National Health Service Reform and Health Care Professions Bill

HL Deb 18 March 2002 vol 632 cc1191-228

House again in Committee.

8.37 p.m.

Clause 5 [Local Representative Committees]:

Lord Rea

moved Amendment No. 54: Page 5, line 1, leave out "may" and insert "shall The noble Lord said: In contrast to some of the weighty matters that we debated before dinner, I hope that these amendments will be taken quickly. I hope to say only a few words about them.

The reason for Amendments Nos. 54 to 58 is to draw the Minister's attention to the importance of ensuring that consultation takes place between primary care trusts and local committees representing the health professions in their areas; namely, local medical committees, dental committees and those representing ophthalmic practitioners and pharmacists.

As it stands, the Bill states that recognition of such committees by PCTs is discretionary. The amendments make that recognition mandatory. My noble friend will doubtless say that that recognition is already given or will always be given by PCTs to local medical committees and the like. Such a statement, if he makes it, will be welcomed. However, it is important to note, as we discussed at some length a little earlier, that not all 300 or so PCTs are yet up and running. Some will have difficulty in becoming operational by the appointed day, and they may feel that consultation with local representative committees has a lower priority than many other conditions. On that I would value my noble friend's comments.

I speak also to Amendment No. 60, which is grouped with these amendments. This amendment enables regulations to be made requiring strategic health authorities rather than primary care trusts to consult with local representative professional committees about those functions that the strategic health authorities will retain and which have not been passed down to the PCTs in the current reorganisation. Those responsibilities and functions include the commissioning of specialist services—or some specialist services, I might say, after the debate that we had before dinner—as well as major capital developments and performance management of the PCTs. The Bill allows such consultations to take place regarding Section 28C schemes—that is, personal medical service pilot schemes—but it does not do the same for general medical services, which are those that concern the great majority of primary healthcare professionals. Decisions taken at strategic health authority level will be much more effective and widely accepted if they are informed by such consultations, preferably on a regular basis.

I shall be very interested to hear my noble friend's comments. I beg to move.

Lord Clement-Jones

I shall briefly support the noble Lord, Lord Rea, on all the amendments. The first amendments in the group concern the duty of PCTs to recognise the local representative committees. The Minister may well be reminded of our happy hours discussing "may" and "shall" on various health Bills in the past, but the situation in this case is rather different. It is all very well for there to be a convention that "may" can mean "shall" as far as the Secretary of State is concerned when it comes to making regulations, but when local bodies such as PCTs see legislation granting them discretion, they will inevitably treat the provision as something that they may do if they get round to it rather than something compulsory. It is important that the Secretary of State makes it clear in the Bill or in some form of guidance what is expected of the PCTs.

The situation is rather different for strategic health authorities. The noble Lord, Lord Rea, has put his finger on a gap in the Bill—if it is possible to put one's finger on a hole or a gap in legislation; I am not sure whether the metaphor extends that far—in relation to general medical services, which are not provided by the great majority of primary healthcare professionals. Amendment No. 60 would fill a gap in the duty of strategic health authorities to consult with local representative professional committees about their functions. I should be very interested to hear whether that has genuinely been thought about in the scheme of things, or whether the Minister has some other form of consultation in mind.

Lord Peyton of Yeovil

More years ago than I care to recall, I served on a regional hospital board. One of my less happy memories of those years is the plethora of committees that surrounded it. Ever since then I have cherished—perhaps that is the wrong word; I have tried unsuccessfully to suppress—a suspicion that there are far too many committees in the National Health Service. To compel one body to recognise another seems to me a mistake.

Not very long ago, I asked the noble Lord if he could give any estimate on this issue. I admit that it was rather a silly question, because I knew that he could not possibly have counted the number of committees that sat under the aegis of the National Health Service and did practically nothing useful, any more than he could oblige if I took him down to a nice sandy beach and asked him to count the grains of sand.

Perhaps I could venture this specuilation—it is no more than that, because I could not prove it. I have always had more than a suspicion that half the membership of any committee ought to be spending their time on far more valuable activities and the other half ought to be on nothing at all.

The Minister has done nothing to deserve this, except that he has my entire respect, but I am offering him my support in rejecting the amendment, as I suspect that he will. That might possibly choke off very slightly the number of committees that strangle the National Health Service without ever benefiting a patient. Committees may do something for their own glorification, but as far as the patients are concerned they are of less value than face powder on somebody else's nose.

Lord Rea

I have a lot of sympathy with what the noble Lord, Lord Peyton, has said. I agree that there are far too many committees. However, they are in existence and they represent the local professional healthcare workers in each local health area. It is important for a health authority to consult the representatives of those who provide the services that the noble Lord thinks are so important.

Lord Clement-Jones

Provoked by the noble Lord, Lord Peyton, I should add that these are important committees. We may talk about structures not having much positive impact on morale, but they can have a negative impact on morale if they do not provide for consultation with those most closely affected by the decisions that they take. This is a classic example. As the noble Lord, Lord Rea, has pointed out, there are committees representing local healthcare professionals, so we are not creating a batch of regulatory or other committees. Those committees would benefit from having their views taken into account on the way in which PCTs and strategic health authorities carry out their functions. This is not a St Augustinian view—"Lord, give me deregulation, but not yet". Rather unusually, it has some good credentials.

Lord Filkin

I am very grateful to have the noble Lord, Lord Peyton of Yeovil, on my side. That does not happen very often, but it is deeply welcome.

Amendments Nos. 54 to 58 would change a power to recognise local representative committees into a duty. Local medical committees have been a feature of the health service since 1911 and pharmaceutical, dental and ophthalmic committees have been a feature since the inception of the NHS after the war. In all that time, we have yet to hear of any LRC being denied formal recognition.

I understand that, of the four professions, only the BMA has expressed some interest in changing "may" to "shall". I suspect that that interest is in the form of a probing amendment rather than anything more fundamental. The BMA has acknowledged that no committee has ever been denied recognition. Elsewhere it has spoken positively about Clause 5.

We have always wanted the NHS to work closely and co-operatively with front-line professionals. That is why we amended the provisions in the 1999 Act to make LMCs and LDCs inclusive of PMS doctors and deputies and PDS dentists.

Amendment No. 60 would oblige strategic health authorities to consult LRCs. We will require primary care trusts and strategic health authorities to discharge their functions inclusively. For example, the duty of partnership working introduced by the Health Act 1999 will apply to strategic health authorities and to primary care trusts. Similarly, we shall expect strategic health authorities routinely to involve and consult local stakeholder groups as they take forward their work. The Committee will recognise that that is good practice.

However, the proposals to place a specific statutory duty on strategic health authorities to consult LRCs is unnecessary and inappropriate. The matters which most directly concern LRCs are those relating to the services provided under Part II of the 1977 Act or their newer Part I locally managed equivalents—namely PMS and PDS. The Bill provides for all existing health authority functions in respect of Part II services to be conferred on primary care trusts. For Part II services, there is, therefore, no statutory function on which the strategic health authority could consult the LRC.

For PMS and PDS, the Bill already makes specific provision to continue the existing statutory requirements. Clause 5 provides for regulations to be made requiring strategic health authorities to consult LRCs on those limited PMS or PDS matters—under both pilot and permanent arrangements—for which the strategic health authority is responsible.

For these reasons, therefore, we find it difficult to understand why we should single out LRCs for special attention. Other groups, nurses, hospital doctors, patients, have at least as great a claim to be involved in the work of strategic health authorities as do GPs or other primary care contractors, however valuable their work is.

We could list all of these groups whom the strategic health authority should consult. But shopping lists of this type put on the face of the Bill are usually incomplete and cause offence to someone who gets overlooked in the process.

For all these reasons, we have to suggest that there does not appear to be any pressing practical benefits to the amendments. I hope, given what I have been able to put on the record, that the BMA and others will be fully assured of the importance we attach to consultation without the need for further statutory direction. It is clear that primary care trusts must and should consult without our needing to teach grandmothers to suck eggs by putting it literally into the Bill.

Government Amendment No. 59 is minor. It clarifies the definition of a Section 28C dental practitioner for the purposes of the section.

Lord Peyton of Yeovil

I cannot easily find words to express my gratification at being able to give such valuable support to the Minister in making such a wise decision.

Lord Filkin

I shall treasure Hansard for many years to come.

Lord Rea

I thank my noble friend for giving the attention that he has to these two amendments. I cannot agree with every word that he has spoken, particularly with regard to Amendment No.60. We shall look at his words in Hansard and decide whether to take it further. It may require further discussions. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 55 to 58 not moved.]

Lord Filkin

moved Amendment No.59: Page 6, line 7, after "services" insert -in the area of the Primary Care Trust On Question, amendment agreed to.

[Amendment No. 60 not moved.]

On Question, Whether Clause 5, as amended, shall stand part of the Bill?

Lord Peyton of Yeovil

I hate to disturb such rapid progress and to break into the harmony. I have long objected to this habit of putting two Bills into the same sausage skin. A new Bill is pushed rather rudely into the old Act of Parliament. The result is something which is not always easy to understand.

I do not know whether the noble Lord, Lord Hunt, or the noble Lord, Lord Filkin, will reply but I would just ask them to explain, in simple language, so that I and other of your Lordships can understand what I am now going to read out.

I would not dream of trying to inflict indefinite pain on the Committee, so perhaps two lines will suffice. Subsection (11) reads: In subsection (1C) for 'subsection (A1)(b) or (c) or (B1)(b) or (c)' there is substituted 'subsection (ZA1)(b) or (c), (A1)(b) or (c), (A2)(b) or (c) or (B1)(b) or (c)". I call for a moment's silence of mourning over such disgraceful garbage being put on the face of a Bill. I recently complained about this same habit when it was practised by the parliamentary draftsman at the Home Office. My punishment was to see produced out of a conjuror's hat a fair copy of the Bill as it was hoped it would emerge from Committee. I visited the Printed Paper Office this evening to inquire whether, hidden away, there was to be a repeat of such a phenomenon. No one had heard of it. Your Lordships' House is faced again and again with this revolting habit of putting something plainly unintelligible—not even meant to be understood—on the face of one Bill after another.

