon, V.
Molloy, L.	Simon of Highbury, L.
Monkswell, L.	Smith of Gilmorehill, B.
Montague of Oxford, L.	Stallard, L.
Morris of Castle Morris, L.	Stoddart of Swindon, L.
Morris of Manchester, L.	Strabolgi, L.
Murray of Epping Forest, L.	Symons of Vernham Dean, B.
Orme, L.	Taylor of Blackburn, L.
Patel, L.	Taylor of Gryfe, L.
Peston, L.	Thomas of Macclesfield, L.
Pitkeathley, B.	Thornton, B.
Plant of Highfield, L.	Turner of Camden, B.
Prys-Davies, L.	Uddin, B.
	Varley, L.
Puttnam, L.	Walton of Detchant, L.
Ramsay of Cartvale, B.	Weatherill, L.
Rea, L.	Wharton, B.
Richard, L.	Williams of Elvel, L.
Sainsbury of Turville, L.	Winston, L.
Sawyer, L.	Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.

4.22 p. m.

[Amendments Nos. 3 to 5 not moved.]

Lord Clement-Jones moved Amendment No. 6:

Page 2, line 27, at end insert— ("( ) Appropriate arrangements shall be made with a view to securing that a Primary Care Trust's functions are exercised with due regard to the principle that there should be equality of opportunity for all people. "").

The noble Lord said: My Lords, to some degree this is a re-run of the amendments that we discussed in Committee on the addition to the duties of primary care trusts of the duty of equality of opportunity. Amendments Nos. 9 and 31 are grouped with this amendment. In Committee, the Minister indicated that she would consider the best way in which to take forward the points raised about adding to the existing duties of primary care trusts the duty to observe equality of opportunity and—I believe that her reply on this was rather more equivocal—adding to the duties of the commission for health improvement in a similar fashion.

We have not changed the amendment raised in Committee for PCTs. It states in broad terms the principle that there shall be equality of opportunity for all people. However, the amendment as regards the commission for health improvement has been made more specific in response to some of the criticisms that Members of the Committee made when that was discussed. It is an important area and it is important for primary care trusts. It would be easy to say that we need a general statement about the duties of the NHS which covered all bodies in the NHS, and we could spend a lot of time devising appropriate forms of language.

However, it is particularly important that that should cover primary care trusts, for a variety of reasons. I recognise that recently the Government launched their own initiative, with a circular to managers across the National Health Service, to take tough action to tackle racism; for instance, by April 2000 every NHS employer will need to be in a position to tackle racial harassment wherever committed by staff or by patients and progress will be measured and targets for reducing incidents will be set.

However, the issues of management in primary care trusts will be more difficult. Structures in primary care are much more devolved than they are in secondary care. The historical independent contractual status of GPs has led to a more fragmented and, at times, resistant approach to mainstream equality initiatives coming from the Department of Health and the NHS Executive.

Many primary care providers are covered by the small partnership exemption in the Race Relations Act. In other primary care professions there has been evidence that ethnic minority professionals are more likely to suffer obstacles to career progress, such as disproportionate appearances at disciplinary hearings. A further reason is that the Health Education Authority's health and lifestyle study in 1994 showed that some ethnic minority groups use GP services more than the majority of the population. That also shows that people from ethnic minorities wait significantly longer in surgery to see a doctor. Among south Asians in particular there is a tendency to register with a GP of south Asian origin.

The proposed policy for dispersal of asylum seekers will have enormous implications for primary care across the country. There are bound to be misunderstandings about entitlement to healthcare and lack of access to interpreters or specialist help for trauma resulting from their experience prior to coming to the UK. There are a number of other reasons that I could go into.

On the commission for health improvement, we had less of a debate on that subject in Committee, but the commission for health improvement must see as part of its remit the function of ensuring that equality standards are met for all ethnic groups, whether those are specified in national service agreements or the NHS Charter—no doubt that is to be revised—or local standards. Such a principle should be a founding principle and should be enshrined in law. It is a new public body and it must be in a strong position to guard against institutional racism, as defined in the Macpherson inquiry report.

I draw your Lordships' attention to two thoughtful and well considered editorials in the Lancet and the British Medical Journal in the past week. Both make the point that action by the NHS is very much needed. I quote from the BMJ: The NHS needs to go further. We need to take a needs led, evidence based approach to understand the reasons for disparities. We need actively to assess services using a centralised body as this would afford economies of scale and proper levels of expertise and independence I suggest to your Lordships that CHIMP is the very body that would fulfil that role. I beg to move.

Lord Astor of Hever

My Lords, I rise to support Amendment No. 6. As the noble Lord, Lord Clement-Jones, said, this is an important area. There is concern that older people and those from ethnic minorities are discriminated against in the NHS. Older people often experience difficulties in primary care provision and are more likely to be dropped off GPs' lists than younger people. There are even reported examples of GP surgeries that refuse to deal with patients over the age of 65.

In addition, the incidence of illness is patterned by ethnic difference; for example, people of Pakistani and Bangladeshi backgrounds have 50 per cent. greater rates of heart disease than white people. Historically, many primary care practitioners were exempt from the Race Relations Act, so primary care has not been subject to the same drive for equality as the rest of the NHS. Healthcare policy must ensure equality of access to primary care trusts. I strongly urge the Government to accept the amendment.

4.30 p. m.

Lord Skelmersdale

My Lords, of this group, I find Amendment No. 31 by far the most attractive and the most sensible. In Committee, the Minister made it clear (at col. 1294 of the Official Report) that she would like to consider the points that were made then. She went on to say that not only would she consider those points but that she would like to look at the best way to tackle the matters put forward and whether they could be accommodated in terms of amendments to the Bill. I therefore looked at the Marshalled List with interest today and at the government amendments on Friday but found absolutely nothing to give me any hope in that regard. I am sure that the noble Lord, Lord Clement-Jones, and my noble friend Lord Astor did exactly the same. I hope that the Minister has some good news for us today in anticipation of Third Reading.

Baroness Masham of Ilton

My Lords, may I ask the noble Lord, Lord Clement-Jones, whether this amendment would end prescribing by postcode? Also, disabled people could have difficulties getting on GPs' lists.

Earl Howe

My Lords, my noble friend Lord Astor has already covered one essential aspect of this and I shall not repeat what he said so eloquently. However, a further point needs making. It relates to the Government's entirely laudable ambition to see a levelling up of patient care not a levelling down. I am afraid that we are seeing just the opposite around the country. Practice-based budgets are being absorbed into unified budgets. In the process, services are being run down. There are numerous examples currently being reported in the medical press and they all relate to mainstream services, not to services at the fringe. I am prepared to accept the Government's assurances that they do not want to see such services disappear as a result of their reforms, but the question has to be asked: what are they going to do to stop it happening?

The other big concern relates to the burden of pay settlements. There are already reports in the medical press that the only way in which some health authorities will be able to fund their pay bill in its entirety will be to make cuts in the GP prescribing bill. The estimated cost of the inflation-plus element of the pay bill could be as much as £1 million for each health authority— and there are 100 such authorities. That is an enormous amount of money to find. It would be totally unacceptable for it to come out of the prescribing budget. The question I need to ask the Minister is this: can she give an assurance that no treatment currently available to patients under the fundholding system will cease to be available under the system of primary care groups and primary care trusts?

Baroness Carnegy of Lour

My Lords, I should like to reiterate the question asked by my noble friend Lord Skelmersdale: does the Minister have it in mind to do anything in the Bill in this respect, because it is most important, and in Committee she said that she had it in mind to put some such provision into the Bill?

While I am on my feet, when the noble Lord, Lord Clement-Jones, replies to the amendment, perhaps he could comment on this. In Committee I suggested that, equality of opportunity for all people", was a somewhat fatuous and meaningless phrase. I am sorry that the noble Lord did not take my stricture into account. I still think that such a phrase would be an extremely unhappy insertion into the Bill. We all know what "equality of opportunity" means. It is defined in law and is well understood. Saying that we can have, equality of opportunity for all people", sounds like something that only the good Lord could say and I do not believe that he would believe it.

Baroness Hayman

My Lords, in Committee we had some thoughtful and serious debates about equal opportunities in relation to primary care trusts and the commission for health improvement. Some of those arguments have been rehearsed today. I hope that it was clear from my comments in Committee that the Government seek to address this issue in a range of policies.

Perhaps I may advise the noble Baroness, Lady Masham, that there are a range of ways in which we are trying to tackle the problem of postcode prescribing— not only through this legislation but also with regard to the national service frameworks, the work of the national institute for clinical excellence and through the institution of clinical governance, by which people will have to justify—if I may put it in that way—any deviation from the kitemark standards that are available. I have never pretended that that is an easy task—not least because we do not want a service that is totally centrally controlled and we have to have a proper level of local decision-making about local priorities. We need to get that balance right.

Perhaps I may return to the issue of equal opportunities. A central part of the Government's agenda is to achieve fairer access to services, to reduce health inequalities and to promote equal opportunities for all those who work in the NHS as well as for those who use it. The noble Lord, Lord Skelmersdale, said that the Government have put nothing on the Marshalled List in this regard. That is absolutely correct. It is simply because in Committee I agreed to consider a large number of points across a wide range of subjects and this is one of the areas on which we have not yet managed to reach a conclusion about the best way forward in legislation. Indeed, the noble Baroness, Lady Carnegy, drew attention to the drafting.

This is an extremely important area, but it is also quite complex in terms of legislation. It is important that we consider the issues carefully. I quite understand why the noble Lord, Lord Clement-Jones, has focused on primary care and on the commission for health improvement—not least because they are the issues with which we are dealing in this Bill, but also because they are very important areas that we must tackle in terms of equal opportunities. I do not for a minute challenge that point. However, it is important that we come back with appropriate solutions for the NHS as a whole, not simply for primary care trusts and the commission.

I should like to reassure the House that we are considering the points raised in Committee. We shall also look at the additional points that have been raised today. I am certain that we shall return to these matters during the passage of the Bill. However, I am not at a stage to go further than that now and I ask the House for a little more leeway on the subject.

Lord Clement-Jones

My Lords, before the Minister sits down, perhaps I may ask her a question. The noble Baroness seemed to indicate that it was the Government's clear intention to consider the best way forward—to legislate for the best way forward—during the passage of this Bill. Am I correct in saying that it is the Government's intention, once they have considered this matter, to insert an appropriate provision during the passage of this Bill and not at a later date?

Baroness Hayman

My Lords, as there are serious difficulties in drafting the legislation, perhaps I ought to say that I shall certainly give a commitment to report progress on the issue during the course of this Bill. At this stage it would be premature of me to give an absolute commitment to bring forward such an amendment because I do not yet have before me advice on whether we can properly legislate as the noble Lord would wish. However, I give the commitment that during the course of the Bill we shall return to the subject and report progress. I think that I have given the noble Lord an absolute commitment that we want to address these issues. It would be precipitate of me to say anything beyond those two things.

Lord Clement-Jones

My Lords, I thank the Minister for her reply, which slightly disappoints me because it did not go as far as I would have liked in terms of saying that amendments will be brought forward at a later stage of the Bill. I fully understand the Minister's reasons for not giving that full commitment because of the difficulties of drafting. I also realise, as the noble Baroness, Lady Carnegy, pointed out, that I did not recognise all the strictures. However, I tried to put forward a bit of a mix and match in terms of tabling a different set of amendments for the commission for health improvement to see if the House was any more enamoured of them. Therefore, I recognise that the Government are having some difficulty in framing their own amendments. I sincerely believe that it is most important for all kinds of public policy reasons to amend the Bill at this particular time in a way that we all clearly desire. I very much hope that the Minister will have some better news for us on Third Reading. I beg leave to withdraw the amendment

Amendment, by leave, withdrawn.

