Clause 103

Health and Social Care Bill – in a Public Bill Committee at 6:30 pm on 22 March 2011.

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Photo of Simon Burns Simon Burns The Minister of State, Department of Health 6:30, 22 March 2011

I beg to move amendment 550, in clause 103, page 94, line 27, leave out ‘the price’ and insert ‘(subject to sections 110 and 111) such price as is determined in accordance with the national tariff on the basis of the price (referred to in this Chapter as “the national price”)’.

Photo of William McCrea William McCrea Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Home Affairs), Shadow DUP Leader of the House of Commons

With this it will be convenient to discuss Government amendments 551 to 557, 559, and 561 to 574.

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

The amendments aim to clarify the provisions on pricing. The amendments in my name clarify that we do not want Monitor to have to specify every possible price payable for every service included in the national tariff. Instead, Monitor will set a national price, agreed with the NHS commissioning board, for the services covered by the national tariff and set an adjustment that will be applied in certain circumstances. Rules will be included to specify how the final price to be paid is calculated.

Under the amendment, Monitor will specify a base price for the service and a series of adjustments, based on, for example, location, the complexity of treating the patient or any other factors deemed to be appropriate. The provider would then be able to calculate the prices that it would receive for treating its patients by applying the rules and adjustments. For example, a specialist provider in central London would add the London uplift and specialist additional cost to the base price to easily calculate the price it will be paid for the service. The final price paid to providers will be transparent and simple to calculate. The need for Monitor to specify all prices in all circumstances for all providers is unnecessary.

Amendments 555, 559 and 562 ensure that the national tariff includes rules governing the application of variation to the national price. Such rules will be transparent, legally binding and enforceable by Monitor. Rules on variations in tariff will specify when the price set in the national tariff changes, which may include when adjustments are made to it to take account of volume—with a marginal rate being applied when fixed costs are covered—complexity of treatment and the location of provision.

The provisions are different from those outlined in clause 104(2), which provide a legally binding framework, within which the provider and commissioner may agree to vary the specified service and price. This measure will enforce rules that must be followed by commissioners and providers on services that are specified in the national tariff.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health) 6:45, 22 March 2011

Unless I missed it, the Minister did not spend much time speaking about the change in losing the ceiling on price. Taking out a maximum price is an important part of the measure, so the Government have made a major U-turn and I would like to expand on that.

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

The hon. Gentleman has made an uncharacteristic inadvertent slip by saying U-turn. On a point of clarification, he knows as well as I do that it is not a U-turn. To put it beyond any doubt, misrepresentation or misunderstanding, we intend to have competition based on quality, not price.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

We will certainly examine that in the coming debate. I want to have a stand part debate, too, but I cannot let this matter pass. Opposition Members agree that competition on price is unacceptable, and a  large body of evidence shows that it is detrimental to quality. It is worth noting that our general concerns—and the public’s—about price competition have been expressed by many experts from whom the Committee has heard. Dr Clare Gerada, who is chair of the Royal College of General Practitioners, said:

“All the evidence appears to show that if you base competition on price you drive down quality. That is what we are concerned about”.––[Official Report, Health and Social Care Public Bill Committee, 8 February 2011; c. 50, Q102.]

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

I do not want to interrupt unnecessarily, but the hon. Gentleman seems to be talking about the issue of maximum prices. Will it not be more appropriate to discuss that on the next group of amendments?

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

My understanding is that it is relevant to this group, Dr McCrea.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

I accept your ruling, Dr McCrea, but I understand that it applies equally to this group.

Photo of William McCrea William McCrea Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Home Affairs), Shadow DUP Leader of the House of Commons

I certainly do not want to stifle debate, but maximum price relates to the next group.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

We will leave it to the next group. If the Minister wants to have the debate, I am happy with that.

Amendment 550 agreed to.

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

I beg to move amendment 187, in clause 103, page 94, line 27, leave out from ‘service’ to end of line 30.

Photo of William McCrea William McCrea Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Home Affairs), Shadow DUP Leader of the House of Commons

With this it will be convenient to take Government amendments 188 to 191 and 193 to 203.

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

I am delighted that Labour Front-Bench Members have seen the merits of these Government amendments and have added their names to them, in a show of consensus, so that we can move forward to get the Bill properly drafted without any misunderstandings. The intention of these amendments is to deal with misunderstandings from some quarters that the Bill introduces price competition. Let me state very clearly once more: it has never been our intention to introduce price competition. We do not want providers of NHS services to compete on price; we want competition on quality, and as we discussed last week, it is the firm view of this Government that competition on quality can act as a mechanism to improve NHS outcomes.

Photo of Grahame Morris Grahame Morris Labour, Easington

Will the Minister comment on the award of the north-east prison health contract, which was apparently awarded on the basis of price?

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

The hon. Gentleman has been a delight in this Committee. [ Interruption. ] Excuse me, I am trying to help the hon. Gentleman. He knows that I do not go down cul-de-sacs to address individual examples because of the problems that can flow from that. On this occasion, in a spirit of generosity, I will say that although I do not  know whether he has portrayed the contract accurately, he will be perspicacious enough to know that it was all done under the system installed by his party’s Government.

