Clause 4 - Public-private partnerships
Health and Social Care Bill
6:15 pm

Mr Desmond Swayne (New Forest West, Conservative)

I beg to move amendment No. 72, in page 4, line 6, at end insert—

`(3A) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under this section at 31st March in that year.'.

Mr John Maxton (Glasgow Cathcart, Labour)

With this it will be convenient to discuss amendment No. 73, in page 4, line 27, at end add—

`(7AA) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under subsection (7A) above at 31st March in that year.'.

Mr Desmond Swayne (New Forest West, Conservative)

I rise to speak to amendment No. 72, tabled under my name and that of my hon. Friend the Member for Woodspring (Dr. Fox). When I put my name to that amendment, I expected that my hon. Friend would move it. However, events have intervened. Labour Members who have unjustifiably accused me of verbosity will be reassured that I will, of necessity, be brief.

We support the principles of partnership and involvement with the private sector that underlie the clause—indeed, we have a measure of enthusiasm about them. That is my understanding, at least, but if I have got it wrong my hon. Friend the Member for Woodspring will correct me.

The Bill allows the Secretary of State to

form, or participate in forming, companies to provide

finance and guarantees to the bodies in question. Our amendments would create the requirement for the audit of the assets and liabilities that the Secretary of State will acquire or incur under the opportunities that arise for him in the provisions of clauses 4 and 5. That strikes me as perfectly sensible—pure common sense, entirely uncontroversial. Therefore, I have every expectation that the Minister will accept the amendments.

Members of the Committee will understand, however, that a concern underlies that requirement. The track record of Government investing in the private sector is long and inglorious. I will not try your patience, Mr. Maxton, or use the Committee's time to detail any of that history—the history of picking winners, for instance. I am sure that it would not prove controversial if I were to do so, however, because we are now governed by new Labour, which accepts the case that mistakes were made. Government Members would now take great care before putting in a Bill provisions that enabled such a process to begin again.

The amendments would require a quantifying of the liabilities that the Secretary of State incurs and the finance that he puts at risk when he invests in companies. They would require the Secretary of State to measure the liabilities into which he enters and to publish them annually, making public the contingent liabilities and off-balance sheet risks. That begs the question as to how one measures such contingent liabilities. In my former occupation in the Royal Bank of Scotland, I specialised entirely in developing technical solutions, finding algorithms and computerising them to calculate precisely the values of those contingent liabilities.

In the past, general practitioners have financed their own premises, borrowing commercially and obtaining reimbursement of the rental from the health authority by the cost rent, or notional rent schemes. That system encouraged general practitioners to work with health authorities to identify third-party developers to design, build and finance premises, and then let them to general practitioners and trusts at a market rent. The national health service does not want a lease longer than 15 to 20 years, however, and I would not blame it for that. Given the 10-year plan, it would be too much to expect the NHS to enter leases for more than 15 or 20 years. Indeed, many commercial undertakings would not wish to do so.

Dr Peter Brand (Isle of Wight, Liberal Democrat)

Will the hon. Member explain why the Conservatives were so enthusiastic about the Government's private finance initiative projects, which tied the health service to contracts of some 60 years with a 30-year break clause?

Mr Desmond Swayne (New Forest West, Conservative)

As the hon. Member says, no such contracts were entered into under the previous Conservative Government, precisely because of the terms and conditions that applied. Only as a result of those conditions being changed do we now have private finance initiative contracts.

The difficulty is that the cost of purchasing and developing the site cannot be amortised at a market rent set by the district valuer. The commercial developer of such sites therefore seeks to make the enterprise profitable. Consequently, if the NHS does not wish to renew the lease, the residual value of the site falls to him.

That is no problem in a constituency such as my own, where developers are queueing up to build on redundant primary, secondary, and—regrettably—intermediate care sites, which are largely privately owned. Recognising the residual value of a site after a development's natural life has expired is not a problem. There is, however, a problem in inner cities and rundown areas in other parts of the country, where initiatives such as this are most required so that modern and desirable premises for the NHS may be provided. Market rents are often too low to justify such a development in the first place, although since 1999 the district valuer has had some scope to deal with that problem. The difficulty arises because there may be no alternative use for the site if the NHS decides not to renew the lease. Therefore, the developer attempts to obtain a longer lease, or seek some guarantee with respect to the residual value of the site. The alternative is to seek agreement with a non-commercial NHS partner to purchase the land, or pay in part for the development itself, which would change the economics of the entire enterprise.