Schedule 1 [Primary Care Trusts]:

Baroness Sharp of Guildford moved Amendment No. 7:

Page 42, line 5, at end insert— ("'(2) The number of persons referred to in sub-paragraph (l)(c) above shall include representatives of key partners in the delivery of NHS healthcare and the promotion of health in the locality. ").

The noble Baroness said: My Lords, I rise to move Amendment No. 7 which has been tabled in the names of my noble friends Lord Clement-Jones and Lady Thomas of Walliswood. The amendment concerns the membership of primary care trust boards. Since we debated this issue on the last occasion, we have had the opportunity to study the detailed proposals put forward by the health Minister in his letter to the chairs of health authorities, NHS trusts and primary care groups, which the Minister referred to in her reply in Committee.

The letter makes a distinction between the trust board, which will comprise a majority of lay members, and the executive board which will be responsible for day-to-day management and led and dominated by the healthcare professionals. We accept that distinction. The amendment relates primarily to the composition of the trust board but it also has relevance to the composition of the executive board.

As the Minister made clear in Committee, the intention is that these new primary care trusts should be firmly rooted in their local communities and responsive to the health needs of the community. The purpose of the amendment is to ensure that there is on the face of the Bill an obligation to ensure that the trust board and the executive board are representative of both users and providers of healthcare in their locality. This time we have been careful to avoid the lists which were criticised on all sides when we previously discussed these matters. However, the principle remains the same.

We are anxious that the PCTs should not become enclaves of professionals, run by the professionals for the professionals. We therefore welcome the dominant lay membership of primary care trust boards. But in looking for people to fill the positions of lay members, we are anxious that, among others, the Minister should remember, when making appointments, the need for users in the form of patient and carer groups to be represented, as well as the need for broad representation across age groups, between men and women, and fair representation of ethnic minorities.

In addition, we are anxious to ensure that it is not just GPs and practice nurses who gain representation among the professionals. We have received extremely strong representation from the professions allied to medicine—midwives, health visitors, physiotherapists, radiographers and speech therapists, to mention a few— about representation on boards. As my noble friend Lord Clement-Jones made clear in Committee, they are particularly concerned about their lack of representation at stage 3 trust level when boards are effectively run by GPs and nurses. As the Minister made clear, this is largely because PCTs will be mainly concerned at that stage with commissioning healthcare services from, among others, these professionals.

However, in moving from stage 3 to stage 4, the danger is that executive boards will remain much the same. If I may say so, that also raises a gender issue. If the executive boards are dominated by GPs, they are likely to be disproportionately male. Therefore the key issue is representation at stage 4 trust level. As the Minister made clear in Committee, the possibility of their being members of the full trust board, as one of the professional representatives, is certainly not excluded. However, as she also made clear, of the 11 members of a trust board, six, including the chair, will be lay members, two will be ex officio in their capacities as the chief executive officer and finance director of the trust, leaving only three places for healthcare professionals, of which one will be filled by the director of clinical governance for the PCT, one by a GP and one by a nurse. Therefore, as the Minister said, although we do not rule out the possibility of the professions supplementary to medicine—or, indeed, midwives or district nurses—being on the board at stage 4 level, in practice it will be extremely difficult to achieve: that aim. As the Minister implied, it would in fact be easier to ensure representation on the executive boards.

In that regard, the amendment is not prescriptive: it is essentially concerned to enshrine the principle of wider involvement in board representation. We should not forget that these PCTs are about "joined-up thinking" on healthcare. That joined-up thinking means that we must consider—and include—all those who are concerned with the provision of primary healthcare; namely, dentists, chiropodists, physiotherapists and midwives. There is a principle involved here and it is an important one. Indeed, it is most important that that principle should be written on the face of the Bill so that there is a commitment to broader representation of healthcare deliverers. I beg to move.

4.45 p. m.

Baroness Carnegy of Lour

My Lords, I believe that this is the point in our proceedings where mention should be made of a communication from the Chartered Society of Physiotherapy and also of a statement by a whole host of healthcare organisations. They are extremely concerned by a letter which was written by the Minister, Mr. John Denham, to NHS chairmen and chief executives stating that he intends to restrict membership of the primary care trust executive solely to GPs and nurses. They are indeed most worried about that for obvious reasons. I believe that that concern needs to be expressed now.

I am not absolutely sure whether this fits in with the discussion on the amendment now before us, but the communication only came to my attention just before I entered the Chamber. It is always difficult at short notice to consider the amendments while reading the Bill and, thereafter, understand the whole thing. However, it would be helpful if the Minister could say something in that respect which is comforting to all those people. They are very important people who are worried that they will not have a say in how such trusts are actually run. Obviously they mind very much about that.

Earl Howe

My Lords, I agree with a great deal of what has already been said, so I shall not repeat any of it. In Committee, the Minister went to some trouble to explain the Government's broad approach to the appointment of the lay element of a primary care trust board. I believe that what she said could be summarised as a wish to ensure flexibility in the representational mix of each board, but also to ensure a balance of representation to reflect the needs and priorities of the local community. Understandably, therefore, the Minister sought to avoid prescriptiveness of any kind. The one element on which she was categoric was the principle of a lay majority.

The only point that I wish to re-emphasise about trust boards is that doctors and healthcare professionals of every kind working for a PCT need to feel a sense of ownership, in however broad a sense, for the organisation in respect of which they are clinically and financially accountable. Even with the comfort of a trust executive with a professional majority, doctors may well feel distanced from the decision-making in a way that— to use a common expression—switches them off. This amendment is helpful in fostering a sense of local ownership, which is why I have put my name to it, but I suggest that the issues here run somewhat deeper.

The first concern is a lack of tightness in the chain of accountability. How in practice will a lay-dominated board exercise the degree of control over doctors that it needs to do if it is to fulfil its responsibilities to the Secretary of State? What incentives are present to ensure that GPs fully accept their own responsibilities? The second concern comes, if you like, from the other direction. Doctors are extremely worried that a non-clinical majority on a level 3 PCT could not only make decisions with which they disagree but are powerless to do anything about but could also initiate and force through a move to level 4. That could see GPs being run by a community trust. There are all kinds of fears associated with that such as a salaried service and so on. I respectfully say to the Minister that if PCT boards are to be lay dominated—I understand why the Government have arrived at that view—there is a need to address the kinds of concerns among GPs that I have referred to. This comes back to the need to instil a sense of corporate feeling and identity in a PCT as much as a sense that the views of doctors carry some weight and are being acted upon at board level.

Lord Rowallan

My Lords, I, too, support this amendment. I, too, received the letter alluded to by my noble friend Lady Carnegy of Lour which appears to suggest that 11 associations connected with medicine, representing 130, 000 health professionals, are all prepared to boycott PCTs at level 3. This is a rather frightening situation; namely, that there is such a huge backlash to try to stop things happening in this regard from within the NHS. The Government must seriously reconsider this matter. As I said, I support the amendment.

Baroness Hayman

My Lords, it has been helpful to have dealt with the proposals that concern the make-up of primary care trust boards and their governing arrangements in perhaps a little more detail than we did at Committee stage. The noble Earl, Lord Howe, is right; namely, we need to get the balance right and we need to establish a sense of corporate feeling in this area. We need to ensure that the views of doctors and general practitioners who have particular concerns are heard. However, I take the point that the noble Lord, Lord Rowallan, and the noble Baroness, Lady Carnegy. made; namely, that there are other groups who also have their concerns and their fears in this regard.

One of my objections to this amendment concerns the term "key partners", because if we suggest that some partners are more key than others we may cause exactly the problems that are being manifested now. However, at the end of the day we have to establish the right governance arrangements. There are obviously a limited number of places on a governing body but I hope that we can provide some reassurance in this regard, particularly to professions supplementary to medicine. We intend to bring forward a government amendment so that primary care trusts, like health authorities, are required to secure appropriate professional advice in carrying out their functions. I shall discuss that in a little more detail in a moment. There will also be significant lay involvement in the running of PCTs.

I hope the House will forgive me if I switch for a moment to PCGs and clarify the analogy that I gave to the noble Lord, Lord Skelmersdale, as regards who could be outvoted by whom on a PCG board. Professional members could not be outvoted by lay members on a PCG board because, unlike the PCT, the lay members would not be in a majority. We discussed the views of general practitioners. General practitioner members—especially if they had not exercised their right to be in a majority of professional members— could be outvoted on that board. I suspect that I may have muddied the waters slightly as regards the terms "professional" and "GP". I take this opportunity to put that right.

I return to the governing arrangements of PCTs. As has been pointed out, they will be established under the overall supervision of a lay majority board but with a trust executive where health professionals will be in the majority. We hope here to have struck the right balance. The aim is for professionals to exercise through the executive major influence in shaping service policies and investment plans but within the wider framework of accountability—that has been mentioned—offered by the lay majority on the trust board. We envisage a board of 11 members, comprising the chairman, five lay members, the chief executive, the finance director and three professional members drawn from the executive, of which at least one will be a GP and one a nurse. One of the professionals will be a director of clinical governance. That is obviously essential if we are to establish the clinical governance provisions.

A difficulty has arisen with regard to the professional make-up of the executive varying between level 3 and level 4 PCTs. A level 3 PCT will consist of up to seven GPs, up to two nurses, one professional with public health or health promotion expertise and a social services officer, as well as the PCT chief executive and finance director. A level 4 PCT will consist of up to 10 clinicians as well as the chief executive, the finance director and the social services officer. It may be helpful if I explain why there is different professional membership at levels 3 and 4, as this is an issue that I know is of concern to the professions allied to medicine. There are two reasons. At level 3, the composition of the executive—with GPs allowed a majority—reflects the commissioning-only role of these primary care trusts. We believe that GPs must have a key role in commissioning because of their role as gatekeepers and in committing resources through their referral and prescribing decisions. This unique role is reflected in the make-up of a level 3 executive.

At level 4, however, PCTs are commissioning and providing bodies. The make-up of the executive must balance significant GP representation alongside local nurses and other community and public health professionals. There also needs to be flexibility in the precise balance of professional members. This is because the configuration and range of services that level 4 PCTs will provide may differ from place to place. Therefore we need to allow flexibility for the balance of professional members appropriately to reflect local variations.

I assure the House that the Government recognise the extremely important contribution that a wide range of groups, including secondary care clinicians, the universities, academic medicine and the professions supplementary to medicine could bring to primary care trusts at level 3 as well as level 4. We will expect PCTs to work closely with all the key local stakeholders, including academic interests. This will be particularly important when PCTs commission services from teaching hospitals, to ensure the interests of NHS teaching and research are fully taken into account.

I appreciate from my own discussions with members of professions allied to medicine their deep concern that the expertise at health authority level as regards commissioning services, particularly therapy services, should not be dissipated or lost completely in the move to primary care groups. As I said earlier, it is for that reason that I intend to bring forward a government amendment—I hope in time for Third Reading—so that PCTs, like health authorities, have a duty to make arrangements to secure appropriate professional advice. The House will understand that while we wish to avoid the problem of lists on the face of the Bill, we shall seek to ensure that the amendment is sufficiently wide to cover academic medicine, the acute sector and the professions allied to medicine.

I am grateful to the noble Lord, Lord McColl, who drew attention to this point during the Committee stage. We are currently considering a suitable amendment to Section 12 of the 1977 Act. I hope that in the light of those assurances the noble Baroness will feel able to withdraw the amendment.

5 p. m.

Baroness Sharp of Guildford

My Lords, I thank the Minister for her reply. In the light of her assurance that she will be bringing forward an amendment—we look forward to seeing it—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe moved Amendment No. 8:

Page 42, line 37, after ("members") insert (, "provided that not more than half of the membership appointments are vacant, ").

