Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Perhaps we are rushing through the Bill just a little too fast, Sir David.

Mr David Madel (South West Bedfordshire, Conservative)

The hon. Gentleman can always stop me.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Thank you, Sir David. That requires me to have my wits about me.

In relation to clause 34, I should like to address the broader issue of NHS contracts versus conventional commercial contracts. Although we have now agreed that clause 33 stand part of the Bill—no amendments were tabled to it and no one objected to it—there is an issue to explore, which I touched on earlier, about the nature of the contracts that will be involved when a pilot scheme takes the form of an arrangement between a health authority and a private sector partner, typically a pharmacy chain or a supermarket chain.

In the normal course of events, the contracts would give the private partner the ability to make the necessary investment. The Minister acknowledged that there would be a problem if the termination provisions allowed for the contract to be terminated by a health authority on a whim or by direction of the relevant authority as no private sector partner would be able to raise the funding or be prepared to risk capital.

Clause 34(1) provides that a company or private body that wishes to enter into a pilot scheme may apply to be treated as a health service body. I understand the reason for the provision—they would then be party to an NHS contract, which, as with so many double speak exercises in the health service, is not a contract, but simply an arrangement that exists so as long as it reflects the will of the Secretary of State. It is not a contract in the legal sense or in the sense in which any commercial entity would understand the term; nor would any banker or financier lend for investment in such a project.

I cannot imagine that the Minister is seeking to undermine his own scheme first by providing in clause 33 that contracts may be terminated at the will of the Secretary of State and, secondly, by suggesting in clause 34 that people who would usually expect to enter into normal, legal, binding contracts should for these purposes become health service bodies and enter into arrangements that are not contractual or binding. Those provisions seem to undermine the principle that the Minister has outlined in mapping out the possibility of a partnership between health authorities and private sector entities particularly in relation to developing services in areas where they do not exist or where they are under-provided and require investment. Will the Minister address what will happen in those circumstances?

If a pharmacist who is currently providing part II services enters into a pilot scheme using existing premises, facilities and assets and the pilot scheme can be terminated in accordance with clause 33, and there is a return-ticket provision allowing them to go back to providing part II services under the 1977 Act, I accept that there is no particular problem and that in those circumstances it may make perfect sense to allow private pharmacists to become NHS bodies for the duration of the LPS pilot. However, that will not bring in the new resources and the new capital to which the Minister referred. Can he reassure the Committee that, where it is appropriate, there will be an opportunity within the pilot schemes for proper contractual arrangements that are bankable and will allow capital to be invested, that there will be a mechanism for effectively contracting them out of the provisions of clause 33 in order to make them bankable and that in those cases it would not be necessary for pharmacists to become health service bodies in order to enter into NHS contracts, which are rather less attractive from a banker's point of view?

Sir George Young (North West Hampshire, Conservative)

My eye was attracted to the explanatory notes on clause 34 as paragraph 156 deals with the issue that my hon. Friend has just raised. It states:

``NHS contracts are not normally enforceable in the Courts.''

It is some time since I was a Health Minister, and I may have been aware of that, but had temporarily forgotten it. The NHS is a major employer. Is it really the case that those contracts of employment are not enforceable in the courts? Is it really the case that the major contracts that the NHS enters into with the private sector are not normally enforceable in the courts and the whole thing rests on the good will of the Secretary of State?

The next sentence says:

Instead, any disputes can be put to the Secretary of State ... for resolution.''

Will the Minister shed some light on that rather astonishing statement that the whole legal principle on which the NHS is founded rests ultimately on the mood of the Secretary of State as to whether or not he finds for the appellant. I assumed that it was subject to the rule of law and that was where disputes were resolved, but that sentence has somewhat undermined my faith in that concept. Perhaps the Minister can now put my mind at rest?

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

I have been in the House long enough to be nostalgic for the days when explanatory notes were every bit as obscure as the clause that they sought to explain. There were never any such difficulties then. Clearly the attempt to express matters in more colloquial terms introduces a wider debate. I will try to reassure the right hon. Gentleman.

The reference here is to what in the legislation are referred to as the contracts entered into between NHS bodies—for example, a commissioning arrangement between a primary care trust and an NHS trust—rather than the whole panoply of NHS contracts. I apologise if the explanatory note is not as clear and comprehensive as it might have been.

I can reassure the hon. Member for Runnymede and Weybridge that it is entirely a voluntary option for potential LPS providers to apply for health service body status. There is no question of anybody being required to go for health service body status in order to take part in LPS. If a provider did not wish to enjoy the health service body status, he or she would not need to do so in order to take part. Clearly, though, there will be circumstances—the hon. Gentleman identified one—where the ability to be treated as an NHS contract holder will be a more convenient way of arranging services and remuneration than a formal legal contract. There is a mechanism for the resolution of disputes and that, ultimately, is enforceable in the county court. It is a voluntary option and a significant number of LPS providers will probably wish to take advantage of it, but it is not a compulsory option. Therefore, the situation that the hon. Gentleman was concerned about—someone being forced to go down such a route, and the viability of the scheme being called into question—should not arise.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Does the Minister not recognise that there could be a problem in relation to termination?

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

The common sense answer is that the parties to the agreement and the provider would have to consider what would happen in the event of a termination before applying for the health service status. As it is a voluntary option, it only arises if somebody chooses to go down that particular route.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I think that the Minister slightly misunderstood what I said. Someone who chooses not to go down that route will still not have the assurance of an enforceable contract, because of the possibility of the contract being terminated by a direction of the relevant authority. The only practical route for a private sector party would be to build in to the contract cancellation provisions that recompensed that body for its investment. The health authority would then be exposed, because it must follow a direction given by the Secretary of State to terminate a scheme. However, it is not conceivable that a private sector investor would invest substantial sums unless the contract were phrased in such a way that the investor would be compensated in such an event.

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

That is an issue in relation to clause 33, which we discussed briefly, rather than clause 34. The reality is that we cannot disapply clause 34. The Secretary of State must have the power to terminate a pilot in circumstances, which I am sure will be rare, in which a scheme proves to be totally unsatisfactory. The various parties will need to consider the consequences of that before deciding to enter into the scheme.

Question put and agreed to.

Clause 34 ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.