The economic reality is that in areas where the Department of Health wants new premises, but where there is no real demand for modern commercial property, the only way to develop the site is by underwriting some of the developer's costs. The advantage of that over the health authority simply commissioning and owning the project in the traditional way is not immediately clear. The private sector is able to accept the risk of managing a project. However, it is not good at or even willing to accept risks such as those that will be incurred as a consequence of developing new general practice premises in areas that are largely represented by Labour Members. To return to our previous discussion, Labour Members might justifiably say that they represent all areas, but I am sure that that imbalance will shortly be corrected in the months, if not weeks, to come.

If public borrowing is to be avoided, the Government will have to be prepared to enter into deals with the private sector that will have a significant potential cost, or contingent liability, in 15 or 20 years' time. When the leases expire and the residual value of the sites is not realised by the developer, the contingent liability, which the Secretary of State will have had to have underwritten in order to initiate the project, will fall due. It is only prudent to measure those liabilities as they are acquired and report on them every year to find out precisely what the Secretary of State is entering into as the years progress. That strikes me as entirely proper.

I have one or two other anxieties about the clause, largely as a consequence of an excellent document furnished by my right hon. Friend the Member for North-West Hampshire (Sir G. Young). However, as I would not want to divert the Committee's attention from these focused amendments, I shall leave those remarks to an even more focused debate on, if you are willing, Mr. Maxton, clause stand part.

Mr John Denham (Minister of State, Department of Health; Southampton, Itchen, Labour)

As the hon. Gentleman, who has just made his first contribution from the Opposition Front Bench, has suggested that he would welcome a clause stand part debate, I shall keep my remarks narrow and relate them to the amendments.

The hon. Gentleman makes the simple proposition that the assets and liabilities arising from the clauses relating to public-private partnerships and income generation should be in the public domain. I assure him that they will be. The amendments are unnecessary. Any assets or liabilities, including contingent liabilities, will be disclosed in the relevant annual accounts. Any assets or liabilities held by the Secretary of State will be disclosed in the Department of Health's resource accounts, which will be published in compliance with the Government's resource accounting manual.

In the case of clause 4, for a health authority or PCT, or clause 5, for NHS trusts, any assets or liabilities would be disclosed in their annual accounts, which they are required to publish under the National Health Service Act 1977. In addition, any public-private partnership set up under the provisions as a limited company will be required to produce and publish annual accounts in compliance with the requirements of the Companies Act 1985. Those accounts will detail all assets, liabilities and recognisable contingent liabilities.

NHS and Department of Health bodies that want to set up companies to exploit intellectual property will have to comply with guidance set out in a financial framework, which will be published as official departmental guidance. Monitoring arrangements on intellectual property in the NHS that are already in place supplement existing accounting arrangements in the annual accounts of the bodies involved.

The purpose of the hon. Gentleman's amendment is achieved by existing arrangements for disclosure. Issues surround how the Secretary of State's liability might be limited through the use of limited liability companies for the proposed public-private sector partnership and how risk over the exploitation of intellectual property rights is managed in clause 5, but it might be better to return to those matters in more detail later.

Mr Desmond Swayne (New Forest West, Conservative)

The Minister's comments offer a measure of reassurance. I assure him that our concern has been prompted by a desire to ensure that the Secretary of State is not ripped off. I am convinced that we have the best civil service in the world. It will, of course, advise the Secretary of State with all its expertise, but with all due respect, that expertise is not, or has not been in the past, commercial expertise. It is undoubtedly a jungle out there. The partners with which the NHS negotiates will seek precisely the guarantees that I described.

However, having heard what the Minister said about the way in which the contingent liabilities will be measured, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Paul Burstow (Sutton and Cheam, Liberal Democrat)

I beg to move amendment No. 23, in page 4, line 15, at end add—

`(6) For the purpose of subsection (1) above, the Secretary of State shall make regulations to establish and require systems of operation that safeguard patient interests, in particular to ensure adequate care standards, accountability and transparency.

(7) Before making any regulations under subsection (6) above, the Secretary of State shall consult such bodies who represent the interests of those likely to be affected by the regulations.'.