The noble Earl said: My Lords, this is a very simple amendment. From time to time, and particularly over the past 18 months, we have seen NHS trusts struggling to cope with board vacancies that remain unfilled, some for quite lengthy periods of time. The question I pose to the House is what will happen if this situation is replicated in primary care trusts? As the Minister said, at the moment the government proposal is for a board comprising 11 members, including the chair. This amendment to paragraph 7 proposes that if s ix of those positions are for any reason unfilled, the PCT board is automatically inquorate.

It is not simply that the business of the trust would otherwise end up being decided upon by too few individuals but that a rump board of five or fewer would not be truly representative of the various interests which the trust is meant to represent. As we know from experience with NHS trust boards where there are vacancies, the additional workload that fall upon the shoulders of the remaining directors—in the case of the PCT it will be members—is unfairly heavy. We should not ask a minority to take on such responsibilities. What I hope from the amendment is that it will act as a spur for the Secretary of State never to allow a PCT to arrive at such a position in the first place. I beg to move.

Baroness Gardner of Parkes

My Lords, I wish most strongly to support this amendment. I have been appalled by the delays in filling the vacancies for non-executive directors on trusts and area health authorities. It has been very unfair to people. There has been no excuse whatever for it. In the instance about which the noble Baroness has heard me speak before, we interviewed 16 people, of whom six were considered immediately appointable. One was appointed months after the vacancy occurred. When I wrote to ask why the second vacancy was not being filled—this is out of five non-executive appointments, so it is a very small number—the answer I received was that they were waiting until they could find someone suitable from an ethnic minority. I do not see why that was necessary when another vacancy was in the pipeline and was due to come up within four months. In the original trawl, ethnic minority members were interviewed but were found unsuitable. Only two were eminently suitable for interview and, at interview, it turned out that they clearly were not suitable. One really thought she was applying for a job and did not understand what a non-executive directorship was; and the other was unsuitable for a different reason altogether. The point I wish to make is that the Government specifically kept that vacancy open for that great length of time for no reason whatever when another vacancy was shortly to follow. I think that appointment was made approximately 11 months later.

When I have previously raised this matter with the noble Baroness she has always said, "We are improving. We are getting better at appointing these people". I certainly hope so, because the present position is very unfair, both to the organisation—whatever the organisation is that is active in the health service—and, as my noble friend said, to the remaining members of a board who have to carry the extra burden.

My noble friend is not asking for very much. I said before that a majority is not much to ask for. He is very modest in everything that he asks for and he is being modest again in asking for this provision to apply only when not more than half the positions are vacant. Again he is adopting the same very reasonable tone. I cannot see why the Government would not accept the amendment.

Baroness Hayman

My Lords, I, too, try to be reasonable. I can perhaps try to be helpful about the substantive issue, although there are some difficulties, as I understand it, with the amendment as drafted. The substantive issue is to ensure that proper and appropriate safeguards are in place to protect the integrity of primary care trust boards and the decisions made by them. There is also another issue of the burden put on the remaining non-executive members, in particular, of boards when there are vacancies. I take seriously the strictures of the noble Baroness in this area and perhaps in a moment I can give her some facts and figures to show that we are making progress and improving.

I wish to deal with the technical problems that I understand could arise if we accepted the amendment as drafted. There may be exceptional, rare occasions where a significant number of the officer or non-officer members resign from a board. I am sure that it would not happen under the chairmanship of the noble Baroness opposite or of any of us who have taken forward those positions. But if it were to occur— it is not unknown in public life—we would not wish to invalidate the proceedings of the trust for the short period before replacement members were appointed. That is the technical issue.

On the substantive issue, it is the clear intention of the Secretary of State to make the appointments that fall to him—that is the non-officer appointments—as quickly as a rigorous appointment process allows to avoid leaving primary care trusts to cope with a number of vacancies on their boards, which I fully accept is a very unsatisfactory position. I can understand the concerns, given the problems experienced during the 1997 round of trust non-executive appointments, which are well documented and have been well expressed in your Lordships' House. There were delays in making decisions but, as I said to the noble Baroness, considerable improvements are being made. In 1998 approximately 50 per cent. of those appointed had four weeks' notice of their appointment and 83 per cent. were made before the term of the incumbent expired. There were no cases in which the quoracy of a board was compromised by delays in the appointment process.

Having said that, I should acknowledge that too many people are still being given only very short notice of an appointment decision, or perhaps none at all when there has been a delay. We are committed to securing further improvements in the appointment process and to ensuring that delays and the subsequent problems for other members are kept to a minimum. The Secretary of State has explicitly asked officials to look at ways of improving the process in 1999 to ensure that our non-executive directors are treated with the courtesy that their contribution to the NHS demands, including proper notice of appointment decisions. I recognise that I and ministerial colleagues have to play our part in ensuring a speedy process.

I wish to assure the House that we intend to put primary care trusts on the same footing as other NHS bodies as regards arrangements to ensure the proper transaction of business. Although the boards of NHS trusts have been in operation since 1991 without any restriction on the number of vacancies that might exist on their boards at any one time, they have done so within the context of the safeguards written into the NHS Trust (Membership and Procedure) Regulations which ensure that, no business shall be transacted unless one third of the whole number of directors are present including … at least one executive director and one non-executive member". There is a similar provision in relation to the business of health authorities in the appropriate legislation. The Government would not wish to create an anomaly in relation to the proceedings of primary care trusts. The Bill as drafted allows for regulations to make provisions about the procedure to be followed by trusts in the exercise of their functions. The Government will use those powers to put in place equivalent safeguards in relation to primary care trusts. For those reasons, and in the light of the assurances I have given, I hope that the noble Earl will feel able to withdraw his amendment.

Earl Howe

My Lords, I am grateful to the Minister, in particular for her acknowledgement that the issue of vacancies has been a problem in the past and needs to be guarded against in the future. The Minister said nearly all the right things. I accept that the situation is improving. I am particularly reassured that the Government intend to see equivalent safeguards put in place to those that exist in other areas of the health service. I do not wish to press this provision. However, this is an important area for Ministers to bear in mind; that is why I tabled the amendment. I am grateful to those noble Lords who have supported the thrust of the issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 9 not moved.]

Earl Howe moved Amendment No. 10:

Page 44, line 27, at end insert (", including details of the proportion of income spent on administration. ").

The noble Earl said: My Lords, the purpose of this amendment is straightforward: it is to provide a clear and accessible way of publicising the burden of management and administrative costs carried by a primary care trust in the delivery of patient care. Subject to the acceptance of common definitions as to what does or does not constitute a management cost, a statistic in percentage form would enable comparisons to be made between PCTs which in turn could trigger some useful questioning about the factors underlying any differences.

In case noble Lords understand me to be saying that management and administrative costs are "a bad thing" and are therefore to be referred to in terms of disparagement, I need to make one point absolutely clear. The health service needs management. It needs to be properly administered. This is not, therefore, a case of saying that "less" necessarily means "better". That point needs to be made. If the present Government came to office with an idéee fixe, it was that bureaucracy in the health service was "a bad thing" and needed reducing.

The elimination of unnecessary bureaucracy is wholly to be desired. However, if one examines management costs across the health service as a whole in relation to the value of services delivered, I believe that that ratio, both now and over the past few years, compares very favourably with other areas of commerce and industry. During the term of office of the previous government, NHS management costs were considerably streamlined, contrary to all the received myths on that subject.

Furthermore, it is a truism that, in any industry, cutting management below a certain level leads inevitably to a deterioration in business performance. To do so in the NHS would equally result in its being unable to sustain the delivery of services. Where that level lies is a matter of judgment; however, I suggest that there is not now a great deal of scope to alter the level downwards.

However, the messages that we are receiving from the Government are rather different. They are fond of repeating that their reforms—and not merely from the abolition of fundholding—will lead to a substantial saving in the cost of administering the NHS, amounting to £1 billion over the course of this Parliament. That is quite a claim and it needs testing. Yes, the abolition of fundholding will reduce the number of commissioning bodies, with a consequent reduction in the numbers and costs of transactions handled by NHS trusts. Yes, moving across to three-year contracts, which is a perfectly sensible move, will save additional administration.

However, we need to look at what else is happening. In the regional offices there is now a huge workload arising from the Government's reform programme. What is the cost of that at health authority level? Will the Minister say whether management costs are rising or decreasing? What are the costs of administering primary care groups? In PCGs, we are seeing a huge disparity in management costs as between one PCG and another—anything from £2.20 to £6 per head of population. I confess that I do not understand why that should be. However, it implies quite strongly that some PCGs will be struggling to deliver what is required of them.

I realise that my remarks go somewhat wider than the terms of the amendment, which relates strictly to PCTs. But we need from the Government more than simply generalised statements about anticipated savings in management and administration costs within the NHS. First, we need hard figures. Secondly, we need mechanisms such as the amendment proposes by which to make meaningful comparisons between different bodies within the health service. At present, it is hard to get a handle on what is happening to costs. That cannot be satisfactory for anyone, least of all the Government. I beg to move.

5.15 p. m.

Lord Renton

My Lords, I should have expected the noble Baroness on behalf of the Government to welcome this amendment. The Government keep telling us that they wish more money to be spent on health and education, and that means on the things that matter, not merely frittering it away on unnecessary administration. If this amendment, or a similar provision, were to be accepted, the Government's purpose would be achieved. I therefore hope that the noble Baroness will welcome this provision.

Baroness Sharp of Guildford

My Lords. I wish to speak to Amendment No. 11, which is grouped with this amendment. Whereas Amendment No. 10 relates to the details to be included in the annual reports of primary care trusts and, as the noble Earl, Lord Howe, explained, details of administrative costs, Amendment No. 11 relates to the need to give wide publicity to that report.

Paragraph 17 of Schedule 1, to which this amendment relates, states that the Secretary of State, may provide that any Primary Care Trust shall take such steps as may be specified in the regulations to publicise… the trust's audited accounts …[and] the trust's annual reports", and that any report on the trust's accounts is to be made by an auditor on a matter of public interest. The provision also relates to, any other document as may be prescribed". The purpose of this amendment is to strengthen that requirement so that primary care trusts are in all cases required to take steps to publicise those documents. The amendment would achieve that aim.

As is well known, we on the Liberal Democrat Benches support the principles of open government. We therefore believe that information about the work of primary care trusts should be made readily available to members of the public and interested organisations in a form that is clear, accessible and easy to read and understand. We support the requirements in Schedule 1 that each primary care trust should prepare an annual report on its activities during the previous financial year and that the report is to be sent to the relevant health authority and the Secretary of State. However, as the amendment makes clear, we believe that there should be a clear obligation on the trusts to give wide publicity to such documents.

We were reassured by the Minister's comments in Committee that it is her intention that primary care trusts will be required to publish their audited accounts and annual reports. However, the Minister went on to say that she was considering an amendment that would have the effect of replacing the Secretary of State's discretion to make regulations as to the requirements to publicise specified reports and accounts with a duty on the Secretary of State to do so.

Patients, local communities, community health councils, staff and professional organisations, as well as the wider public, all have a right to know about the activities of their local primary care trusts and to be able to satisfy themselves that trusts are behaving in a financially responsible way. Primary care trusts should be required to make the information available in a way which is affordable and accessible, including placing it in local libraries.

Baroness Gardner of Parkes

My Lords, I rise to support Amendment No. 10, moved by my noble friend Lord Howe. It is important to be able to see what money is spent on administration. I believe that this matter has been hyped up artificially. When the present Government were elected, they spent all their time talking about the waste of money on bureaucracy in the health service. My own experience, as chairman of a major trust, was that the administration was extremely hard-worked, very good value for money and that no big business enterprise could have hoped to have achieved, with the same amount of money, what was achieved by the administrators in that trust. The matter has been turned into a political football, which is a great pity. Administrators within the health service are not a separate class of people; they are the people who have been asked to carry out necessary and unenviable tasks, without whose efficiency and commitment the health service could not be run. Nothing has changed on the ground. The same people are all in their places, doing the same jobs; but now they are all in partnership and the terminology is different. It is important that these figures should be available.