The noble Lord, Lord Hunt, is someone for whom your Lordships have great respect. I hope he will justify that feeling of respect by taking this garbage away and saying it will not do.

Lord Hunt of Kings Heath

I am grateful to the noble Lord for allowing me to explain Clause 5(11)(a). I thought it would be abundantly clear to your Lordships. In essence, the clause is simply consequential on renaming health authorities strategic health authorities. It removes the need for local representative committees to be coterminous only with the relevant health authority and it provides for local representative committees to establish themselves at the level of one or more primary care trust area.

I recognise that amended wording is difficult to follow. The noble Lord is right to point that out. The only crumb of comfort I can give is that work is in hand in the department on a consolidation Bill bringing together within a fairly short period of time all relevant health service legislation. This will make life easier, both for the legislatures and, more importantly, for the National Health Service.

Lord Peyton of Yeovil

The last comment is astoundingly good news. Only recently, when the Police Reform Bill was before your Lordships' House, I inquired at the Public Bill Office whether anybody had any thoughts about further consolidation measures. There were, I was told, European measures which were due for consolidation but otherwise nothing at all—a bleak nothingness between us and the horizon.

I am grateful to the noble Lord for what he said in his tribute to me, but I had hoped that he would produce a simple summary of this gibberish. In so far as he has succeeded in doing so—and one would need hours to check up on the matter—it entitles me to ask why he did not place it on the face of the Bill.

Baroness Fookes

I do not want to depress my noble friend too much, but I serve on the Select Committee which examines the consolidation of Bills. I have to tell him that the committee does not meet very often.

Lord Hunt of Kings Heath

All I can say is that work on such a measure has begun within the department. I do not know when it will be completed and when the matter will come before the noble Baroness's committee. All I would say is that I very much understand the need for a consolidation measure on health service legislation.

Clause 5, as amended, agreed to.

9 p.m.

Earl Howe

moved Amendment No. 61: After Clause 5, insert the following new clause— "THE HEALTH INSPECTORATE (1) There shall be a body corporate known as the Health Inspectorate, which shall take effect from 1st April 2004. (2) The Health Inspectorate shall assume at that date the functions undertaken prior to that date by—

1. (a) The Commission for Health Improvement, and
2. (b) The National Care Standards Commission.

(3) The Secretary of State may by order make such amendments of the legislation relating to the health service in England and Wales as in his opinion facilitate, or are otherwise desirable in connection with, subsections (1) and (2). The noble Earl said: With the proposals in the Bill to widen the functions of the Commission for Health Improvement, an opportunity has arisen for us to examine CHI's role in the round. In particular, we have an opportunity to revisit a matter that was first considered by this House during the passage of the Care Standards Act 2000.

During the passage of that legislation, we debated—at some length, and not without some fairly energetic exchanges—the respective roles of the Commission for Health Improvement and the National Care Standards Commission, which the Care Standards Act brought into being. At the time, many noble Lords, including myself, urged the Government to consider whether the demarcation line that they were seeking so firmly to draw between the NHS and the private acute sector for the purposes of inspection and monitoring was really in the best interests of either sector, and, more particularly, of patients.

I believed then, as I still do, that for quality control purposes the distinction between the two sectors is, and should be, academic. The Secretary of State has a duty to ensure that wherever patients are treated, no matter who is paying for the treatment, standards of care are both uniform and of the highest possible quality. The doctors who treat patients in the NHS are the same doctors who treat patients in private hospitals.

That position begs the question of whether we need two full-blown inspectorates. Two years ago, the Government stuck firmly to their line, "Yes, we do", on grounds which I confess I have never fully understood; namely, that the NHS as a managed service, and the independent sector as a regulated service, should not be subject to the same quality control regime. I do not believe that it is unfair to say that behind that policy stance there lay a deep-rooted antipathy towards the independent sector in the minds of certain Ministers at the time. What we emerged with at the end of the day was Section 9 of the Care Standards Act, which provided for co-operative working between CHI and the NCSC, whereby each regulatory body could delegate functions to the other.

To be fair to the Government, a great deal has happened since the Care Standards Act was passed. There has been a tangible warming of relations between the Government and the independent sector. A concordat has been signed under which many NHS operations and procedures are being carried out in private hospitals. We have a target, I believe, of 100,000 such operations being performed in the private sector over the next year. As recently as last June, the Secretary of State was saying to Parliament: by and large, we thankfully have one monopoly provider and that is the NHS. As long as a Labour Government are in power that will remain the position".—[Official Report, Commons. 26/6/01: col. 500.] It was striking that only a few months later, in December last year, he should be saying completely the opposite: Where we need to get to is a position where the NHS is no longer a monopoly provider of care, but it does become a monopoly funder of care". That U-turn is to be welcomed because it recognises reality. However, it again opens up the issue of how quality standards should best be monitored. The more there ceases to be a meaningful distinction between the NHS and the private sector, the less one can justify the overlap and duplication inherent in having two inspectorial bodies, each imposing its own burdens on doctors, nurses and managers, each having to observe fairly artificial demarcation lines, and each separately staffed. It has to be said that the pool of expertise available for such monitoring work across the country is not that large in the first place. A single body would not only ensure consistent standards between the NHS and the private sector; it would also capitalise on the expertise gained in CHI as a result of work that has been done there to date.

I felt emboldened to table this amendment when I read the Secretary of State's response in another place to the Bristol report, when he said: There will be greater co-ordination among those organisations responsible for assuring the quality of care in the NHS. That will necessitate closer working and, over time, organisational integration between the CHI. the Social Services Inspectorate, the National Care Standards Commission and the Audit Commission, so that health and social care services are subject to a common set of standards, irrespective of whether they are provided by public, private or voluntary organisations".—[Official Report, Commons, 17/1/02; col. 456.] What a difference from a couple of years ago! The energy expended by the Government in putting up fierce resistance to exactly that argument from these Benches could have been more usefully directed elsewhere. But if the Government are now serious about organisational integration, why not make a start now, using this Bill? It is a golden opportunity. I beg to move.

Lord Peyton of Yeovil

I want to make two points. First, I acknowledge the generosity that we always expect from my noble friend on the Front Bench. On this occasion he has rather exceeded himself. He might have challenged the Government by saying, "Let us bury, alive or half dead, the Commission for Health Improvement and the National Care Standards Commission". That would have put the Minister on the spot: he would have had to explain what useful functions these two bodies had ever performed and what degree of skill they had shown in doing so. Can the Minister tell the Committee whether their functions are so important and so well performed that they should be taken over by the health inspectorate?

My noble friend puzzled me. Subsection (3) of his amendment contains the words, The Secretary of State may by order make such amendments of the legislation relating to the health service in England and Wales as in his opinion facilitate". I wonder whether one should voluntarily make such an offer to Secretaries of State, a genus for whom I am not soaked with respect. They need to be carefully checked. I am more than conscious of the fact that, given the power to do something by order, they almost always generate more bureaucratic activity from which patients are the last to benefit, if they benefit at all.

It grieves me deeply that in the first two subsections of the amendment my noble friend did not see fit to go a little further and question the usefulness of the two bodies, and whether their functions should be taken over. I appreciate that it is better to have one body rather than two. I also feel slightly uncomfortable about the prospect of inviting a Secretary of State to do something by order. That does not appear to be appropriate.

Baroness Carnegy of Lour

Out of kindness to my noble friend, I am bound to say that I believe that this is an extremely good idea. The battle appears to have been won and the Government appear to be persuaded that the private sector can be extremely useful in the National Health Service. They appear to have dropped their doctrinaire dislike of it. Perhaps that is dire necessity. The battle having been won, it appears to be pointless to have two bodies carrying out roughly the same task in two different parts of the service.

I agree with my noble friend Lord Peyton, who objects so much to subsection (3). However, my noble friend Lord Howe did not draft an amendment that he expected to be put on the face of the Bill verbatim. Many other amendments would have to be made to the Bill should this extremely good idea be adopted by the Government, so I am not too worried about subsection (3). In this Bill so many matters will happen by order that this particular requirement may disappear into oblivion.

I do not believe that the Minister should launch into an endless description of the system as it now stands. Perhaps he will tell the Committee why, given the fact that the battle in relation to the private sector has been won, we need two bodies. Why not have a single inspectorate?

Baroness Pitkeathley

I confess to a certain wry amusement on seeing this amendment. Earlier today and last week, we heard a great deal from the Opposition Benches about delay, about the state of unreadiness in PCTs and so on. Now we hear the opposite: that we should hurry to merge the functions of two bodies, one of which is not even yet in existence.

However, I am in sympathy with the spirit of the amendment. As the noble Earl, Lord Howe, has told the Committee, the Secretary of State has committed the Government to further integration of inspection services in the future. As your Lordships know because I go on about it endlessly, I am also in favour of anything that promotes further co-operation between health and social services. The commitment to that cooperation already exists in the bodies mentioned in the amendment, as I have reason to know from my role as interim chair of the General Social Care Council.

We have to ensure that there is an ongoing review of the functions of each body and of the relationships between them, as the Secretary of State and the Kennedy report have suggested, and that those bodies should be given the utmost importance as we proceed, together with their relationships with the Audit Commission and the Social Services Inspectorate. Please let there be no merger of the General Social Care Council before it has had an opportunity to put into practice its wide-ranging and significant powers, and to capitalise on the welcome support that it will command among all those who work in the area of social care.

Baroness Masham of Ilton

Recently, there was an example of a mother who had given birth to twins in a private hospital and died because she had not had her blood pressure monitored. Patients are patients wherever they are treated. Surely they should all have the same minimum standards and Parliament should try to ensure their protection. I therefore support this amendment.

Baroness Fookes

I, too, support this amendment. In fact, I think that it is very important that there should be one common standard, and I saw no reason for having two sets of regulatory bodies when the legislation was first brought in. Now, I believe that it is even more important that the situation should be simplified: one standard for all. I therefore support the amendment.

9.15 p.m.

Baroness Northover

I, too, support the amendment, which proposes a health inspectorate that includes both CHI and the national care standards commission. As my noble friend Lord Clement-Jones explained on Second Reading—perhaps he has said this so often that he is blue in the face and it is now my turn to say it—we have long supported these proposals. We welcomed CHI when it was established in the Health Act 1999 and gave a general welcome to the Care Standards Act 2000, but we feel that the national care standards commission should he incorporated with CHI. This is a good time do that, before the National Care Standards Commission comes into effect and we have two bodies working in parallel.

