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

I beg to move amendment No. 208, in page 30, line 24, leave out from beginning to end of line 25.

Mr David Madel (South West Bedfordshire, Conservative)

With this it will be convenient to take Government amendment No. 221.

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

The clause provides a power to make regulations that allow health authorities to designate neighbourhoods and premises for the purpose of local pharmaceutical services pilots. The idea is that the development of LPS is not undermined by the operation of existing national arrangements for pharmaceutical services. If a health authority and its local partners wanted to discuss and prepare pilot schemes, they should have the breathing space to do so, without constantly being faced by the pressure that someone else might apply to open a pharmacy in the same place under the national arrangements.

Under existing national arrangements, health authorities are obliged to consider applications from people wishing to provide pharmaceutical services in their areas. If the application satisfies certain tests, health authorities have no choice in practice but to grant it, so there clearly could be conflict and disruption between the desire to develop a local pharmaceutical services pilot and an application from a scheme under the national arrangements.

With LPS, we want something much more proactive. We want a two-way process in which existing contractors and other prospective pilot scheme participants come forward with ideas that they want to discuss with health authorities, while health authorities will look for opportunities of their own to develop pilots. It would be wasteful if health authorities had to do that and deal with applications to open pharmacies under the national arrangements.

There must be limits to such designations. We have no desire to see deliberate or inadvertent planning blights. The clause provides for us to make regulations, rather than conferring the power directly on health authorities. The regulations will be able to set limits on which places may be designated and the period for which designation may be maintained. The clause also ensures that we can take timely action should the designation system be misused. If necessary, the Secretary of State and the National Assembly for Wales will be able to direct a health authority to cancel a designation.

On reflection, however, we think that one part of the clause is unnecessary. Its purpose is to allow health authorities to defer part II applications. That is stated explicitly, so we do not think that the further reference to health authorities giving priority to LPS schemes in some other unspecified way is necessary. Amendments Nos. 208 and 221 delete that unnecessary power by deleting the relevant paragraphs.

That is probably sufficient introduction for the amendments.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am delighted that the Government tabled the amendment, as the idea of health authorities prioritising pilot services in some unspecified way was alarming. By tabling the amendment, the Minister has saved me working out how to attack paragraph (c).

Will the Minister to acknowledge the fact that the process of designation causes concern in the same way as paragraph (c) does? Alarmingly, he proposes to interfere with commercial freedom by preventing certain businesses from setting up in an area. Although it is unnecessary to do so, it would be easy to paint a picture of circumstances in which it would be sensible to defer part II applications while the structure of a pilot was put in place. The Minister must recognise the danger of a health authority choosing as its preferred partner a large national pharmacy chain, capital-rich and perhaps proposing a complex deal involving all sorts of glamorous additional benefits to the health authority. The health authority would then be in a position effectively to trade off in a deal with the provider monopoly exclusivity in a particular area. The real concern is that if ``Shoes the Chemist'' makes a deal with the health authority, all potential entrants to an area will be blocked out.

I am sure that that is not what the Minister has in mind, but he will have to draft the regulations to ensure that health authorities do not abuse their powers—although I am aware that he has given himself the power to deal with abuses of the system. It would be helpful if he assured the Committee that health authorities would not be allowed to designate an area. He used the term ``breathing space''. In my experience of bureaucratic organisations, their idea of breathing space is a little longer than that of commercial organisations. One can well envisage a health authority breathing a sigh of relief and saying, ``We will designate our entire area, so that we can think about it for two or three years without having to process all the tiresome part II applications, and then see if we can come up with a pilot scheme''. I am sure that the Minister does not intend that to happen, but he must make sure that the power to designate cannot be used as a blocking mechanism or to create blight. We must bear in mind—and this is a familiar theme—that it will have an impact on the provision of services other than pharmaceutical services within the meaning of the Bill because it could prevent retail pharmacies from opening and therefore limit access to over-the-counter products.

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

The hon. Gentleman makes a fair point, although I am sure that he would not suggest that health authorities should be unable to take advantage of the opportunity of significant investment in the development of pharmaceutical services in a particular area if that was to the benefit of patients. However, he is quite right to stress that the power should be used carefully. Health authorities should not prolong designations any longer than necessary nor should they designate a location in the first place unless they are actively considering an LPS scheme. If the scheme came to nothing, we would expect them to cancel the designation.

It is difficult at present to be sure what the length of designation is likely to be. It will depend to an extent on the cycle in which we invite applications for LPS schemes, so central Government will have an influence on that if we proceed as we did with PMS in inviting several waves of applications. It is unlikely that the period from applications being formally invited to schemes coming into effect will be much more than a year and could well be less. If substantial capital investment is involved, the time scale might be different, but as the hon. Gentleman recognised, we have taken extensive powers to act if there is any evidence to suggest that health authorities deliberately—or otherwise—are misusing the power.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am grateful to the Minister for reassuring the Committee about the Government's intention. There is a slight contradiction between what he said about patients continuing to have the choice as to which pharmacy they take their scrip and the scenario that I outlined that implies that a health authority might effectively make a deal to give one provider predominance in an area. The Minister said that he was sure that I would not want to suggest that anything that produced beneficial investment should be blocked, but that is the argument of the budding monopolist, who would say, ``If you give me a monopoly, I can make a bigger investment.'' I ask the Minister to bear in mind when he makes the regulations that although investment is good in terms of absolute provision, choice is also a good thing.

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

I have said nothing to contradict what I said earlier. If there is an opportunity to get the best possible service—subject to all that I said earlier—it is reasonable that a health authority developing a LPS scheme would want to obtain the best possible service for patients rather than a second-best service.

Amendment agreed to.

Clause 31, as amended, ordered to stand part of the Bill.