I agree with the point made by my noble friend that, unless there is a basis for comparing like with like, there is no way of knowing the true position. With the national institute for clinical excellence we shall be able to see clinical standards that are parallel. We need to be able to see financial standards that are parallel, too.

In a different capacity, I am involved in an NGO which helps children in the third world. I notice that in their annual accounts NGOs include various categories under different headings, and comparing one with another is extremely difficult. If one NGO has an overhead of 10 per cent. and another an overhead of 90 per cent., often a totally false basis has been used for assessing that. My own NGO is very strict with regard to percentages, but, for example, we have noticed that other NGOs include all kinds of things under the heading of education, such as perhaps paying for a person to go in a taxi to deliver papers to someone who is to be educated.

It is extremely complicated to achieve a common basis on which to assess costs. However, it is worth doing, and not just in the case of primary care trusts, but throughout the health service. It would enable us to know where we were getting value for money. Within the health service it is not just a matter of cost, which I know is very important; it is also a question of value for money. If something looks cheap but is not satisfactory, there is nothing cheap about it. We want to be sure that we are getting good care for patients in this country and that whatever we spend is well spent. That could be done by showing the proportion spent on administration.

When one asks them a question, this Government, like all governments, say that they cannot give an answer. I have had that experience repeatedly over many years when I have asked dental questions: "No, we cannot give you the answer". Yet there is a vast enterprise, which is completely computerised, which decides on the type of filling that everyone has. I am a member of the Parliamentary Information Technology Committee. That committee would tell you that it should be possible to press a button on the computer and see exactly what is spent on every different aspect of dentistry. But, no; we have always had the answer that the information is not available. The amendment, if passed, would mean that the information would have to become available, and I strongly support it.

I read in the newspaper that the Secretary of State wishes to appoint the chief executives in the National Health Service. I believe that that is like expecting a major company to allow the Government to appoint its chief executive. It is a very worrying matter. It is one thing to appoint the non-executive members, but I believe there is cause for concern if the Secretary of State wants to take on the appointment of chief executives in the National Health Service, whether it be of one of these trusts or of any other type of trust or authority. I hope that the Minister can give us an assurance that that will not be the case.

Lord Skelmersdale

My Lords, it is inevitable that, like the Minister's arguments sometimes, in any large organisation subsets of the organisation will come under the heading of "the good, the bad and the ugly". I believe it is vital that these details should be publicised, whether they relate to my noble friend's charity, part of the health service, secondary schools, primary schools or, indeed, clinical excellence. It should not only be possible for the sum to be compared—in other words, by the Government and possibly Parliament—but, much more importantly, for local people to be able to compare and to know that what is done in Blackpool is better or worse than what is done in Blackburn, or wherever.

Governments tend to be rather frightened about the amount of income spent on this or that service. It may well be that a good trust spends more on administration and that that is why it is good. Equally, it may be that a good trust, in specific instances, spends rather little on administration. There is no reason to hide that information in either of those cases because it is germane to the public's understanding of what their trust is doing for them. That is what the Bill is all about.

Baroness Carnegy of Lour

My Lords, the Government should not underestimate the interest that the public takes in how much is spent on administration and what the reason for it is. The noble Baroness probably knows that increasingly local government councils, which have by law to circulate a leaflet to their council-tax payers explaining how the council tax is made up, give descriptions of what is spent on administration and why because they know how great the interest is. I believe that most people are sensible enough, as my noble friends pointed out, to know that sometimes a bit more spent on administration can result in a better service and better value for money within a given sum. They understand that, but they need to know the figures and to be able to compare them with those for other like bodies.

The health service is thought of by the public as being somewhat amorphous and difficult to understand, and they do not know where the money goes. I believe that the provision in the amendment would help the public to find the health service user-friendly and that they would understand much better than some of us might suppose, on the face of it, why sufficient money has to be spent on administration. Some of them know the administrators, whether they think they are good or bad, and so on. The better people are educated on this matter, the better regard they will have for the management of their local health service.

Lord Laming

My Lords, we should recognise the helpful point made earlier about NGOs. There is no point having figures for expenditure on administration without definitions of what is included in "administration". We cannot compare like with like unless we record like with like. Recording like with like across primary care trusts and a range of activities requires a sophisticated accounting and recording system. Of course it would be helpful to have information of this kind, but we should not be under the illusion that it can be achieved at the press of a button. It will require a substantial amount of investment and time to assemble information across the country which can be useful in the way in which your Lordships have asked for it. If that is to happen, we must acknowledge the infrastructure required to achieve it.

5.30 p. m.

Baroness Cumberlege

My Lords, I rise to support the remarks of the noble Lord, Lord Laming, who had a distinguished career throughout social services and in government. When the last Government established the total purchasing pilot schemes—the nearest thing to primary care groups—that was, an academic said to me the other day, about the only sensible thing they did. They monitored those schemes carefully, set the baselines and could see how costly they were. Interestingly, research has shown that they are more expensive than GP fundholding and general practice in its generality.

The Government are setting out on a new road of innovation. Some of us do not agree with the whole approach but clearly the Government are intent on that route, so we are determined to make it work. However, we need to know the cost. I support those of my noble friends who said that the cost should be transparent. The Government have put on record on many occasions their wish for transparency and in this case, they should prove that is so.

Baroness Hayman

My Lords, I am grateful to those noble Lords and Baronesses who contributed and hope that I can be reassuring on both strands of the argument. There has been debate about transparency, comparability of costs, and the need for effective management, which I do not challenge for a moment— but I will speak about the difference between bureaucracy and of the importance of removing systems that create unnecessary administrative work that adds no value to the services provided. It is crucial to make that distinction.

We are completely sympathetic to the suggestion that primary care trusts should include details of the proportion of income spent on management costs in reports to their health authorities and to the Secretary of State. However, we do not believe that Amendment No. 10 in necessary. Primary care trusts will be required to keep and publish accounts in a form directed by the Secretary of State. Under Section 98 of the National Health Service Act 1977, the Secretary of State directs health authorities and NHS trusts to present their accounts in a form set out each year in the manual for accounts. They will show management costs—income spent on administration, to use the words of the noble Earl, Lord Howe—as a separate item. The accounts will show also details of the PCT's income and it will be easy to work out the proportion of income spent on management costs.

Paragraph 16(2) of Schedule 1 states that the report prepared by a PCT at the end of each financial year— that is, its annual report—shall give details of the measures the trust has taken to promote economy, efficiency and effectiveness in using its resources. Crude demarcations between the amount spent or not spent are an insufficient reflection of whether money has been well and usefully spent. That is why economy, efficiency and effectiveness are useful. Those details will embrace administrative or management costs and that is certainly one of the areas at which we shall be looking.

Further scrutiny of expenditure on management costs will be provided by the Audit Commission—which, as the noble Lord, Lord Laming, pointed out acknowledges the importance of the comparability of data. We do not add much light to the argument if we try to compare apples with pears. I accept the point made by the noble Baroness, Lady Cumberlege, about ensuring from the beginning that systems are in place to monitor expenditure. As to her comment about the total purchasing pilots, they had higher management costs than fundholding but covered the full range of commissioning or purchasing activity, whereas fundholding only covered 20 per cent. or so. The findings are entirely consistent with the Government's approach to funded care groups—that management budgets should be linked with the responsibilities that go with them.

In Committee, when we considered a proposal similar to Amendment No. 11, I undertook to give the matter further consideration. I can report that we will seek to bring forward an appropriate amendment, I hope on Third Reading, that will have the effect of placing on PCTs an express duty to publicise the specified accounts and reports in accordance with requirements set out in regulations. That will make the duty on PCTs more specific, in line with the proposed amendments, but will retain the Secretary of State's discretion to make regulations setting out, for example, when the accounts and reports must be published, any other requirements, and whether the list of documents that must be publicised should be extended to those other than accounts, annual reports and auditors reports on matters of public interest. That arrangement will have the added benefit of retaining flexibility, to cater for future changes in circumstances.

Many statutory schemes contain powers rather than duties to make regulations. That is true even when the failure to do so would render the scheme inoperable. There are a number of instances in the Bill where the word "may" is used but where there is a clear intention that such regulations will be made. It would not be appropriate to review every such instance where the word "may" rather than "must" is used. I hope that the noble Baroness accepts my assurance that we intend to impose an express duty on PCTs on the face of the Bill to publicise their reports and accounts. On that basis, I hope that she feels able to withdraw her amendment.

As to management costs and our commitment to ensure that £1 billion that would otherwise have been spent on bureaucracy is freed up for patient care, I was asked for hard facts. In Committee, I reiterated that we are looking to add to that target as well as improve the target reduction set in May 1997 of £84 million in health authority, NHS trust and GP fundholder management costs, together with further reductions of £73 million in 1998–99, which we announced last December.

Cumulative savings to date are already about £250 million. Primary care trust management costs are expected to be contained from the replacement of the internal market, GP fundholding and related measures. Together with PCGs, they will bring a more rational approach to the commissioning services and, across Great Britain, the number of commissioning bodies will be cut from more than 4, 000 to 600. PCTs in particular will enable savings in management costs through the merger of functions between PCGs and community trusts and by more cost-effective use of staff, a greater skill mix and sharing of skills, and resources across primary and community healthcare. As I said earlier, there is no way that I would wish to denigrate the contribution made by managers within the NHS as part of the team that provides high-quality healthcare. Money that is spent on effective management to ensure that that takes place is money well spent.

To deal with the point raised by the noble Baroness, Lady Gardner, about the appointment of chief executives, the Government attach great importance to developing and supporting a strong cadre of highly trained managers. We have already strengthened appointment procedures by arranging for NHS executive regional directors to act as the external assessors for such appointments. This new approach will need arrangements and methodology that are being developed. It is right that the Secretary of State should have an interest in ensuring that there are high quality managers available to the NHS, which is a public service, but I can assure the noble Baroness that these new plans will fall strictly within the Nolan Committee rules. In no way are they concerned with politicising the appointments process, and the appointments will themselves be made by NHS chairs and boards. I hope that the noble Baroness finds that reassuring.

I hope that I have also reassured the noble Earl, Lord Howe, that the Government recognise that a high proportion of NHS costs should not be spent on management. One of the great successes of the National Health Service is that it is much cheaper to administer than systems based on private insurance or private healthcare. That is one of the reasons why we manage to provide a high quality, effective service at lower cost than in other countries. For that reason we are determined to safeguard that publicly taxed-based system. In so doing we recognise the role of effective management and the payment of appropriate amounts of money to reflect that management. We do not want to spend money on the unnecessary and bureaucratic paperchase that was a feature of previous arrangements in the NHS with all those different commissioning bodies. In particular, teaching hospitals had to deal with contracts involving hundreds of individual commissioners and bill them which meant a paperchase around the National Health Service. That added nothing to patient care but took money out of it. Based on the assurances I have given as to what is already in the Bill and what we intend to put in it, I hope the House will feel that the Government are safeguarding the transparency of the costs of administration and management within primary care trusts.

Earl Howe

My Lords, this has been a useful debate. I am very grateful to the Minister for her helpful and thoughtful comments. I agree with the noble Baroness that a distinction must be made between management costs and bureaucracy. But if there is a disagreement between us at the margin it is whether the savings of paper to which she referred will result in overall savings to the NHS at the end of the day once the Government's reforms have been put into practice.

I am a little disappointed not to have had from the noble Baroness a fuller picture of what is going on currently on the ground at regional offices, health authorities, primary care groups and so forth in that the bill for administration appears to be growing quite alarmingly, if anecdotal evidence is to be believed. The estimates that I have seen for the costs of administering the PCG/PCT structure range from £150 million to over £300 million a year excluding start-up costs. That is much greater than the cost of fundholding. I do not believe that that should come as any surprise. Any system that seeks to control the commissioning functions and budgets of every single GP, to control the co-ordination of many different bodies and agencies, including local authorities, and engage in almost continuous consultation with local interest groups is bound to result in a considerable burden of management and administration.

