Clause 56

Health and Social Care Bill – in a Public Bill Committee at 1:00 pm on 17 March 2011.

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

Photo of Grahame Morris Grahame Morris Labour, Easington

The clause requires Monitor to review regulatory burdens as part of its functions as the regulatory body for the new health market. It must ensure that it does not either impose or maintain unnecessary burdens. According to the Bill, not only must Monitor impose only regulation that it deems necessary and proportionate but it must determine whether its own regulation is necessary and proportionate. I suggest that there is a tension between those two roles.

David Bennett, the chief executive of Monitor who has often been quoted in this Committee, said in his recent interview with The Timesthat Monitor’s aim will be to create a genuine market for fair competition between providers. However, that would require a fair plying field between competing providers, and as things stand, there cannot be a fair playing field, due to the differential costs that apply to different types of organisation. The Opposition are genuinely concerned that Monitor will decide to act against those differential costs, which it will justifiably view as regulatory burdens. The Bill certainly gives it the powers to do so, and David Bennett’s comments fit in with that scenario.

I have previously referred to the Government’s impact assessment of the Bill. On closer examination, it is most revealing in relation to what clause 56 could mean and  what action Monitor may be obliged to take as a result of it. Paragraph B108 states:

“The regulator will also be tasked with publishing advice…on barriers to competition/fair playing field…and implement recommended solutions…Once the net distortion facing different provider types is better understood, the tariff methodology could be developed in such a way as to move towards a fairer playing field by setting”— this is really important—

“different prices for different providers.”

That is a key point, to which Monitor’s chief executive, David Bennett, referred.

The Minister of State, the hon. Member for Sutton and Cheam, and I have had a number of exchanges on the matter. On 4 February, in a reply to a written question, the Minister said:

“The impact assessment for the Health and Social Care Bill…includes a partial assessment of factors affecting the costs incurred by national health service bodies and private providers, respectively, in delivering health services for NHS patients. The key conclusion is that some of these factors appear to increase costs for NHS bodies relative to private providers, whilst other factors appear to increase costs for private providers relative to NHS bodies. However, based on the information held centrally, it has not been possible to determine, on balance, whether NHS bodies or private providers of NHS services are systematically advantaged or disadvantaged relative to the other.”—[Official Report, 4 February 2011; Vol. 522, c. 1007W.]

I confess that I have struggled to reconcile that ministerial answer with the Government’s impact assessment. Paragraph B55 states unequivocally:

“The majority of the quantifiable distortions work in favour of NHS organisations”.

In layman’s terms, NHS providers are able to provide services at a cheaper cost base than private providers. The impact assessment also has an intriguing section on the cost of capital. In it, the Government admit that public investment is far more efficient than private borrowing. I do not want to deviate from the clause, but there is a credibility gap between the Government’s rhetoric on the private finance initiative and what is actually happening on the ground. There are issues around deeds of safeguard that need to be tackled elsewhere. Alarmingly, the point about the cost of capital is viewed as a problem rather than an argument for the publicly funded investment that we all want.

The impact assessment goes on to outline how to remove the distortion when creating private markets. Whether the Minister or the impact assessment is correct is irrelevant because we have to deal with the provisions in the Bill. It will be the duty of Monitor, not the Minister, to take action and resolve these problems. The impact assessment uses KPMG research into fair playing fields, which calculated additional costs for private providers at 14%. By and large, according to KPMG, NHS providers are 14% cheaper.

In the view of Opposition Members and some informed commentators, the spectre of European competition regulations and rules on state aid are quite important. Monitor will be under pressure to give either tax breaks or subsidies to private providers, or to put additional costs on to NHS providers. Unless the Minister is willing to reduce the scope of powers given to Monitor by this Bill, it will not be able to offer any guarantees on decisions that will be out of its hands.

The King’s Fund has described Monitor’s duty as

“strikingly similar to the original duty on Ofgem…in that the duty to promote competition is closely linked to the duty to protect and promote the interests of service users.”

My hon. Friend the Member for Leicester West has set out in a most comprehensive manner the key differences between utilities and health services. The public would find such a comparison objectionable.

Monitor’s power within the health service will dominate the provision of future services. The Bill suggests that it will take a prime position over the bodies responsible for quality, notably the Care Quality Commission. The clause gives Monitor unnecessary control over the market by giving it the power to fix costs and act against the naturally cheaper and better option, the NHS provider. I would argue that if the Government are sincere about rejecting price competition, Government Members should take this opportunity to vote against clause 56.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health 1:15, 17 March 2011

I hope the Committee will be satisfied if I deal with this clause relatively briefly, rather than having a long drawn out debate, because we have a considerable amount of work to get through this afternoon.

Clause 56, as we know from clause 52, ensures that Monitor’s main duties are to protect and promote the interests of people who use health care services by promoting competition where appropriate and by regulating where necessary to enhance quality. Clause 56, therefore, requires Monitor to keep those regulatory practices under review so it does not increase or retain unnecessary regulatory burdens, and, through that, it will ensure best regulatory practice.

Over time, as the health care markets change and competition becomes more embedded and efficient, Monitor will adapt the way it regulates those services, particularly where regulatory activity is no longer necessary. It will also be possible for it to reduce certain regulatory activities for certain types of providers, which would ensure that regulation is applied proportionately and only where necessary. That would ensure sufficient regulation while keeping burdens and costs to a reasonable minimum. Monitor, under this clause, will publish statements reporting its actions for every 12-month period and its plans for future regulatory changes.

Photo of Grahame Morris Grahame Morris Labour, Easington

Will the Minister confirm that Monitor could invoke those powers when a private provider complains under competition law that a GP commissioner is favouring the incumbent provider, such as an NHS foundation trust?

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The answer is, in theory, yes.

May I pick up another point raised by the hon. Gentleman, which was about Monitor giving higher prices to private providers? As the hon. Gentleman should be aware, we have tabled Government amendments to make our position on pricing completely clear. We will reach the relevant clause, which addresses pricing, in due course. I will tread very carefully so as not to go down a cul-de-sac and stray out of order, Mr Hancock. Amendment 192 to clause 104 will ensure that Monitor cannot vary prices according to whether a provider is public or private. We will debate that later, and I am sure the hon. Gentleman will have a considerable amount to say about it, although I hope he studies the amendment carefully so he fully understands it.

For those reasons, I urge my hon. Friends to ensure that clause 56 stands part of the Bill.

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

The Committee divided: Ayes 13, Noes 10.

Division number 48 Decision Time — Clause 56

Aye: 13 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly agreed to.

Clause 56 ordered to stand part of the Bill.