The amendment is designed to elicit assurances from the Government about how we can ensure, in the context of public-private partnerships, that patients' interests are safeguarded at all times. It would ensure that commercial interests were not put ahead of patient interests. The amendment would place a regulation-making power in the Bill, with a duty to consult prior to the publication of regulations about arrangements to ensure that there was transparency in dealings involving public-private partnerships in terms of how care standards are safeguarded and the information that is provided.

We are concerned that, beneath the cloak of commercial sensitivity or confidentiality, issues that are of public interest, that the public have a right to be informed about and that go to the heart of safeguarding patient interests will not be in the public domain. We therefore seek a mechanism that will enable the House further to scrutinise arrangements for monitoring and reporting on the operation of public-private partnerships set up under the clause.

The explanatory notes make it clear that the Government intend to use that power in the first instance to establish an organisation called NHS Local Investment Finance Trust—NHS LIFT—which is not about the construction of many lifts in health service buildings, but about investing in new primary care premises. Perhaps some will have lifts.

I hope that the Minister can answer some questions that seem relevant to the way in which the public-private partnerships that provide the premises might operate. First, can he tell us what the incentives will be for private companies to invest in under-doctored target areas? Secondly, are there any implications for the control of such premises through the involvement of private partners? Thirdly, will private companies that become involved in the arrangements have any say over how and what care is provided in establishments built through that mechanism?

I hope that the Minister can also say a little about whether the entities that will be created—the public-private partnerships—will in all cases work under a charging regime and the same employment and service conditions that pertain in the NHS. It appears that there is a question mark over whether that is the case, so we would like the Minister to give us some assurances on that.

The amendment is fundamentally about the need to ensure that there are procedures to allow the House to conduct scrutiny and to allow proper consultation by Ministers. There must be a system that ensures that patient interests are safeguarded when public-private partnerships bring in new money and that they cannot use commercial interests solely as a device to avoid public scrutiny.

Mr John Denham (Minister of State, Department of Health; Southampton, Itchen, Labour)

I agree that the interests of the patient must always be paramount, but I am not convinced that the amendment is necessary to safeguard those interests, because the reality is that the existing obligations will apply where the Secretary of State or NHS bodies use this power. The power represents an additional way of improving facilities that are available to those who are providing NHS services and does not provide any excuse for ignoring patients' interests. All the current regulatory checks and financial and legal requirements that exist within the NHS will continue to apply. For example, the legal duty of quality of care on commissioners and providers applies, as will the guidance on clinical governance issued to the service. The role of the Commission for Health Improvement in looking after patients' interests will apply.

I can reassure the hon. Gentleman that the patients' interests will be paramount, and just because a public-private partnership is used to improve GP premises there is no reason to believe that that should lead to any diminution in the quality of patient care, any more than it would do if a purely private arrangement were entered into, or if those facilities were provided directly by a health authority through a health centre. The issue that the hon. Gentleman raises is a fair one, but because the checks and the obligations on the provision of services apply as they would in any other circumstance, there is no need to accept the amendment.

Mr Paul Burstow (Sutton and Cheam, Liberal Democrat)

Can the Minister assure us that, so that those checks and obligations actually operate in the interests of the patient, there will be no need for those who act on behalf of patients to scrutinise the system at a local level? Does he believe that there will no need for them to have to navigate their way around the system to gather the various aspects of the information of the various checks that he was outlining?

Mr John Denham (Minister of State, Department of Health; Southampton, Itchen, Labour)

The point is that services that are provided through new primary care facilities provided by NHS LIFT, and the issues that arise from the point of view of patient service, are exactly the same as if those premises had been directly provided by an NHS trust or a health authority or through a private arrangement made by the general practitioner: the patient is in the same position. Later, we will discuss a new system of patient scrutiny. That will be relevant, but only in the sense that we are looking to that to cover primary care in all its settings, including those that are provided here.

The hon. Gentlemen asked what incentives there are to invest in under-doctored areas. NHS LIFT will deliver good-quality primary care facilities because the nature of public-private partnership is that it can offer economies of scale and economies of financial skills. There will be an ability beyond that which an ordinary GP could normally handle to attract pharmacists and other health investors who want to become partners in the venture. It could be possible to raise additional capital to provide other facilities on a site such as flats or retail developments. There will be economies of operation for NHS LIFT, in that it would be able to tender for local authority or other personal social services facilities at the same time as providing health care properties. It might be able to offer other health care provision, such as minor injury units or intermediate or step-down care beds. Because of the involvements of the Department of Health and the NHS, we hope that it would be able to take advantage of the higher credit rating that the Department is able to bring to the company.