As to the amendment, I never sought to suggest that there was always direct comparability between one NHS body and another. Clearly, that would be an absurd suggestion. However, the kind of statistic that I propose in the amendment is, I believe, useful as an initial standard of comparison not only for internal management purposes but also to inform the general public. I shall read carefully the words of the Minister, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 11 not moved.]

5.45 p. m.

Clause 3 [Primary Care Trusts: finance]:

Earl Howe moved Amendment No. 12:

Page 2, line 38, at end insert (", including an identified minimum sum to meet the need for investment in primary care").

The noble Earl said: My Lords, when primary care groups were first proposed 16 months ago one of the main concerns of GPs was the need to protect current levels of investment in primary care. The establishment of unified budgets for PCGs meant that GMS funds to pay for staff, premises and computers in GP practices were in danger of being squeezed by the other elements of the unified budget—namely, secondary care and prescribing—the direct consequences of which would be a fall in investment in primary care infrastructure.

Secondary care and prescribing are both areas in which costs have the potential to spiral upwards. The unified budgetary structure allows for a measure of flexibility in the way that funds are utilised. But the concern of the General Practitioners' Committee was that the unified budget could be put under enormous strain. That led directly to an agreement with the Government in the middle of the previous year that within the unified budget allocated to PCGs a specified level of funding would continue to be available for general practice infrastructure. That minimum level of funding is equivalent to the present levels of expenditure from the money that health authorities allocate for general medical services with an allowance for inflation.

Amendment No. 12 is intended to address exactly the same issue in the context of primary care trusts. The quality of frontline services should be protected. Without the proper level of investment in staff, premises and computers within GP practices the standards of primary care will suffer. These are not minor concerns. The investment in the practice infrastructure can represent up to 30 per cent. of the income of a GP practice. Therefore, the issue facing GPs is one that will weigh heavily with them as they consider any proposal to progress from PCG to PCT status. They will look ahead and see a PCT board that is controlled by lay members who have been appointed by the Secretary of State. It will be that board, not the executive below it— certainly not the GPs themselves—that determines how the unified budget is spent. The board will take advice from the executive, which we understand will have a professional majority on it, but need not accept that advice.

I should like to put some questions to the Minister. First, to what extent is it intended that there should be mechanisms to safeguard the investment in infrastructure in GP practices? Secondly, does the noble Baroness agree that that infrastructure is of key importance in the delivery of a quality agenda? Thirdly, does the Minister also agree that the views of local medical committees should play a major part in informing primary care trusts as to what levels of investment are needed, as indeed they do under present arrangements? I beg to move.

Baroness Thomas of Walliswood

My Lords, we have general sympathy with this amendment. These days one hears a great deal about investment in the infrastructure of hospitals and the importance of it. The current level of investment in GP practices is quite a small proportion of the total expenditure in that area of medicine. I look forward with interest to the comments of the Minister in response to the noble Earl, Lord Howe.

Baroness Hayman

My Lords, I thank the noble Earl, Lord Howe, for raising the matters addressed by Amendment No. 12. We are fully aware of the significance of these matters to GPs and to other members of the primary care team. The Government, too, place great significance on securing appropriate investment in developing primary care.

That is why the modernisation fund includes £82 million specifically for investment in GP practices in the coming year, 1999–2000. It is also reflected in the guarantees, to which the noble Earl, Lord Howe, also referred, which the honourable Member, the then Minister of State for Health, gave in his letter of 17th June last to Dr. John Chisholm, chair of the BMA General Practice Committee, on the minimum levels of investment in GP practice infrastructure to be delivered by health authorities and primary care groups.

Those guarantees have subsequently been confirmed in the guidance to health authorities and primary care groups on allocations for 1999–2000. The guarantees go further than any previous ones in ensuring that the investment in GP practice infrastructure will increase year on year. In practice we expect that most primary care groups and primary care trusts will want to invest above that floor. But the floors provide a guarantee for GPs and their teams in areas where, for whatever reason, the investment priorities of the local health community, and in particular of the primary care group and health authority, lie elsewhere.

I hope that it will be helpful to the House to say in response to the amendment that I can confirm that in their plans for primary care investment, primary care trust expenditure will be subject to the same government commitment in maintaining the level of spending on GMS infrastructure that covers primary care group expenditure. That guarantee will be secured in the same way as that which now applies to primary care groups; that is, reliance on the Section 97 powers, as extended by Clause 3. We shall also be publicising this commitment in a further paper about primary care trusts which we are planning for publication next month. In response to the specific question about LMCs, primary care trusts will have the same relationship with LMCs as health authorities now do in any decisions they take over GMS matters.

Given that assurance and confirmation of our intention to maintain the level of expenditure on infrastructure within primary care trusts, I hope that the noble Earl will feel able to withdraw the amendment.

Baroness Carnegy of Lour

My Lords, with the leave of the House, before the Minister sits down perhaps I may ask the noble Baroness a question to which I shall be grateful if she can find out the answer. It will save putting down another amendment relating to Part II of the Bill about Scotland. There is much concern among GPs about the squeezing out of expenditure on infrastructure in Scotland. Will the answer the noble Baroness has just given be replicated in Scotland? Will the Government make sure that those amounts are reasonably protected? That would be of great comfort to general practitioners in Scotland.

Baroness Hayman

My Lords, I shall resist the temptation to give an off-the-cuff response. I undertake to find out and respond to the noble Baroness as soon as possible.

Earl Howe

My Lords, the answer to the Minister's last point of her main response is yes, I do feel able to withdraw the amendment. Her answer was extremely helpful. I am grateful to the noble Baroness for the assurances she has given. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p. m.

Baroness Hayman moved Amendment No. 13:

Page 2, leave out lines 39 to 45.

The noble Baroness said: My Lords, I announced during the earlier debate in Committee on Clause 3 of the Bill that we would be bringing forward a government amendment to refine the definition of the prescribing costs that will be included in health authorities' and primary care trusts' unified budgets. That is the main purpose of these amendments. The main feature of the amendments is a new schedule to the 1977 Act defining health authorities, and primary care trusts' "main expenditure" (which is cash-limited) and their "general Part II expenditure" (which is demand-led).

Before I address the amendments in any detail I should offer your Lordships some background. I know that it is an area of interest to the House. Unified budgets—which we announced in the White Paper, The new NHS—will create for the first time a single financial envelope covering the commissioning of hospital and community health services; primary care prescribing; and investment in general practice infrastructure—the issue which we have been addressing. This is essential to achieve our objective of aligning clinical and financial responsibility: offering those closest to patients the maximum scope to deploy NHS resources in ways that best meet patient needs.

In the past, distinctions between these funding streams have made it difficult for local clinicians to make changes that they know would be beneficial. They could see ways of saving in one area of activity to support much needed improvements elsewhere but did not have the power to move resources around to achieve that. As local needs or clinical practice changed, it was difficult to adjust patterns of expenditure.

We want a system that is more responsive. Moving to unified budgets will give health authorities and, after this Bill is enacted, primary care trusts greater flexibility in deciding the most appropriate balance between these three areas of expenditure. This will enable health authorities, primary care groups and trusts to decide relative priorities between and within the three areas of activity and match the resources to those priorities without the artificial barriers imposed by the present separation between the different funding streams.

The unified budget itself does not depend on the Bill. Two elements of the unified budget—hospital and community health services, and GP practice infrastructure—are already part of health authorities' cash-limited budgets. But these are managed separately and divided by a statutory ring fence.

The third element, prescribing costs, can be brought within the unified budget using existing powers in Section 97 of the 1977 Act. Those powers allow expenses incurred by family health services practitioners—that is, GPs, dentists, pharmacists or optometrists—to be designated as part of health authorities' cash-limited main expenditure.

Indeed, in effect prescribing costs were partially brought within wider cash limits by the previous administration through the fundholding scheme. It is right to acknowledge that one of the important lessons we can learn from fundholding is that when offered the opportunity to handle a budget which brought together prescribing with an element of hospital and community services expenditure and funding for practice staff, many fundholders were indeed able to find efficient and effective ways of providing services for their patients.

Of course the fundholding scheme also had important limitations. It left artificial barriers between emergency care and other services, for example. And it only ever covered around half the country. But over the past year it has been interesting to see the GP commissioning group pilot schemes managing budgets effectively on a larger group basis—some of a similar size to primary care groups. The 1998 report of the University of Birmingham Independent Health Service's Management Centre on GP commissioning groups found that the groups sought continuously to improve their prescribing and promote high standards of care. They took their responsibilities seriously and adopted a range of tactics in order to monitor and develop individual, practice and group prescribing practice, including development of formularies, setting up prescribing groups, open sharing of prescribing data and use of incentive schemes. Most used professional pharmaceutical advice for management and peer review purposes—it is another example of where other professionals such as pharmacists need to be involved—and nurses were also employed as advisers. Quality was addressed, as well as cost issues, including the importance of developing a peer review culture; and over a quarter of the pilot sites projected underspends on their prescribing budget— which I think is interesting.

Our new approach will for the first time bring all hospital and community services within a unified budget and will extend the flexibilities and freedoms of unified budgets to the whole country. This means—and let me be up front about this—that we will for the first time bring all prescribing expenditure within a unified cash limit. Equally, we are not putting a cash limit around prescribing expenditure itself. We are bringing that prescribing expenditure, £4.4 billion in England, within a wider unified budget of some £24 billion in England. Many GPs already have experience of working with this kind of approach, and hospital prescribing has always been managed as part of a wider overall cash limit.

Let me turn now from the overall policy context to the purpose of the amendments before us. It is critical that the new arrangements should operate in a fair and equitable way. The amendments are addressed to this, and are designed to ensure that we apply the principle of aligning clinical and financial responsibility as accurately as possible at local level.

As I have explained, Section 97 as it stands does already allow us to create the unified budgets that we are putting in place from April 1999 for health authorities and primary care groups. But in practice the framework which the existing Section 97 provides does not enable us to align clinical and financial responsibilities as accurately or equitably as is desirable. The main reason for this is that, under the existing powers, we would be bringing within a health authority's cash-limited budget the cost of drugs dispensed in its area, rather than the drugs prescribed by GPs and other practitioners in that area. In other words, we should be asking the GPs in a PCG to take responsibility not for expenditure on the drugs they had prescribed for their patients but on the prescriptions presented at chemists within the area of their PCG.

In some health authorities there is a significant mismatch between the two. Up to around 25 per cent. by value of the drugs dispensed in some authorities are prescribed elsewhere, and up to around 15 per cent. of the drugs prescribed by some authorities' practitioners are dispensed elsewhere. At primary care group level the discrepancies could well be more marked.

The amendments address this issue by allowing the Secretary of State to apportion payments for drugs among health authorities to take account of cross-boundary prescribing and dispensing. They allow health authorities to make comparable arrangements for primary care trusts.

To put it another way, and I hope more simply, these amendments will refine the definition of prescribing costs so as to enable those costs to be charged to the health authority or primary care trust where the prescription was written rather than where it was dispensed. We need to achieve this because the crucial decision is that of the GP or nurse on whether to prescribe for a particular patient and, if so, which drug. The patient's decision on where to get the prescription dispensed should be of lesser significance to the arrangements for attributing prescribing costs. These amendments will deliver that objective. They will also enable the apportionment process to be used to average out those elements of drug costs that are outside the influence of the person doing the prescribing, for instance, the amount deducted from pharmacists' reimbursement to reflect average discounts. This will be more equitable for health authorities and primary care trusts, again ensuring our principle of aligning clinical and financial responsibility is implemented as fully as possible.