Photo of Margot James Margot James Conservative, Stourbridge

Is my right hon. Friend concerned that there might be a rash of these private providers coming in to try to compete on price to get in quick before this Government’s legislation outlaws the practice?

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

My hon. Friend raises an intriguing point, which we could probably debate for hours. In deference to hon. Members I will resist the temptation, but my hon. Friend makes a valid point that is on the record.

These amendments remove Monitor’s ability to set national tariff prices as the maximum. This means that for all services covered by the tariff there can be no competition on price. The provisions for Monitor to set maximum prices were never to be used to introduce price competition. Competition should be based on quality, and wherever possible the price must be fixed before beneficial competition can take place. The use of maximum prices was included to allow Monitor to regulate price increases for non-competitive services, again, among monopoly providers. However, Monitor’s competition powers are sufficient to deal with any abuse of the dominant position and we are able to remove the references to maximum. Let me remind hon. Members that for the first time the Bill introduces a framework in primary legislation to govern the use of the tariff in the NHS. That is a very significant change, which Labour Members can appreciate and support—although they did not legislate for it when they were in power.

Where a service is covered by the national tariff, competition should only ever be on the quality of care that the provider can provide to its patients. Being covered by the tariff means not only that we can be certain that competition is focused on quality, but that the risk of cherry-picking is mitigated by the setting of accurate prices that fairly reflect costs. As hon. Members will be aware, the setting of the tariff is a complex process, which must take into account a wide range of considerations. That has contributed to the current situation where the tariff is not comprehensive and many clinical areas that would benefit from having a national tariff are not covered. That is not good enough.

Photo of Steve Brine Steve Brine Conservative, Winchester

I welcome the amendments wholeheartedly. Many of the representations made to me revolve around the misrepresentation on so-called price competition and so-called cherry-picking. I welcome the Government’s listening mode on this. Does the Minister agree that this goes to the very heart of addressing some of the criticisms of the Bill? Does he accept that the measure will stop the creeping privatisation and price competition that we inherited from the previous Government?

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

My hon. Friend makes an excellent point. I wholeheartedly share his view. Does he agree that one should always welcome a sinner who repenteth? I will take the fact that Opposition Front Benchers have signed up to our amendment as a sign of a sinner repenting, and I will give them forgiveness.

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

No, because of the time. As I said, hon. Members will be aware that the setting of the tariff is a complex process, which must take into account a wide range of considerations. That has contributed to the current situation where the tariff is not comprehensive and many clinical areas that would benefit from having a national tariff are not covered. Because of that, at a later stage we will bring forward amendments to put an express duty on Monitor and the NHS commissioning board to develop the tariff into a comprehensive system of national pricing.

Photo of William McCrea William McCrea Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Home Affairs), Shadow DUP Leader of the House of Commons

Let me say to Mr Twigg that I certainly do not want in any way to stifle the questions that he wanted to ask previously and that he has the freedom to ask them.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

Thank you, Dr McCrea.

It is interesting that the Minister is denying it was the intention to have price competition. The explanatory notes state on page 117:

“it allows for those services to provided at a standard price or a maximum price, with flexibility to negotiate below that price.”

That is in the Government’s explanatory notes. How can they deny their own explanatory notes? As usual, the right hon. Gentleman tried to make a good fist of his Government’s appalling policies. I am sure that he will look back with fondness on some of the things he has had to say, and perhaps cringe at some of the others. The fact is that competition was—I am going to explore whether it still is—the purpose of the Bill.

We believe that outright competition on price is unacceptable. There is a large body of evidence to show that such an approach is detrimental to quality. It is worth noting that in addition to their own and the public’s general concerns about price competition, many of the experts we heard from during the Committee’s evidence sessions expressed concerns. Dr Clare Gerada of the Royal College of General Practitioners said:

“All the evidence appears to show that if you base competition on price you drive down quality. That is what we are concerned about, that it will be a race to the bottom.”––[Official Report, Health and Social Care Public Bill Committee, 8 February 2011; c. 50, Q102.]

Dr Gerada’s concerns were echoed by others during the evidence sessions, but I will not go into that because we were all there. In particular, however, it is clear from the evidence of experts that there is a real danger that price competition will be damaging. We were not the only ones who felt that we were moving towards price competition; lots of experts outside did, too. I do not know how the Minister can deny it.

The Minister is fond of claiming that my right hon. and hon. Friends have somehow misunderstood the Bill or have sought to misrepresent it. I refer him to the explanatory notes and to the other representations. Last week he declared himself

“saddened by this philosophy that if someone repeats something that is not factually correct often enough, it might become a fact.”––[Official Report, Health and Social Care Public Bill Committee, 17 March 2011; c. 869.]

I am unsure what is the best evidence for that that I have heard during this Committee, but perhaps we have just heard it now. Just this morning the Minister said with exasperation that, given my mindset, it would be an uphill battle to convince me of the arguments. Well, he certainly has a big uphill battle to convince us.