In the other place, in relation to this Bill, we urged that the time had come to put the two bodies together. We also disagreed with the Conservative Party in the other place that the merger should include NICE and the proposed council for the regulation of the professions. We felt that the latter two bodies are expected to perform different functions and should remain separate. We therefore welcome the fact that, speaking for the Conservative Party in this House, the noble Earl, Lord Howe, has accepted the proposal that it is CHI and the care standards commission that should be merged. We are happy that we are speaking with one voice on this side of the House—a point which I am sure will not be lost on the Minister.

We are fully committed to the objectives of ensuring the highest possible quality of care for all patients. Patients deserve the best possible protection regardless of whether they are being treated in the NHS or the private sector. A single inspectorate should help to achieve uniform high-quality patient care across both those health sectors, avoiding, as we have heard, unnecessary duplication. If we merged these two organisations, we would ensure consistent standards between the NHS and other sectors. As the noble Earl, Lord Howe, has pointed out, CHI would be in a position to use the expertise it has gained from inspecting the NHS and the same limited pool of expertise could be used.

It should also be clear that we are certainly heading down that road. We on these Benches have noted what Mr Alan Milburn said in his response to the Bristol report—which the noble Earl, Lord Howe, has quoted—when he spoke of the, organisational integration between the CHI, the social services inspectorate, the National Care Standards Commission and the Audit Commission".—[Official Report, Commons, 17/01/02; col. 456.] That is precisely what we are talking about. Therefore, as I said, it looks as though we are pushing at an open door.

The BMA has produced a chart showing the multiplicity of organisations that check on the various sections of the health service. Surely anything that streamlines the arrangements must be welcomed—although that does not seem to be the Government's intention, as demonstrated by their proposals to replace CHCs. I trust that the Minister will see the sense of this proposal. Nevertheless, even if he does not, I think that he will find that this type of arrangement is coming down the track.

Lord Hunt of Kings Heath

I should like first to say what a joy it is to welcome the noble Lord, Lord Peyton, back to our debates on the National Health Service. I was particularly struck by his reminiscences of the work of regional health authorities. Earlier, while looking wistfully back at regional health authorities, the noble Baroness, Lady Noakes, expressed her wish that they should speed on and be reintroduced. I suspect that the noble Lord, Lord Peyton, might have something to say about that.

As for the general point made by the noble Lord, Lord Peyton, on the accomplishments of the Commission for Health Improvement and the purpose of the National Care Standards Commission, I believe that they perform very important functions. The Commission for Health Improvement provides a means of reviewing the way in which clinical governance is undertaken within the National Health Service. I think that, in its first reports, it has shown its mettle and been very helpful in identifying issues to be raised and problems to be tackled within the NHS.

The National Care Standards Commission starts its work this April, and it will lead to a much more uniform, consistent quality of legislation within the private health sector, the care homes sector and various other care sectors. It will take responsibility from both health authorities and local authorities, and I am sure that it will lead not only to a much higher inspection standard, but, as importantly, to greater consistency. That is why care homes and other parts of the independent sector were so welcoming of the establishment of the National Care Standards Commission.

As far as the general principles raised in this debate are concerned, there is very little between us. The Government are certainly sympathetic to the thinking behind the amendments but consider that they are somewhat premature. At the moment, the Commission for Health Improvement and the National Care Standards Commission have discrete and distinct functions in relation to the inspection and regulation of health and social care in this country, but they already plan to work collaboratively where their respective roles impact on each other. This cooperation will also be assisted by, and extended to, other bodies through the new council for quality that we announced in our response to Professor Sir Ian Kennedy's report on Bristol. Noble Lords may well recall that the Bristol inquiry response referred to: in the short term, a strengthened inspection role for the CHI working with the Social Services Inspectorate and National Care Standards Commission as appropriate to give the public an independent assurance that each provider of NHS services has proper quality assurance and quality improvement mechanisms in place". The Government said: We will take further steps at the earliest opportunity to rationalise the number of bodies inspecting and regulating health and social care". As the noble Earl, Lord Howe, has already suggested, my right honourable friend the Secretary of State for Health, in a speech to the new health network, said: The Commission for Health Improvement will take responsibility for the independent publication of information about clinical and organisational performance. It will have a greater inspectorial and reporting role over the health system's performance that will necessitate closer working and, over time, organisational integration between the CHI, the Social Services Inspectorate, the National Care Standards Commission and the Audit Commission, so that health and social care services are subject to a common set of standards whether they are provided by public, private or voluntary sector organisations". There is nothing between us on this matter, therefore. Our intention is that there will be a convergence between the activities of these four bodies, including CHI and the National Care Standards Commission, drawing together their expertise in joint work where appropriate, and sharing best practice.

To give an example of how we will develop this, as the National Care Standards Commission starts its work in April and as the Commission for Health Improvement develops its inspection function, we will be looking for the development of common methodologies, where appropriate, and the coordination of visiting programmes. We have made it clear, however, that we believe that it would be premature to seek to rationalise the functions of CHI and the National Care Standards Commission, or indeed other relevant bodies, in the current Bill. These issues and possible legislative requirements are complex and they need to be given full consideration before we act.

We have, however, already made provision in the Care Standards Act 2000 for CHI to exercise functions of the National Care Standards Commission in relation to the independent sector. When we enacted the Care Standards Act, we considered it right that the regulation of private healthcare should be different from arrangements for the independent review of NHS bodies by CHI. But life has moved on. We have gained a lot of experience with CHI, and the Bill before us now gives CHI a new function of inspection, which will be against published standards.

While we are clear that private and voluntary health care must remain under a system of regulation or licensing of service providers, we believe that CHI should now act on the National Care Standards Commission's behalf to inspect independent hospitals. We will therefore be bringing Section 9 into force shortly and making regulations so that the Commission for Health Improvement may exercise the National Care Standards Commission's function of inspection in relation to independent hospitals.

I hope that in the immediate future that will go some way to meeting the points raised by noble Lords tonight. In the rather more long term, work will continue to look at how we can rationalise the different inspecting organisations I have mentioned. We will have to come back to that at a future stage. I hope, however, that in my remarks noble Lords will see that we are very much with the thrust of the points being put forward. We believe that this amendment is premature in terms of legislative action to bring the bodies together but, in bringing into action Section 9 ill relation to CHI and the National Care Standards Commission, we are showing, I believe, that we are moving down that route.

Lord Peyton of Yeovil

The Minister's response was most interesting. However, in case I gave the wrong impression, I should like to stress that I did not intend any criticism of the Commission for Health Improvement or of the National Care Standards Commission when I spoke earlier. It seems to me that bodies established to look at the work carried out in hospitals, and elsewhere, should also be inspected. I am not making a flippant point.

I was recently in a very major hospital, which is not in London. I shall not mention the name, but the chairman of the group said to me, "What we are suffering from here is death by a thousand visits". I hope that the Minister will take that message on board. Let us face it, most of those who visit and inspect hospitals do not make patients any better; they are made better by physicians, surgeons and nurses. If such people are over-inspected and over-examined, their morale may suffer.

Baroness Hanham

I am tempted to rise to my feet at this moment on the subject of the inspection of inspectorates. I should declare an interest now, and in respect of any further interventions that I may make, in that I am chairman of an NHS trust.

So far, CHI has been well received, except by those who have borne the brunt of its remarks. I support what my noble friend Lord Peyton has just said about the multiplicity of inspectorate regimes. Indeed, far more than that, there is the amount of information that is required both in advance and at the time of such inspections. I assume that the information required for the first visit will not subsequently be required when the overall picture has been grasped. But if that is not the case, we are talking about a week's visit to the whole trust involving many people's time and, prior to that, something like four weeks during which information from all sorts of sources must be collected. It is not a terribly useful way of serving patients because it is time-consuming.

As I said, I hope that such information would be required only once. Thereafter it should be available on computer records. Indeed, the information obtained for CHI could very reasonably be passed on to the National Care Standards Commission, which would mean that it does not have to be requested again. It is a question of trying to rationalise what the inspection regimes are doing. I am not quibbling about the fact that this work has to be done, but it seems to me that such inspections take up an awful lot of people's time that could otherwise be used more effectively.

Lord Hunt of Kings Heath

I do not disagree with the points made by the noble Lord, Lord Peyton, and the noble Baroness, Lady Hanham. The noble Lord is right to say that it is important to keep one's eye on the activities of these bodies. We agree a work programme with CHI and Ministers have regular meetings with the commission. We also listen to comments and criticisms about CHI's performance from the NHS, which we then discuss with the commission. I am sure that the same arrangements will be put in place in relation to the National Care Standards Commission when it starts its work.

I very much share the concern about a multiplicity of organisations inspecting hospitals. My right honourable friend the Secretary of State started the process of looking at the regulatory inspection regime to assess whether we can rationalise it. Therefore, although I am sympathetic to the thrust of the arguments put forward tonight, I feel that the proposed amendment is a little premature because we have not yet completed the process.

The noble Baroness, Lady Hanham, raised the question of the amount of information required to assist such inspections. I accept that the task of providing it can be quite onerous. However, I should point out that CHI has undertaken many reviews. When considering the performance of the board of some trusts, the CHI was surprised at the paucity of information at its disposal in terms of judging the performance of its organisation. It was clear to CHI that, in many of those organisations, the board of the trust was not getting enough information from which to judge overall performance. It is to be hoped that CHI focusing on information will help boards to ensure that they are able to judge their own performance, benchmark it with other organisations and, through that, improve standards overall.

9.30 p.m.

Baroness Hanham

I think I accepted that that was what I said; that in the initial stages the collection of information was necessary. I hope that it will not be necessary to require quite so much in future.

Earl Howe: I am inwardly distraught that my amendment does not commend itself to my noble friend Lord Peyton, whose approval, when I get it, I unfailingly cherish. I have to say to him that I do not regret tabling the amendment. I am and will remain an unashamed supporter of what is termed "the quality agenda" across the NHS and the private sector. I believe that an efficient inspectorate is an integral part of that.