These practical arrangements for attributing drug costs will build on the well-established systems which are familiar to health authorities and currently operate for tracking spend against GP fundholders' budgets or against non-fundholders' indicative prescribing budgets. What will change, by virtue of these amendments, is that these refined attributions can be used as the basis for determining what prescribing expenditure counts against a health authority or primary care trust's unified budget. In other words, we will be aligning those responsibilities at practice and health authority or primary care trust levels.

I apologise to the House for the fact that the resultant amendments are lengthy and technically complex. They have to be so because they amend Section 97 of the 1977 Act, which is in itself a complex piece of legislation. They are also complex because they are designed to provide for an equitable charging system which can be operated by adapting the existing well-established NHS systems for remunerating dispensing contractors. Despite this legal complexity, the purpose of the amendments is straightforward. They are designed to deliver the fair and accurate charging of prescribing costs to health authorities' and primary care trusts' unified budgets. I commend the amendments to the House. I beg to move.

Lord Renton

My Lords, I shall try to be constructive rather than critical in what I have to say. We appreciate the efforts that the noble Baroness has made to explain the Government's intentions, but we are in a rather unusual position on this Bill. At least a third of it consists of amending previous Acts of Parliament. Indeed, Clauses 3 to 10 inclusive are confined to amending the Acts of 1977 and 1990. The 10 pages of Schedule 4 comprise a mass of amendments to previous legislation. Of the three amendments moved by the noble Baroness we are mainly concerned with Amendment No. 15. It adds a new clause, adding a new schedule to the 1977 Act. This is rather unusual. Rather than adding a new clause, it would have been more usual, tidier and more logical, to have a new schedule to the Bill. I have studied the content quite closely. It deals with detailed guidance as to the way in which expenditure shall be handled: the sort of thing which is very often put into a schedule. I hope that we shall have early consolidation after this Bill becomes law, because those splendid people with the professional duty and administrative ability will have a terrible time trying to establish across the statute book exactly what the law is. If one looks at the amendments in Schedule 4, it will require tremendous documentary effort on their part to find out their responsibilities.

I do not say that there is much that the noble Baroness herself can do about this. My main point, however, is to implore those concerned within the Government to give high priority to consolidating all this legislation on health before great confusion sets in.

Baroness Carnegy of Lour

My Lords, what was said by my noble friend Lord Renton is even more true of Part II of the Bill. I have attempted, with very much less expertise than he has, to ask whether the Government would consider the same matter.

I turn to the question of how prescriptions will be charged and the part they will play in the unified budget. The Minister has already kindly agreed to find out about the replication in Part II of the Bill in connection with the arrangements she spoke of last time. Could I ask her also to add what she has just said about prescribing and how those arrangements will be made, because that is part of the problem which I tried to enunciate?

Lord Walton of Detchant

My Lords, as the Minister said, the amendments tabled in her name are exceptionally complex, particularly the one relating to Schedule 12A, proposed as an amendment to the 1977 Act.

Drug budgets in the NHS have always been cost-limited to an extent. Is the intended purpose of these amendments to make prescribing across the country more even, ruling out, one hopes, the issue of post-code prescribing, which has been referred to on a number of occasions when this Bill has been debated in your Lordships' House?

We have seen the establishment of the national institute for clinical excellence, inexorable rising costs of technical and pharmaceutical developments and the introduction of expensive new drugs. After due inquiry, NICE may indicate that within the NHS a particular form of treatment is the most right and cost-effective for a particular condition. Might not the drugs budget then be adjusted to take account of its recommendations? The director of NICE has said that in making recommendations the institute will take account of cost-effectiveness. However, it is likely that drugs such as beta-interferon, the other interferons for multiple sclerosis, Donepezil and other drugs for the treatment of Alzheimer's, and many more, will put an increasing burden on the NHS and its prescribing budget. Does the Minister believe that the amendments she has introduced today will help to deal with such problems?

Earl Howe

My Lords, I am grateful to the Minister for her thorough explanation of the amendments. I am also personally grateful to her for taking the time to brief me about them last week with her officials. I understand that a principal purpose of the amendments is to direct the costs of prescribing to the place where they should properly fall; that is, to the point at which the prescribing rather than the dispensing is done. I entirely understand why that should be thought desirable.

However, I find one point in Amendment No. 15 somewhat obscure. In paragraph 3(4)(b) of the new Schedule 12A the Secretary of State is granted power to exercise his discretion in apportioning funds, by reference to averaged or estimated amounts". I see the sense in allowing for estimated amounts of expenditure, but what is the significance of "averaged"? In what circumstances might the Secretary of State be minded to apportion funds relating to the cost of drugs in a way which averaged out any likely differences between health authorities, or is reference being made to some other kind of averaging?

Lord Clement-Jones

My Lords, I, too, thank the Minister for her careful explanation of the amendments and for the opportunity she gave us last week of discussing them before they were tabled.

We on these Benches have considerable sympathy with the issues raised by the noble Lord, Lord Walton of Detchant. In Committee we tabled an amendment which probed cash limits and the drugs budget and the Minister gave a clear and firm assurance, as she has done today, that there was no intention to cash limit drug prescribing budgets at GP level. However, there are dangers in the unified budgets being held at PCT level when there is overspending.

The Minister mentioned the temporary financial assistance which would be available if unified prescribing budgets were overspent, and that provides some assurance. However, we believe that if NICE, which will set standards for prescribing, regards particular drugs as being important and necessary as an effective form of treatment, making GPs bound to prescribe them, there is a great danger that the overall unified budget will not be sufficient. Will not either temporary or permanent financial assistance at that unified level need examining?

We accept, however, that these amendments do not alter the principles involved and the moves towards indicative and unified budgets. We also accept that there is considerable logic in being able to pinpoint with greater accuracy who is responsible for the prescription of the drugs. Therefore, that amendment does not give us cause for concern, unlike the overall framework in which it would be placed.

Furthermore, I have sympathy with the view expressed by the noble Lord, Lord Renton. These are perhaps plangent amendments in terms of their clarity, and early consolidation of the Bill is important. Representations have been made to me for a memorandum explaining the amendment in greater detail prior to any consolidation. Perhaps the explanation which the Minister has given today will be extremely helpful, but there is concern about people's ability to understand the new legislation. I described our previous canter through unified budgets as being a financial seminar. Today we have had the second round of that financial seminar and I am grateful to the Minister.

6.15 p. m.

Baroness Hayman

My Lords, I am grateful to all noble Lords who have contributed to the debate, not least the noble Lord, Lord Clement-Jones. It is the first time I have ever heard the word "plangent" used in normal discourse—if a debate in your Lordships' House can be described as normal discourse.

I shall deal first with some of the technical issues. When dealing with the three components of the unified budget, I gave as the total sum £24 billion, but I should have said £28 billion.

In answer to the noble Baroness, Lady Carnegy, I point out that at a later stage my noble friend Lord Macdonald of Tradeston expects to bring forward a similar amendment.

As regards the inclusion of the words "averaged" and "estimated", the key adjustments we wish to make take account of cross-boundary prescribing but other adjustments will allow prescribing costs to be more accurately and equitably attributed to health authorities. They build on well-established systems for measuring spend against GP fundholders' budgets and against indicative budgets.

Averaging is perhaps most relevant where payments to pharmacists are made. They take into account the level of discounts which is assumed to obtain on the purchase of drugs. The larger their volume of NHS dispensing, the larger the assumed discount. The level of that discount deduction has nothing to do with the prescribing decision as such, so it is fairer to average out that discounting element in the recharging costs to health authorities. I hope that that clarifies the matter.

The noble Lord, Lord Clement-Jones, spoke of an over-commitment on unified budgets. In the first instance, it will be for health authorities, as now, and primary care trusts to manage the risks across the whole of the unified budget; in other words, by balancing over-commitments in one part by reducing spending elsewhere. But health authorities will assist primary care trusts in that task by, for example, helping them to pool financial risks.

As in the current system, an over-commitment may sometimes be unavoidable. There are well-established in-year mechanisms for dealing with over-commitments. For example, a health authority or primary care trust could have its cash-limited budget increased to cover potential overspend by transferring resources from an under-spending health authority or primary care trust elsewhere. That is the well-established brokerage system.

I am not sure what I can say to the noble Lord, Lord Renton. I feel as much a prisoner of the complexity of the legislation as any other Member of your Lordships' House. I certainly recognise the difficulties to which he and other noble Lords referred.

As regards the issue of the new clause or schedule. I must deny all responsibility, if that is not inappropriate behaviour at the Dispatch Box. In dealing with those technical drafting issues, one depends on the advice of parliamentary draftsmen. It was chosen as the preferred method of dealing with the issue but it is obviously not the preferred method of the noble Lord, Lord Renton.

Lord Renton

My Lords, I hope that the noble Baroness will realise that parliamentary draftsmen are there to serve and not to direct. I hope that she will bear in mind what I said about the need for consolidation.

Baroness Hayman

My Lords, I shall certainly do that. I shall go on my assertiveness training course for dealing with parliamentary draftsmen as soon as the Bill has passed through your Lordships' House!

Serious issues were raised in relation to the memorandum. Revised explanatory notes will be published to cover those new provisions on the introduction of the Bill in another place. A further revised version will be published after that, on enactment of the Bill. However, I recognise that that goes only so far and does not deal with the major consolidation issue.

I deal now with the major substantive issue which has been raised on the effect of bringing together the prescribing budgets in primary care. Perhaps I may offer some reassurance to the noble Lord, Lord Walton. We believe that allowing maximum flexibility for local clinicians to identify and take the steps which will produce the best results for patients from all the resources available in the unified budget, free of artificial and distorting boundaries between different types of expenditure, is an important driver towards the high quality prescribing which I am sure we all wish to see.

The main issue is in relation to outputs rather than inputs from prescribing. We can all recognise that spending large amounts of money on prescribing is not necessarily a guarantee of high quality in that prescribing. As I made clear, the unified budget will not place a cash limit on any area of GP activity as such, whether it is prescribing or referrals. The cash limits will apply at the health authority or PCT level and not to individual practices and GPs.

The point has been made about NICE. If it functions as we hope it will do so that clinically-effective treatments are more widely available sooner, we must recognise the need to provide a system which also delivers on rigorous and cost-effective prescribing in other areas.

The experience to which I referred earlier, in terms of peer group review and working in a broader and larger system with the advice that is available from pharmacy advisers, is that it is possible to improve the quality of prescribing. There are a range of ways in which that can be done without necessarily sending the bill sky high. I recognise that that is an important area if we are to see clinically effective treatments reaching all patients who need them as soon as possible.

It will perhaps be reassuring if I make clear that the extra resources we have made available to the NHS for the next three years take full account of the growth in recent years of prescribing costs, which have been about 8 per cent. annually, and of our expectations for the future. I reiterate that there is no reason for us to think that the unified budget will lead to patients being denied the medicine that they need. As I said in my opening remarks, all the evidence points in the other direction. I hope that the House will accept that these very technical and lengthy amendments provide a sound basis for what will be a better way in which to ensure that we achieve the best value for money across the board in relation to the way in which funds are spent by primary care trusts rather than in artificially-divided funding streams. I commend them to the House.

On Question, amendment agreed to.

Earl Howe moved Amendment No. 14:

Page 4, line 33, at end insert— ("(9) The Secretary of State shall provide guidance to Primary Care Trusts regarding appropriate levels of expenditure on research and development, training and tertiary services. "").

The noble Earl said: My Lords, on Second Reading and again in Committee, we heard contributions from a number of noble Lords, not least the noble Lords, Lord Winston and Lord Walton of Detchant, which highlighted the importance of clinical academic medicine and training within the context of a thriving health service. The purpose of the amendment is to enable me to address those issues in what is intended to be a constructive spirit.