In this instance it is lucky that I was not convinced by the right hon. Gentleman’s previous arguments on price competition. He has said numerous times to the Committee that there will be a genuine market, but he has never said that there will be a genuine market in quality. It is lucky that we were not convinced by what the Government have said, and it is lucky that the medical professionals and the public have not been convinced by the plans. As a result, would he like to take this opportunity to apologise for his previous comments and accept that, in this case, it is he and the Government he represents who appear to have failed correctly to understand their own Bill? That is quite remarkable.

As we have noticed quite a few times during this debate, Ministers lack understanding of what is in the Bill and how it works, not least in terms of competition. I am sure you will not let me go down that road, Dr McCrea, but it is a very important point. In the light of that, I can only hope that the Government take the opportunity to reread some of the evidence we have received, particularly on the role of Monitor, to see whether there are other policy shifts that might be in the best interests of the national health service. I feel that, in the Minister’s words, it might be “an uphill battle”. Despite the Government’s talk of having regard to price competition, which is a deviation from their original position—I use that word carefully—we remain unconvinced that they will go far enough to ensure that price competition cannot and will not take place in the NHS.

During the Opposition day debate last Wednesday, the Health Secretary said

“we have amended the Health and Social Care Bill on an important point, which greatly concerned the BMA, and clarified that the measure supports competition on quality, not price.”—[Official Report, 16 March 2011; Vol. 525, c. 387.]

Earlier in the day, the Prime Minister went further, stating categorically

“we have ruled out price competition in the NHS.”—[Official Report, 16 March 2011; Vol. 525, c. 292.]

If we are to believe that is truly the Government’s position, will the Minister explain where he sees the need for a new and hugely expanded Monitor? It is the economic regulator, but why do we need it? If there is no price competition, why do we need a huge regulator such as Monitor? The evidence does not stack up in the Government’s favour.

I do not wish to appear to be seeking to revisit the ground we covered on Monitor last week, so I think the best approach is to ask the question everyone is thinking: if there is to be no possibility of price competition in the NHS, why do we need this remodelled economic regulator? Where is the need for reorganisation on such an unprecedented scale? If the Government truly want to rule out price competition, why not simply introduce an amendment that states, perhaps on Report, that competition on price is not allowed and that anyone who believes that such a practice has occurred may lodge a complaint with the NHS commissioning board, Monitor in its current form, or any other body that the  Government create? Why will the Government not make it plain and clear in the Bill that price competition is not allowed?

Even after the amendments were tabled, the future head of Monitor said in an interview with the BBC:

“I wouldn’t go so far as to say you can never have price competition. I think over time it will probably emerge.”

That is the regulator! Is the Minister going to sack him? Quite frankly, it completely contradicts the Government’s policy. Could the Minister confirm whether, in his opinion, the new head of Monitor is incorrect, and what is he going to de about it? If he will not, will he accept that there is a need for the Government to consider tabling further amendments? They need to clarify their position beyond any further doubt, not least to offer some clarity to the head of their new economic regulator.

On cherry-picking, the Government are trying to confuse the issue with that around cherry-picking on price, rather than dealing with other issues, which I want to come on to. May I quote the Prime Minister last week? We will probably all enjoy his full quote, so we can understand what he is saying. He said:

“First of all, let us be clear about the fact that the reforms are about cutting bureaucracy and improving patient care. They were drawn up by us as a coalition to improve the NHS. Let me answer the right hon. Gentleman’s question very directly. We have already made some real strengthenings to the Bill”—

I do not think that we have seen many of those.

“First, we have ruled out price competition in the NHS”— but, obviously, not told the regulator.

“Secondly, there is the issue raised by the Liberal Democrats, with which I completely agree: we must avoid cherry-picking by the private sector in the NHS.”—[Official Report, 16 March 2011; Vol. 525, c. 292.]

Yet again, the Prime Minister’s promises do not match his actions. Nothing in the Bill rules out cherry-picking. Let us be clear what we are talking about with cherry-picking, and it is important to separate the various comments of the Minister and his hon. Friends. It is about bidding only for services that present less complex problems—in other words, healthier patients—and about private providers choosing certain profitable services or people to compete over, taking away activity from existing providers and so undermining the financial stability of NHS trusts, which have to provide unprofitable services, so endangering local hospitals. We have, again, a charter for putting hospitals—I hate to use the phrase—out of business. One of the consequences could be that NHS trusts stop providing services that they cannot make a profit from, and do not want them designated.

I could go on, but we clearly have the Government denying that they want price competition, while all the facts point in the opposite direction, including their own explanatory notes. We have the chairman of Monitor completely contradicting what Ministers are saying. The whole system is chaos, a mess and going nowhere other than to the detriment of the future NHS. We already know from the Minister’s comments in Committee that European and UK competition law will increasingly apply to the NHS. That is what the Bill is about—no matter what the Minister and the Government say, it is about competition on price.

Amendment 187 agreed to.

Clause 103, as amended, ordered to stand part of the Bill.