I fully agree with my noble friend that those bodies should have to justify their existence. However, that is perhaps a separate question to the one I sought to raise. I also agree with him about death by a thousand visits. If he is good enough and patient enough to wait for Amendment No. 96, to which my noble friend Lady Noakes will speak at a later stage in Committee, he will find that the issue is brought into even sharper focus.

The noble Baroness, Lady Pitkeathley, chided me for proposing the merger between the two bodies with, as she thought, undue haste. I enjoyed the point she made. However, the fact that PCTs are, in the view of some of us, not ready for the big changes that are about to engulf them, has nothing to do with the fact that CHI and the National Care Standards Commission may be ready. The fact that the Secretary of State has spoken of organisational integration and, indeed, the fact that the Minister has tonight confirmed the department's intention is, at least to me, a hopeful and promising sign that I am on the right track. Perhaps I may say to the noble Baroness that the amendment was not that hasty in that it proposed a two-year delay before we plunge into the merger. I was struck by the comment of the noble Baroness, Lady Northover, that this was a good time to consider the merger immediately prior to the National Care Standards Commission being up and running for the first time.

I do not want to prolong the debate. I thank the Minister for his sympathetic response. I am glad that he acknowledged that life has moved on from a year or two ago. There is little between us on the issue. We wait with interest to see how the convergence of the four regulatory bodies is brought about in practice over the months ahead. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 [Funding of Strategic Health Authorities and Health Authorities]:

Baroness Noakes

moved Amendment No. 62: Page 9, line 11, leave out subsection (3) and insert— (3) Subsection (3C) is omitted. The noble Baroness said: Amendment No. 62 is a probing amendment which would amend subsection (3) of Clause 7 by deleting the current subsection (3) and replacing it with a new subsection deleting subsection (3C) from Section 97 of the 1977 Act.

Subsection (3C) of Section 97 of the 1977 Act was inserted by the Health and Social Care Act 2001. It gives the Secretary of State power to pay additional amounts to health authorities if they satisfy objectives or perform well against criteria. We debated those powers last year. Subsection (3) of Clause 7 amends that to replace health authorities with strategic health authorities while Amendment No. 62 deletes the power altogether.

When we come to Clause 8 of the Bill we shall deal with the financial arrangements for PCTs and the creation of a similar power for the Secretary of State to pay additional amounts to PCTs. The Secretary of State has said that he intends to allot at least 75 per cent of the funds available to him to PCTs. Strategic health authorities will not have significant functions other than performance management of PCTs and NHS trusts and so it is difficult to see why the Secretary of State needs these performance payment powers over strategic health authorities.

Can the Minister give any explanation of why in reality these powers created over health authorities are needed for strategic health authorities, given that the vast majority of the functions will now be taken over by PCTs?

As far as I can see, the only possible reason why the Secretary of State would require the powers is because he cannot bear to see any tiny part of the NHS over which he has less than a complete set of powers for use one day when the mood takes him. I shall be interested to hear whether the Minister has any substantive reasons for these powers over strategic health authorities. I beg to move.

Lord Peyton of Yeovil

I should like to congratulate my noble friend on having given us as lucid an explanation of what she was after as the Bill which she seeks to amend allows. I am just a little sorry that she allowed her natural good nature to get the upper hand of her and did not try to turn the knife slightly in the wound which I tried to inflict on the Minister just now about this awful habit of superimposing a Bill on an old Act of Parliament. No one just coming to look at the amendment could possibly understand without a certain amount of research what it intended to do. My noble friend moved her amendment very well, but I do think that she allowed herself to be a little more merciful than the situation caused her to be.

Baroness Finlay of Llandaff

The noble Lord, Lord Peyton, has given me the courage to stand up to ask a question. I am a novice on legislation. I find some of this rather gobbledegook to follow. But I had understood from Clause 1 that the term "strategic health authorities" applies to England and that the term "health authorities" applies to Wales. Yet the wording within Clause 7 appears to relate to England and not to Wales. Therefore, I fail to understand why the heading of this clause includes "health authorities". Have I missed something and does the clause in some way apply to Wales as well as England.

Lord Hunt of Kings Heath

First, I thank Members of the Committee for comments that they have made about the amendment. Essentially, the subsection as currently drafted means that the Secretary of State could give performance-related payments to strategic health authorities for meeting certain objectives notified to them. It does not compel him to do so. The amendment proposed by the noble Baroness, Lady Noakes, would take away the power of the Secretary of State to make such performance-related payments to strategic health authorities.

The noble Baroness, Lady Noakes, asked why we needed this part of the Bill when we have stated that it is not our current intention to make performance-related payments to the new strategic health authorities out of the NHS performance fund. The intention is that we shall not make performance-related payments to strategic health authorities, but it may be that in the future, and as we see how the new arrangements develop, there may be an opportunity to make such payments.

Perhaps I may give an example. In relation to the way in which we judge and make payments in accordance with performance, while much performance relates to the work of an NHS organisation, working across boundaries and in partnership is also one of the ways in which one can ensure good quality performance. It may well be that strategic health authorities may be incentivised in future for partnership working by being given money to use to encourage partnership working between primary care trusts. We may wish to make payment to health authorities for that purpose. We have no current intent to do so, but we want to allow for that possibility in future.

Baroness Noakes

I thank the Minister for that reply. Perhaps I may tell my noble friend Lord Peyton how much I appreciate his kind comments. Those of us on the Front Bench always look to my noble friend for kind comments; this is the first time that I have received some from him, and I hope that it is the first occasion of many.

Turning to the Minister's explanation, what he said demonstrated that there is no need for the power to make performance payments. The Government have no current intention to make such payments and the examples that the Minister produced sounded somewhat thin. He said something about working in partnership and across boundaries. I could not see the substance of that. However, in the interests of moving on, I shall consider what the Minister said and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clause 8 [Funding of Primary Care Trusts]:

Baroness Noakes

moved Amendment No. 63: Page 9, line 35, at end insert— ( ) In determining the amount to he allotted for any year to a Primary Care Trust under subsection (1)(b), the Secretary of State shall consult with health professionals, local authorities and other interested parties as to the health needs of the population served by that Trust. The noble Baroness said: In moving Amendment No. 63, I shall by leave speak also to Amendments Nos. 68, 73 and 81, which are grouped with it. Amendments Nos. 63, 68, 73 deal with consultation and taking account of the health needs of the population in determining allocations to primary care trusts by amending new Section 97C of the 1977 Act, which is proposed in Clause 8. Amendment No. 81 deals with taking account of health needs in the amounts allocated to local health boards by the National Assembly for Wales.

Amendment No. 63 seeks to insert a new subsection into new section 97C. It would require the Secretary of State to consult health professionals, local authorities and other interested parties about the health needs of the population served by the PCT. Amendment No. 68 would insert a new subsection after subsection (2) of new Section 97C, which would require the Secretary of State to take health needs into account when determining the amounts allotted. Amendment No. 73 is a narrower amendment, and would attach the same requirement to have regard of the health needs of the population to the powers in subsection (6) of new Section 97C, which allows the Secretary of State to reduce allotments already made to PCTs in certain circumstances.

I am sure that the Minister will say that the amendments are redundant because the Secretary of State already takes into account the health needs of the population when assessing how moneys are to be allotted, but the health Acts do not require him to do so. More importantly, whether or not in practice the Secretary of State takes into account the population's health needs, there is no requirement on him to consult anyone. I am aware that in practice there is an advisory committee on resource allocation, but that is a central body and I am not aware of locally based debates on health needs feeding into that committee. In any event, the advisory committee does not advise on all aspects of the allocation methodology. In particular, it does not advise on the subjective pace of change and health inequality adjustments.

Amendment No. 63 is therefore designed to ensure that there is more openness in each allocation process so that there is greater public confidence in the process. Although the Department of Health releases copious notes on allocation methodologies after it has announced allocations, those methodologies are not the subject of public debate—certainly not in advance of the Secretary of State's allocation decisions. The department's figures per weighted head of population for health authorities, based on allocations for 2002–03, show that the highest spending authority spends 15 per cent more than the lowest. That is on a weighted basis, so why the differences? That space cries out for more public debate.

Amendment No. 73 is important because it qualifies the Secretary of State's power to claw back moneys allocated under subsection (3) of Section 97C on the basis that the PCT has failed to meet some conditions imposed. It might be good business management theory to impose penalties for failure to meet a condition, but the NHS is not a business. Penalties can have only one target: the patients. Less money means less patient care. If the Secretary of State wants to use business-world penalties—we are far from convinced that that is an appropriate mechanism—the amendment would require him to have regard to the health needs of the population. If the health of the population would be harmed by the withdrawal of funds, the amendment would make it difficult, if not impossible, for the Secretary of State to proceed.

9.45 p.m.

Lord Clement-Jones

This may be the opportunity to talk more generally about the funding of PCTs, which has raised concerns in several quarters. The way in which the allocation of funds is devolved to PCTs is of particular concern.

There is concern that PCTs could be saddled with the outstanding deficits of health authorities, as part of the devolution process, leaving PCTs without the resources to implement their devolved responsibilities and achieve the Government's targets. Arguably, there could be no additional resources and, therefore, little opportunity to improve the provision of healthcare over and above that provided by the authorities from which the PCTs have taken the responsibilities.

It is also unclear whether PCTs' funds will be protected from the revenue consequences of any major building projects. It is understood that discretionary capital will be allocated to the new strategic health authorities. If PCTs are not protected from the revenue consequences, there will be particular concerns in areas in which boundary changes following the establishment of strategic health authorities mean that PCTs may become retrospectively liable for the revenue consequences of a major building project.

Baroness Hanham

I endorse the fact that there is concern about the resources being given to PCTs and about the way in which they will be allocated. I speak from the point of view of the acute sector, although this probably affects the primary sector as well.

As has rightly been said, resources have been secured for 2002–03. They are not secured for 2003 onwards. There are only a few pilot primary care trusts in existence, and those that are coming into existence will not really be operational and taking a strategic view of how they will spend their resources for at least six months. There is a concern about the allocation of resources and how it will be carried out, particularly in 2003–04 when the ground will hardly be secure under the PCTs' feet.