The Richards Report of 1997 recognised that the supply of academic clinicians is drying up. The UK is producing a lower proportion of academic papers than it used to. If we look at teaching hospitals, part of the problem is the developing fault line between the two sides of their activity: the clinical care side and the academic and training side. Those two sides are in danger of becoming dislocated due, in large part, to the increasing pressure caused by the need to treat more and more patients.

That is a serious trend. It goes almost without saying that any erosion of the teaching base will have a highly detrimental effect on both the quality of training and the numbers being trained. In the longer term, it will lead to this country losing its place as one of the foremost centres of excellence in clinical research.

The noble Lord, Lord Winston, whom I am sorry not to see in his place, reminded us on Second Reading of how intimately bound up with each other are those ingredients of excellence—the availability of academic clinicians, the concentration of specialist expertise and case studies of patients and the clinical research base. It is vital to retain the links between the universities and other centres carrying out basic research and the various arms of the health service, but particularly the teaching hospitals.

As we witness ever-greater demands on the NHS budget, my great fear is that those vital elements of excellence in the delivery of healthcare will diminish both in quality and quantity. Of course, the streams of money which flow into academic training and research are not exclusively an NHS spend. The DfEE element is designed to cover a large part of the teaching and research activity, although the split of responsibility between the DfEE and the DoH is fairly complex. In the unified budgetary structure of a primary care trust, especially at level 4, we may find less and less of a commitment and, therefore, less money flowing towards those activities in NHS trusts. The purchasing horizons of a PCT will inevitably be much shorter than those of the Department of Health or even of a health authority. It is not clear what mechanisms will be in place to protect the broader, long-term objectives of the health service.

Those are the issues that lie behind the amendment. They are tremendously important, but they are not easy to deal with. I hope the Minister can provide some reassurance. I beg to move.

6.30 p. m.

Lord Walton of Detchant

My Lords, I rise to support warmly the amendment so splendidly proposed by the noble Earl, Lord Howe. As he said, the issue of the future of clinical academic medicine and the related problems of teaching and research are crucial to the future of the National Health Service. It was reassuring when the Minister spoke earlier about the crucial importance of academic clinical input into primary care trusts. I am delighted that she was able to acknowledge that.

One important matter of relevance to the problem is that today's development in medical clinical research brings about tomorrow's practical development in patient care. In the area of primary care, academic departments and general practice play an increasingly important role, not least in training medical students, but also in the vocational training of future general practitioners and in a much wider range of activities than ever was the case in the past.

To the credit of the last government, they recommended that 1.5 per cent. of the NHS budget should be devoted to research and development. I had the privilege of chairing an inquiry of your Lordships' Select Committee on Science and Technology into research in the NHS in the light of the last government's reforms. The Culyer inquiry on R&D in the NHS reported at about the same time as our Select Committee. Those reports identified the need to have research and development funded, first, at a central level through the Research and Development Directorate; secondly, by regional directors of research and development; and, thirdly, at a sub-regional level, with the intention that funds for research could be channelled to those general practitioners, to those nurses and other healthcare professionals who wished to undertake research of importance to the future of the NHS.

Such matters are of great importance. I am delighted that they have been highlighted in this amendment. I hope that the Minister will be able to give us assurances that the present Government propose to continue support for research and development at all three levels. It is a very important issue.

I am also glad that the amendment includes tertiary services. An unexpected effect of the internal market introduced by the last government was that tertiary referrals to centres of excellence, upon which so much major research depended, fell away sharply. That is a matter of relevance to Amendment No. 20 which stands in the name of the noble Baroness, Lady Masham. The issue of cross-boundary flow and the ability to have patients referred to centres of excellence, not only because of the quality of the treatment that they will receive in such centres, but also in the furtherance of the clinical research which is so important to the future of the NHS, is a vital characteristic that I trust the Government will continue to support.

Baroness McFarlane of Llandaff

My Lords, I seek to support the amendment. I am glad that the noble Lord, Lord Walton, mentioned the need for expenditure on research and development in disciplines such as nursing, physiotherapy and others. We need the ability to research and develop evidence-based practice.

Baroness Sharp of Guildford

My Lords, I also rise to support the amendment. As the noble Lord, Lord Walton of Detchant, and other noble Lords indicated, it is extremely important that we maintain the high quality of research and development in this area of expertise in the UK, where we have led for many years.

Given present scientific developments, there is an increasing lowering of boundaries between the life sciences, the biological sciences and the medical sciences. Although we have seen some diminution in the proportion of papers produced on the medical sciences, the UK is still highly ranked on the production of papers on biological sciences. We have recently seen an increase in the numbers of papers published in those areas. Nevertheless, the points made by noble Lords on all sides of the House are absolutely correct and we fully endorse them.

Lord Skelmersdale

My Lords, far be it from me to throw rocks into still waters and make them troubled, but I am rather troubled by this particular amendment of my noble friend. Of course, there is no doubt that both medical noble Lords who spoke on this issue in Committee are worried. They are right to be worried because the situation, as the noble Lord, Lord Walton, has just said, is, without a shadow of a doubt, deteriorating. That said, I believe that beggars—or perhaps cobblers—ought to stick to their lasts, which is why I only really welcome two-thirds of this amendment.

Primary healthcare trusts are, after all, going to be concerned with primary healthcare. Training, especially the postgraduate training of doctors into various disciplines, some of which are not truly recognised like stroke medicine or indeed the professions allied to medicine—PAMs, or whatever they are called; for example, the various therapists—needs extra input. We all know that there are not nearly enough of them. It is in those areas that the primary care trusts should get involved.

I take issue with the noble Lord, Lord Walton, in going on to expect the primary care trusts to expend money on research and development in the tertiary services. Tertiary services are equally in need of boosting, of extra funding and all the rest. The question is whether it should be done by the health trusts, by central government or some other organisation. I rather suspect that it would not be right for the primary care trusts to do it.

Baroness Masham of Ilton

My Lords, I add my support to the amendment, but I should like to ask the Minister if he can say who will fund the tertiary services. There seems to be concern about that. As other noble Lords have said, the quality of training spreads throughout the country. People who are trained in tertiary units move on. They get married and move down to the primary care services. Therefore, their expertise is spread around the country. The existence of units of excellence encourages nurses from all over the world to train in such places. The training of doctors, nurses and physiotherapists is vital when there is such a shortage.

Baroness Gardner of Parkes

My Lords, I did not understand the point made by my noble friend Lord Skelmersdale about tertiary services. I do not think that the amendment calls for GPs or primary care trusts to support research in tertiary services. It is more concerned with the referral of patients to the tertiary services and, because patients are referred to tertiary services, the tertiary services themselves will carry out the research. Can my noble friend confirm that the training will include newly qualified doctors who often undertake a period of primary care training in general practice? Are they included in the amendment?

Earl Howe

My Lords, with the leave of the House, although that area is important, it was not uppermost in my mind. I was seeking to focus on clinical academic medicine in the medical schools. I believe that that was the principal concern also of other noble Lords, including especially the noble Lord, Lord Walton of Detchant.

Baroness Gardner of Parkes

My Lords, I thank my noble friend for that clarification and strongly support the amendment.

Baroness Hayman

My Lords, we have had a useful debate, following which I cannot be in any doubt about the strong feeling held by noble Lords about the importance of academic medicine. As the Minister in the department with responsibility for research and development, I feel that I am reminded constantly of the areas in which we need to ensure that those interests are properly safeguarded. We recognise the seedcorn that they represent in terms of high quality patient care for the future. We should not lightly neglect that.

I was grateful for the acknowledgement from the noble Lord, Lord Walton, of what we are trying to do in terms of the amendment that we shall be bringing forward to ensure that, as part of a PCT's duty to make arrangements to secure appropriate professional advice, the local stakeholder must take into account the key area of academic interests, particularly where a PCT commissions services from a teaching hospital.

In terms of the effect of the amendment, the provisions of Schedule 1 will give primary care trusts powers similar to those currently enjoyed by NHS trusts to conduct or commission research and to make offices and facilities available for training purposes. As the House is aware, funding for research and development is achieved through the research and development levy. It is for each trust to put forward research proposals for central funding. The strategic framework for the R&D levy, issued in January 1997, sets out the principles that govern the allocation of NHS funding for research and development. A strategic review is currently under way with the aim of ensuring that the allocation of funding takes full account of the organisation and function of the new NHS and that it continues to improve quality and value for money.

With regard to the short debate which was initiated by the noble Lord, Lord Skelmersdale, we should not think of research and development as something that happens simply in academic medical departments and tertiary centres. One of the opportunities for primary care trusts with regard to their ability to undertake research and development is to ensure that that work is conducted in areas such as nursing, the professions supplementary to medicine and primary care where, after all, the vast majority of healthcare is delivered to patients and where the research base has not traditionally been as strong as in some areas of secondary and tertiary care. There are great opportunities there.

With regard to training, undergraduate and postgraduate training are both funded also through a system of levies, although postgraduate deans contribute to the costs. The arrangements for both are well established for NHS trusts. Primary care trusts will be brought into the same system.

The appropriate level of expenditure on tertiary services will obviously depend on local circumstances. However, I hear the concerns expressed about the importance of ensuring patient access to proper tertiary facilities. I am sure that when we reach Amendment No. 20 we shall have an opportunity to debate some of those issues. The appropriate level of expenditure will vary greatly. The provision of guidance from the Secretary of State would restrict the local flexibility that is required to ensure the most appropriate arrangements for the commissioning and provision of services. I am not sure that it would be appropriate for the Secretary of State to provide guidance on appropriate levels of expenditure on tertiary services, although I recognise the importance of ensuring access to those tertiary services and of the trickle-down effect of that throughout the service.

With the assurance that PCTs will be brought fully within the existing arrangements which apply to NHS trusts in respect of research and development, training and tertiary services, I hope that the noble Earl will not feel it necessary to press the amendment.

6.45 p. m.

Earl Howe

My Lords, this has been a useful debate and I am grateful to all noble Lords who have participated in it and to the Minister for her response. In my view at any rate, part of the problem is that those who perform work that deals in long-time horizons— that is, in training and research, or in what is sometimes referred to as the "futures agenda"—are inevitably subject to a different kind of culture from those who deal in purchasing and commissioning decisions of a short-term nature. The second culture benefits from the first, but it is an underpinning that allows change to manifest itself only gradually. One day you notice that something on which you relied is no longer there.

One of the less satisfactory features of the proposed system for funding tertiary services is, as I understand it, the emphasis to be placed on historical spending patterns. It is essentially a system that relies on rolling forward what has happened in the past. That may well cut down on the paperwork, but it may also serve to ossify current structures in an unhelpful way. Alongside the protection of the overall levels of funding, one needs to achieve an ability to build up new tertiary concepts where there is the scope to do so. An over-reliance on the past will not allow such flexibility. If the Minister feels that she can elaborate on what she has already said on that point, I should be grateful if she would write to me.

On PCTs, I was trying to make it clear that it is not so much that funding will be voted away from training and research, but that the decisions taken by PCTs, particularly in areas such as tertiary services, will have direct, knock-on implications for those activities, with the resultant consequences in terms of funding over the medium to long term. With that, and with thanks once again to the Minister, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hayman moved Amendment No. 15:

AFTER CLAUSE 3, INSERT THE FOLLOWING NEW CLAUSE—

EXPENDITURE OF HEALTH AUTHORITIES AND PRIMARY CARE TRUSTS

(". —(1) AFTER SCHEDULE 12 TO THE 1977 ACT THERE IS INSERTED—

"SCHEDULE 12A

EXPENDITURE OE HEALTH AUTHORITIES AND PRIMARY CARE TRUSTS

Health Authorities: general Part II expenditure 1. —

1. (1) In section 97 above and this Schedule, general Part II expenditure, in relation to a Health Authority, means expenditure of the authority which—
   1. (a) is attributable to the payment of remuneration to persons providing services in pursuance of Part II of this Act, and
   2. (b) is not excluded by sub-paragraph (2) below.
529
2. (2) Expenditure is excluded if it is attributable to—
   1. (a) the reimbursement of expenses of persons providing services in pursuance of Part II which are designated expenses incurred in connection with the provision of the services (or in giving instruction in matters relating to the services),
   2. (b) remuneration referable to the cost of drugs,
   3. (c) remuneration paid to persons providing additional pharmaceutical services (in accordance with directions under section 41A above), in respect of such of those services as are designated, or
   4. (d) remuneration of a designated description which is determined by the Health Authority and paid to persons providing general medical services in pursuance of Part II.