The acid test is that there is significant interest in the private sector in taking part in NHS LIFT. It is clear that it is the under-doctored and deprived areas in which we wish to invest, and there seems to be no shortage of potential private sector partners to take part in it.

The hon. Gentleman asked a number of questions, which hung around the idea that the nature of the services would be determined by the fact that this was a public-private partnership. I know that he does not agree with me, but it is important to stress, as we do with PFI, that this is an alternative route to making the provision; it is not an alternative provision. It is exactly the same with LIFT or any other use of this clause to develop a public-private partnership: it gives us an alternative means of achieving the same outcome for patients. We do not expect to cover all the investment that is necessary in primary care premises.

The hon. Member for New Forest, West referred to the existing arrangements for funding GP premises. Those will continue, but there are areas of the country where LIFT will not operate, certainly in the first instance, and where alternative routes which have been tried, tested and worked will continue.

Mr Paul Burstow (Sutton and Cheam, Liberal Democrat)

The Minister began his response by saying that he was not convinced of the need for the amendment. I have not been convinced by his arguments as to why it is not necessary to place specific requirements in the Bill. We have not gone down the route of a detailed and prescriptive amendment, because that that would have invited him to advance arguments with which I am familiar in Committees. Nevertheless, we gave the Government the scope to advance the cause of patients' interests. We would like to take stock of what the Minister has said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Sir George Young (North West Hampshire, Conservative)

I am grateful to you, Mr. Maxton, for calling me and observing a semblance of rank in these matters.

It is ironic that clause 4 of the Bill embraces the private sector in comparison with a rather more narrowly drafted clause which is perhaps more notorious. Nothing shows the change that has taken place in the Labour party over the past 30 years more than the fact that we have clause 4 of this Bill, whereas the last time I served on a Standing Committee under a Labour Government nearly 25 years ago we had a Bill that phased out pay beds from NHS hospitals—``The private sector must not be allowed to infect the NHS and must therefore be driven out.'' It is interesting to contrast that philosophy with paragraph 11.2 of ``The NHS Plan'', which reads:

For decades there has been a stand-off between the NHS and the private sector providers of health care. This has to end.

Hear, hear to that. However, who is responsible for the stand-off?

On clause 4, there are a number of issues on which the Minister touched on which I should like to press him a little more. When the last Government were negotiating PFI deals, I had no idea that, sitting on the other side of the table, representing the hard-nosed bankers, was my hon. Friend the Member for New Forest West. How delightful it is to have him on one's side now. When the Minister explained what would have to be declared, he said that where the Secretary of State gave a guarantee, which he can do under proposed section 96C(2b), it would be declared in that year that it was made. Will he confirm that? The Secretary of State for the Environment, Transport and the Regions made a statement about the channel tunnel rail link which involved a Government guarantee. I think I am right in saying that, in those circumstances, that would score as public sector expenditure only if and when the guarantee was called. Will the Minister confirm that what he has said—that where the Secretary of State provides a guarantee, it will be declared at once—is consistent with the line that the Secretary of State for the Environment, Transport and the Regions took with the channel tunnel rail link?

Under proposed section 96C(1), the Secretary of State may form companies. Do the Government intend having a majority stake in any of those companies, or is it envisaged that they will have a minority stake, which would be the normal pattern?

Will the Minister clarify what appears in ``The NHS Plan''? Paragraph 4.11 refers to new local surgeries, which is what the clause is about. It states:

The NHS will enter into a new public-private partnership within a new equity stake company—Lift—to improve primary care premises.

It continues:

As a result of this NHS plan, up to £1,000 million will be invested in primary care facilities.

Does he really envisage that £1 billion will be spent through LIFT? If so, that is a substantial amount. If not, will he say what percentage of that £1 billion will come through LIFT, and whether that is on top of what was planned anyway, or is simply refinancing something that was to be provided in any event?

Will the Minister explain more about the decision-making process? If, as I envisage, the Government hold a minority stake and the private sector the majority stake, how can the Minister encourage investment in the more deprived parts of the country, which the private sector has not yet reached? What dialogue can the Minister engage in to encourage the drift of investment? Will the Secretary of State put on the table what is necessary to persuade the private sector to go there, or does the Minister envisage an alternative form of dialogue to achieve that?