Stability of funding is vital in the short term, if not in the long term, in the health service. The amendment is important as it begins to show a way of discussion and consultation about how services should be provided. My noble friend Lady Noakes would agree that that cannot happen in the short term, but it could happen in the longer term. However, I would be interested to know how the Minister sees 2003–04 progressing in the light of the fact that PCTs will probably not be able to make serious and informed decisions about funding and the continuation of or changes to services within that timescale.

Lord Hunt of Kings Heath

Stability of funding is extremely important. Noble Lords will know that by 2004 we intend that some 75 per cent of the budget should be devolved to the primary care trusts. The Advisory Committee on Resource Allocation, to which I shall refer in more detail in a moment, is currently developing a formula for primary care trust allocations alongside a decision that will then need to be taken by the Government with regard to any pace of change policy in relation to movements from target on the part of primary care trusts.

As a point of interest, I understand that the current figures in relation to primary care trusts and distance from target reveal a range from minus 14 per cent to plus 14 per cent. Some 46 per cent of primary care trusts are within 2 per cent of target, while 83 per cent are within 5 per cent. My right honourable friend the Secretary of State will give great consideration to deciding what pace of change should be introduced for PCTs when they receive the full allocation.

However, there are always counterbalancing forces. If you are in a part of the country where the primary care trust is greatly under target, you will want the pace of change to move as quickly as possible. That has to be balanced against the need for stability in general across the NHS. That summarises the nature of the decision which my right honourable friend will have to reach.

The national resource allocation formula that is used to determine fair shares for health authorities and primary care trusts reflects the fact that different locations around the country have different health needs. The formula takes account of the age structure of the local population. Patterns of morbidity vary by age group. The very young and the elderly, whose populations are not evenly distributed around the country, make more use of health services than the rest of the population. Even when differences due to age are taken into account, populations display different morbidity characteristics, so the formula includes a wide range of health and socio-economic indicators associated with the need for healthcare.

The formula is already used to establish targets, or fair shares, for primary care trusts. While allocations are still made to health authorities, they are required to pass on resources to primary care trusts in accordance with national guidance. As I have already pointed out, we are asking the Advisory Committee on Resource Allocation to review the operation of the formula at primary care trust level. I listened with interest to the comments made by the noble Baroness, Lady Noakes, but she will recognise that the advisory committee has serving on it NHS management, GPs, academics and clinicians. Of course one would always welcome contributions from the NHS towards more general discussions on the way in which the formula is developed.

Lord Roberts of Conwy

Would the Minister be kind enough to clarify a point for me? He will have noted Amendment No. 81, which is grouped with Amendment No. 63. It relates to the local health boards to he established in Wales. Can the noble Lord give me an assurance that the formula to which he has just referred will apply equally in Wales? Alternatively, will there be different principles of allocation?

Lord Hunt of Kings Heath

I cannot answer the noble Lord's question because it will be up to the National Assembly for Wales to decide how resources are to be allocated to the health service in Wales. I hope that I am not going outside my brief if I suggest that many of the principles which govern the allocation to the health service in England will be the kinds of issues of which the National Assembly will also wish to take account when developing its own formula. However, ultimately it must be a formula that is developed by the National Assembly for Wales and not the Department of Health in England. I am reliably informed that officials of the National Assembly and of the Department of Health hold regular meetings to discuss the intricacies of resource allocation. We will allocate resources direct to primary care trusts through a national formula. That will take into account the health needs of a primary care trust's population.

Amendment No. 63 would undermine that process. If the Bill was enacted with the amendment as drafted, we would face applications from each of the 300 primary care trusts. That would be an arduous and heavy duty for both the primary care trusts—which, as we have heard, will be hard pressed to get on with the job of commissioning services from April—and for the Department of Health. The present arrangements whereby the advisory committee advises the Secretary of State about improvements to the formula is the best approach and one which has general acceptance.

As the noble Lord, Lord Roberts, suggested, the formula in Wales is different from the one in England, but it takes account of a whole range of health and socio-economic indicators associated with the need for healthcare. My understanding is that the Assembly is committed to ensuring that there is more equitable access for the entire population in accordance with their health needs. At the moment, the Welsh Assembly is considering the outcome of a major resource allocation review.

As to Amendment No. 73, Clause 8, in essence, mirrors the existing powers in the Health and Social Care Act 2001 which enable us to recover sums from health authorities if they have not met the conditions set. I listened carefully to what the noble Baroness, Lady Noakes, said about that. I hope that the power will not have to be used, but it is necessary to have a discipline in the system to prevent abuse.

It is unnecessary and misleading to single out health needs as the one particular factor to be considered when the Secretary of State makes a decision as to whether to recover funds. In practice, the Secretary of State will take into account a range of factors. These may include health needs but could also include matters such as the performance of the organisation in general, the leadership of the trust and the chief executive, and any other number of matters.

Overall, the amendments are not required. It would be best if we put our trust in the very sensible national formula which has broad acceptance within the health service. It is as appropriate for primary care trusts as it is for health authorities.

Lord Clement-Jones

Will the Minister answer the two sets of questions that I referred to in my short contribution?

Baroness Noakes

Perhaps the noble Lord, Lord Clement-Jones, would care to wait until we gel to Amendment No. 66, which deals specifically with deficits. I realise that the Minister has not answered the noble Lord's points, but he will have another opportunity to do so when we reach later amendments, to which I am sure he is looking forward.

I thank the Minister for his reply. He appears to be wedded to the processes of allocations being shrouded in some secrecy or, at least, confined to a small group of people at the centre. I would not necessarily he horrified by the prospect of up to 300 PCTs having their say about how they thought the process worked for them. That would seem to be an entirely sensible and rational debate for them to have, although I take the point that they must have the capability to handle their other functions before they move on to demanding the money that is rightfully theirs. I was disappointed by the noble Lord's answer to that.

I was even more disappointed with his answer to Amendment No. 73, which was about clawing back moneys. The Minister said that the Secretary of State might want to take into account performance in general or leadership. I suggest to him that that misses the point, that whenever moneys are taken away they are going to harm patients. Performance in general and leadership are just abstract concepts, but money taken away from primary care trusts will affect patient care. That is the inevitable arithmetic of the NHS.

As I say, I am disappointed by the Minister's responses. I shall consider them further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10 p.m.

Baroness Noakes

moved Amendment No. 64: Page 9, line 35, at end insert— ( ) From 1st April 2004 the total amounts paid to Primary Care Trusts in any financial year under subsection (1) above shall be not less than 75 per cent of the total moneys available to the Secretary of State for distribution to all NHS bodies for that year. The noble Baroness said: The aim of the amendment is to require the Secretary of State to distribute 75 per cent of NHS money direct to PCTs. In the document Shifting the Balance of Power and in the earlier announcement on the reforms, the Secretary of State committed himself to 75 per cent of the total budget being passed to PCTs. We have no problem with that in principle, but with the readiness of PCTs to accept all that money being passed down to them at this time. There is no point in revisiting those discussions.

For the purpose of this amendment let us assume that all PCTs are up and running and have the capability to handle the money coming down. On that basis we completely welcome the allocation of the majority of the resources for decision-making at the lowest possible level. Indeed, we wonder why it is as low as 75 per cent. I shall be interested to hear from the Minister why 25 per cent needs to be kept back from the decision-making powers of the PCTs.

As I have said, this amendment has the simple aim of enshrining in legislation the stated distribution policy. I have no doubts about the integrity of the current Secretary of State and have no reason to believe that he will not do what he has said he will do. But as we know, Secretaries of State come and go, as indeed do governments. This amendment will at least hold any future Secretary of State to the current intent of putting the majority of the purchasing power of the NHS in the hands of PCTs.

In replying, I ask the Minister to confirm that when moneys are allocated to PCTs they will not be ring-fenced, earmarked or have any restrictions placed on them. Otherwise it would be a complete sham if the moneys were allocated on the basis of restricted local decision-making. I beg to move.

Lord Hunt of Kings Heath

The 75 per cent of the NHS budget going directly to primary care trusts is intended to cover the unified allocation for the provision of hospital and community health services, the costs of prescribing by general practitioners and GP practice infrastructure. The remaining 25 per cent of the NHS budget includes items such as funding for capital projects and for research and development, and the education and training of doctors and nurses which is not spent by primary care trusts.

The noble Baroness, Lady Noakes, said that Secretaries of State come and go as do governments. None the less, I believe that there is an interesting debate to be had as to whether it would be right to enshrine the 75 per cent in law or whether it is properly a matter for Ministers to decide what the resource allocation for the health service should be. They are accountable to Parliament.

The Government's view is that at the end of the day it is a matter which should properly fall to Ministers, who are accountable to Parliament, to make a decision as to the broad allocation of resources to the health service and the proportion that should be allocated to different tiers. On that basis, I do not believe that we are justified in going for a formulated approach enshrined in legislation.

What is not in doubt is that we are determined to ensure the commitment that by 2004 PCTs will control 75 per cent of the total NHS funds and that that will be put into practice. We also believe that primary care trusts will have the capacity to accept that challenge. But I do not believe that a case has been argued persuasively that one needs to enact that in legislation.

Baroness Carnegy of Lour

Would the 25 per cent include the amount mentioned in Clause 8(3), which is the reward to primary care trusts for doing well?

Lord Hunt of Kings Heath

I believe it would.

Baroness Hanham

Perhaps I may revert briefly to the previous amendments on which I spoke and ask for some clarification. I was specifically referring to when these allocations would start and when the primary care trusts would be in a position to deal with them. I have two questions. First, is the 75 per cent due to be passed to the PCTs in the year 2003, or will it start in 2004? Secondly, does the Minister believe that the PCTs that will not be up and running until probably October or November this year be ready and able rationally to make the kinds of decisions they will be required to make so as not to affect the stability of funding around their trust areas as they start up?

Lord Hunt of Kings Heath

The commitment made by my right honourable friend the Secretary of State is that the 75 per cent will be directed to PCTs by the year 2004. We have some flexibility in relation to whether that will be done in the 2003–2004 or 2004–2005 financial year. Final decisions still need to be made.

With regard to the specific issue raised by the noble Baroness, Lady Hanham, we intend that every primary care trust shall be in position to accept the responsibilities laid upon them. Whatever the vesting date, we want the new primary care trusts to be in a position to do so.