Health Authorities: main expenditure 2. —

1. (1) In section 97 above, main expenditure, in relation to a Health Authority and the year in question, means—
   1. (a) expenditure of the authority mentioned in sub-paragraph (2) below,
   2. (b) any other expenditure of the authority attributable to the performance of their functions in that year (other than general Part II expenditure and remuneration referable to the cost of drugs), and
   3. (c) expenditure attributable to remuneration referable to the cost of drugs for which the authority are accountable in that year (whether paid by them or another authority).
2. (2) The expenditure referred to in sub-paragraph (l)(a) above is expenditure attributable to—
   1. (a) the reimbursement in that year of expenses of persons providing services in pursuance of Part II which are designated expenses incurred in connection with the provision of the services (or in giving instruction in matters relating to the services),
   2. (b) remuneration paid in that year to persons providing additional pharmaceutical services (in accordance with directions under section 41A above), in respect of such of those services as are designated, or
   3. (c) remuneration of a designated description which is determined by the Health Authority and paid in that year to persons providing general medical services in pursuance of Part II.

3. —

1. (1) For each financial year, the Secretary of State shall apportion, in such manner as he thinks appropriate, among all Health Authorities the total of the remuneration referable to the cost of drugs which is paid by each Health Authority in that year.
2. (2) A Health Authority are accountable in any year for remuneration referable to the cost of drugs to the extent (and only to the extent) that such remuneration is apportioned to them under sub-paragraph (1) above.
3. (3) Where in any financial year any remuneration referable to the cost of drugs for which a Health Authority are accountable is paid by another Health Authority, the remuneration is to be treated (for the purposes of sections 97 and 97A above) as having been paid by the first authority in the performance of their functions.
530
4. (4) The Secretary of State may, in particular, exercise his discretion under sub-paragraph (1) above—
   1. (a) so that any apportionment reflects, in the case of each Health Authority, the financial consequences of orders for the provision of drugs, being orders which in his opinion are attributable to the authority in question,
   2. (b) by reference to averaged or estimated amounts.
5. (5) The Secretary of State may make provision for any remuneration referable to the cost of drugs which is paid by a Health Authority other than the Health Authority which are accountable for the payment to be reimbursed in such manner as he may determine.

PCTs: general Part II expenditure 4. —

1. (1) In section 97C above and this Schedule, general Part II expenditure, in relation to a Primary Care Trust, means expenditure of the trust which—
   1. (a) is attributable to the payment of remuneration to persons providing services in pursuance of Part II of this Act, and
   2. (b) is not excluded by sub-paragraph (2) below.
2. (2) Expenditure is excluded if it is attributable to—
   1. (a) the reimbursement of expenses of persons providing services in pursuance of Part II which are designated expenses incurred in connection with the provision of the services (or in giving instruction in matters relating to the services), or
   2. (b) remuneration of a designated description which is determined by the Health Authority within whose area the area of the trust falls and paid to persons providing general medical services in pursuance of Part II.

PCTs: main expenditure 5. —

1. (1) In section 97C above, main expenditure, in relation to a Primary Care Trust and the year in question, means—
   1. (a) expenditure of the trust mentioned in sub-paragraph (2) below, and
   2. (b) any other expenditure of the trust attributable to the performance of its functions in that year (other than general Part II expenditure), and is to be treated as including any expenditure apportioned to the trust for that year under paragraph 6 below.
2. (2) The expenditure referred to in sub-paragraph (l)(a) above is expenditure attributable to—
   1. (a) the reimbursement in that year of expenses of persons providing services in pursuance of Part II which are designated expenses incurred in connection with the provision of the services (or in giving instruction in matters relating to the services), or
   2. (b) remuneration of a designated description which is determined by the Health Authority within whose area the area of the trust falls and paid in that year to persons providing general medical services in pursuance of Part II.

6. —

1. (1) For each financial year, a Health Authority may apportion, to such extent and in such manner as they think appropriate, among the Primary Care Trusts whose areas fall within their area, the remuneration referable to the cost of drugs for which the authority are accountable in that year.
531
2. (2) Where in any financial year—
   1. (a) any remuneration referable to the cost of drugs for which the Health Authority are accountable is paid (whether by them or another Health Authority), and
   2. (b) that remuneration is apportioned to a Primary Care Trust under sub-paragraph (1) above, that remuneration is to be treated for the purposes of sections 97C and 97D as having been paid by the trust in the performance of its functions.

Interpretation 7. —

1. (1) In this Schedule—
   • "designated" means designated in writing by the secretary of state (and different designations may be made for different purposes),
   • "drugs" includes medicines and listed appliances (within the meaning of section 41 above),
   • "pharmaceutical services" does not include additional pharmaceutical services.
2. (2)The Secretary of State shall determine what remuneration paid by Health Authorities to persons providing pharmaceutical services is to be treated for the purposes of this Schedule as remuneration referable to the cost of drugs.
3. (3) The Secretary of State may treat all remuneration paid by Health Authorities to such persons, so far as it is met by an NHS trust or Primary Care Trust under section 103(3) below, as remuneration referable to the cost of drugs for those purposes. "

(2) Section 97 of the 1977 Act is amended as follows—

1. (a) subsection (2) is omitted,
2. (b) in subsection (3), at the end there is inserted "in that year",
3. (c) for subsections (3A) and (3B) there is substituted—

(3BB) Schedule 12A to this Act (which defines "general Part II expenditure" and "main expenditure" for the purposes of, and supplements, this section and section 97C below) shall have effect". (3) Section 103(3) of the 1977 Act (special arrangements as to payment of remuneration) is amended as follows—

1. (a) in paragraph (a), for the words from "the Health Authority" to the end of that paragraph there is substituted "a Health Authority so determined in respect of the whole or any part of that remuneration",
2. (b) in paragraph (b), for "that" there is substituted "the whole or (as the case may be) that part of the".

(4) This section has effect for the financial years 1999-2000 and subsequent financial years. ").

The noble Baroness said: My Lords, this amendment was spoken to with Amendment No. 13. I beg to move.

On Question, amendment agreed to.

Clause 4 [Primary Care Trusts: provision of services etc.]:

Earl Howe moved Amendment No. 16:

Page 4, leave out lines 40 to 44.

The noble Earl said: My Lords, I should say straightaway that this is a probing amendment, but it concerns a matter of genuine puzzlement to me. Clause 18A(2), which is to be found at the bottom of page 4, contains a provision that permits a PCT to provide services to patients of other NHS bodies, such as a primary care group or another PCT, as long as it already provides those services to its own population. In itself, that seems a perfectly sensible provision, but can the Minister say whether the flexibility granted to a PCT in that way is entirely without condition? As I understand it, the clause would allow a PCT that was a provider of services and an acknowledged centre of excellence for, let us suppose, one or more of those services to treat patients living outside its own boundaries without restriction. I did not believe that that was the Government's intention.

In this Bill, we are seeing a move towards more proactive partnerships within the NHS. The powers in Clause 24 will allow greater operational flexibility between NHS providers and social services, perhaps in some cases involving more than one NHS provider. These will doubtless make for more co-ordinated provider arrangements, but that is not the point of new Section 18A(2) as set out in Clause 4.

It seems to me that what we have here is, in some senses, a continuation of market mechanisms. A PCT will be allowed to sell its people and facilities to other parts of the service. By definition, the purchaser/provider split is thereby retained. If one reads the section as an open-ended provision, it would be possible to envisage a health authority which happened to require a particular service choosing between two neighbouring NHS providers on the basis of the cost and quality that each could offer. If that is not a continuation of a kind of internal market, we need to understand exactly what it is. I look forward to what the Minister has to say about it. I beg to move.

Baroness Hayman

My Lords, perhaps it will be helpful if I clarify for the noble Earl exactly what new Section 18A(2) of the 1977 Act, which will be inserted by Clause 4, is intended to achieve.

A level 4 PCT will have a degree of flexibility as to whether it deploys its unified budget to commission community health services from another provider or provides those services itself. The noble Earl is right to point out that this is not as neat a division as perhaps the most logical of minds would wish. However, I suggest to him that it actually reflects a sensible way forward which recognises the benefits brought by separating providing and commissioning responsibilities; but it does not bring with it such a total separation that would actually stand in the way of sensible patient care.

Therefore, perhaps I may explain the circumstances in which we think it would be appropriate to allow a PCT to provide to patients outside its own area any service that it can provide to its own population. Under this provision a PCT will be able to enter into a service agreement with a health authority or another PCT to provide services. These services may be health services—for example, health visiting or speech and language therapy. That flexibility—I believe the noble Earl recognised this in his introduction to the amendment—may be especially helpful where a PCT has particular expertise or well-developed services which other parts of the NHS might sensibly want to use.

Equally the services provided by a primary care trust could comprise management or support services. This provision thus offers opportunities to arrange services in more efficient ways, for example, by allowing a PCT to provide support services—such as payroll management, estate management or IT support—to other parts of the NHS. This provision therefore provides both for operational flexibility in the way in which primary care trusts secure the delivery of services to patients and provides opportunities to increase management efficiency.

Where a PCT provides services to other parts of the NHS in this way, it would get income for these services through service agreements. That income would be on top of the unified budget allocation that the PCT will get to commission and provide services for its own population. Any arrangement for a PCT to provide services outside to other parts of the NHS—and this is the key issue about whether we are allowing a free-for-all into a market let rip—would obviously be subject to agreement between all the interested parties. The health authority will have to satisfy itself that any arrangement is consistent with the local health improvement programme. We believe that that will give a framework in which such arrangements can take place. It will be a sensible one in terms of maximising the expertise and services that an individual PCT may be able to provide for a wider geographical area and group of patients, without turning the chief executives of PCTs into Arthur Daleys trying to sell services throughout the country.

I believe that it is a sensible recognition to say that some of the divisions are not as neat and tidy in some areas as they could be. However, it would actually allow an appropriate extension of the providing activities of the PCTs. On that basis, I hope that the noble Earl will feel that I have answered the questions raised by his amendment.

Earl Howe

My Lords, I am grateful to the Minister for what was a most helpful explanation. I do not disagree in any way with the provision in the clause, as explained by the noble Baroness. Indeed, it will obviously make for greater operational flexibility. The clarification she gave about how this fits into the context of health improvement programmes was also most helpful. No doubt it will be a comfort to all the Arthur Daleys out there in the NHS.

However, if you do retain the purchaser/provider split and actively allow a PCT to sell its services to other arms of the NHS, it seems to me that what you have in some sense or another is a kind of market. Nevertheless, it is not an issue which I want to press in any way. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6[Payments relating to past performance]:

Baroness Hayman moved Amendment No. 17:

Page 6, line 14, leave out ("(3B)") and insert ("(3BB)").

On Question, amendment agreed to.

Lord Hunt of Kings Heath

My Lords, before we move on to deal with Amendment No. 18, it might be convenient at this point for us to take the Statement on NHS modernisation. It might also be for the convenience of noble Lords if I say that it is intended to move at the end of the discussion on the Statement that the House adjourns for dinner for 45 minutes.