I do not wish to prolong the debate. I welcome the clause and am trying to establish how it fits with section 96 of the NHS Act 1977. It does not fit at all, because section 96 has four subsections and the clause refers to section 96C. I understand that the only way to make sense of it is to refer to the unwieldy document before all members of the Committee. Out of interest, I examined section 97, which printed 20 lines of an Act, but crossed every single line out. I wonder what function was served by that exercise in bureaucracy. If the Minister can shed some light on the operation of the clause, I would welcome it even more enthusiastically than I have so far.

Mr Desmond Swayne (New Forest West, Conservative)

It is a great pleasure and honour to follow my right hon. Friend and quite proper to have given way to his rank. I shall not repeat any questions that he asked more eloquently and intelligently than I could, but ask one additional question. Insofar as the clause enables the Secretary of State to be a participant in the formation of companies, how will it be affected by EU purchasing and procurement rules? I look forward to hearing the Minister's response.

My right hon. Friend the Member for North-West Hampshire provided me with a brief from the Democratic Health Network—an organisation of 80 members, the majority being local authorities, but primary care groups and trusts, community health councils and trade unions are also involved. It seems that clause 4 has not been universally welcomed. The brief points out:

This short clause allows for a radical change to the way in which NHS services and facilities are financed. If the provisions in the clause were exploited to their full extent, most of the NHS could be financed through PPP. It will affect service users, patients, employees and wider communities. It is likely to be challenged by those who believe that public private partnerships are a ``back door'' way of privatising the NHS and neither provide value for money nor are sufficiently accountable.

The brief goes on to state the deep concerns of many people about the clause. Of course, I do not share those concerns. The Conservatives support the principles behind the clause, but it would be remiss not to have drawn the Committee's attention to those concerns.

In some ways, sitting in Committee today has been a surreal experience—a feast without Banquo's ghost. This morning, we had the spectre of health authority boards being dismissed and replaced entirely by the private sector—a spectre that the Minister failed to dispel. This afternoon, provisions on new, exciting arrangements with the private sector are being spelled out in the clause, yet we have not heard a peep from Labour Members. Perhaps that is a consequence of the ruthless way in which those who participated in the Second Reading debate have been excluded from the Committee. I leave hon. Members to think about that.

Ms Lorna Fitzsimons (Rochdale, Labour)

The hon. Gentleman knows that some of us spent most of our time in the corporate sector and have therefore no problem working, or identifying the excellence, within it.

Mr Desmond Swayne (New Forest West, Conservative)

That begs the question, where was the hon. Lady on Second Reading? Others, who were not quite so involved with the corporate sector to which she so lovingly refers, made their feelings plain. It would have been interesting to hear those views reflected in the Committee. I am disappointed that a voice has had to be given to them by Opposition Members. Perhaps it is worth reflecting on that.

Mr John Denham (Minister of State, Department of Health; Southampton, Itchen, Labour)

I shall deal directly with the series of questions raised by the right hon. Member for North-West Hampshire.

On when the guarantee would be declared, my understanding is that it would form a contingent liability and would be declared in the financial year in which it was made. However, I am not an expert in that area. I shall look further into whether it scores as public expenditure in that year or only the year in which the guarantee was actually caused. I shall write to the right hon. Gentleman and copy the letter to members of the Committee.

It is certainly our intention to take a minority stake in LIFT, as the Secretary of State, in partnership with Partnerships UK. We believe that LIFT will be able to produce £1 billion over the period that we have set out. That will make a major contribution towards the planned refurbishment of primary care premises and the development of new premises. It is our intention that the existing streams of funding will continue at the levels which are available, so this will not become a sole or exclusive route to the refurbishment of GP premises.

As for the ability to attract LIFT into the areas where it is needed, clearly the Secretary of State has a number of tools at his disposal, including the shareholding in the company and the NHS resources that could be put into, or that already exist, within areas. A planned approach to the refurbishment of a number of different premises enables us to bundle together a variety of different properties and development opportunities in one place in a way that most purely private sector companies would find difficult to achieve.

On section 97, I apologise if the document is hard to read, but as we discussed on the first day, my officials have made strenuous efforts to be as helpful as possible to the Committee in having a consolidated version of the legislation. I noted with interest the comments made by the hon. Member for New Forest, West on the Democratic Health Network. I should not mislead the Committee: we have done this primarily to get LIFT under way, but it is possible to envisage areas where significant capital investment would be required in the NHS and where a similar model could be used in the future.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.