I made it clear earlier in the debate that we believe that there are, at most, only two primary care groups that will not become primary care trusts by 1st April this year. In relation to October, therefore, we are talking at most about two such organisations.

Baroness Noakes

I thank the Minister for his replies. I heard him say what are to be retained—capital projects, certain developments, certain training. It appears to me that that does not amount to 25 per cent of total NHS spending. There is, therefore, perhaps a lack of ambition in the target to put 75 per cent of the funding into PCTs.

Perhaps more important is the Minister's unwillingness to accept that the Secretary of State's intention should be enshrined in the legislation. That should put a chill in the heart of every primary care trust in the land. They cannot rely on the statements already made, because the legislation will be in such a form as to allow the Secretary of State to decide how allocations are to be made, which can be changed by Ministers at will, and the primary care trusts will have nothing on which to rely. I regret that. However, for the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes

moved Amendment No. 65: Page 9, line 38, leave out ", in whatever way he thinks appropriate". The noble Baroness said: In moving Amendment No. 65, I shall speak also to Amendments Nos. 67, 78 and 80, which are grouped with it. These amendments concern the discretion of the Secretary of State in relation to PCTs in England and of the National Assembly for Wales in relation to health boards in Wales.

Amendment No. 65 removes from subsection (2) of Section 97C, introduced by Clause 8 of this Bill, the words, in whatever way he thinks appropriate". Amendment No. 78 is the equivalent for Wales under Clause 9. Amendment No. 67 deletes the two closing lines of subsection (2) of Section 97C, which allow the Secretary of State to consider any period or elements of expenditure he thinks appropriate. Amendment No. 80 is the equivalent for Wales under Clause 9. These are probing amendments to discover why the Secretary of State might possibly need to rely on those words.

Section 97C(2) specifies what the Secretary of State may take into account—general Part 2 expenditure and items that would have been general Part 2 expenditure but for an order under Section 103. The same provisions are made for Wales under Clause 9.

I am sure that the Secretary of State or the National Assembly would want to take those items into account only in a reasonable way. If that is the case, the words, in whatever way he thinks appropriate and, during any period he thinks appropriate are not necessary. However, if the Secretary of State does not want to act reasonably, he may need to rely on those words. I am sure that the Committee would be chary of facilitating the unreasonable acts of a Secretary of State. I hope that the Minister will place on record why the Secretary of State or the National Assembly for Wales might want to use the discretion conferred by those words. I beg to move.

Lord Hunt of Kings Heath

Section 97C(2) confers a general power on the Secretary of State to take into account a primary care trust's non-cash-limited expenditure when determining its cash-limited allocation. Under the existing provisions for funding health authorities, contained in Section 97 of the National Health Service Act 1977, the formula, process or mechanism by which the Secretary of State determines the allocation of each health authority is left to his discretion. It has always been for the Secretary of State to decide what each health authority should receive and how that is determined, subject to the usual constraints of being answerable to Parliament and the funding process being monitored by the National Audit Office. Of course, he must also exercise his powers in accordance with the principles of administrative law. In other words, as the noble Baroness implied, the power must be exercised rationally. It cannot be exercised in a way in which no reasonable Secretary of State would exercise it. That allows the allocation process to evolve over time, in line with policy changes. We have simply adopted the same approach in Clause 8.

The alternative to a general power would have been to take a very narrow power to allow the Secretary of State to introduce a particular scheme to take into account an authority's non-cash-limited expenditure when determining its cash-limited allocation. Such an approach might limit the ability to modify our approach over time—for example, as new information or research becomes available—and could reduce Ministers' ability to determine the pace of change policy on an annual basis. A narrower power might limit a future administration's ability to make allocations in line with their policy.

The words that Amendments Nos. 65 and 67 would remove simply make it clear that it is the Secretary of State who exercises that power and that he has a wide discretion to determine precisely how the primary care trusts' non-cash-limited expenditure is to be taken into account. The same arguments are also true for Amendments Nos. 78 and 80, as they relate to the funding of local health boards in Wales. Clause 9 as it stands allows the Assembly to take into account all healthcare resources that are available to meet the needs of a local health board's population when determining allocations. That philosophy is part of the National Assembly's determined drive to close the gap between the worst off and the better off in health terms. If those words were deleted, as the amendments suggest, the Secretary of State and the Assembly would retain a general power. The amendments would simply remove wording that helps to clarify the intention of the clause that the Secretary of State and the National Assembly for Wales should have a general discretion as to how they take account of a primary care trust's and local health board's non-cash-limited expenditure. We would not want to agree to any amendment that made the provision less rather than more clear.

Baroness Noakes

I thank the Minister for that clear and comprehensive reply, which I look forward to reading carefully in Hansard. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10.15 p.m.

Baroness Noakes

moved Amendment No. 66: Page 10, line 2, at end insert "; and (c) any deficit inherited from a predecessor body, The noble Baroness said: The amendment deals with deficits, which the noble Lord, Lord Clement-Jones, referred to earlier. It would add a new paragraph to Section 97C(2) of the 1977 Act, as inserted by Clause 8. It may be convenient if I also speak to Amendment No. 79, which is grouped with Amendment No. 66, because it is in virtually identical terms but deals with the Welsh equivalent under Clause 9.

Amendment No. 66 allows but does not require the Secretary of State to take into account deficits inherited from a predecessor body m determining allotments to PCTs. The noble Lord, Lord Clement-Jones, has already referred to the concerns that have been expressed about this area, in particular by the BMA.

There was a time, which I am sure the Minister recalls, when I seemed to spend all of my time on National Health Service deficits. That might sound sad, but it is the truth. In the back end of the 1980s, deficits were spiralling out of control. As the then director of finance of the National Health Service Management Executive, it was my job to get them under control.

Health service deficits never go away. You may think you have them under control, but they pop up again. There are various levels at which deficits can exist. What we used to call income and expenditure deficits were met by brokerage at the year end—borrowing from other health authorities to get by. Nowadays, the language is more complicated with the introduction of resource accounting, but the basic principles remain the same.

Deficits do appear to be a topical issue. We heard earlier this year about a potential deficit of £60 million emerging in the south east region. The story was that brokerage would cover that, so the National Health Service overall would remain in balance. But there would still be deficits in some authorities and surpluses in others. That £60 million is a lot of money in patient care terms, although not a big percentage of the overall money in the National Health Service.

This is not confined to the South East. The Health Service Journal at the end of January said that other parts were struggling to the tune of £150 million. I see from a Written Answer given by the Minister on 25th February that the Department of Health's expenditure limit for 2001–02, has been increased by £230 million, of which £120 million relates to the take-up of flexibility for health authority allocations. If I understand the code correctly, it means that the National Health Service has borrowed £120 million from next year's allocations. There is a deficit of £120 million to start the new financial year.

I ask the Minister to say what the deficits for health authorities for 2001–02 are expected to be. I would ask him to state that on a gross basis and not net off the surpluses in those authorities that are fortunate enough not to be facing financial pressures.

If there are any which start with deficits, I repeat what the noble Lord, Lord Clement-Jones, asked. What will be done in respect of allocations to PCTs taking over the functions of health authorities with deficits? Will the new PCTs be starting with a clean slate?

I have talked about the simplest kind of deficits—the GCSE of deficits. The noble Lord, Lord Clement-Jones, is clearly on to the advanced levels of deficits. He talked about the revenue consequences of capital schemes which is of particular concern where funding does not exist to meet the revenue costs of capital schemes once commissioned. Underlying deficits occur when income and expenditure are in balance or resource limits are met, but non-recurrent moneys have been used to fund recurrent expenditure. There are hidden deficits which occur when spending commitments are deferred in the hope that money will emerge from somewhere before the project can be delayed no longer.

These advanced forms of deficits are likely to be even more important than the basic levels of deficit which get recorded year by year. Will the Minister say what the Secretary of State intends to do about these areas? They are just as important to PCTs starting life with a clean slate as anything else. I look forward to the Minister's comments. I beg to move.

Lord Hunt of Kings Heath

This is an important matter. We start from a position where the NHS is in receipt of record sums of resources as a result of the Government's policy on the NHS. That certainly provides a very good foundation on which we can discuss the issue of the transfer of resources to primary care trusts.

In the last financial year, all but one health authority achieved a balanced financial position. I know that the noble Baroness, Lady Noakes, asked me about the current position. She will understand that we are not yet at the conclusion of the financial year. We are in discussions with trust health authorities and PCTs about managing their end-of-year positions, but we cannot speculate about the year-end financial position before those discussions are complete.

By the end of this financial year we expect all health authorities to live within their agreed resource limits. Where they require support at the year-end, this will be provided principally through brokerage from elsewhere in the NHS. As the noble Baroness suggested, that is normal practice in managing the year-end financial position of individual bodies for the NHS overall.

In practical terms, one accepts that while brokerage can assist an organisation to manage its end-of-year position and avoid a breach of its statutory duty, it does not of itself cure the cause of the financial problem; it essentially rolls the issue over into the next financial year. In practical terms, that means that borrowing organisations must have plans in place not only to fund the replacement of brokerage the following year but also to ensure that the problem does not repeat itself—so the underlying cause of the financial overspend needs to be addressed.

Inevitably, that means that although there may have been high levels of growth, a greater proportion of it will be used to meet the cost of the previous year's over-spending and the recurrent effect in forward years of spending above the levels allocated. There is no getting away from that.

Where a health authority has been involved in a brokered situation and its responsibility then devolves down to a primary care trust, clearly the PCT has to pick up the consequences of that. It would not be feasible simply to say that we should wipe the slate clean so that primary care trusts can start from a position as if, within a local health community, there has not been a financial issue to be dealt with and there has not had to be brokerage. That would not be fair to the NHS as a whole, and it would not ensure that the proper disciplines were in place. The overall position is that, given the overall strengths of NHS finances, primary care trusts in general will have an immensely strong foundation on which to build in the future.

So far as concerns the general point, it is clear that in a situation where brokerage has had to be entered into to deal with some specific funding problems within a local health community, the primary care trust involved will need to take forward those issues when it takes over major responsibility for the budget of the local health service.

Lord Clement-Jones

Before the noble Baroness, Lady Noakes, replies—and she will no doubt have a far more penetrating set of questions—what information will the PCT have on the actual state of finances regarding the services that it will be assuming from the health authority? It seems to me that the state of the knowledge of the PCT in the circumstances described by the Minister is of crucial importance.

Lord Hunt of Kings Heath

Of course, the noble Lord is absolutely right, but the books will be open. I do not believe that there should be any situation where information is not available to primary care trusts taking on new financial responsibilities. I know of no reason why full information should not be available to those primary care trusts.

Lord Clement-Jones

If the strategic health authority retains certain functions carried out by the health authority, but the primary care trust assumes other functions, how transparent will the accounts of the former health authority be? How will the deficit be allocated between the strategic health authority and the primary care trust?

Lord Hunt of Kings Heath

Such matters will be as transparent as they can be. I am talking about a situation where financial pressures have been experienced, and brokerage has had to be entered into so as to enable a particular health authority to fulfil its statutory duty. I have already said that the point of brokerage is to allow time to enable the individual health authority to get its financial situation back into a viable position. Inevitably, as strategic health authorities come forward, and as primary care trusts have to take on the major responsibility for funding services at local level, they will have to take on their share of the brokerage arrangements.

Lord Clement-Jones

Is the brokerage allocated by function which is devolved to the primary care trust: or retained by the strategic health authority?

Lord Hunt of Kings Heath

It is a matter of the NHS as a whole ensuring that we meet statutory obligations and it will enable the funding to be transferred from one part of the NHS to another. In essence, the money will have to be paid back. That would not he done by function; there would be a totality of a figure.

Baroness Noakes

I raised the matter of the £120 million. Can the Minister clarify whether that £120 million that is included in the additional expenditure limit for 2001–02 relates to deficits that are carried forward; for example, £120 million borrowed from next year?

Lord Hunt of Kings Heath

I may have to write to the noble Baroness as I do not have the information about the specific figure that she has raised.

Baroness Noakes

I look forward to receiving that. This is an important area.

The questions raised by the noble Lord, Lord Clement-Jones, are extremely important. The Minister has suggested that it is in some way easy to parcel up a deficit and to attribute it to a primary care trust. I put it to him that there is no logical way of allocating a deficit that exists in one health authority between, say, three or four primary care trusts. Do the primary care trusts share equally in the deficit? Are some allocated larger amounts than others? If a health authority has a deficit at the end of the year, there is no logical way to allocate it to any one particular activity and to say which activity has borne the deficit. The noble Lord, Lord Clement-Jones, has raised some extremely important questions on that.

I ask the Minister to consider the matter again. He may like to write to us before Report stage about how that provision will work in practice as we have concerns about it. The noble Lord said that this will he a record year for resources, but I put it to him that the signs emerging from the NHS are that next year is already looking extremely tight. I understand that the early cut of the planning framework—nowadays called "SWAFF"—is showing almost as many tensions as there were this time last year. That round was regarded as an extremely difficult and bloody round of financial planning. That may not be a good basis on which to go forward into next year.

10.30 p.m.

Lord Hunt of Kings Heath

This is the time of year for noises and squeals from the health service, because this is the time of year when the health service is trying to reach agreement on the SWAFF round. I suspect that, whatever amount of resource one might give to the health service, there will always be squeals at this time of year. I think that the noble Baroness herself will remember the process all too clearly.

Baroness Noakes

I do remember the process. I was merely remarking that people in the NHS are not saying, "Oh, what a lot of money we've got!" Until we see the end of that process, I think that we might have to take with a pinch of salt the Minister's assertion that there will be so much money sloshing round next year that a few deficits will not make much difference.

Basically, however, the Minister has confirmed to us that PCTs will have to pick up the sins of their forebears. I know that that will be a considerable disappointment to PCTs, who will find it difficult to know how to start their life with a deficit, even if they do not know how that deficit is to be calculated.

Lord Hunt of Kings Heath

Surely this is no different from any other restructuring in the health service when successor bodies take on the assets and liabilities of their predecessors. This is a normal process of structural change in the health service. Moreover, it seems to me that it would be wrong to wipe the slate clean. If we were to do that, surely we would be rewarding areas that have benefited from spending in excess of what we regard as their fair share. It would also send out the wrong signals to primary care trusts about the need to exercise financial discipline in the future. Surely this is the only sensible way in which to go forward.

Baroness Noakes

There are two ways forward. The first is to say that we shall give these new organisations a clean slate to begin with, and the second is to attribute a history from the previous organisation. Each is logical, and each has advantages and disadvantages which have been considered in previous reorganisations. There are two ways to proceed, and some PCTs will be disappointed at the Government's line.

We would like to think again about the issue. We should be grateful if the Minister will provide the additional information that he has undertaken to provide. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 67 and 68 not moved.]

Baroness Noakes

moved Amendment No. 69: Page 10, line 7, leave out "may" and insert "must The noble Baroness said: In moving this amendment, with leave, I shall also speak to Amendments Nos. 70, 71, 72 and 82. This group of amendments generally concerns payments to primary care trusts under the powers in Section 97C of the 1977 Act as inserted by Clause 8 of this Bill, while Amendment No. 82 deals with the corresponding amendment for Wales to Clause 9.

The effect of Amendment No. 69, which replaces "may" with "must" in subsection (3) of Section 97C, is to convert the Secretary of State's option as to whether he makes an extra payment to a PCT if it has satisfied its objectives or performed well against criteria. If the PCT has fulfilled its side of the bargain and satisfied its objectives and so on, why should the Secretary of State have the option to renege on his side of the bargain?

Amendment No. 70 deletes the words "if it appears to him" from subsection (3). The effect of that is to turn the question of whether a PCT has or has not satisfied its objectives or performed well against criteria from a subjective test to an objective one.

Amendment No. 72 inserts a new subsection after subsection (3) which provides that the Commission for Health Improvement will supply the answer as to whether or not a PCT has passed the performance tests. The Commission for Health Improvement is fairly independent and so can provide the required objectivity.

The sum of those three amendments is to turn a subjective set of tests into objective ones. We on these Benches are far from convinced that the micro-management of PCT budgets via additional payments for achieving the Secretary of State's latest set of requirements is the right route. These provisions are a part of the Secretary of State's determination—as we have discussed before—to hang on to as much power as possible over the PCTs despite his decentralisation rhetoric. In our view, if these powers are to exist and to be held at the centre, they should be operated as rigorously and objectively as possible.

Lastly, Amendment No. 71 leaves out the words, (whether or not the method of measuring its performance against those criteria was also notified to it)". Amendment No. 82 does the same for Wales. This removes a particularly nasty element of the performance payment regime contained in Section 97C. It is not new to your Lordships' House and we debated it in the context of the Health and Social Care Act 2001. The words allow the Secretary of State to move the goalposts or, even worse, erect goalposts after the game has been played.

PCTs can be rewarded for performing well against criteria notified to them as criteria relevant to the satisfactory performance of their functions. Under the terms of Clause 8 it is not necessary to tell PCTs how their performance will be measured. In management terms that is complete nonsense. There is a massive library of literature on rewarding performance, and I do not believe that there is one respectable page of it which would recommend setting measurement rules separately, let alone not notifying measurement rules. But, of course, the Secretary of State may not be interested in sound management practices because we know what he wants to do is to retain as many levers as possible over his NHS. It is not decentralisation. It is old-fashioned command and control.

These amendments are modest changes, designed to give PCTs more of a chance to manage their affairs within the Secretary of State's framework, without the arbitrariness of the powers as drafted. I beg to move.

Lord Roberts of Conwy

I am particularly interested in Amendment No. 82, which is very similar to Amendment No. 71 relating to England. I am not sure whether these two gratuitous lines that we seek to eliminate do not indicate a somewhat slipshod approach towards financial allocations.

I am bound to say that subsection (3) as a whole reads very oddly in this clause. It says in effect that the Assembly may add to the initial amount allocated to the local health board if (a) the board satisfies notified objectives and (b), it performed well against any criteria notified to it as criteria relevant to the satisfactory performance of its function". Then, as an afterthought, come the two gratuitous lines that the amendment seeks to delete.

My question is how on earth can a local health board perform well if it does not know the criteria against which its performance is to be measured?

I note under subsection (6) that the Assembly may also take away money from boards in the event of failure, wholly or in part, to meet any conditions imposed. What if the money has already been spent in trying to meet the conditions?

The arbitrary subtraction of moneys could in these circumstances have a seriously detrimental effect on the board's services. These arrangements are hardly reassuring so far as the local health boards are concerned, therefore, and seem to confirm our view that this clause gives the Assembly absolute discretion and very considerable latitude in financial matters.

Lord Hunt of Kings Heath

This is indeed happy, familiar territory and I hope that I shall be able to convince the Committee, as I am not sure I did last time we debated the matter, that there is a perfectly reasonable explanation as to why the particular words the noble Lord, Lord Roberts, mentioned should be in the Bill.

What subsections (3) to (6) of Clause 8 to the Bill do is simply to mirror, for primary care trusts, existing powers to make payments to health authorities. Essentially the Secretary of State is here taking power to determine how much to allot each primary care trust based on their performance. He may consider a whole range of factors and we believe it is right that he has the flexibility to determine if and on what basis those payments should be made.

The Secretary of State may want to increase the allocation to a primary care trust for a number of reasons —either as a reward for good performance against challenging targets, or perhaps to assist those PCTs that have under-achieved against certain targets and, therefore, need extra assistance. For example, the Secretary of State might want to reward PCTs to meet challenging waiting-list targets, as in the former performance schemes in operation in 2000–01. Primary care trusts might also take part in pilot schemes, in conjunction with the Modernisation Agency, or others, to develop new ways of delivering healthcare. It would be wrong to tie our hands and remove the ability and flexibility to respond to opportunities to improve local services for people

In 2001–02 all NHS organisations have received their fair share of the new performance fund, regardless of star ratings. High-performing, three-star organisations have, however, the freedom to spend the fund as they want. Organisations with unsatisfactory levels of performance have received their funding with strings attached. The Modernisation Agency signs off their plans and oversees the implementation and spending of the fund. That will also be the case in 2002–03.

Amendments Nos. 69 and 70 would take away the flexibility of the Secretary of State to consider whether performance payments were warranted in the light of other information. I believe that these amendments rather contradict Amendments Nos. 71 and 72, which seek to make payments dependent on reports by the Commission for Health Improvement. Amendments Nos. 71 and 72 would take away the flexibility of the Secretary of State to take into account such factors as CHI reports.

The Secretary of State should specify the precise measures used to assess performance. Indeed. I do not believe that there is any doubt in that respect. However, for important reasons, he might not be able to do so before the start of the financial year in question. Planning guidance published in autumn 2001 will affect the financial performance for the year 2002–03, which, in turn, will influence the performance ratings that are due to be published in July 2003. It would simply not be possible to commit ourselves to the precise measures and thresholds to be used 18 months in advance of the star ratings being published.

I know that the noble Baroness, Lady Noakes, and the noble Lord, Lord Roberts, said that this was like moving the goal posts. However, perhaps I may give the Committee an example of how this provision would apply. The recently published mortality indicator for all deaths within 30 days following an operation now includes subsequent deaths in hospital and at home. This is clearly a better indicator than using only the deaths-in-hospital statistic which was previously used. Many patients are discharged from hospital and die elsewhere. If, however, we tied ourselves to the old measure purely because hospitals knew about it 18 months ago when the planning and priorities guidance was issued, that would mean using an inferior indicator of hospital performance.

In terms of the integrity of the process, perhaps it would be helpful if I inform noble Lords that in 2002 CHI will publish the performance ratings, and in 2003 will take full responsibility for the process. It will still be for the Secretary of State to determine the priorities for the NHS, but CHI will have an active role in overall assessment. As CHI is an independent inspectorate, this seems to be an appropriate division of responsibilities as opposed to the Department of Health, which is accountable through Ministers to Parliament for the management and performance of the NHS.

Indeed, the department may well act on the recommendations of CHI, as was the case last September when the star ratings of two NHS trusts were downgraded to zero stars because of adverse CHI reports. However, I believe that it would be wrong to put CHI in the driving seat when determining if and how to make specific payments based on performance. Surely that is a proper function of the Secretary of State.

As I have said, the Secretary of State may want to increase the allocation to a primary care trust for a number of reasons, either as a reward for good performance against challenging targets or, as I have said, to assist those primary care trusts which have under-achieved against certain targets and need extra assistance.

Amendment No. 82 concerns Clause 9, which deals with the funding of local health boards in Wales. The National Assembly is currently considering a new framework to promote continuous improvement in health and health services in Wales. That is based on a "balanced score card" approach. The Welsh approach will be to look at the situation in the round—the resources and pressures locally as well as the current performance—and will have a future orientation. It will not simply give good or bad marks but will look at capacity, processes and results and provide a strong steer to every health organisation to sustain good performance and make improvements over time where needed.

If performance were to be measured solely on numerical indicators, it would be straightforward to specify the exact methodology for measuring performance. Although numerical indicators will play a key role in performance assessment, they cannot illustrate every aspect of performance. To give an example, one element of taking a balanced view of overall performance would be to assess whether the healthcare system is in touch with patients, its staff and partners both in terms of expectations and satisfaction. For such an area, performance will be more appropriately assessed against statements and standards. To set out exactly how performance will be measured in advance might be counter-productive and restrict the autonomy of the Assembly to take into account all the information available in reaching that judgment. The approach being taken by the National Assembly is innovative and will need to be fine tuned to best accommodate nuances in assessing performance. I hope that noble Lords will accept that a straitjacket would not be helpful in the early stages of performance funding.

I hope that my example illustrates why it is important that the amendment should not be accepted and that some flexibility must be allowed in order to arrive at a balanced view of local health board performance.

10.45 p.m.

Baroness Noakes

I thank the Minister for that extremely comprehensive reply. He made a bid for flexibility. One man's flexibility is another man's lack of certainty. If we look at the arrangements for performance payments through the other end of the telescope, the primary care trust end, we might find that the view from there is that the Secretary of State does not want to give certainty to primary care trusts about how the performance regime will operate for them. He wants to retain as many controls over it as possible, including using indicators that were not even relevant when the PCT set out its plan for what it was to achieve and went ahead.

These are complex matters and the hour is late. I shall read the Minister's comments in Hansard with interest. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 70 to 73 not moved.]

Baroness Noakes

moved Amendment No. 74: Page 10, leave out line 42. The noble Baroness said: In moving Amendment No. 74 I shall speak also to Amendment No. 75. With Amendment No. 74 we return again to the theme of the powers of the Secretary of State over primary care trusts. The amendment deletes paragraph (a) of subsection (8) of Section 97C of the 1977 Act as inserted by Clause 8 of the Bill.

Paragraph (a) allows the Secretary of State to give directions to a PCT with respect to moneys paid to it as allocations or as additional allocations for performance. The Secretary of State cannot have it both ways. He cannot say that on the one hand he is committed to decentralisation, to devolving decision-making to the front line and to freedoms and autonomy for PCTs while at the same time retaining massive powers to intervene in their affairs.

Paragraph (a) would give the Secretary of State carte blanche to tell PCTs what to do. This is not about strategic direction at a high level. There is no limitation on this power. It potentially attaches to every last penny paid to a PCT. The Minister may say that the Secretary of State needs these powers for when things go badly wrong and that he would not use them all the time. However, we are all well aware that statutory powers of direction, even though rarely used formally, are used often and significantly by way of background threat and inducement to achieve things. I believe that the power is grossly disproportionate and wholly out of keeping with the Government's stated intention to decentralise.

Amendment No. 75 is rather different. It inserts the word "reasonable" into subsection (9) of new Section 97C so that when the Secretary of State sets conditions as to records and certificates they must be reasonable conditions. I am sure that the Secretary of State would only act reasonably and therefore that the noble Lord will find it easy to accept the amendment. I beg to move.

Lord Roberts of Conwy

Amendment No. 83 relating to Wales is grouped with these amendments. It is an indication of general public concern in Wales that there should be equitable distribution of funds between local health boards in different parts of the country. That is a very sensitive issue in Wales. Ministers may have noted in Committee last Thursday that the noble Baroness, Lady Finlay of Llandaff, in her proposed new clause, ascribed to the national agency that she proposed, the function of overseeing "the equitable distribution of funds" to local health services. It is a very important issue.

We are all familiar with the fact that, for example, similar operations do not cost the same in different parts of Wales. There are tremendous variations in cost for fairly standard operations. I am sure that the Assembly will do its best to reduce those differences. There are similar variations in England.

We also have postcode prescribing in Wales. Certain drugs are available in certain areas and not in others. There are also variations in waiting times for hospital treatment. In these circumstances, there is a strong temptation to concentrate resources on the worse affected areas at the expense of the best served. The result is often to reduce the level of service overall.

Of course it is certainly not easy to define, and even more difficult to provide equity where funding is concerned. All sorts of factors have to be taken into account. There is the nature of the population, levels of morbidity, the NHS inheritance and so on. Nevertheless, in a country like Wales, some regard must be paid to the equity principle; otherwise people soon sense that one area is being unduly favoured at the expense of another and discord ensues.

I am bound to tell the Minister that I am not reassured by the fact that there are going to be different formulas operating in England and Wales. I do not see why we should not have the same formula operating in, both countries if there is any objective criterion which that formula must meet.

Lord Hunt of Kings Heath

I have noted with interest the suggestion of the noble Lord, Lord Roberts, that we operate the same formula. I suspect that many of the broad principles will be the same, but I think that there is some advantage in looking at how different approaches work out in practice. Obviously, it will be interesting to compare how this works through over the next number of years.

The effect of Amendment No. 74 would be that the Secretary of State could not impose any conditions on any of the allocations to a primary care trust. As we devolve power to the local level we clearly want to get as much resource as we possibly can to primary care trusts. But we also want to be able to set the general course for the NHS and to set national priorities. On occasion—I stress "on occasion"—we might want to ring-fence part of the allocation to ensure that funds are spent on the purpose for which they are allocated. We do that at present for out-of-hours development funds for GPs, and we must retain that facility.

On Amendment No. 75, under existing provisions for funding health authorities and primary care trusts, it has always been for the Secretary of State to decide what records each health authority and primary trust may keep, subject to the usual constraints of parliamentary accountability. So far as reasonableness is concerned, power must be exercised rationally. It cannot be exercised in a way in which no reasonable Secretary of State would act. On that basis, the wording of the amendment is superfluous. Obviously, the Secretary of State would always act in a reasonable way.

On Amendment No. 83, I listened with great interest to the comments of the noble Lord, Lord Roberts, about the issue of equity in Wales. That is a matter for the National Assembly, but I understand that the Assembly is committed to ensuring more equitable access for the entire population in Wales. As I said earlier, the Assembly is currently considering the outcome of a major resource allocation review, which is an attempt to close the gap between the worse off and better off in health terms.

The problem with Amendment No. 83 is that if it were accepted, the Assembly would be prevented from pacing the introduction of a new formula. Pacing is important. In any move to a new formula that could lead to large differences in the new allocation compared to the old one, we must ensure that the rate of introduction is paced. The problem with Amendment No. 83 is that it would inhibit the National Assembly's ability to pace that introduction. The National Assembly for Wales is exercised by the production of a fair formula. On that basis, I hope that the noble Lord will not press that amendment.

Baroness Noakes

I thank the Minister for that reply on both my amendments and that of my noble friend Lord Roberts. I cannot say that I am surprised by the Minister's views on Amendment No. 74. Of course, the power allows the Secretary of State to direct the smallest amount of activity in a primary care trust, because he is allowed to attach a power of direction to any tiny amount paid to a primary care trust. The Minister said that he may want to use that for ring-fencing to set direction for the NHS.

Of course, if it were simply a question of direction and balance, that would be much easier to understand. Perhaps at present we are lacking the words to give that sense in the Bill. In the light of the Minister's comments, I shall reflect further and see whether we can include in a direction-giving power something of a higher level to give sufficient freedom for primary care trusts. However, at this late hour, I shall not labour the point further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 75 not moved.]

Clause 8 agreed to.

Lord Filkin

It is nearly 11 o'clock and I am aware that the House is sitting early tomorrow. I therefore beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

House adjourned at eleven o'clock.